Recently we published a five-part series that debunked many prevalent myths about patent trolls. See A Fractured Fairy Tale: Separating Fact and Fiction on Patent Trolls, written by Steve Moore of Kelley Drye. While a bit long, it should be considered mandatory reading if you want to understand the underlying facts instead of just buying into the hype and hyperbole associated with the so-called “patent troll problem.” Similarly, if you want to get a good, non-biased view of patent litigation in the United States you absolutely have to read the recent report of the Government Accountability Office, which is an independent, nonpartisan agency that works for Congress.
Moore, with co-authors Marvin Wachs and Timothy Moore, concludes that when you really look at the facts and underlying dynamics of patents and patent litigation, there really isn’t a problem at all. The GAO report released on August 22, 2013 confirms the extensive research by Moore. The GAO report explains that the number of patent litigations only slightly fluctuated between 200o and 2010, with a one-third increase in 2011, which the report attributed to changes to patent laws ushered in by the America Invents Act and not as the result of any problematic increase in litigations initiated by patent trolls. This increase in patent litigation was by design. While Congress may not have been aware that an increase in litigation would occur, the truth is that the design of the AIA was guaranteed to lead to one of two things. First, the joinder and consolidation provisions of the AIA would either substantially curb patent trolling because it is now much more difficult, if not impossible, to bring a single lawsuit with many dozens (or hundreds) of defendants. Second, increase in the number of patent infringement lawsuits because patent owners must sue infringing defendants one at a time, or at least in much smaller groups. It would seem that the AIA did not stop patent litigation, so the result is a greater number of lawsuits. See alsoThe America Invents Act at Work.
Still further, the GAO found that “companies that make products brought most of the lawsuits and that nonpracticing entities (NPE) brought about a fifth of all lawsuits.” So there isn’t a patent troll problem at all despite the protestations of the Silicon Valley elite who think every patent they get sued on is invalid and every patentee plaintiff is a patent troll.
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.
The law as it relates to software has been in flux over the last 10 years. Many older patent applications simply do not have enough detail to satisfy the current requirements to obtain a patent, although when drafted they would have been sufficient to satisfy the requirements then in place. Describing software as a pure method claim has not worked for a long time despite the fact that in reality software is really a method. Much more than a cursory description of software as a series of steps is required in order to have hope of obtaining patent protection for software.
Indeed, ever since the Federal Circuit en banc decision in Bilski, claims have been required to be tethered to tangible components, such as data storage devices, processors, databases, controllers, servers and the like. Unfortunately, however, the Patent Trial and Appeals Board at the United States Patent and Trademark Office now has taken the position that they will ignore the tangible components within a computer implemented method claim and then look to see what remains before determining whether the claim is patent eligible. See PTAB Kills Software.
Of course, after you remove or ignore the tangible components what remains is a naked process, which is patent ineligible. Thus, deciding to ignore tangible components leads to the inescapable conclusion that no software is patent eligible. Such disingenuous reasoning has the effect of punishing applicants for writing claims as the Patent Office has mandated ever since the machine-or-transformation test was first announced by the Federal Circuit in Bilski. The test announced in SAP/Versata, which was the first covered business method review decision announced by the PTAB, cannot be the correct test, and ultimately the decision (or at least the rationale) will be reversed. Any test that has the net effect of rendering all software patent ineligible, like the SAP/Versata test, is simply not correct as I will explain more clearly below.
On Tuesday, June 11, 2013, the Patent Trial and Appeals Board issued a ruling in SAP America, Inc. v. Versata Development Group, Inc., which is the result of a Covered Business Method challenge to U.S. Patent No. 6,553,350 filed by SAP on September 16, 2012. The PTAB, per Administrative Patent Judge Michael Tierney, determined that “Versata’s ’350 claims 17, and 26-29 are unpatentable under 35 U.S.C. § 101.” Looking more closely at the ruling, however, makes it clear just how significant this ruling will be. The breadth of the 101 determination is shocking and virtually guarantees that 101 will be used by patent examiners to effectively prevent software patents from issuing altogether.
In a nutshell, the PTAB ignored all the recited tangible computer elements embodied in the claims. Once the specifically articulated and necessary structure is ignored the PTAB then concluded that the claims protect only an abstract idea.
In order for there to be infringement each and every limitation would have to be found in the accused infringing method. So under what authority does the PTAB ignore specifically recited structure? The authority that the PTAB seems to be relying on to ignore claim terms is unclear and not explained in the opinion in any satisfactory way. It does, however, seem that the fact that the invention can be implemented in any type of computer system or processing environment lead the PTAB to treat the method as one that could be performed on a “general purpose computer,” rather than a specific purpose computer. Thus, the PTAB picks up on the arbitrary and erroneous distinctions between general purpose computer and specific purpose computer without as much as a thought and wholly without factual explanation.
How can the Patents Bill appear so different to so many people? Why is it moving so slowly through the parliamentary process? Have we at last found the mythical kiwi chameleon?
The current law
The Patents Act 1953 defines an invention as any “manner of new manufacture”. Nobody looks at this literal definition any more. What is patentable subject matter and what is not patentable subject matter is defined by case law.
In a one-page memorandum to the Patent Examining Corpsdated May 13, 2013, Deputy Commissioner for Patent Examination Policy Drew Hirshfeld had a simple message to respond to the Federal Circuit’s en banc non-decision in CLS Bank v. Alice Corp. The message was this: “there is no change in examination procedure for evaluating subject matter eligibility.” (emphasis in the original)
This is hardly a surprise given that there were 7 different opinions with only one opinion garnering more than 5 out of 10 Judges. The sole opinion that achieved a majority was a mere 58 words in length and did nothing more than explain that given the fracture of the Court all that could reasonably be said was that the decision of the district court had been affirmed by an equally divided Court, which unfortunately rendered the claims all patent ineligible.
In his opinion Chief Judge Rader explained in footnote 1: “though much is published today discussing the proper approach to the patent eligibility inquiry, nothing said today beyond our judgment has the weight of precedent.”
Chief Judge Rader’s band De Novo should play a dirge tonight.
On May 10, the Federal Circuit issued its en banc opinion in CLS Bank. Within 48 hours, I had twice read the 135 page decision. It may be a bullet to the head of the software industry. Don’t take my word for it: four different judges say so:
And let’s be clear: if all of these claims, including the system claims, are not patent-eligible, this case is the death of hundreds of thousands of patents, including all business method, financial system, and software patents as well as many computer implemented and telecommunications patents. If all of the claims of these four patents are ineligible, so too are the 320,799 patents which were granted from 1998-2011 in the technology area “Electrical Computers, Digital Processing Systems, Information Security, Error/Fault Handling.” Every patent in this technology category covers inventions directed to computer software or to hardware that implements software. In 2011 alone, 42,235 patents were granted in this area. This would render ineligible nearly 20% of all the patents that actually issued in 2011. If the reasoning of Judge Lourie’s opinion were adopted, it would decimate the electronics and software industries. There are, of course, software, financial system, business method and telecom patents in other technology classes which would also be at risk. So this is quite frankly a low estimate. There has never been a case which could do more damage to the patent system than this one.
That parade of horribles is not entirely fair to Judge Lourie’s concurrence. Judge Lourie based his opinion on the fact that the disputed patent is directed not just to electronics, but to an insignificant use of modern electronics to implement an arguably basic financial transaction. I doubt that Judge Lourie would expand the holding in CLS Bank far beyond that specific fact pattern. Nevertheless, as quoted above, the dissenting judges do not share even this much optimism.
How to Write a Patent Application is a must own for patent attorneys, patent agents and law students alike. A crucial hands-on resource that walks you through every aspect of preparing and filing a patent application, from working with an inventor to patent searches, preparing the patent application, drafting claims and more.
Without hesitation I recommend One Simple Idea and think it should be required reading for any motivated inventor. There is so much to like about the book and so much that I think author Stephen Key nails dead on accurate. The book is educational, information and inspirational. For the $14 cover price it is essential reading.
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