Posts Tagged: "Alice v. CLS Bank"

The United States Supreme Court is commonly known to resolve difficult issues of law. Yet, Alice v. CLS Bank[ii], last year’s unanimous Supreme Court decision, has caused confusion about whether computer-implemented business methods and software innovations are patentable under 35 U.S.C. §101. The question of patentability of software-related innovations – even those involving merely implementations of business-related innovations – seemed…

Clearly, one does not get a patent on software or a computer program. Software, just like electronic circuits, or steam, or solar energy, or gears, or rubber bands — to name a few — is only a means to an end. Under the USPTO long time guidelines one receives a patent only if a) there is an invention b) if there is a proper Specification (an adequate disclosure to one skilled-in-the-art) and c) the so-called invention in the patent application is not abstract and not obvious.

Business method patents are still being granted after Alice, but are being granted at lower rates than before, and some assignees are better at obtaining them than others. The top assignees in the business methods art units have a wide range of allowance rates, from Oracle at 83.3% to Siemens at 35.3%, resulting in a difference of 48 percentage points. Even among the most successful assignees, only three have allowance rates of over 50%.

In general, the courts distinguish between functions and algorithms, and they require patent applicants to disclose algorithms to cure perceived deficiencies in functions. The problem with this line of reasoning is that both algorithms and functions under 35 U.S.C. § 112(f) are composed of the same things: steps. So the result of the algorithm requirement is to simply make patent applicants “fix” one step by specifying more steps. Accordingly, if the algorithm requirement is taken to its logical conclusion, then each step would be fixed with more steps, and each of those steps would be fixed with even more steps, like Russian dolls. Instead, the courts do not take the algorithm to its logical conclusion and, instead, only require a single layer: the original step and the further steps (i.e., algorithm) for it. This is arbitrary, confusing for patent applicants and examiners, and a poorly calibrated solution to concerns about software patents.

The idea that the Supreme Court is at all capable of understanding — let alone deciding — issues of a technical nature is ridiculous. Yet their individual and collective lack of knowledge hasn’t prevented them from reaching misguided decisions in a variety of cases. Like an Emperor without any clothes the Supreme Court seems blissfully ignorant of their own ignorance. Indeed, you would have to go out of your way to find nine less qualified people to decide issues of a technological nature.

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.

Art Unit 3689 has the lowest allowance rate at 7.7%. Art Unit 3659 has the highest at 98.3%. Oddly enough, these two art units are from the same technology center. It’s worth noting, however, that the 3600s deal with a variety of inventions, including transportation, e-commerce, and national security. Of the 20 art units with the lowest allowance rates, eight are in the 3600’s. This is not surprising. After all, the 3600’s host many business-method art units.

If U.S. patent eligibility rules were more clear and predictable, the useful art of software development would be more prevalent. The “notorious computer” of the European Patent Office offers a viable option for reaching this objective. This approach would make business less uncertain as to whether not their proposed investments in software could receive patent protection. And reducing this risk would promote the future useful art of software development.

Changing the rules of the game is fundamentally unfair, which would be obvious to everyone if we were talking about football, soccer or playing a board game. Somehow common sense is abandoned when dealing with patents. Changing patent laws in midstream seems particularly un-American, both because it disturbs vested property rights and because it is quintessentially anti-inventor. If we want to maximize a property rights regime it must be certain, stable and predictable. Patents are no exception.

The fact is, patent examiners are struggling with the application of 35 USC 101 in light of the Alice decision just as much as everyone else. Greater uncertainty among both patent applicants and patent examiners surely increases the likelihood of disagreement between them. Thus, the Alice decision will not just increase the number of rejections under 35 USC 101, but is also likely to result in more rebuttals by applicants and more appeals of examiner decisions. A loss in patent examination efficiency, even if small, will act as a headwind against further reductions in patent pendency.

Sadly, this is not an isolated case. I’ve seen similar rejections in a diverse (and utterly random) number of art areas and technologies ranging from predictive computer algorithms, to voice recognition technology, to methods for user-customization of advertising received on a device. While some of the rejected claims were arguably directed to an abstract idea, only a small minority had any apparent connection to “organizing human activity” as that phrase has been used in the case law.

I will be criss-crossing the country again in March 2015, with stops in Washington, DC, Chicago, Michigan, and San Fransisco. What follows is my schedule for the month. If you are in the area come out to say hello.

I do feel that the whole notion of trying to find an “inventive concept” is really challenged. While the Supreme Court went out of its way to say we are really not putting Sections 102 or 103 in here, I think what’s happening is the Courts are basically trying to do that. And they’re looking deeply into prior art in some cases to knock out patents under Section 101 and whittle away the invention, and trying to find the abstract idea by doing a prior art analysis, and I think that’s troubling.

Whether Alice v. CLS is a ”good” decision depends on your perspective. Certainly, Alice could have said Diamond v. Diehr was overruled, it could have said that software was patent ineligible, it could have said that business methods were patent ineligible. So it could have been worse, that is absolutely true, but I don’t know that makes it a good decision.

Truthfully, the Supreme Court decision in Alice can only be described as an intellectually bankrupt. The Supreme Court never once used the word “software” in its decision. The failure to mention software a single time is breathtaking given that the Supreme Court decision in Alice will render many hundreds of thousands of software patents completely useless. Ironically, at the end of the day, software patent claims written in typical, industry standard format will result in patent ineligible claims. Yet, at the same time, business methods are patentable. To call this bizarre and inconsistent doesn’t begin to scratch the surface.