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Dissecting the Software Patent Amici in Support of CLS Bank


Written by Gene Quinn
Patent Attorney & Founder of IPWatchdog, Inc.
Principal Lecturer, PLI Patent Bar Review Course
Posted: March 27, 2014 @ 12:13 pm

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There are numerous briefs listed on the ABA’s brief publication webpage for Alice Corp. v. CLS Bank that are filed in support of the respondent, most of which make specious claims about software patents blocking innovation, or which make arguments that claims that specifically recite computers, data storage units, devices and more are somehow abstract and imaginary. These arguments should be easy enough to dispose of as ridiculous on their face, but who knows how the Supreme Court will respond. Still, one would hope that the Supreme Court would notice that neither patents generally or software patents specifically have done anything to block innovation in the smartphone industry.

Whereas the Alice supporters feel that the U.S. Patent and Trademark Office’s issuance of software patents are important for protecting and spurring innovation in many fields, the supporters of CLS Bank have largely responded that software patents hurt innovation. But that can’t be! One of the areas critics always say has been allegedly hamstrung by patents, the smartphones industry, is barely over 6 years old.  Have patents stopped innovation of smartphones? Hardly. In fact, with every new version companies tout just how much more the phones do and how they are so far superior to the previous model. Thus, it is easy to see that those claiming that software patents block innovation simply ignore market reality and how the functionality of current devices (which is thanks to software) match up with previous generations of devices over the last 6 years. Corporate critics must also ignore their own marketing of new smartphones, which directly contradicts the ridiculous claim that software patents are preventing innovation. Still they make these and other specious arguments as if they are true.

Doing away with software patents is myopic and not in the long term best interests of even the companies that support killing software patents. Google, for example, is an aggressive user of the U.S. patent system, is second in the number of patents obtained only to IBM, and the ruling that they seek would destroy the value of their own patent portfolio. It would open themselves up to immediate competition that they could not stop because they would have no patents. It would also mean that the $12 billion spent to acquire the grossly overpriced Motorola patent portfolio would have been nearly completely wasted. Attorneys who represent shareholders in class action lawsuits get ready! If CLS Bank prevails you are going to have a rather easy lay-up opportunity to sue all those companies that advocated against their own interest.

What follows is a summary (and discussion) of the positions raised in some of the briefs supporting the CLS Bank position. We focus on what we call the “corporate briefs” and the brief filed by 26 professors.

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Amicus Briefs Filed by Corporations in Support of Respondent

There are two major “corporate briefs” that we focused on that were filed on behalf of major corporations in software fields supporting CLS Bank. The more concise of these is certainly Brief of Amici Curiae Checkpoint Software, Inc., Collateral Analytics, LLC, Daily Motion, Inc., Github, Inc., Guidewire Software, Inc., Hipmunk, Inc., Jive Software, Inc., LinkedIn, Inc., Message Systems, Inc., Netflix, Inc., Newegg, Inc., Quantum Corporation, Rackspace, Inc., Ring Central, Inc., Trulia, Inc., Twitter, Inc., and Yelp Inc. in Support of Respondents.

The elongated title of this brief belies the amount of material that it contains. The amici of this brief describe themselves as “small and medium-sized companies that develop and sell software,” interested in encouraging innovation through the patent system. In the summary of arguments, the amici state quite bluntly that, “Software patents do not serve the Constitutional purpose of the patent system: to promote the progress of science and the useful arts.” Instead of obtaining software patents, these companies believe that “we create innovative software because of our desire to delight our customers.” While they don’t necessarily take a stand on the patentability of software, these companies are advising the U.S. Supreme Court that software patents aren’t necessary to promote software innovation.

These companies undoubtedly come to that opinion based on the mistaken belief that copying the work of others is somehow innovative. Of course, it is nearly laughable for anyone to say that these for-profit companies are simply doing it for the benefit of customers. As if they would be innovating and providing services for free out the goodness of their hearts if only the patent system would be destroyed.

A number of companies that cannot describe themselves as small or medium-sized are involved with another corporate amicus brief, Brief of Google Inc., Amazon.com Inc., American Association of Advertising Agencies, Dell Inc., Facebook Inc., Intuit Inc., LinkedIn Corp., Netflix Inc., Rackspace Hosting, Inc., Verizon Communications Inc., and Zynga Inc. as Amicus Curiae in Support of Respondents. The companies filing this brief develop high-technology products and services used by everyday citizens, Fortune 500 companies and the United States government. The companies listed include a few that we cover in our Companies We Follow series here at IPWatchdog, and the interests of the amici section even mentions that these corporations have engaged heavily in obtaining patent protections for their software, which of course they have. But more than that, Google, for example, has offensively used its patent portfolio to attack and has been adjudicated as a patent troll for refusing to license patents under fair and reasonable terms despite being required to do so. So these companies are not strangers to software patents, nor are they strangers to infringing software patents and suing for infringement of their own patents. Indeed, many of these companies have real vested financial interests in the outcome of this case. Corporations who enforce their software patents against other companies can sometimes command huge settlements. Twitter, listed above as an amicus, paid $36 million to IBM in December 2013 to settle a patent infringement suit by buying 900 patents.

Again, these companies come right out at the top of their summary of arguments with their stance on software patents: “Patents that merely claim abstract ideas implemented on computers or over the Internet are invalid under 35 U.S.C. § 101. Such patents add nothing meaningful to the abstract idea.” That statement is, of course, correct. The problem is that the claims in the Alice patents are not drawn to abstract ideas.

Be that as it may, the amici companies focus their attention on several major points. They don’t believe that Alice’s patent claims limits itself to a specific way of implementing the idea on a computer, creating abstract protections that the companies argue have given some companies the right to protect high-profile ideas, “blocking others from undertaking the truly innovative task of developing specific applications.” This argument is contradicted by the Solicitor General, however, who acknowledges that the claims do not preempt ideas, but confusingly tries to say they are still nonetheless abstract. But let’s take a look at one of the so-called abstract claims, which is Claim 1 of U.S. Patent No. 7,725,375 recites (with emphasis added):

data processing system to enable the exchange of an obligation between parties, the system comprising:

first party device,

data storage unit having stored therein

(a) information about a first account for a first party, independent from a second account maintained by a first exchange institution, and

(b) information about a third account for a second party, independent from a fourth account maintained by a second exchange institution;

and a computer, coupled to said data storage unit, that is configured to

(a) receive a transaction from said first party device;

(b) electronically adjust said first account and said third account in order to effect an exchange obligation arising from said transaction between said first party and said second party after ensuring that said first party and/or said second party have adequate value in said first account and/or said third account, respectively; and

(c) generate an instruction to said first exchange institution and/or said second exchange institution to adjust said second account and/or said fourth account in accordance with the adjustment of said first account and/or said third account, wherein said instruction being an irrevocable, time invariant obligation placed on said first exchange institution and/or said second exchange institution.

Patents by their very nature block to some extent since they provide the patent owner with exclusive rights. The problem is when patents block by protecting ideas, which is clearly not the case with the above claim in the ‘375 patent. Indeed, a good deal of tangible and identifiable structure is specifically recited in that allegedly abstract claim. How computers, storage units, devices and institutions are abstract or imaginary is a mystery to me, particularly if you concern yourself with the actual definition of “abstract,” which is: “relating to or involving general ideas or qualities rather than specific people, objects, or actions.”

Furthermore, while the Supreme Court did away with the “useful, concrete and tangible result” test from State Street Bank v. Signature Financial, in Bilski v. Kappos, 8 out of 9 Justices (i.e., everyone except Justice Scalia) signed onto an opinion that recognized that the patent claims in State Street displayed patent eligible subject matter. Indeed, the dissenters in Bilski specifically acknowledged that the claims at issue in State Street did not deal with processes, but dealt with machines. See Footnote 40 of the Steven’s dissent.

So let’s take a look at claim 1 of U.S. Patent No. 5,193,056, which was at issue in State Street, and which even the dissenters in Bilski recognized as patentable because it recited a machine. Claim 1 covers:

A data processing system for managing a financial services configuration of a portfolio established as a partnership, each partner being one of a plurality of funds, comprising:

(a) computer processor means for processing data;

(b) storage means for storing data on a storage medium;

(c) first means for initializing the storage medium;

(d) second means for processing data regarding assets in the portfolio and each of the funds from a previous day and data regarding increases or decreases in each of the funds, assets and for allocating the percentage share that each fund holds in the portfolio;

(e) third means for processing data regarding daily incremental income, expenses, and net realized gain or loss for the portfolio and for allocating such data among each fund;

(f) fourth means for processing data regarding daily net unrealized gain or loss for the portfolio and for allocating such data among each fund; and

(g) fifth means for processing data regarding aggregate year-end income, expenses, and capital gain or loss for the portfolio and each of the funds.

(emphasis added to draw attention to the “tangible” elements of the claim).

Difficult to in any intellectually honest way distinguish the claim structure of claim 1 in the ‘056 patent with claim 1 in the ‘375 patent. So unless the Supreme Court is going to turn their back on their own previous statements of just several years ago it is difficult to see how the systems claims will be determined to be abstract.

 

Brief of Amici Curiae Law, Business, and Economics Scholars in Support of Respondents

Twenty-six professors and scholars of law, business and economics filed this brief independently and not on behalf of the educational institutions where they teach or engage in research. A summary of affiliations does disclose that these amici include professors from Duke University, Columbia Law School, Harvard Business School, Stanford Law School and George Mason University, among others.

This brief concludes by saying urging the Supreme Court to: “affirm the invalidity of the patent claims at issue here and further hold that abstract ideas in the form of software are unpatentable and the mere computer implementation of those ideas does not create patentability.”

Astonishingly, despite advocating that the patent claims at issue here are invalid, these learned, intellectual masters never once cited, quoted or actually referred to the claims at issue. Instead, they wax poetically throughout the brief about how ideas cannot be patented, yet they never do the hard work of explaining exactly how or why the claims actually before the Supreme Court represent ideas alone. That is, of course, because the claims do not relate to ideas. Still, such a glaring deficiency in a brief boggles the mind. Sorry professors, in a patent case about the invalidity of claims you really need to analyze the claims. If this were a student assignment the failure to address the claims would mean that the brief could be graded no better than a “C.” Professors failing to address the only issue in the case except in rhetorical and inaccurate terms is inexcusable.

But let’s return to the beginning.  This brief starts out by explaining that the Federal Circuit expanded patentable subject matter for software in the 1990s, and since then an explosion in the number of U.S. software patents has been experienced, “many of which contain abstract ideas merely tethered to a computer.” In contrast, the professors believe there was much stronger software innovation during previous years. As a result they believe the current state of software patents promotes an increase in patent litigation and the acquisition of patents for reasons other than innovating. Again, there is no mention of the phenomenal rate of innovation relating to smartphones and data services, but readers are supposed to take their word for it that software gets in the way of innovation.

A high degree of abstractness in software-related patent claims is the major issue cited by this brief that renders software unpatentable in the eyes of the amici. Presumably, the fact that some software patents have been issued when they shouldn’t have been issued means that forever more software should not be patent eligible. The problem with this argument is that there is nowhere to draw the line. The brief seems to indict the industry rather than address these particular claims in these particular patents.

The abstractness of software patent claims, the brief explains, “can be construed to cover any of the particularized processes that result in the same outcome, including those never envisioned by the inventor.” First, this once again fails to realize the overwhelming reality that the claims at issue are specifically tethered to multiple tangible structures and incorporate specific limitations. Second, from a conceptual level after developed technology can easily infringe electrical and mechanical patents too.  So should we eliminate all patents period because after developed technology that the original inventor didn’t invent is infringing if the after developed technology incorporates everything included and taught in the patent claim? Seriously! It sounds like they are against patent rights that are fundamental and foundational. If someone builds on your invention that should be proof that the patent should have been issued?

This professor’s amici brief further explains that the Supreme Court should not only find Alice’s patent claims invalid, but should decide the case in a way that extends patent ineligibility to all software patents, stating that “mere computer implementation of those ideas does not create patentability.” In other words, nothing related to software would be patentable. Presumably this would extend to automobiles, robots, GPS, missile guidance and defense systems, and the multitude of other devices that simply cannot operate without software. Astonishing that a group of allegedly highly educated professors would recommend destroying the economy like that.

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Posted in: Companies We Follow, Computers, Facebook, Gene Quinn, Google, IP News, IPWatchdog.com Articles, Patentability, Patents, Software, US Supreme Court

About the Author

is a Patent Attorney and the founder of the popular blog IPWatchdog.com, which has for three of the last four years (i.e., 2010, 2012 and 2103) been recognized as the top intellectual property blog by the American Bar Association. He is also a principal lecturer in the PLI Patent Bar Review Course. As an electrical engineer with a computer engineering focus his specialty is electronic and computer devices, Internet applications, software and business methods.

 

16 comments
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  1. Regardless of the outcome, the future direction for courts is clear – limit patentability of “software”

    In this regard I have this idea: submit a patent application on some new and unobvious “hardware” device – something that does not exist today. It’s gonna be a real device serving some useful purpose, with nuts and bolts (actually microphones, analog pre-amps etc) but the magic would be performed by “software”
    Device as a whole would be patentable – cause it’s new and unobvious, however it can’t be built without “software” part (be it a program for DSP, or FPGA device or an ASIC) and that “software” is highly advanced and unobvious (can’t be easily re-engineered unless the code is stolen)
    If “software” is unpatentable do I have to disclose any details about “software” part ?
    Without those precise details (detailed flowcharts, pseudocode etc) nobody can build the device

    So the big question is this:
    Does unpatentability of “software” mean that software block can be omitted from patent application or they expect you to fully disclose your software for free, without getting any legal protection on it ?
    (that “software” part is actually more valuable than the particular device itself because it can be used for other applications)

  2. Gene,

    I think a bigger problem with the “Scholars” Amicus Brief is that it is intellectually dishonest. For example, this Brief includes the following statement:

    “District courts would also be well served by a strong, clear § 101.”

    However, the “Scholars” Amicus never actually quotes the language of 35 USC § 101, much less attempts to explain why the current language is not “strong and clear.”

    To me, the current language of 35 USC § 101 looks very strong and very clear that a wide variety of things are patent eligible:

    “Whoever invents or discovers any new and useful process, machine, manufacture, or composition of matter, or any new and useful improvement thereof, may obtain a patent therefor, subject to the conditions and requirements of this title.”

    It is all of the judicial exceptions that have weakened 35 USC § 101 and made 35 USC § 101 less clear.

    What the “Scholars” Amicus Brief is effectively arguing is that the Supreme Court should be free to rewrite a statute any time they feel like it “for the good of the country.”

    My guess is that many of the “scholars” who wrote this amicus brief would be much less comfortable with the Supreme Court rewriting other statutes.

  3. I agree with everything this article says. However, I also predict doom at the Supreme Court for Alice (I really hope I am wrong). Sometimes Judges decide first who they think should win and then characterize the opinion to fit. Look at Roe v. Wade, does the “right of privacy” in the constitution really include abortion? I am pro-choice but just don’t see the basis for that opinion in the text of the constitution. Similarly, the justices will read 101 to whatever they want to read it and make an “abstract idea” whatever they wish. I think a majority of the bench just won’t want Alice’s patent to stand thinking this patent could disrupt CLS’s trillion dollar daily transactions. Of course CLS could just easily design around Alice’s patent (as the Alice brief points out).

    “Bad facts make bad law”, unfortunately this case is a terrible case for the Supreme Court to examine the patentability of software. The only thing that gives me a little hope is at least Stevens has retired. Sotomayor was a real disappointment in Bilski.

  4. Rational Person-

    Good point. This reminds me about how Professor Duffy kept telling the Federal Circuit en banc in Bilski that they should follow their own precedent. Chief Judge Michel kept asking “which precedent.” Michel finally said something to the effect that the reason the Court was sitting en banc was because there was precedent on virtually every side of the issue, so he asked again, “which precedent should we follow and why?” Duffy never had an answer. It was quite embarrassing to watch.

    -Gene

  5. Gene,

    This coming Monday will be an embarrassment for the watching.

    I expect one of the Supremes to ask whether “software” is like plucking a leaf off a fig tree or blowing away the fluff of a matured dandelion. As Humpty Dumpty would say, Go ask Alice if the other pill makes you ten feet tall (from Jefferson Airplane’s, “White Rabbit”).

  6. Patent Leather wrote:

    “Sometimes Judges decide first who they think should win and then characterize the opinion to fit.”

    Only “sometimes”? These days, I would suggest this is what is being done most of the time. For example, I defy anyone to provide a “rational” argument” the can find a way that the following language from 35 U.S.C. § 101:

    “Whoever invents or discovers any new and useful process, machine, manufacture, or composition of matter, or any new and useful improvement thereof, may obtain a patent therefor, subject to the conditions and requirements of this title.”

    could ever be logically interpreted as meaning that to be patent eligible, “one must do more than simply state the law of nature while adding the words ‘apply it.'” as held by the Supreme Court in Prometheus v. Mayo.

  7. Monday should be interesting, I’m sure Gene and Dennis Crouch will post articles reading the ‘tea leaves’

    This is how I think it will go down:

    Scalia: “how could the founding fathers have intended that software be patented?”
    Ginsburg: “software? what’s software?”
    Sotomayor: “even though I lied last time, this time I promise we will not overrule State Street.”
    Thomas: says nothing

  8. Here’s hoping for a Chakrabarty/Diehr readjusting type of day.

  9. Patent Leather:

    Are we starting a Final 9 bracket betting pool? ;-)

    Scalia: I can’t honestly say I understand this “software” stuff, but nonetheless it’s all Gobbledygook.

    Kennedy: I’m still on the fence between all those 1’s and 0’s.

    Roberts: A computer is a person and has rights of free speech and religion. I’m not sure though whether all computers go to heaven.

    Sotomayer: This Latina is deeply troubled. What happens in that limbo space between when the software says it has decided to go the “one” way or the “zero” way? Is that transgender? Are LGBT rights implicated here?

    Ginsburg: I’m not retiring until I can clearly answer the penultimate question: What is software?

    Stevens: Here come the retired Justice, here come the retired Justice. Make way. I have a right to file a belated vote on this issue. All this new fangled stuff is evil and must be stopped. The Constitution is limited to promoting only the “good” kind of progress like fracking and water pollution. Just say no to software!

    Anita Hill: If he can make a come back, so can I!

    Thomas: I now choose to say something original about all this. Gobbledygook.

  10. Attention should definitely be paid to what the frogs have to say about draining the swamp. After all, their homes, even their lives, are at stake. Similarly, the opinions of Toll Booth Constructers (TBC’s) are worthy of attention, when municipal authorities are doing well by licensing tolls on heavily frequented pedestrian ways, and as a consequence the Supreme Court is debating the Toll Booth clause of the US Constitution (the one that permits the Congress to pass laws allowing tolls on “Highways” in order to promote progress in the art of swiftly getting around obstacles to progress).

    Likewise, patent attorneys will have a lot to say to the court about how it is to assess patent-eligibility.

    One supposes though that the Court will extend its considerations to the interests of society as a whole, indeed the general welfare, not just that of the TBCs. I am confident that it will do that, because it does understand what its job is, and that is its job, right?.

    Whether it can grasp the issue fully and accurately though, and whether it can come up with coherent and rational supporting reasoning for its conclusions; that’s another matter entirely. I must say, I have much enjoyed reading the suggestions above, how the individual SCOTUS members will approach their onerous task.

  11. in the art of swiftly getting around obstacles to progress

    I do not get this metaphor. A blocking patent is one way to promote progress – necessity being the mother of invention.

    because it does understand what its job is, and that is its job, right?.

    That is a highly debatable point, given the prominence of the Court in protecting its implicit writings perhaps even at the expense of clarity in the explicit words of Congress. Creating maps and reading maps, etc.

  12. What strikes me about all of this is the following: 1) the incredible ignorance of the judiciary regarding science; 2) the fact that we are talking about real things, and yet they are classified as abstract. So, what that means is that a question should be asked what language could be used to describe it if the language that is used is not acceptable? And, 3) what about software that only applies to things that are technology? Such as software for running a server.

    The law professors should be shamed for what they wrote. I think we should all remember the big picture here too. This is big business trying to get rid of patents and we are seeing just how much power they have to do that. Google is interesting in that they 8 years ago were crying about the need for enforcement to protect them from copiers, but now that they figure their competitive advantage is not innovation, but market power, they want to get rid of patents.

    There is a machine performing useful work that is delivered to a business. What the antis are saying is that that machine is an __________ (witch–abstract, natural law, etc.)

    And, just consider that we live in the information age, and yet probably not a single judge on the SCOTUS or the Fed. Cir. could explain what the Church-Turing Thesis is. The Church-Turing Thesis is arguably the most important thesis in the information age. The implications of the Church-Turning Thesis to some of the arguments are profound. For example, that since all computable functions could be performed by computers, then whatever is going through the minds of those justices could be a method on a computer, so to hold them ineligible is to violate ever notion of what an invention is. Moreover, the Church-Turning Thesis renders the pencil and paper test of Lourie absurd (but holding Lourie as being absurd is an easy task.)

  13. “Fortunate”-ly, the “truth” is out there: ;-)

    “For the common mortal, the case, known as Alice Corp. v. CLS Bank International, is a frustrating one. It involves an “invention” that is so vague and inchoate that most of us would not consider it an invention at all, but rather just a prediction that someone else would eventually invent the thing being described.”

    http://features.blogs.fortune.cnn.com/2014/03/28/supreme-court-to-decide-when-ideas-become-too-abstract-to-patent/

  14. NWPA,

    You’ve forgotten the history of this country –the Salem witch trials

    This is another witch trial

    (Except that the ‘realists’ on the courts are hunting after T-words instead of after W-words)

  15. Readers, in this context, I commend to you a piece on another blog:

    http://patlit.blogspot.de/2014/03/adult-tv-channel-blocking-patents-held.html

    This very lengthy judgment about methods for blocking TV channels addresses infringement, novelty and obviousness but not (I gather) eligibility at all. Eligibility was raised at the EPO during post-issue opposition proceedings in EP-B-1763234 that were initiated by the accused infringer and, lo and behold, the EPO Opposition Division declared that “controlling flows of Information…is technical”.

    Just thought I should mention this English case, given that one prolific poster here asserts that the US Constitution’s “useful arts” is unequivocably “wider” than the EPO’s “technical character”. Perhaps we shall soon have more fuel for that debate.

  16. MaxDrei,

    Your subtle (?) attempt at a slight is easily brushed aside with the thought that your refusal to define “technical” allows “evolution” of that term to be more than what is considered “technical in any debate on the differences at any one particular point in time.

    It is the ultimate moving of the goalposts. Any discussion then on the US position of Useful Arts must take into account the non-US change in position.