There was a lot riding on Alice v. CLS Bank, and the Supreme Court got it wrong. There is no point in sugar-coating it, or pretending that everything will be alright. The Supreme Court is openly hostile to patents, and increasingly so is the Federal Circuit. Simply stated, strong patent rights are an absolute prerequisite for a high tech economy.
It is a sad realization, but we are indeed at a point were commercially viable claims worth litigating are virtually assured to be invalid claims. Until this changes the economy suffer in due course. After all, it isn’t the copycats who create new things. Copycats copy and innovators innovate. You cannot infringe patents owned by an innovator and claim that because the product is new to you it is an innovation. NO! It is merely new to you and a rip-off from the true innovator.
On the very same day that the U.S. jobs report shows unexpectedly weak growth, the Federal Court of Australia issued a ruling directly opposite to the ruling rendered by the United States Supreme Court relative to gene patents. In Yvonne D’Arcy v. Myriad Genetics, Inc., the Federal Court of Australia ruled that Myriad’s claims to isolated DNA are patentable under the laws of Australia. That is the correct ruling, and it is the ruling the U.S. Supreme Court should have reached in Association of Molecular Pathology v. Myriad Genetics. As the patent eligibility laws of the U.S. become increasingly inhospitable to high-tech innovative businesses we can expect more job losses and worse news for the U.S. economy on the horizon.
By now virtually everyone in the patent industry is aware of the Supreme Court’s decision in Alice v. CLS Bank. What is less universally understood is the full extent of the decision. My immediate reaction was that this would be extremely bad for software patents. Many others thought I was engaging in extreme exaggeration. Since then, however, the Patent Office has started issuing Alice rejections where no previous 101 patent eligibility rejection stood, they have been withdrawing notices of allowance after the issue fee has been paid in order to issue Alice rejections, and the Federal Circuit is strictly applying the nebulous “Alice standard” to find software patent claims patent ineligible.
It is now clear that the Supreme Court’s decision in Alice fundamentally changed the law and future of software patents, at least those already issued and applications already filed, which cannot be changed without adding new matter. Those applications were filed at a different time and under a substantially different regime.
Patent law has always swung like a pendulum. The law swings between extremes, spending very little time in the middle. It is easy to get caught up with the shifting laws and even easier to start looking at the trees instead of the forrest, worrying where there is really no need to become so distressed. Lately, however, there has been an ever increasing and significant assaults on patent rights. It is not much of an exaggeration to wonder whether any commercially relevant innovation can be and remain patented. We seem to be back to the days when valid patent claims were those that had not been litigated. Today it is more fair to say valid patent claims are those that haven’t reached the Supreme Court or the Federal Circuit. Ubiquity is now the touchstone of ineligibility, or obviousness, rather than being celebrated for such wide spread adoption.
I am more concerned now than ever that the pendulum has swung so far and has gained so much momentum that it will fly clear from its support base point. I raised this with Ray Niro, the famous patent litigator who was originally called the first patent troll, back in July 2013. Then he told me: “looking at the bright side of things, I believe that the pendulum will swing. I believe it will come back.” I again asked him his thoughts on the matter in another interview approximately 11 months later, Niro said that he thought the pendulum would swing back, but he was far less optimistic.
Recently I had the opportunity to interview Bob Zeidman, the president and founder of Zeidman Consulting, who is also the president and founder of Software Analysis and Forensic Engineering Corporation, Zeidman is an software expert. In fact, in addition to consulting with lawyers and technology companies, he is an testifying and consulting expert witness. The premise of our conversation was the upheaval in the patent industry thanks to the Supreme Court’s decision in Alice v. CLS Bank. In part 1 of our conversation we discussed the decision and ways that attorneys can build a specification to satisfy the Alice standard. In part 2 of our 3 part discussion, which appears below, we wrap up our discussion of the Alice decision and dive into a discussion about the fact that many in the computer science world don’t believe what they do to be particularly innovative or even special.
QUINN: And then there’s always the fear that if you put in code then you’re gonna be limiting yourself. I don’t think that’s really a justifiable fear as long as it’s put in properly as illustrative instead of limiting. You know, I mean the folks in the chemical world, they do this all the time. They have example after example after example after example, which is a great way to disclose what it is that you have, what it is that you’ve tried, what it is that you know that works.
ZEIDMAN: Exactly. It seems like if there is some ambiguity in the claims then you would go back to the specification to see if the code there could clarify the claims.
As I was reading recent Federal Circuit decisions I initially skipped right past I/P Engine, Inc. v. AOL, Inc. (CAFC, August 15, 2014). After all, this decision was non-precedential, so how important could it really be? But the Federal Circuit seems to have a peculiar definition of “non-precedential” these days.
In this case the jury found that the asserted claims were infringed, the jury found that the asserted claims remained non-obvious because the defendants’ evidence did not establish obviousness with clear and convincing evidence, and the plaintiff won a verdict of over $30 million with an ongoing royalty rate of 3.5%. The district court judge reviewed the jury determinations, particularly with respect to obviousness, and found that the jury was correct. The Federal Circuit, in their infinite wisdom, disagreed and found the asserted claims obvious. To do so the majority provided no deference to the factual determinations of the jury.
As a US Patent Attorneywho has been working abroad in Asia for a while, I’m often the Asia interface with US companies and firms seeking to get their patents granted in Asia, especially China. US Attorneys/Agents always complain about the narrowness of Asian claims – oftentimes limited to just what the examples describe – when the corresponding US claims are so much broader. My 2 cents: broader Asian Patent scope is possible – not easy, but possible. This past week I’ve struggled with 2 applications which we’ll get granted, but with claims merely covering the examples in the spec. However, given a little forethought, we would have achieved a broader scope. So I’m putting down my thoughts in the hope of helping US practitioners a bit with their Asian prosecution.
Laws & Practice Are Different
If you are experienced in Asia practice, know the risks, and have made a conscious decision to write applications in a certain way (i.e., because your US application is the most important), then that’s fine. That’s your decision and I’m all for it. Stop reading now and don’t waste your time. I’m writing this for those who never made that conscious decision and assume that patent practice everywhere is the same as the US. Sorry, but it’s not the same.
On July 3, 2014, I had the opportunity to interview Judge Michel, former Chief Judge of the United States Court of Appeals for the Federal Circuit. The interview took place at the University Club in Washington, DC. Our conversation was wide ranging, dealing with all the pressing issues of the moment in the patent world. In part 1 of the interview Judge Michel explained exactly why the Supreme Court’s decision in Alice v. CLS Bankwas terrible, saying that he thought the decision would lead to “total chaos” because there is no repeatable, predictable test that can be objectively applied.
In part 2 of the interview, which appears below, we continue our discussion of Alice, but focus on how the Supreme Court is importing considerations that historically (and correctly) are matters of obviousness under 35 U.S.C. 103.
QUINN: Well, I know one of the things that we’ve talked about in the past as a concern is with all these decisions patents have gotten a lot longer, a lot more difficult to read, and really almost in some ways hide the innovation. And it’s not necessarily a conscious “I want to hide it,” sometimes it may be, but patents from 50, 60 years ago used to be a couple pages long and that included the drawings. What do you think the Alice decision is going to do to the complexity of patent applications moving forward?
MICHEL: Well, it’s hard to imagine that it will encourage shorter or simpler applications. But I don’t really know. I can’t predict. And part of what worries me is the extent of the harm is difficult to gauge. I think there will be harm. My concern is that it’s likely to be massive harm. But it can be equally argued that the harm will be very small because really nobody knows. So we’re taking a huge gamble here where nobody knows what the risks and harms can be. Also consider this you talk about the stability of property regimes in the law, how about the right of a property owner as to who’s going to decide things? In our lawsuit where you sued me if I claim your patent’s invalid as obvious I’ve got to prove it. I’ve got to prove it to an elevated burden with admissible evidence to a jury. But in a 101 matter it looks to me like there’s no role for the jury it’s all going to be up to the district judge to decide whether to invalidate the patent by declaring it ineligible. So there’s a lurking issue here of right to jury trial because the Supreme Court has now shifted the center of gravity of an invalidity case from the trial and the jury to a pretrial motion with no jury and probably very limited factual records.
Chief Judge Michel (ret.), Dec. 10, 2013, at IPO Inventor of the Year ceremony in DC.
Recently I had the opportunity to sit down with private citizen Paul Michel, who we know in the patent community as the former Chief Judge of the United States Court of Appeals for the Federal Circuit. Judge Michel left the Federal Circuit several years ago now, choosing to retire rather than take senior status. Michel told me back then that he wanted to step down so he could say what needed to be said on behalf of the patent system, something he felt he couldn’t do while a member of the federal judiciary.
Judge Michel has been true to his promise. He keeps an active speaking schedule, he continues to appear on Capitol Hill to discuss matters of concern for the patent system, he continues to attend numerous industry events, and he has freely given of his time on the record for us at IPWatchdog.com.
In our latest conversation we talked about a great many things, including the seemingly inevitable nomination of Phil Johnson as Director of the USPTO, which now seems very unlikely. We also spent considerable time talking about the Supreme Court’s decision in Alice v. CLS Bank. As you will read in the interview below, Michel thinks the decision was terrible and will lead to nothing short of chaos because there is simply no workable, repeatable test that can evenly and predictably be applied by the numerous decision makers in the patent world.
Alice with Lion and Unicorn from “Through the Looking Glass,” published 1871.
Last month, the Supreme Court issued its opinion in Alice Corp. v. CLS Bank International, _ U.S. _ (2013). In its opinion, the Court holds that Alice Corp.’s patent claims are drawn to the abstract idea of intermediated settlement, and that merely requiring generic computer implementation fails to transform the abstract idea into a patent-eligible invention. Since the opinion issued, the PTO has starting pulling allowed applications and issuing § 101 rejections. And lower courts are already applyingAlice to hold claims ineligible. Taken together, all this signals that § 101 is going to remain at the forefront of patent law for the foreseeable future. In view of its importance, this article provides an overview of the opinion, attempts to glean lessons from Alice, and finally identifies some considerations for patent owners and challengers as they navigate the murky morass that is § 101 jurisprudence.
At the outset, the Supreme Court reiterates the principle that laws of nature, natural phenomena and abstract ideas are not patentable—noting that it has interpreted § 101 and its predecessor statutes this way for over 150 years. It observes that the concern driving these exceptions to patentability is pre-emption. That said, the Court recognizes that this exclusionary principle must be carefully construed because at some level all inventions embody laws of nature, natural phenomena or abstract ideas. It states “[t]hus, an invention is not rendered ineligible for patent simply because it involves an abstract concept” and “applications of such concepts to a new and useful end . . . remain eligible . . . .” Slip op. at 6 (internal quotations and citations omitted).