Editorial Note: This article is part 1 of a 2 part series adapted from a presentation I gave earlier this week at the annual meeting for the Association of Intellectual Property Firms (AIPF). CLICK HERE for my PowerPoint presentation.
Today I am going to talk about what I call the patent pendulum. When Todd Van Thomme and I originally started talking about what I would talk about today I said that there would undoubtedly be something that comes up at the last minute. I even joked that I might wind up talking about how the Supreme Court actually got the Alice decision right, surprising us all and saying once and for all that software is clearly patentable. We all know it didn’t turn out that way. So the title of my presentation today is this: Dark Days Ahead: The Patent Pendulum.
As you are probably all familiar, patent law never stays the same in the same spot. It is always swinging one or another, either swinging more towards stronger patent rights and the patent owner, or away from strong patent rights and away from the owner. It has been that way throughout history.
Normally what’s happened is that we’ve seen the pendulum swing over longer periods of time, like over decades, and then it’ll move away. For example the 1952 Patent Act was premised on the fact that Congress didn’t like the way the law was developing over the preceding years and wanted more things be patentable, hence the 1952 Patent Act did away with the flash of creative genius test. So things swung back toward a more patent friendly law, at least for a while. And then in the 1970s no courts ever saw a patent that actually had valid patent claims. This famously prompted Congress to create the Federal Circuit. Under the guidance of Chief Judge Markey and Judges like Giles Sutherland Rich and Pauline Newman, who is still on the court, the pendulum swings back toward the patent owner once again.
Generally the pendulum swinging takes a decade, or a generation. Now over the last few years things have really started to unravel and the pendulum is swinging very wildly, and quickly, in a decidedly anti-patent direction. I think we are at about the furthest point where the pendulum can swing without the little ball at the end flying clear off.
We have an ambitious agenda for 30 minutes. I’m going to talk to you about a brief history of the problem, some recent SCOTUS decisions, and then very briefly about the Federal Circuit and where they seem to be heading with respect to obviousness. I want to loop in at least a mention of obviousness because that’s really where the next battleground will be I’m afraid.
So the brief history of the problem can be summarized like this. For a very long time there’s been a whole lot of people who have just believed that innovation simply happens. They similarly believe that some innovations, no matter how useful or new, are just not deserving of a patent. They also believe that when someone patents something they are actually taking it away from the public domain, which boggles the mind really because how can something that is new and never appreciated or understood be taken away? Innovation adds to the public knowledge base, it takes nothing away from the public knowledge base or public domain.
All of this can really be traced all the way back to the flash of creative genius test by the Supreme Court, which Congress specifically outlawed in the 1952 Patent Act. It is no doubt making a resurgence under slightly different terminology, but make no mistake — Judges are making subjective decisions about innovations in a way that is remarkable similar to how the flash of creative genius test was applied. But today the problem is not only all of the aforementioned, misguided beliefs, but rather we have a general problem with ignorance. It is self evident to anyone who cares to be honest and objective that it takes time and money to innovate; innovation does not simply fall out of the sky or invent itself.
And I told some of you last night that I was going to more so than I do normally tell you what I really think today. The truth of the matter is that there are an awful lot of flat out ignorant people driving the discussion on patents and innovation. And I’m not name calling. They are ignorant. If you look at the definition of the word “ignorant,” the word “means that you are unknowledgeable or lack information about a particular area. The anti-patent naysayers have no knowledge about the industry and no desire to inform themselves about factual reality. Of course that doesn’t stop them from having opinions. Well an opinion reached based on erroneous facts isn’t helpful or legitimate. If you rely on clearly erroneous statements of fact, as they do, your opinion is likewise clearly erroneous and shouldn’t be given any consideration whatsoever.
What I find quite humorous is how anti-patent forces simply disregard our expert opinion, brushing us off as unreliable because we’re just attorneys. They say that since we’re attorneys we’re only complaining because we’re going to have less work to do. And it’s hard to imagine a more ignorant statement than that because when the law gets more complicated do any of you ever make less money? No. The people who get screwed are the clients we represent. There’s no such thing as a cheap software patent any more. Can I get you a software patent? Yes. The software patents that you already have are they worth anything? No, most of them are not after Alice. Are the applications that you’ve been filing over the last six or eight years going to be worth anything? No, most of them won’t be thanks to Alice. Moving forward can and will still get software patents for clients. This is clearly evident by the fact that the big banks aren’t having trouble getting their software patents issued, which is an interesting topic in and of itself. But at the end of the day it’s our clients that are going to take the short end of the stick. As it always is when poor decisions are made and bad law is enacted.
As I’ve already said, the mischief in my opinion all starts with the flash of creative genius test. In 1941 the Supreme Court says that the new device, no matter how useful that it may be, must reveal a flash of creative genius in order to be patented. This test has more to do with obviousness, but what we see today with respect to obviousness and patent eligibility is they’re really one and the same thing any more. The Supreme Court, as we’ll get to in a minute, just conflates those issues.
I think the way we move forward will be to write patent applications so that the invention confuses anybody who wears a black robe. If they are confused then you’ve got something that’s patent eligible. [Laughter] Because if they understand what your invention is, if those English majors and History majors can understand what you’re telling them, then they get it and it’s either going to be trivial and obvious, or it’s simply not deserving of a patent and patent ineligible. Because I was amazed at some of the stuff we just saw up here. How many of you were amazed? [Clapping — NOTE: the opening speaker at the meeting was Jim Marggraff, the Chairman, CEO, and Founder of Eyefluence, as well as the Founder and Vice Chairman of Livescribe. Marggraff may be most known as the former President of LeapFrog Enterprises’s Internet Division. More to come on the truly amazing innovations Marggraff demonstrated. Stay tuned!]
How many of you actually think any of of what Jim just demonstrated is patentable today? Yeah, that’s sad, isn’t it? Because the components are just plastic, with circuit boards, it’s got some wiring, and it’s a coaxial cable. But the real magic is the software. And now that’s just an abstract idea according to the Supreme Court. According to Justice Kennedy during the oral arguments in Alice any second year engineering student can create software. We all know that isn’t true. We all know that Justice Kennedy is flat out incorrect. But that’s where we’re at, unfortunately. Cool stuff like this is an abstract idea. Why? I can’t tell you because they haven’t defined what it means to be “an abstract idea.” We have a test that we have to satisfy and no definition for what the test even means. The critical word not defined. I’m gonna get worked up. And we’re gonna start with ignorance.
One of the things that we see in this space is that people say “software patents are unnecessary.” Surely in bio and pharma they’re spending billions of dollars, maybe they need software patents there, but anybody can program software over the weekend. You just code up whatever you want. I’m sure the stuff just demonstrated took no more than three hours to code. Ridiculous! That is what they say, but anyone who cares about truth knows writing code that actually works is no trivial matter.
The naysayers try to back up their claims by go back to Twitter because the belief was that patents didn’t matter much to Twitter. “Oh, Twitter doesn’t care about patents, and they’re doing all kinds of great stuff,” they say. Well how about we look at the facts?
Twitter was founded in March of 2006 and they filed their first patent application two years later in July of 2008 to cover what? Tweeting. That’s right – Tweeting! And that was at a point in time when you file under a first to invent system so the priority date is going to be well before they filed that patent application.
As of the end of September 2013, before Twitter went public, they had nine U.S. patents issued and 95 patent applications pending. Does that sound like a company that doesn’t care about patents? No.
Surprisingly, every time Twitter files something with the SEC they say patents are incredibly important assets for them and that they plan to go after patents. And when they can’t get a patent they plan to rely on trade secrets and keep it confidential. They’re saying all the right stuff, but the public narrative is that Twitter doesn’t care about patents. Hakuna Matata, group hug. Let’s just donate everything to the next person who’s going to rip you off. But they go public in November of 2013 and less than seven weeks later they buy 900 patents from IBM. How many of you think that the institutional investors didn’t know that that was going to happen when Twitter went public? Of course they knew! What institutional investor in their right mind would pay the money that Twitter was asking to raise in an IPO for nine patents and 95 patent applications? Nobody would have paid billions for that. IBM had long since threatened to sue Twitter. We know IBM doesn’t like to sue anyone, but they are a sophisticated company with a lot of patents. Everybody knew IBM portfolio was going to be a huge thorn in the side of Twitter. Everybody knew IBM had rights that Twitter was infringing. And the deal closes within seven weeks after they go public? Of course all the institutional investors knew.
Even now that Twitter is approaching a thousand patents, every SEC filing continues to point out that other companies in the internet technology and/or media space have far more patents than Twitter, which will create risk for the company moving forward.
So the next time somebody tells you “software patents don’t matter, look at Twitter they didn’t care about these things,” you can say that just isn’t true. Not only is it wrong, but if you just take even a small amount of time to look at publically available information they would know it’s wrong. Twitter, Facebook, Google, Priceline, Apple all built on software patents. Facebook and Google filed their first software applications before the companies were even founded. Google filed two applications before they even bought the domain name Google. The popular narrative, which is simply not true, is being driven by ignorance. The article that will debunk the Twitter myth was posted on IPWatchdog this morning.
My next provocative but correct statement is this: The modern technology industry doesn’t exist without patents. The critics hate hearing this, too. I actually got into a Twitter battle with somebody from EFF and the guy who writes Techdirt a couple weeks ago over this point. The fellow who writes Techdirt said, “So you’re basically saying that the technology industry wouldn’t exist without software patents?” And my response was “Finally you get it!” And their response was basically, to paraphrase: “You’re so stupid.” No, it is just a fact that the modern technology industry wouldn’t exist without patents. But I won’t just say it, let’s actually look at the facts.
The first software patent issued in 1965. Even the most intellectually dishonest critic has to admit that the technology industry that existed in 1965 bears no relationship to what we have now. None. The only company that’s still relevant is IBM. All the other companies are just names on a building and now they’re taking the names off the buildings as the buildings fall apart. The younger folks in the room probably know Wang as a name on a building, right? No. That was once upon a time synonymous with computer. They were as dominant as Microsoft ever was, as dominant as Google ever will be, and now they probably don’t even have a Wikipedia page anymore.
The technology industry today is very different from 1965, and it’s also very different from the early 1980s when software started to become more widely patented after Diamond vs. Diehr.
If you look within the first year of Apple being founded that’s when they filed the original Wozniak patent application. And Microsoft didn’t go after patents right away until they started getting sued. In response what did Microsoft do? Starting in 1995 Microsoft has gone a totally different way and now they’re in the top several patenting companies in the world.
It’s all built on patents. And if we don’t have patents for software or for biotechnical stuff we’re only going to get trivial innovation. Why? Because that’s the only innovation that’s worth doing because innovating costs money. Even creating a software package costs money despite what the critics seem to think. Take for example an IBM mainframe kind of project. That will take hundreds – probably 500 or 600 team members – several years to put out. You can’t invest that kind of money if the minute it comes out somebody’s able to just copy it and sell it for less because you paid for it and they don’t have to pay for the sunk costs associated with research and development.
The only way that the Supreme Court Justices could say what they said in Alice is because they don’t use a computer. Did you know they don’t even use email? Justice Kagen in a Politico interview about 18 months ago said that the Justices don’t use email. Where do they live? Are they from earth? And they’re deciding these cases!
How could software be so trivial? How could something be so trivial that never works? How many times do you have to update any piece of software? You get these warnings that say: “This is a critical update. If you don’t update immediately your computer is going to explode when you turn it on next.” Obviously I’m taking some literary license there, but if it isn’t critical updates its patches to prevent identity theft and other security vulnerabilities. Even giant retailers like Target and Home Depot have those problems and they have massive IT Departments chasing these problems. You know, you could almost write a novel and nonobvious software claim merely by saying in the preamble that the invention is “A piece of software that works appropriately as designed that doesn’t need to be updated and comes without security vulnerabilities comprising…” And you could put whatever you want next because nothing in the preamble’s ever been done before. Software always fails. It always needs to be updated. Interoperability problems galore. For the life of me I can’t understand how anyone could ever say that software is trivial.
Continue Reading Part 2 —> SCOTUS: Public Enemy Number One for Patent Owners