Software patent debate

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The software patent debate is the argument about the extent to which, as a matter of public policy, it should be possible to patent software and computer-implemented inventions. Policy debate on software patents has been active for years. [1] The opponents to software patents have gained more visibility with fewer resources through the years than their pro-patent opponents. [2] Arguments and critiques have been focused mostly on the economic consequences of software patents.

Contents

One aspect of the debate has focused on the proposed European Union directive on the patentability of computer-implemented inventions, also known as the "CII Directive" or the "Software Patent Directive," which was ultimately rejected by the EU Parliament in July 2005.

Arguments for patentability

There are several arguments commonly given in defense of software patents or defense of the patentability of computer-implemented inventions.

Public disclosure

Economic benefit

Encouragement of innovation

Patents protect functionality. Copyright on the other hand only protects expression. Substantial modification to an original work, even if it performs the same function, would not be prevented by copyright. To prove copyright infringement also requires the additional hurdle of proving copying, which is not necessary for patent infringement.

Copyright law protects unique expressions, while patent law protects inventions, which in the case of software, are algorithms; copyright cannot protect a novel means of accomplishing a function, merely the syntax of one such means. [7]

This means that patents incentivize projects that are unique and innovative in functionality rather than simply form. Copyrights, in turn, only incentivize uniqueness in form. [8]

Protection for small companies

Software patents can afford smaller companies market protection by preventing larger companies from stealing work done by a smaller organization, leveraging their greater resources to go to market before the smaller company can. [9]

Hardware patents analogy

Hardware and software are sometimes interchangeable. If people can patent hardware, then ideas describing software implemented by that hardware should also be patentable. [10]

Arguments against patentability

Opponents of software patents argue that:

Software is math

A program is the transcription of an algorithm in a programming language. Since every (Turing-complete) programming language implements Church's lambda calculus by virtue of the Church-Turing thesis, a program is thus the transcription of a mathematical function. Math is not patentable. Therefore, neither is software. [11]

Software encourages patent thickets

A patent thicket is a dense web of patents that companies must decipher to develop new technology. There are various types of patent thickets such as when a single innovation is protected by multiple patent holders or when a product is covered by numerous patents. The consequences of patent thickets are increased difficulty of innovation, complex cross-licensing relations between companies, and discouragement of newcomers from entering the software industry. [12]

Hinders research and development

Hinders innovation

Cost and loss of R&D funds

Software is different

Trivial patents

Open source disadvantage

Software patents' usefulness as an information source is limited

Long patent pendencies

Patent trolls

Disproportionately harms startups

U.S. Supreme Court decisions

Several Supreme Court decisions since 2000, as well as the Federal Circuit and district court decisions interpreting and implementing them, have dramatically impacted the status of software patents in the United States. They have particularly affected many thousands of business-method patents that issued as a result of Federal Circuit decisions in the 1990s. The two principal Supreme Court decisions were Bilski v. Kappos and Alice v. CLS Bank , the latter of which confirmed the applicability of the earlier decision Mayo v. Prometheus to computer-related inventions in which a computer was used to implement an abstract principle or preexisting business practice. See also Software patents under United States patent law .

Bilski case

The Bilski case involved a patent application on methods for hedging against commodity price fluctuations, which the PTO had rejected. The Federal Circuit, in In re Bilski , upheld the PTO's rejection on the grounds that the claims failed the machine-or-transformation test, which the court held should be used as the sole test of patent eligibility. The court did not hold that all business methods are patent ineligible, though a minority of the judges would have ruled that business methods are not properly the subject of patents.

The Supreme Court affirmed the judgment of ineligibility, in Bilski v. Kappos , but on more general, and less articulated in detail, grounds of undue abstractness. It rejected the Federal Circuit's elevation of the machine-or-transformation test as the sole test of patent eligibility, saying that rather it was simply a "useful clue." The 5-4 majority refused to hold that all business methods were incapable of being patented, but four justices would have established such a rule. A concurring opinion pointed out that the Court was unanimous, however, as to many issues in the Bilski case, including a rejection of the Federal Circuit's late 1990s State Street Bank decision, which allowed patents on any advance, technical or nontechnical (and in that case a numerical financial calculation of stock price changes) that produces a "useful, concrete and tangible result."

The Supreme Court's Bilski decision was criticized because of its lack of detailed guidance on how to determine whether a claim was directed to an abstract idea. Nonetheless, it provided some clarification and affirmed the Federal Circuit's taking a new direction in its software-related patent cases.

Mayo case

In Mayo v. Prometheus , the Supreme Court invalidated a patent on a diagnostic method, because it non-inventively implemented a natural principle; the Court drew on cases involving computer software and other abstract ideas. In this case, the Court was much more detailed in describing how to recognize a patent-ineligible claim to an abstract idea. The Mayo methodology has come to dominate patent-eligibility law. It revived the approach of the Flook and Neilson cases, which is to treat the underlying principle, idea, or algorithm on which the claimed patent is based as if it were part of the prior art and to make patent eligibility turn on whether the implementation of it is inventive. This led to the "two-step" Alice test described next.

Alice case

At the time the Mayo case was decided, there was some uncertainty over whether it applied only to natural principles (laws of nature) or more generally to patent eligibility of all abstract ideas and general principles, including those involved in software patents. The Alice decision confirmed that the test was general. The Alice case involved patents on electronic methods and computer programs for financial-trading systems on which trades between two parties who are to exchange payment are settled by a third party in ways that reduce the risk that one party performs while the other does not. The patents cover what amounts to a computerized escrow arrangement.

The Court held that Mayo explained how to address the problem of determining whether a patent claimed an unpatentable abstract idea or instead a potentially patentable practical implementation of an idea. This requires using a "two-step" analysis.

In the first step, the court must determine whether the patent claim under examination contains an abstract idea, such as an algorithm, method of computation, a Law of Nature or other general principle. If not, the claim is potentially patentable, subject to the other requirements of the patent code. If the answer is affirmative, the court must proceed to the next step.

In the second step of the analysis, the court must determine whether the patent adds to the idea "something extra" that embodies an "inventive concept." If there is no addition of an inventive element to the underlying abstract idea, the court finds the patent invalid under section 101. This means that the implementation of the idea must not be conventional or obvious to qualify for a patent. Ordinary and customary use of a general-purpose digital computer is insufficient; the Court said—"merely requiring generic computer implementation fails to transform [an] abstract idea into a patent-eligible invention."

The ruling continued with these points:

The Alice decision met a mixed reception, but profoundly affected U.S. patent law. In its wake, as explained in the Wikipedia article on the case, courts invalidated vast numbers of so-called software and business-method patents (the overwhelming majority of those the United States Court of Appeals for the Federal Circuit considered) and the number of such patents issued has drastically fallen. The Alice decision has been widely criticized for its failure to specify in detail the boundaries of patent eligibility, but it has also been defended because its unanimity tends to stabilize decisional law in the field. [33]

Subsequent developments

After Alice, the Federal Circuit and district courts invalidated large numbers of business-method and software patents based on those courts' interpretations of Alice. Federal Circuit Judge William Bryson summed this up in these terms:

In short, such patents, although frequently dressed up in the argot of invention, simply describe a problem, announce purely functional steps that purport to solve the problem, and recite standard computer operations to perform some of those steps. The principal flaw in these patents is that they do not contain an “inventive concept” that solves practical problems and ensures that the patent is directed to something “significantly more than” the ineligible abstract idea itself. [Citing Alice and Mayo.] As such, they represent little more than functional descriptions of objectives, rather than inventive solutions. In addition, because they describe the claimed methods in functional terms, they preempt any subsequent specific solutions to the problem at issue. [Citing Alice and Mayo.] It is for those reasons that the Supreme Court has characterized such patents as claiming “abstract ideas” and has held that they are not directed to patentable subject matter. [34]

See also

Related Research Articles

Neither software nor computer programs are explicitly mentioned in statutory United States patent law. Patent law has changed to address new technologies, and decisions of the United States Supreme Court and United States Court of Appeals for the Federal Circuit (CAFC) beginning in the latter part of the 20th century have sought to clarify the boundary between patent-eligible and patent-ineligible subject matter for a number of new technologies including computers and software. The first computer software case in the Supreme Court was Gottschalk v. Benson in 1972. Since then, the Supreme Court has decided about a half dozen cases touching on the patent eligibility of software-related inventions.

State Street Bank and Trust Company v. Signature Financial Group, Inc., 149 F.3d 1368, also referred to as State Street or State Street Bank, was a 1998 decision of the United States Court of Appeals for the Federal Circuit concerning the patentability of business methods. State Street for a time established the principle that a claimed invention was eligible for protection by a patent in the United States if it involved some practical application and, in the words of the State Street opinion, "it produces a useful, concrete and tangible result."

Business method patents are a class of patents which disclose and claim new methods of doing business. This includes new types of e-commerce, insurance, banking and tax compliance etc. Business method patents are a relatively new species of patent and there have been several reviews investigating the appropriateness of patenting business methods. Nonetheless, they have become important assets for both independent inventors and major corporations.

Diamond v. Diehr, 450 U.S. 175 (1981), was a United States Supreme Court decision which held that controlling the execution of a physical process, by running a computer program did not preclude patentability of the invention as a whole. The high court reiterated its earlier holdings that mathematical formulas in the abstract could not be patented, but it held that the mere presence of a software element did not make an otherwise patent-eligible machine or process patent ineligible. Diehr was the third member of a trilogy of Supreme Court decisions on the patent-eligibility of computer software related inventions.

Patentable, statutory or patent-eligible subject matter is subject matter of an invention that is considered appropriate for patent protection in a given jurisdiction. The laws and practices of many countries stipulate that certain types of inventions should be denied patent protection. Together with criteria such as novelty, inventive step or nonobviousness, utility, and industrial applicability, which differ from country to country, the question of whether a particular subject matter is patentable is one of the substantive requirements for patentability.

Gottschalk v. Benson, 409 U.S. 63 (1972), was a United States Supreme Court case in which the Court ruled that a process claim directed to a numerical algorithm, as such, was not patentable because "the patent would wholly pre-empt the mathematical formula and in practical effect would be a patent on the algorithm itself." That would be tantamount to allowing a patent on an abstract idea, contrary to precedent dating back to the middle of the 19th century. The ruling stated "Direct attempts to patent programs have been rejected [and] indirect attempts to obtain patents and avoid the rejection ... have confused the issue further and should not be permitted." The case was argued on October 16, 1972, and was decided November 20, 1972.

Freeman-Walter-Abele is a now outdated judicial test in United States patent law. It came from three decisions of the United States Court of Customs and Patent Appeals—In re Freeman, 573 F.2d 1237, In re Walter, 618 F.2d 758 ; and In re Abele, 684 F.2d 902 —which attempted to comply with then-recent decisions of the Supreme Court concerning software-related patent claims.

<i>In re Bilski</i>

In re Bilski, 545 F.3d 943, 88 U.S.P.Q.2d 1385, was an en banc decision of the United States Court of Appeals for the Federal Circuit (CAFC) on the patenting of method claims, particularly business methods. The court affirmed the rejection of the patent claims involving a method of hedging risks in commodities trading, as non-patentable subject matter. Most importantly, the Court concluded, that machine-or-transformation test "was proper test to apply to determine patent-eligibility of process", and that the “useful, concrete and tangible result” of State Street Bank v. Signature Financial Group and AT&T Corp. v. Excel Communications, Inc. should no longer be relied upon.

In United States patent law, the machine-or-transformation test is a test of patent eligibility under which a claim to a process qualifies for consideration if (1) the process is implemented by a particular machine in a non-conventional and non-trivial manner or (2) the process transforms an article from one state to another.

Bilski v. Kappos, 561 U.S. 593 (2010), was a case decided by the Supreme Court of the United States holding that the machine-or-transformation test is not the sole test for determining the patent eligibility of a process, but rather "a useful and important clue, an investigative tool, for determining whether some claimed inventions are processes under § 101." In so doing, the Supreme Court affirmed the rejection of an application for a patent on a method of hedging losses in one segment of the energy industry by making investments in other segments of that industry, on the basis that the abstract investment strategy set forth in the application was not patentable subject matter.

Mayo v. Prometheus, 566 U.S. 66 (2012), was a case decided by the Supreme Court of the United States that unanimously held that claims directed to a method of giving a drug to a patient, measuring metabolites of that drug, and with a known threshold for efficacy in mind, deciding whether to increase or decrease the dosage of the drug, were not patent-eligible subject matter.

Alice Corp. v. CLS Bank International, 573 U.S. 208 (2014), was a 2014 United States Supreme Court decision about patent eligibility of business method patents. The issue in the case was whether certain patent claims for a computer-implemented, electronic escrow service covered abstract ideas, which would make the claims ineligible for patent protection. The patents were held to be invalid, because the claims were drawn to an abstract idea, and implementing those claims on a computer was not enough to transform that abstract idea into patentable subject matter.

DDR Holdings, LLC v. Hotels.com, L.P., 773 F.3d 1245, was the first United States Court of Appeals for the Federal Circuit decision to uphold the validity of computer-implemented patent claims after the Supreme Court's decision in Alice Corp. v. CLS Bank International. Both Alice and DDR Holdings are legal decisions relevant to the debate about whether software and business methods are patentable subject matter under Title 35 of the United States Code §101. The Federal Circuit applied the framework articulated in Alice to uphold the validity of the patents on webpage display technology at issue in DDR Holdings.

<i>In re Alappat</i>

In re Alappat, 33 F.3d 1526, along with In re Lowry and the State Street Bank case, form an important mid-to-late-1990s trilogy of Federal Circuit opinions because in these cases, that court changed course by abandoning the Freeman-Walter-Abele Test that it had previously used to determine patent eligibility of software patents and patent applications. The result was to open a floodgate of software and business-method patent applications, many or most of which later became invalid patents as a result of Supreme Court opinions in the early part of the following century in Bilski v. Kappos and Alice v. CLS Bank.

Versata Development Group, Inc. v. SAP America, Inc., 793 F.3d 1306, is a July 2015 decision of the Federal Circuit affirming the final order of the Patent Trial and Appeal Board (PTAB), the recently created adjudicatory arm of the United States Patent and Trademark Office (USPTO), invalidating as patent ineligible the claims in issue of Versata's U.S. Patent No. 6,553,350. This was the first case in the Federal Circuit reviewing a final order in a Covered Business Method (CBM) invalidation proceeding under the America Invents Act (AIA). The case set an important precedent by deciding several unsettled issues in the interpretation of the CBM provisions of the AIA>, including what are business-method patents under the AIA and whether the AIA authorizes the PTO to hold such patents invalid in CBM proceedings on the ground that they are patent ineligible under 35 U.S.C. § 101 as "abstract ideas."

Enfish, LLC v. Microsoft Corp., 822 F.3d 1327, is a 2016 decision of the United States Court of Appeals for the Federal Circuit in which the court, for the second time since the United States Supreme Court decision in Alice Corp. v. CLS Bank upheld the patent–eligibility of software patent claims. The Federal Circuit reversed the district court's summary judgment ruling that all claims were patent–ineligible abstract ideas under Alice. Instead, the claims were directed to a specific improvement to the way computers operate, embodied in the claimed "self-referential table" for a database, which the relevant prior art did not contain.

<i>Amdocs (Israel) Ltd. v. Openet Telecom, Inc.</i>

Amdocs (Israel) Ltd. v. Openet Telecom, Inc., 841 F.3d 1288, is a court case in the United States Federal Court System that ended with a panel decision by the Federal Circuit to uphold the patent eligibility of four patents on a system designed to solve an accounting and billing problem faced by network service providers. The district court had held the patents invalid because they were directed to an abstract idea. In the Federal Circuit panel's view the patents were eligible because they contained an "inventive concept"—a combination of elements that was sufficient to ensure that the patents amounted to significantly more than a patent on the ineligible concept itself.

Intellectual Ventures I LLC v. Symantec Corp., 838 F.3d 1307, is a 2016 Federal Circuit decision concerning the patent eligibility of a computer-software claimed invention. In a split decision, a three-member panel of the court discussed the current legal status of such patents. The court held all three patents invalid as patent ineligible under 35 U.S.C. § 101.

<span class="mw-page-title-main">Patentable subject matter in the United States</span>

Patentable subject matter in the United States is governed by 35 U.S.C. 101. The current patentable subject matter practice in the U.S. is very different from the corresponding practices by WIPO/Patent Cooperation Treaty and by the European Patent Office, and it is considered to be broader in general.

References

  1. ↑ Nichols, Kenneth (1998). Inventing Software: The Rise of "computer-related" Patents. Greenwood Publishing Group. p. 15. ISBN   1-56720-140-7.
  2. ↑ Välimäki, Mikko (2005). The Rise of Open Source Licensing. Turre Publishing. ISBN   952-91-8779-3.
  3. 1 2 Gallini, Nancy T (June 1, 2002). "The Economics of Patents: Lessons from Recent U.S. Patent Reform". Journal of Economic Perspectives. 16 (2): 131–154. doi:10.1257/0895330027292. ISSN   0895-3309.
  4. ↑ "Ways in Which Patents can Help Your E-Commerce Business". World International Property Organization. Archived from the original on October 15, 2007. Retrieved June 19, 2008.
  5. ↑ Coriat, Benjamin (2002). "Establishing a New Intellectual Property Rights Regime in the United States: Origins, Content and Problems". Research Policy. 31 (8–9): 1491–1507. doi:10.1016/s0048-7333(02)00078-1.
  6. ↑ "The Experts: Does the Patent System Encourage Innovation?". Wall Street Journal. May 16, 2013. ISSN   0099-9660 . Retrieved March 29, 2017.
  7. ↑ "Experts Debate Constitutionality Of Software Copyrights" . Retrieved March 28, 2017.
  8. ↑ "Software Myths and Facts" . Retrieved March 29, 2017.
  9. ↑ Shaw, Steven. "Why we need software patents, and yes, I'm smarter than you". ZDNet. Retrieved March 29, 2017.
  10. ↑ "Should Patents Be Awarded to Software?" . Retrieved March 28, 2017.
  11. ↑ Pamela Jones, An Explanation of Computation Theory for Lawyers.
  12. ↑ González, Andrés Guadamuz (January 10, 2006). "The software patent debate". Journal of Intellectual Property Law & Practice. 1 (3): 196–206. doi:10.1093/jiplp/jpi046.
  13. ↑ Jaffe, Adam B.; Lerner, Joshua. Innovation and its discontents: how our broken patent system is endangering innovation and progress. ISBN   978-0-691-11725-6
  14. ↑ Almarin Phillips (March 1, 1966). "Patents, Potential Competition, and Technical Progress". The American Economic Review. 56 (1/2): 301–310. JSTOR   1821293.
  15. ↑ Lee, Timothy B. (July 31, 2013). "Here's why economists hate software patents". The Washington Post. Retrieved August 31, 2016.
  16. ↑ "EFF Outlines Plan to Fix the Broken Patent System". Electronic Frontier Foundation. February 23, 2015.
  17. ↑ Samuelson, Pamela (2008). "Are Patents on Interfaces Impeding Interoperability". Berkeley Law– via Berkeley Law Scholarship Repository.
  18. ↑ Boldrin, Michele; Levine, David K (February 1, 2013). "The Case Against Patents". Journal of Economic Perspectives. 27 (1): 3–22. doi: 10.1257/jep.27.1.3 . ISSN   0895-3309.
  19. ↑ Mulligan, Christina and Lee, Timothy B., Scaling the Patent System (March 6, 2012). NYU Annual Survey of American Law, Forthcoming. Available at SSRN: http://ssrn.com/abstract=2016968
  20. ↑ "Patent medicine - Why America's patent system needs to be reformed, and how to do it". Economist. August 20, 2011. Retrieved September 26, 2011.
  21. ↑ "The Basics". NoSoftwarePatents.com. Retrieved June 19, 2008.
  22. 1 2 3 Plotkin, R. (2002). "Intellectual property and the process of invention: Why software is different". IEEE 2002 International Symposium on Technology and Society (ISTAS'02). Social Implications of Information and Communication Technology. Proceedings (Cat. No.02CH37293). p. 236. doi:10.1109/ISTAS.2002.1013821. ISBN   0-7803-7284-0.
  23. ↑ James Bessen & Michael J. Meurer "Patent Failure: How Judges, Bureaucrats, and Lawyers Put Innovators at Risk" Princeton University Press, 2008, ISBN   978-0-691-13491-8: "(...) many people have focused solely on patent examination quality as the objective of reform, based largely on anecdotal evidence of trivial, obvious, or otherwise invalid patents. Although we support efforts to improve patent examination quality (large numbers of questionable patents create conditions in which poor patent notice is unavoidable), our analysis suggests that this is only part of the problem and the patent system cannot likely be fixed by addressing only this issue. Of course, the notice problems that we find central to the poor performance of the patent system are not the only ones looking for a remedy. We argue, however, that many proposed reforms, including reforms directed toward improving patent examination quality, are unlikely to be effective unless patent notice is improved generally".
  24. ↑ James Bessen & Michael J. Meurer "Patent Failure: How Judges, Bureaucrats, and Lawyers Put Innovators at Risk" Princeton University Press, 2008, ISBN   978-0-691-13491-8: "It is possible, however, that features of software technology make it particularly susceptible to the patenting of obvious ideas, especially given the legal doctrines of non-obviousness developed by the Federal Circuit. For one thing, the general-purpose nature of software technology—again, because the technology is abstract, similar techniques can be used in a wide range of applications— makes it inevitable that techniques known in one realm might be applied in another, yet the documentary evidence that the Federal Circuit requires for a demonstration of obviousness might not be published."
  25. ↑ "Software patents need shelter from the storm". ZDNet - Tech News.
  26. ↑ To Promote Innovation: The Proper Balance of Competition and Patent Law and Policy A Report by the Federal Trade Commission (PDF). Federal Trade Commission. October 2003.
  27. 1 2 "United States Patent and Trademark Office". USPTO . Archived from the original on June 30, 2023. Retrieved July 1, 2023.
  28. ↑ "IP5 Statistics Report 2015" (PDF). IP5.
  29. ↑ Lapowsky, Issie. "EFF: If You Want to Fix Software Patents, Eliminate Software Patents". Wired. Retrieved April 26, 2017.
  30. ↑ "2016 Patent Litigation Study: Are we at an inflection point?". PwC. May 2016. Archived from the original on September 26, 2016.
  31. 1 2 Bessen, James; Ford, Jennifer; Meurer, Michael J. (Winter 2011–2012). "The Private and Social Costs of Patent Trolls" (PDF). Regulation. Cato Institute. Archived (PDF) from the original on March 2, 2022. Retrieved December 20, 2022.
  32. ↑ Chien, Colleen (January 1, 2014). "Startups and Patent Trolls" (PDF). Stanford Technology Law Review. 17 (1). Archived from the original (PDF) on September 12, 2017.
  33. ↑ Richard H. Stern, Alice v CLS Bank: US Business Method and Software Patents Marching towards Oblivion?, [2014] Eur. Intell. Prop. Rev. 619, 629.
  34. ↑ Loyalty Conversion Sys. Corp. v. American Airlines, Inc..
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