Over the last several days I have heard of an alarming trend from the United States Patent and Trademark Office — Patent Examiners are canceling Notices of Allowance and yanking previously granted claims back into prosecution while citing the United States Supreme Court’s ruling in Alice v. CLS Bank. In some instances granted claims are being pulled back into prosecution only to be rejected as lacking patent eligible subject matter even after the issue fee has been paid. This is an alarming trend that seems to be building steam as virtually everyone who operates in this space is now seeing this happen and/or they are seeing supplemental office actions issued where the pending office action never rejected claims based on patent eligibility grounds.
Rejecting claims after the issue fee has been paid represents an extraordinary disconnect from the initial USPTO guidance that essentially said that Alice changed nothing from a substantive point of view. I was shocked that the USPTO issued such guidance because if you actually read the Supreme Court’s decision in Alice you could hardly walk away with the belief that nothing had changed.
In the immediate aftermath of the Supreme Court’s decision in Alice the USPTO told examiners that the reason Alice’s claims were determined to be patent ineligible was because “the generically-recited computers in the claims add nothing of substance to the underlying abstract idea.” The USPTO, by and through the Deputy Commissioner for Patent Examination Policy, Andrew Hirshfeld, then went on to point out to patent examiners that there is no new category of innovation that is patent ineligible, nor is there any new or special requirements for the eligibility of either software or business methods. Hirshfeld explained: “Notably, Alice Corp. neither creates a per se excluded category of subject matter, such as software or business methods, nor imposes any special requirements for eligibility of software or business methods.”
I feel like a very broken record. In an IPWatchdog article I wrote back in 2012, I commented on the currently fractured patent-eligibility landscape in the split Federal Circuit panel decision in CLS Bank International v. Alice Corp. Pty. Ltd. where a claimed trading platform for exchanging business obligations survived a validity challenge under 35 U.S.C. § 101. See The Fractured Landscape of Patent Eligibility for Business Methods and Systems in CLS Bank International. That fracture got even worse in the subsequent en banc ruling which can only be described as lengthy, tumultuous, and confusing, with a brief per curiam opinion, as well as six full opinions.
With the Supreme Court’s most recent foray into the patent-eligibility world in Alice Corp. v. CLS Bank International, we now have a complete and utter disaster as to what data processing claims can (or more unfortunately cannot) survive scrutiny by Our Judicial Mount Olympus under 35 U.S.C. § 101. I once had respect for Justice Thomas’ view on patent law jurisprudence, having considered his substandard opinion in Myriad on the patent-eligibility of certain “isolated” DNA claims to be an “isolated” aberration. But having now read his mind-boggling Opinion for the Court in Alice Corp., I’ve now thrown my previously “cheery” view of Thomas’ understanding of patent law jurisprudence completely into the toilet. I have even less kind words to say about the three Justices that signed onto Justice Sotomayor’s disingenuous concurring opinion that accepts retired Justice Steven’s equally disingenuous suggestion in Bilski that 35 U.S.C. § 273 (in which Congress acknowledged implicitly, if not explicitly the patent-eligibility of “business methods” under 35 U.S.C. § 101) is a mere “red herring.” See Section 273 is NOT a Red Herring: Steven’s Disingenuous Concurrence in Bilski.
The Supreme Court’s decision in Alice Corp. operates from the view that “ignorance is bliss” when it come to the patent statutes, as well science and technology. I don’t share that view and never will. So in the format that I began with in shredding Justice Alito’s “comedic” opinion in Limelight Networks, here are my “ignorance is not bliss” candidates for Alice Corp., in all their ugliness.
NOTE: A version of this article was originally published by the ABA in May/June 2014 issue of LANDSLIDE, a publication of the ABA Section of Intellectual Property Law.
The history of film is a long one that, by some accounts, extends as far back as the early 1700s and the discovery by German physicist Johann Heinrich Schulze that silver salts react to light exposure by becoming darker in color.[i] By the late 1800s, celluloid film had appeared and the ability to record motion pictures through a camera had become a reality. Indeed, it was none other than George Eastman, who in 1889 perfected the first commercial transparent roll film, one year after the name “Kodak” first began to be used to market his cameras.[ii] It was the Eastman flexible film advancement that made it possible for the development of Thomas Edison’s motion picture camera in 1891. Edison called his first generation picture camera a “Kinetoscope,” after the Greek words “kineto,” which means “movement,” and “scopos,” which means “to watch.”[iii] Edison filed a patent application on the Kinetoscope on August 24, 1891, and the patent ultimately issued on August 31, 1897.[iv]
Over the years, the industry has seen some incredible innovations that include improvements to color exposures, sound recording and the current-day transition to digital recording. The glittering lights of Hollywood and other filmmaking scenes throughout the world have risen on the backs of these developments. Many of these film innovations have been subject to patent protection, with countless patent applications being filed with the U.S. Patent and Trademark Office, which has granted many protections to film innovators over the years. A quick survey of patents granted since the earliest days of film shows that over the course of less than a century film and motion pictures have gone through some immense changes. A review of patented film technologies took us on a journey from feeding celluloid film through a recording device to writing video data digitally to an optical disk for easier computer editing. What follows are some of the patented inventions that most captured my attention and imagination.
At the heart of policy disputes over standard essential patents is a simple truth: Companies whose products depend on standardized technologies want to increase their profit margins by cutting input costs – the royalties they pay to use standardized technologies invented and patented by other companies.
In other words, policy conflicts over standard essential patents (SEPs) tend to pit implementing companies against inventing-and-licensing companies, one business model against another.
So when in the course of patent policymaking it becomes necessary to examine the worthiness of alleged scholarship about SEPs, a decent respect for the consumers and markets ultimately affected requires policy makers to examine the scholarship’s origin and separate fact from advocacy.
Such is the case for a new “working paper” that entered the standards debate last month with a controversial thesis that generated headlines and a lot discussion in patent circles. Its title: “The Smartphone Royalty Stack: Surveying Royalty Demands for the Components Within Modern Smartphones.” Its authors: Ann Armstrong, associate general counsel at Intel, as well as Joseph J. Mueller and Timothy D. Syrett, two lawyers at Wilmer Cutler Pickering Hale & Dorr who work for Intel.
A recent research report by Professor Catherine Tucker, titled The Effect of Patent Litigation and Patent Assertion Entities on Entrepreneurial Activityhas received wide publicity. The report purports to document suppression of Venture Capital (VC) investments due to litigation by so-called “patent trolls” – or Patent Assertion Entities (PAEs), which Professor Tucker identifies as “frequent patent litigators” – patentees that have caused more than 20 “instances of a patent being litigated” in a span of 17 years (p31-32). Professor Tucker arrives at a startling conclusion: VC investment would have been about $22 billion higher over the course of five years “but for litigation brought by frequent patent litigators” (p36) – suggesting that enforcement of patents can frustrate the goal of the Patent Act. In other words, the law of innovation ostensibly works against itself.
A footnote in the report’s front page discloses that the source of funding for this particular study was provided by an organization that has a substantial interest in the study’s outcome – the Computers and Communication Industry Association (CCIA). It may come as no surprise that Professor Tucker’s conclusions happen to fall in line with this organization’s previously-articulated beliefs that patents block new technology development. It is also noteworthy that Google, a prominent member of the CCIA, has also provided Professor Tucker with $155,000 of funding since 2009. In a June 2014 press release announcing this study, CCIA attorney Matt Levy proclaimed:
“For the first time, we have an economic model proving patent reform is not a zero sum game between protecting intellectual property and reducing abusive patent litigation … Professor Tucker’s research reveals the harms of skewing the patent system too far in favor of protecting low-quality patents.”
Over the past several years the U.S. Supreme Court has slowly, but consistently, eroded what is considered patent-eligible, most recently with decisions on software and gene patents. In essence, the universe of patentable innovations has been diminished. And with it, the country’s economic potential.
Innovation is a powerful economic force and driver of both development and prosperity. Yet the Supreme Court’s recent decisions undermine the incentives to innovate in areas critical to future U.S. economic growth. Reducing the patent-eligible landscape in this way essentially eliminates any future U.S. contribution in these areas. Fundamentally it is an issue of incentives and their power to shape behavior.
Incentives are essential to innovation due to the expense of research and development activities, and the public-goods nature of the resulting knowledge. As described by Belleflamme (2006), intellectual property (IP) generating activities suffer from three generic sources of market failure: externalities, indivisibilities and uncertainty. The externalities arise from the public-goods nature of information, which makes imitation is easier than invention. Information and knowledge are public good in the sense that they are non-rival in consumption and non-excludable. In addition, intellectual property markets are characterized by indivisibility since knowledge and information are inherently discrete. Finally, knowledge creation involves tremendous uncertainty and risk.
In this final segment of my conversation with Ray Niro we discuss the politics of patents, starting with the reality that the Obama Administration has for some time adopted the view of Google and other similarly situated tech companies that seem comfortable with an ever weakening patent system. We also discuss the Supreme Court’s recent decision in Alice v. CLS Bank, as well as the continuing and alarming trend toward expanding the definition of patent ineligible subject matter.
QUINN: Given that the Obama Administration is already out in front anti-NPE, anti-patent troll, and seems to be taking the Google philosophy which is who their advisors are, it seems to me foolish to think the Patent Office is going to moderate that decision and limit it narrowly.
NIRO: Right. The Administration has become a shill for Google — you even have a Google person running the Patent Office. So you have a situation where any number of patents, tens of thousands of patents, are going to be affected by Alice and also by the Limelight decision on split infringement.