The Australian Full Federal Court recently handed down its decision in Research Affiliates LLC v Commissioner of Patents. The decision is an important addition to Australian case law concerning the patentability of business methods and software.
Judges Kenny, Bennett, and Nicholas ruled that the Appellant’s claimed computer implemented method for generating an index for use in securities trading was unpatentable as an abstract idea. The Court held that “[t]he claimed method in this case clearly involves what may well be an inventive idea, but it is an abstract idea. The specification makes it apparent that any inventive step arises in the creation of the index as information and as a scheme. There is no suggestion in the specification or the claims that any part of the inventive step lies in the computer implementation. Rather, it is apparent that the scheme is merely implemented in a computer and a standard computer at that. It is no part of the claimed method that there is an improvement in what might broadly be called ‘computer technology’.”
In our opinion this case does not present a major change in the law in Australia regarding the patentability of business methods and software, but clarifies that mere reference to computer implementation in patent claims will not be enough to satisfy Australia’s requirements of patentable subject matter. Otherwise, the patentability of business methods and software, where a computer is “inextricably linked with the invention itself”, appear to remain patentable in Australia.
Well, the United States Court of Appeals for the Federal Circuit sort of decided CLS Bank v. Alice Corporation earlier today. Truthfully, all the important questions that we thought might be answered remain completely and totally unanswered because there were only 10 judges who sat on the en banc tribunal and no more than 5 judges signed on to any one opinion.
The only thing we know is this — the Federal Circuit issued an extraordinarily brief per curiam decision, which stated:
Upon consideration en banc, a majority of the court affirms the district court’s holding that the asserted method and computer-readable media claims are not directed to eligible subject matter under 35 U.S.C. § 101. An equally divided court affirms the district court’s holding that the asserted system claims are not directed to eligible subject matter under that statute.
Thus, all of the asserted claims are not patent eligible. At the moment I am completely flabbergasted and don’t know what to say.
On Friday, April 12, 2013, I was at American University Washington College of Law for a program titled Patent Subject Matter Eligibility Today: Software, Genomics, and Business Methods. I participated on a panel titled CLS Bank en band: Are Software Methods Patentable? What I want to write about today, however, is not our panel presentation, but rather the Keynote presentation by Suzanne Michel (no relation to Chief Judge Michel), a former deputy director of the FTC who is Senior Patent Counsel at Google, Inc., working in Google’s policy office in Washington, DC.
It is no great surprise probably, but I disagreed with practically everything she said, although I did enjoy her presentation. I love to debate the issues, and she is extremely knowledgeable and well briefed on what is happening in the trenches. Those of us who disagree with the proffered narrative that the patent system is broken can’t ignore competent advocates like Michel. She is not a patent-hater and her message is sharp, crisp and clear, although I do think it is misleading. The patent system is not broken, and for reasons I can only guess the best and brightest leaders in much of the big-tech industry are pursuing paths not calculated to succeed; at least if the goal is to stem the rise of patent litigation and innovate for the future.
With this in mind, what follows is a summary of Michel’s presentation, which if not titled was certainly themed — Fixing Problems of the Patent System to Improve Innovation. I also provide my thoughts and comments in the format of comments from the peanut gallery, or perhaps as a patent law equivalent to Mystery Science Theater 3000. In order to differentiate my thoughts/comments from Michel’s presentation, my comments are italicized, colored, indented and tagged with the IPWatchdog logo.
On Friday, April 12, 2013, i will be at American University Washington College of Law for a program titled Patent Subject Matter Eligibility Today: Software, Genomics, and Business Methods. I will be participating on a panel that begins at 10:15am, which is titled CLS Bank en band: Are Software Methods Patentable? The event is free to attend. To register to attend you can visit WCL Event Registration.
Topic for Discussion
The following is what our panel will discuss regarding application of Section 101 to software:
(1) For many years, a large segment of the software industry viewed patent protection as inappropriate for software, relying instead on a mixture of copyright and trade secret law. At a high level, should software be patentable?
(2) Two common criticisms of software patents, as compared to patents in the pharmaceutical and biotech sectors, are (a) the relatively low cost of invention; and (b) the relative ease of implementation. Are these the right factors for us to be considering for purposes of inventiveness?
Over the past year or so ever more patent data has been made publicly available thanks to Google. In collaboration with the USPTO Google is scraping information from the USPTO servers, transferring the many image files into searchable text documents. The availability of this information has allowed companies like Reed Technologies to offer interesting and useful patent analytics. For example, the Patent Advisor™ product, which is powered by PatentCore, allows users to find rejection, allowance, RCE and appeals information relating to individual Art Units and individual examiners. Armed with this information better prosecution strategies can be developed, saving time and money in the long run.
As I have dove into the Patent Advisor statistics I jumped to those Art Units charged with so-called business method patents in class 705. This has lead me to write several articles critical of one Art Unit in particular for having an extremely low allowance rate, with many of those allowances ordered by the Board. For example, see Allowance Rates for Art Units Examining Business Methods.
But what is a business method? That is the very question that dogged the United States Supreme Court in Bilski. In fact, a definition of “business method” has proven to be as illusive as a unicorn or Bigfoot. The goal of those who care to try and define “business methods” is almost universally so that they become non-allowable subject matter. But with every definition there comes the realization that some of what seems like it should be swept up in the definition remains on the outside and some things that really ought not to be considered “offensive” business methods are swept up in the definition. The trouble is that methods have been patentable since 1790 in the United States and on some level virtually every method could be characterized as a method of doing business, or more generally a method that facilitates one or another business goal.
One of the criticisms of the PatentCore database in the past was that the database was not a complete representation of the case files at the USPTO and gave a false impression. I never personally found that persuasive given that even when the database first became public there were approximately 1.5 million application files within the database. Still, many patent examiners scoffed at the notion that this data was accurate.
If I were a patent examiner that hadn’t issued patents for years I wouldn’t want anyone to know that either. Similarly, if I were a Supervisory Patent Examiner (SPE) in an Art Unit that routinely only issued patents after a long drawn out appeal process that resulted in the Board overturning the rejections I wouldn’t want the public to know about that either. Sadly, this type of gaming exists at the Patent Office. There are examiners who only rarely issue patents and Art Units that openly tell patent attorneys that they don’t issue patents unless ordered to do so by the Board. Knowing that this happens, which is supported by hard data, makes it impossible to tolerate the anti-patent zealots who routinely opine about just how easy it is to get a software or business method patent issued. Really? You have to be kidding!
Those who have been following comments on the split decision in CLS Bank v. Alice Corp. case will be unsurprised to learn that yesterday the Federal Circuit ordered a rehearing en banc in the matter, vacating the panel decision originally decided on July 9, 2012.
The questions to be addressed on appeal are:
1. What test should the court adopt to determine whether a computer-implemented invention is a patent ineligible “abstract idea”; and when, if ever, does the presence of a computer in a claim lend patent eligibility to an otherwise patent-ineligible idea?
2. In assessing patent eligibility under 35 U.S.C. § 101 of a computer-implemented invention, should it matter whether the invention is claimed as a method, system, or storage medium; and should such claims at times be considered equivalent for § 101 purposes?
The parties have been invited to file new briefs on these questions, and the case will be heard based on the original briefs and any new briefs filed.
Post Grant Review, Inter Partes Review and the Transitional Program for Covered Business Method Patents were instituted with the goal of improving patent quality by giving third parties methods to challenge patents that are less expensive and less involved than litigation. Each of these procedures is a trial before the Patent Trial and Appeal Board (Board) composed of Administrative Patent Judges and subject to Part 42 of 37 C.F.R., Trial Practice Before the Patent Trial and Appeal Board. The trials allow for limited discovery, which has not been available in Ex Parte or Inter Partes Reexamination, the existing procedures for challenging patents in the U.S. Patent and Trademark Office. Because the discovery is limited, it is unlikely that these procedures will be used in cases where large amounts of evidence may be needed to prove patent invalidity.
Post Grant Review
A petition for Post Grant Review (PGR) must be filed no later than nine months after the issue date of a patent or, for claims broadened in a reissue, nine-months after the date of the certificate. A third party may challenge a patent under PGR based on any ground that may be raised under 35 U.S.C. § 282(b)(2) or (3) including patent subject matter eligibility or utility under 35 U.S.C. § 101, novelty under 35 U.S.C. § 102, Obviousness under 35 U.S.C. § 103 and enablement, written description and definiteness under 35 U.S.C. § 112. A PGR may only be instituted for a patent having claims with an effective filing date after March 16, 2013. A PGR must be filed no later than one year after the petitioner has been sued for infringement and cannot be instituted if the petitioner has filed a declaratory judgment action against the patent.
For at least the past 15 years, the legal, technical and academic communities have been debating the patentability of business methods and software. Despite much negative press ink, talk, legislative activity and court opinions, the answer with respect to patent eligibility is still a resounding and categorical “yes.” That’s the easy part. What types of business methods and software exactly are patentable? That is the difficult question to answer.
What is Patentable?
U.S. Patent Law recognizes four broad categories of inventions eligible for patent protection: processes; machines; article of manufacture; and compositions of matter. 35 U.S.C. Section 101. Despite the oft-quoted recognition that the patent laws were made to cover “anything under the sun that is made by man,” Diamond v. Chakrabarty, 447 U.S. 303, 309 (1980) (quoting S. Rep. No. 1979, 82d Cong. 2d. Sess., 5 (1952)), the U.S. Supreme Court, has long recognized that there are three exceptions to these four broad patent-eligibility categories: laws of nature; physical phenomena; and abstract ideas. Id. These three exceptions are necessary because “[s]uch discoveries are manifestations of … nature, free to all men and reserved exclusively to none.” Id. (citations omitted). Yet, “a process is not unpatentable simply because it contains a law of nature or a mathematical algorithm,” and “an application of a law of nature or mathematical formula to a known structure or process may well be deserving of patent protection.” Diamond v. Diehr, 450 U.S. 175, 187 (1981).
The inventions described in Bancorp’s US Patents 5,926,792 and 7,249,037 concerned methods, media and systems for administering and tracking the value of life insurance policies. A representative claim reads:
A life insurance policy management system comprising:
a policy generator for generating a life insurance policy including a stable value protected investment with an initial value based on a value of underlying securities of the stable value protected investment;
a fee calculator for calculating fees for members of a management group which manage the life insurance policy;
a credit calculator for calculating credits for the stable value protected investment of the life insurance policy;
an investment calculator for determining an investment value and a value of the underlying securities of the stable value protected investment for the current day;
a policy calculator for calculating a policy value and a policy unit value for the current day;
digital storage for storing the policy unit value for the current day; and
a debitor for removing a value of the fees for members of the management group which manages the life insurance policy.