Posts Tagged: "patent eligibility"

It is really incorrect to say that the Federal Circuit eliminated the business method exception in State Street Bank, although the same net effect admittedly occurred regardless of how you characterize the ruling. It is better to say that the Federal Circuit went out of its way to explain that the business method exception had really never existed in the first place. The court explained that neither it nor its predecessor court, the CCPA, had ever applied the business method exception to a single case. Furthermore, Judge Rich explained that the cases relied upon to support the existence of the business method exception were In re Maucorps and In re Meyer were both rendered prior to the Supreme Court’s decision in Diehr, and prior to the Federal Circuit’s abandonment of the Freeman-Walter-Abele test. Furthermore, the Maucorps and Meyer cases were decided not on the business method exception, but on the mathematical algorithm exception.

The problem with this analytical approach lies not in the two-step Mayo “algorithm,” but rather in framing the analysis in terms of subject matter eligibility under Section 101 rather than patentability under 103. Section 101 is intended to deal with the eligibility of the claimed subject matter for patent protection as a class (i.e., genus or sub-genus) of inventions, rather than the contribution of the particular invention (i.e., species) defined by the claim vis-a-vis the prior art. So why did the Supreme Court frame the inquiry in terms of patent-eligible subject matter, rather than proceeding directly to the question of obviousness?

The big banks have backed Schumer for years, which makes sense since he is the senior Senator from the States of New York, which is where all the bankers are located (i.e., on Wall Street). But given all the vitriol aimed at software patents, particularly those in the financial services sector, there is a real irony that big banks are able to get software patents that explicitly cover computer implemented methods in the wake of Alice v. CLS Bank when so many others aren’t. So much of this anti-software patent hysteria was started by the big banks but they seem unaffected. That is an unfortunate theme in America. The big banks on Wall Street destroyed the economy with reckless disregard and yet not a single person went to jail and big bonuses continued to be paid to the very bankers and executives responsible for the economic meltdown that lead to the Great Recession.

In the latest decision (“Ultramercial-3”), the panel reached the opposite conclusion and affirmed the dismissal. This apparent turnaround was based on two intervening events: (1) the Supreme Court’s Alice decision in June; and (2) the fact that Chief Judge Rader was no longer on the court, and his place on the panel was taken by Judge Mayer. Much has, and will be, written about the first of these factors, so I would like to focus on the second, and in particular, the diametrically opposed views of Judges Rader and Mayer on a very important procedural issue; namely, whether the lack of patent-eligible subject matter should be a basis for dismissing a case at the outset based only on the “intrinsic” evidence, i.e., the patent itself and its prosecution history in the USPTO, without any discovery, expert testimony and/or claim construction.

The Supreme Court is simply not knowledgeable about patent law. And that’s not to say that the Justices couldn’t become knowledgeable, but even in this active state they’re only handling six or eight patent cases a year at most and so a lot of those deal with contracts and that sort of thing. So they’re not ever going to do enough patent cases to develop a specialty. They’re allergic to bright line rules despite the fact that in our space we have 10,000 front line decisions makers between the patent examiners, the Board, the district courts, and the Federal Circuit. You can’t have that many decisions makers without bright line rules, which should be self-evident to anybody including those that went to Ivy League schools and wear black robes. But apparently it’s not.

The environment for patent applicants and examiners that has resulted from such inconsistent treatment of Alice by the USPTO is one in which neither examiners nor applicants have clear guidance about how the USPTO is interpreting and intends to apply the Alice decision. This makes it difficult for examiners to know whether and how to issue Alice-based rejections, and for applicants to know how to respond to such rejections. In this environment, software patents are not dead; instead, they are, like Schrödinger’s cat, in an indeterminate state, simultaneously dead and alive until examined by an observer. In this case, the uncertainty over the impact of Alice on patent prosecution will only be dispelled when the USPTO analyzes the Alice opinion thoroughly and announces the Office’s interpretation of that opinion with a clear and unified voice. At that point, inventors, business owners, patent prosecutors, and patent examiners will be able to return to playing their respective roles within a rational patent system in which all parties involved seek to promote innovation according to fair, clear, and consistently-applied rules.

The consequences of SCOTUS decisions are really severe. The U.S. is no longer a favorable jurisdiction for many biotech patents, medical devices and software. What that’s going to mean is companies are going to move. We’ve known this throughout history. Companies locate where the laws are the best for them. If you’re an innovator you’re going to go where the patent laws are the strongest. And that’s why the U.S. has dominated in these industries. We’re number one in biotech is because of Chakrabarty, which has basically been overruled. Prior to Myriad you would have said the ruling of Chakrabarty was this: if there’s human intervention it’s patent eligible, but now you can’t say that because there was human intervention in Myriad, which they acknowledged, and still the claims were patent ineligible. We know companies will move to jurisdictions with more favorable laws…

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.