Is there a future for software patents in an age of software innovation?

A little less than one year ago the United States Supreme Court issued its decision in Alice v. CLS Bank, setting off a whirlwind reaction. In a unanimous decision authored by Justice Thomas the Supreme Court held that the patent claims were drawn to a patent-ineligible abstract idea, thus they were not eligible for a patent under Section 101. Despite the fact that the claims involved were directed to software (i.e., software patent claims) the Supreme Court did not use the word “software” in the opinion. Nevertheless, the future for software patents has been dramatically altered.

Since the decision by the Supreme Court, Alice has been used to reject software patent claims as being patent ineligible by the Federal Circuit, numerous district courts, the Patent Trial and Appeal Board (PTAB) and patent examiners at the United States Patent and Trademark Office (USPTO). Indeed, the Alice decision has infused a great deal of uncertainty into the law of patent eligibility. The level of uncertainty can perhaps best be exemplified by the fact that the Federal Circuit issued what appear to be diametrically opposed opinions in Ultramercial and DDR Holdings.

Numerous patents have been lost with claims invalidated as being patent ineligible in the wake of Alice. This has negatively affected patent valuation, rendering many patents worth far less if not completely worthless. this has led some commentators to lament the toxicity of the patent asset and question whether the the United States Patent and Trademark Office (USPTO) has the bandwidth to cope with the increased time demands placed on patent examiners as they navigate the patent eligibility issue in as many as 50% of all pending patent applications.

In December 2014, the USPTO provided interim guidance on patent eligibility. The guidance provided the below flowchart to describe the two-step analysis required when patent examiners are confronted with software patent claims.

The USPTO further attempted to mitigate the Alice disaster by publishing hypothetical examples of when software patent claims should be deemed to be patent eligible. Unfortunately, it seems to many practitioners that at least some examiners are simply not following what the Office has told them to do.

Reports suggest that some patent examiners are going through both parts of the Mayo analysis even when Step 2A of the analysis clearly requires a finding that the claim is patent eligible. While I do sympathize greatly with the examiners given the tumultuous past few years, with no fewer than 19 substantive changes to patent law according to an Inspector General from the Commerce Department, there is no excuse for continuing on to Step 2B of the inquiry if the patent claims are eligible under Step 2A. Unfortunately it seems that many patent examiners and judges alike are channeling the Supreme Court and attempting to determine how they may view a particular patent claim rather than independently applying the test. This has led to great uncertainty, which has led many to question the future for software patents.

I do feel for the Patent Office and patent examiners because I don’t know how they can really rationalize the Federal Circuit’s rulings in Ultramercial and DDR, at least not the way that patent decisions have historically been rationalized.  While there are ways that you could distinguish Ultramercial from DDR, I don’t think you can honestly rationalize these two decisions by looking at the patent claims. The patent claims are structured in a similar way. There was a thicker technical disclosure in the patents that were an issue in the DDR case, but a thicker specification should be properly treated under 35 U.S.C. 112, not as a patent eligibility issue under 35 U.S.C. 101. The future for software patents, although tied to patent eligibility under 101, seems more directly linked in an analytical way to sufficiency of disclosure under 112 and obviousness under 103.

Normally when there is a rejection the innovation itself has not been rejected, but rather the particular way in which it has been claimed is found to be unacceptable for one reason or another. The insidious nature of patent eligibility rejections, however, is that that innovation itself is rejected without regard to whether the innovation is useful, new, non-obvious and described well enough. A finality in the decision making process is reached even before any substantive inquiry is made about the nature and quality of the innovation. Such cursory decisions at the front end, without any factual inquiry into the merits of the invention, can render an entire category of innovation dead on conception, which is why patent eligibility has always been historically viewed as a low threshold inquiry, not the insurmountable mountain that it has become.

There never should be difficult decisions under 101. If there isn’t an easy, obvious decision that would render the innovation patent ineligible then patent examiners, and Judges, shouldn’t seek to use 101 to immediately render the entire innovation patent ineligible. In many regards this type of decisional approach is reminiscent of the “earth is flat” crowd, who couldn’t be bothered with considering new information and instead clung to irrational notions in the face of evidence to the contrary. What scientific research and technological pursuits will be stopped by a patent eligibility requirement on steroids? We have already significantly deterred R&D into genes, medical diagnostics and software. Amazing really, but this Supreme Court will go down as one of the most science phobic courts of all time.

Using 35 U.S.C. 101 to render an innovation patent ineligible is not only myopic in the extreme, but it is also akin to using an elephant gun to kill a mosquito.  The proper analysis has historically allowed the other sections of the statute due the work for which they were intended. If there is anything in the disclosure that satisfies 35 U.S.C. 112 then look at the claims through those eyes as you determine whether the claims are novel under 35 U.S.C 102 and non-obvious under 35 U.S.C 103. Patent eligibility should only be used as an impediment in the most extreme, egregious cases. It is simply inappropriate, and rather stupid, to allow innovations to be weeded out before anyone actually considers whether there was a disclosure that adequately teaches a new and non-obvious innovation.

Historically the USPTO always preferred to issue a patent when in doubt rather than bury the innovation that otherwise could have led to things that we could never have known. Stopping an innovation at the gate prevents investment, which places a strangle hold on the technology and kills further research and development. Unfortunately, somewhere along the way we got away from that understanding. Perhaps it was under the Bush Administration with so-caled “second pair of eyes” review, and if you recall that was largely a response to New York Times, NPR and other media outlets making fun of certain patents that had issued, for example the patent on the swing that went sideways. So the response was that the Patent Office was never going to let anything that shouldn’t have issued ever issue again. Well, silly patents don’t issue as often as it once did, but by having the filter so high you wind up catching a lot more than what you really should.

But this leads us to the real reason that 101 is such a hot topic — by forcing patent eligibility to perform a stringent gatekeeping function district court judges can get rid of many patent cases on a motion to dismiss without any discovery. The Supreme Court seems exceptionally interested in the patent troll that’s not really in front of them in the cases they are deciding, and they are trying to deal with abusive litigation despite that not being an issue. Yes, there are bad actors in the industry, but making the patent eligibility inquiry the ultimate test is not a productive way to do anything other than weed out innovation at its earliest stages before it has ever been evaluated for novelty or obviousness, and in many cases before it has ever had an opportunity to show its value in the marketplace.

As odd as all the machinations over software patents have been, the one thing that strikes me as most bizarre is how the courts continue to cling to the ridiculous, nonsensical distinction between a general purpose computer and a specific purpose machine. This isn’t a distinction without a difference, but rather it is a distinction for those without a clue. The real value in software is that it operates across platforms. If you want to fire up an Apple computer you’re going to be able to use compatible software, if you’re going to fire up a PC you’re going to be able to use the same compatible software regardless of what other software you might be using. Yet, interoperability and compatibility seems to literally make software less likely to be patent eligible because it works on any type of machine. Well, that is of course the point. If you say that out loud it sounds strikingly ridiculous, yet judges write it all the time as if the more they write it somehow it will eventually become true.

That fact that software works on any machine, at any time, in any environment is where the value resides. To even suggest that interoperability and compatibility somehow makes the software routine is among the most ridiculous things anyone has ever thought, said or written. It shows such a lack of familiarity with the fundamental underpinnings of software that anyone who has such a childish view of the technology should be deemed unfit and not competent to decide issues involving the technology.

As we approach the first anniversary of the Alice decision, the future of software hangs in the balance. Ultimately I have no doubt that software will be declared to be patent eligible either by the Congress or the Supreme Court, but it took the Supreme Court nine (9) years to retreat from their first misguided software patent decision in Gottschalk v. Benson. Congress seems wholly incapable of doing anything that would remotely be in the best interest of the patent system. Thus, the immediate future for software patents seems murky. Certainly there are ways forward, but the way forward is not cheap, it is not easy, and it will likely be long and arduous. Gone are the days that a patent on software could be quickly and cheaply obtained. To be worth anything in the long run great care must be made to disclose the technology with an overwhelmingly detailed specification. Narrowly tailored claims should be sought, but with plenty of support to circle back for broader protections once the courts have come to their senses on software, which makes up at least 50% of all innovation today.