Ten years ago if you said that patent eligibility would become one of the most important, hotly debated issues in the patent field most in the industry probably would have thought you simply didn’t know what you were talking about. Five years ago some saw the issues percolating, but still many in the trenches with their day-to-day practice life would likely still have raise a cautious eyebrow and questioned why you thought even the Supreme Court might turn its back on a solid generation of well established patent law. The tone was perhaps cautious, but most couldn’t imagine that the Supreme Court and the Federal Circuit would cease their expansive view of patent eligibility.
Oh how times change!
Today, after several years of substantial turmoil, patent eligibility in a variety of economically significant technologies is extremely uncertain, including software, natural products, medical diagnostics and personalized medicine. It is with great irony that one of the few things we know with any degree of certainty is that business methods are patent eligible. We likewise know that at least some cDNA is patent eligible, except that man-made cDNA that happens to be identical to what occurs in nature. Of course, that raises more questions than it answers.
Not surprisingly, the decision of the latest Federal Circuit case on software patent eligibility – Accenture Global Services, GMBH v. Guidewire Software, Inc. – could be predicted from the makeup of the CAFC panel. Judge Lourie, joined by Judge Reyna, issued the majority opinion that the system claims were invalid. The Court followed the analysis for determining patent eligibility from CLS Bank,, 717 F.3d 1269 (Fed. Cir. 2013) and affirmed the district court’s finding that the system claims of U.S. Patent No. 7,013,284 (“the ‘284 patent”) were ineligible. Judge Rader dissented.
Accenture appealed the district court’s holding that system claims 1-7 and method claims 8-22 were invalid as not directed to patentable subject matter. Interestingly, Accenture only appealed the ruling on the system claims, thus waiving its appeal on the method claims.
Everyone in the industry knows that over the past several years there have been numerous patent eligible subject matter issues raised and decided (to some extent) in the United States Supreme Court, the Federal Circuit and in the Patent Trial and Appeals Board at the USPTO. None of these cases are what I am referring to here in this section. In perhaps lesser known fashion Congress made two significant, but limited, statutory changes to what is considered patent eligible subject matter.
1. Tax strategy patents
The first of two noteworthy changes relates to tax strategy patents, which became effective on September 16, 2011.
In a bizarre circumstance Congress chose not to render tax strategy patents patent ineligible under 35 U.S.C. 101. Rather they chose a far more convoluted route. Tax strategy patents are still patent eligible subject matter pursuant to Section 101, but for purposes of evaluating an invention under section 102 or 103 of title 35, any strategy for reducing, avoiding, or deferring tax liability, whether known or unknown at the time of the invention or application for patent, is deemed insufficient to differentiate a claimed invention from the prior art.
The deeming of tax strategies, known or unknown, as being within the prior art does not does not apply to that part of an invention that (1) is a method, apparatus, technology, computer program product, or system, that is used solely for preparing a tax or information return or other tax filing, including one that records, transmits, transfers, or organizes data related to such filing; or (2) is a method, apparatus, technology, computer program product, or system used solely for financial management, to the extent that it is severable from any tax strategy or does not limit the use of any tax strategy by any taxpayer or tax advisor. Thus, you can still patent technologies, including software related innovations, that relate to the preparation of tax filings and the like.
Over the years I have had the opportunity to work with many inventors. In fact, over the years I have worked with or advised literally thousands of inventors, the overwhelming majority of which were first time inventors, or inventors who were for the first time attempting to protect their own invention for their own company. I have found that those who are serious are capable of meaningfully participating in the preparation of their own patent applications. Such inventors are highly motivated, but they just don’t know what to do, or exactly how to do it. Frequently they are afraid to mess things up by trying to do something themselves that is over their head, not because they are not smart enough, but rather because this “patent stuff” is quite complicated.
The patent rules at times seem arbitrary (because they are) and show little evidence of an overall thoughtful consideration. For example, why would you ever set up a regime where there are different time frames for completing various mandatory responses for free, but also having the ability to obtain automatic extensions of time of varying length? For example, you will have 3 months to respond to an Office Action issued by an examiner, but that can be extended for another 3 months. But if you get a Notice of Missing Parts you will get 2 months to respond, but that could be extended up to 5 months. Talk about arbitrary lunacy! How is an independent inventor supposed to navigate such a mindless maze?
In the United States, attorneys, judges and others have struggled for decades to determine when, if ever, computer programs or software should be eligible for patent protection. In the 1960’s the U.S. Patent Office declared that software could not be patented. Since then, a series of court decisions have rejected that view and established that one may definitely patent software in the U.S., although the exact requirements remain unclear and critics increasingly demand that it should not be patentable.
As a starting point, 35 U.S.C. §101 provides that any new and useful process, machine, manufacture, or composition of matter, or new and useful improvement thereof, is eligible for patent protection, subject to other requirements of the Patent Act (that is, §101 is just the threshold test for patentability). Congress has never stated any limitations to the patentable categories of §101 and case law has only recognized three categories of exceptions – subject matter that may not be patented: laws of nature, physical phenomena and abstract ideas. Computer software is often found to be ineligible on the ground that it comprises abstract ideas, but courts have struggled to provide a precise formula or definition for abstract ideas.
Earlier today the United States Supreme Court issued a decision that fundamentally changed the law of patent eligibility that has existed in the United States for the past 30 years, calling into question at least many tens of thousands of issued patents and many tens of thousands of pending patent applications. See Supremes Rule Isolated DNA and some cDNA Patent Ineligible.
With lightening speed, the United States Patent and Trademark Office has sent a memorandum to patent examiners relating to the aforementioned Supreme Court decision in Association for Molecular Pathology v. Myriad Genetics, Inc. The 1-page memorandum from Drew Hirshfeld, who is Deputy Commissioner for Patent Examination Policy, is direct. “Examiners should now reject…”
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