On August 28, 2014, I had the opportunity to speak with Professor Mark Lemley on the record. Lemley and I share the opinion that Alice v. CLS Bank represents a significant change in the law relevant to software patents. To my surprise this truth is not understood or appreciated by many in the patent community.
If you review the Alice form paragraph rejections from the USPTO, the reality that the USPTO is withdrawing Notices of Allowance and issuing Alice rejections, the latest decisions from the Patent Trial and Appeal Board, and a handful of post-Alice Federal Circuit cases the landscape is extraordinarily adverse to software patent applicants. Still there are those who protest and say that little or nothing has changed despite the objective reality facing applicants and patent owners.
Against this backdrop of disbelief I thought it would be useful to walk through the analysis with Professor Lemley. What follows is the final segment of our interview. To start reading from the beginning please see The Ramifications of Alice: A Conversation with Professor Mark Lemley. For our continuing coverage of the Alice decision please see our Alice archive.
QUINN: Yes, I think so, too. What part do you suppose the fact that these judges largely did not grow up during the era of the Internet plays in their decision making? The reason I throw that out there is because it seems like there is just this completely false idea that coding software is a trivial process. And it’s not. Even Justice Kennedy during the oral argument said that “any second year engineering student could code this up.” Well, I don’t know about you but practically every time I open my computer I see a critical warning that tells me that I have to download this or my system’s will explode. Shouldn’t that nearly universal experience be a clue to somebody that maybe this isn’t as trivially easy as the judges think it is?
LEMLEY: I think that’s right. And part of the problem is you’ve got some old language, there’s old Federal Circuit language that let people get away with very little disclosure in the spec by saying that writing code was “necessarily a mere clerical function to a skilled programmer.” And that strikes me as crazy. But the Court seems to have come out and had that in its mind. It didn’t help that the lawyer for Alice was asked by the Supreme Court, well, couldn’t somebody code this in a weekend? And he said yes. So it may be that this was a particularly bad case for the patentability of software generally. And I think that’s been another lesson in the 101 cases. Part of the Supreme Court’s view and the outcomes is they just view the 101 issue differently than the Federal Circuit does but part of it is they’ve gotten some pretty lousy claims up there to review, right? And so they look at those claims and say well this sort of thing shouldn’t be patentable. But their opinions are not limited to this sort of thing. And it’s hard to draw a distinction without putting in front of them a case that really does look like it’s got real computer technology in it.
QUINN: I think up until— I would have totally agreed with what you just said up until this case because I think that the claims in this case were good. This was by and large the way that you construct software claims. I mean I was reading some of IBM’s patents that deal with Watson and they’re really constructed the same way. I think the construct is a good construct whether or not the underlying technology comes through is a different question. That’s again problematic because I think you could read the Watson claims, a lot of them at least, and you get done and you’re like well what really is new here? But then at the end you have what is essentially a Star Trek level computer. The claims were no doubt written that way because that was how the industry was told to write claims to get them to pass muster, so the rules of the game have changed mid-stream it seems. And I don’t know what the answer to this is other than through all these changes in the law, additional layers of disclosure need to go into the spec in a way that doesn’t come back to haunt you. You just cannot hide the innovation anymore both in the claims and in the spec.
LEMLEY: Yeah. People have been writing claims that don’t emphasize the technological contribution of the innovation. And I think that’s part of the problem. And I think if we can write claims that really highlight the technological contribution then the Court maybe is going to be inclined to view those differently. And more favorably.
QUINN: I hope so. I mean basically right now what I tell people with software it’s not pretty, it’s not the end of the world moving forward, but it’s gotten a lot more expensive because we have to do a lot more in the spec to have any hope. And the reality is that the law is likely to change a couple times before any patent applications that you would file today would even get examined. But if I’m correct, it will be too late to apply when the law changes to whatever the next test is, or whatever the more developed version of this test will be. So you have to take your best shot now, give a solid technical disclosure and hope for the best.
LEMLEY: And that may well be right. Although I’m hoping that the other thing Alice has done, of course it’s a little bit too soon to tell, but in the conference in Seattle Judge Rader made reference to the Federal Circuit having staged a bit of a rebellion against Mayo. And I think the days of that rebellion are over. Judge Rader is no longer on the court. You’ve clearly got a majority of Federal Circuit judges who applied a more restrictive test. And I think the cases you’re seeing after Alice suggest to me that the Federal Circuit doesn’t have any continuing appetite to try to fight about this anymore. There have been four patentable subject matter cases go to the Supreme Court in the last four years and they’re not going to fight this battle any more. So if that’s right, while we’re certainly going to see a bunch of cases trying to draw this line, I don’t think that patent practitioners can hope and say well I’m just going to wait it out and the Federal Circuit will come back and make this all broad again. I’m just not sure that’s going to happen.
QUINN: I don’t think it’s going to happen either. But at the end of the day the reality is the Supreme Court’s just not following the law because these different sections of the statute are concerned with different concepts. They seem like they’re interested in just shoving it all into 101 and it’s disconcerting. But what the Supreme Court doesn’t seem to be wanting to take away with 101 the Federal Circuit seems to take away with 103. That’s probably another conversation for another day though.
One of the things I definitely wanted to ask you about is where do you see this going in Congress if anywhere? And the reason I bring that up is I’ve started to raise this as an issue, and I’m starting to hear others talk about it. With what’s going on both in the biotech world and in the software world with respect to patent eligibility, without even getting into all the 103 stuff that’s going on right now, patents are being devalued at an enormous pace. Many software patents are simply no longer worth the paper that they’re written on. And a lot of patents in the biotech space are the same way thanks to Myriad and Mayo. At what point do these companies have to notify their shareholders that maybe billions of dollars need to be written down because their patents aren’t worth anything? I know this is a Sarbanes-Oxley issue. I don’t think there’s a right of private action under Sarbanes Oxley, but do you suppose at any point in time that will cause CEOs to clue in to what’s going on here and that might force Congress to take a look?
LEMLEY: That’s an interesting question. I think part of the problem, frankly, is we’ve had, especially in the software world, we’ve had a lot of over claiming. So if you look at the history of the patent system you see some pendulum swings in different directions, right? And we go from really strong protection and maybe too strong, all the way back to really weak protection that’s too weak. We’re definitely on the backward swing of the pendulum away from strong protection right now. And one of the things that I’ve always kind of tried to push for is what you really want is actually to have the pendulum stop swinging so far in either direction. You’d like to keep it somewhere near the middle. And the problem is I think that Section 101 is just a really coarse filter to try to distinguish the good from the bad in software or anything else. And so the kind of impact of too many people asserting some dubious patents or patents that they’ve over claimed maybe the backlash is bad and a bunch of legitimate patents are gonna get swept into the invalidation. John Allison, Dave Schwartz and I have a comprehensive new study of patent litigation outcomes that we’ve just completed. We looked at the industry and technology differences in litigation outcomes and some of it’s what you’d expect, but some of it is fascinating. Pharmaceutical patents do pretty well. Pharmaceutical patent owners win more than half of the time. Software patent owners do pretty poorly. They win only about 13% of the time. But the thing that really surprised us, and I think is kind of alarming is the single industry that did worst in patent litigation was biotechnology. Biotechnology patent owners won 8% of the time that a case went to final judgment.
LEMLEY: For an industry like biotech, which I think really does depend pretty heavily on its patent portfolio, that’s an alarming statistic.
QUINN: Yeah, that’s very alarming because as you know most of those companies need investors for 10 or 12 years if they’re going to have any hope of ever succeeding.
QUINN: And investors like patents, particularly in that space, because they’re investing so much money. If you don’t have a competitive advantage how are you ever going to grow as a small biotech company?
LEMLEY: Yes. I think that’s right. We need to do something about the problem of nuisance value litigation and over claiming patents, which I think has been a real problem, but we also need to make sure that people who have real inventions can get effective protection for them. And the difficulty with something like 101 is it’s really hard to look at those and distinguish them and say okay, only the good patents are going to survive this filter and the bad patents are going to be weeded out.
QUINN: You know we’re entering I think a dark time for patents and I don’t know that anybody really knows what’s going to happen on the other end. I just know that patents are important to an awful lot of different companies for an awful lot of different reasons. And the decisions that we’ve made repeatedly throughout our history is we want to have a strong patent system and right now it doesn’t seem to me like we’re heading in that direction. And this is at a time when the rest of the world largely is adopting stronger patent rules and if you look at like Bayh-Dole, for instance, dozens of countries are trying to adopt a system like we have. It just seems like we’re going backwards at the exact wrong time.
LEMLEY: Well, the question to me is how far you go backwards, right? I do think we had some excesses in the last 15 years or so and the patent litigation explosion by patent trolls has been part of that. I think that’s in large part what the Supreme Court has been responding to. The key is to not go too far in the other direction.
QUINN: I agree. In this instance I just don’t see an awful lot of judicial restraint. We study judicial restraint probably our first day of law school in many different areas so it doesn’t seem fair. You practically beg for answers. Please answer this question, you know what the important question is we’re asking, don’t dodge it, give us an answer. But now it seems like the Courts today are answering these questions about litigants that aren’t really in front of them based on these generalized concerns. I’m not going to deny that there’s been excesses in the patent litigation arena, there is certainly has been and I think there is real, genuine evil in the patent troll market with fraudulent demand letters, which is just nonsense.
QUINN: But by the same token I would be so much more comfortable handling these cases under 102, 103, and 112 because like Judge Newman says, if you handle technologies under 101 you’re potentially forestalling an entire avenue of innovation and preventing an entire industry from developing.
LEMLEY: I think that’s right. The problem is 101 is an attractive tool to people who are confronting those nuisance suits because it’s early and it’s easy, right? And it doesn’t require going through a lot of the facts, discovery, and work that can cost a lot of money if there were better mechanisms to try to get at those weak suits earlier and more cheaply you know then people could use those mechanisms. But the problem is that I’ve got somebody who shows up and says it’s going to cost you $3 million to get the summary judgment on your obviousness claim and probably courts aren’t going to grant summary judgment and they’ll send it to trial anyway. So why don’t you pay me a million dollars to go away. Everybody’s decision is to pay million dollars.
QUINN: Yeah. It is a mess all around.
QUINN: But I do think I would like to try requiring those people who are bringing a patent infringement lawsuit to file it with a much more specifically pleaded complaint and one that probably also includes detailed claim charts. Because if you’re a serious litigant you’ve got that stuff before you file anyway.
QUINN: All right. Well, I really appreciate you taking the time to chat with me. And it’ll be interesting to see where we go from here. So thanks a lot, Mark.
LEMLEY: Okay. Take care.