Justices Show Supreme Skepticism About Broad Business Model Patents

from the good-for-them dept

You never know how they'll actually rule, but in hearing the oral arguments in the Bilski case over the patentability of business models (and, most likely, software), one thing became quite clear: nearly every Supreme Court Justice was seriously skeptical of outlandish patent claims. We've noted, of course, that the Supreme Court over the past few years has taken a renewed interest in patent law, pushing back time and time again against the Federal Circuit (CAFC), who in the 80s and 90s seemed to take the position that more patents was always a good thing. Sensing that, with Bilski, CAFC even pushed back on its own earlier rules, and it appears that the Supreme Court at least agrees that the era of crazy business model patents should end now. The full transcript is worth reading, but Justin Levine did a nice job summarizing some of the highlights in the questioning by the Justices:

JUSTICE GINSBURG: But you say you would say tax avoidance methods are covered, just as the process here is covered. So an estate plan, tax avoidance, how to resist a corporate takeover, how to choose a jury, all of those are patentable?

MR. JAKES: They are eligible for patenting as processes, assuming they meet the other statutory requirements.

JUSTICE BREYER: So that would mean that every -- every businessman -- perhaps not every, but every successful businessman typically has something. His firm wouldn't be successful if he didn't have anything that others didn't have. He thinks of a new way to organize. He thinks of a new thing to say on the telephone. He thinks of something. That's how he made his money. And your view would be -- and it's new, too, and it's useful, made him a fortune -- anything that helps any businessman succeed is patentable because we reduce it to a number of steps, explain it in general terms, file our application, granted?

MR. JAKES: It is potentially patentable, yes.

---

JUSTICE BREYER: You know, I have a great, wonderful, really original method of teaching antitrust law, and it kept 80 percent of the students awake. They learned things.[Audience laughter.] It was fabulous. And I could probably have reduced it to a set of steps and other teachers could have followed it. That you are going to say is patentable, too?

MR. JAKES: Potentially.

---

JUSTICE SCALIA: You know, you mention that there are all these -- these new areas that didn't exist in the past because of modern business and what-not, but there are also areas that existed in the past that don't exist today. Let's take training horses. Don't you think that -- that some people, horse whisperers or others, had some, you know, some insights into the best way to train horses? And that should have been patentable on your theory.

MR. JAKES: They might have, yes.

JUSTICE SCALIA: Well, why didn't anybody patent those things?

MR. JAKES: I think our economy was based on industrial process.

JUSTICE SCALIA: It was based on horses, for Pete's sake. You -- I would really have thought somebody would have patented that.

Of course, these are the same Justices that have been pushing back on the patent world for quite some time. What about the newer Justices? Turns out they were pretty skeptical as well. There were some questions about new Justice Sotomayor, who had been an IP litigator at one point, but seemed pretty skeptical of these sorts of patents:

JUSTICE SOTOMAYOR: So how do we limit it to something that is reasonable? Meaning, if we don't limit it to inventions or to technology, as some amici have, or to some tie or tether, borrowing the Solicitor General's phraseology, to the sciences, to the useful arts, then why not patent the method of speed dating?

MR. JAKES: Well, first of all, I think, looking at what are useful arts, it does exclude some things. It does exclude the fine arts. Speaking, literature, poems, I think we all agree that those are not included, and there are other things as well. For example, a corporation, a human being, these are things that are not covered by the statutory categories.

JUSTICE SOTOMAYOR: So why are human activities covered by useful arts?

MR. JAKES: Human activities are covered.

Chief Justice Roberts dug into the Bilski patent in question, and noted how ridiculously broad the claims were:

CHIEF JUSTICE ROBERTS: What -- I'm looking at your Claim 1, in Joint Appendix page 19 to 20. How is that not an abstract idea? You initiate a series of transactions between commodity providers and commodity consumers. You set a fixed price at the consumer end, you set a fixed price at the other end, and that's it.

I mean, I could patent a process where I do the same thing. I initiate a series of transactions with sellers. I initiate a series of transactions with buyers. I buy low and sell high. That's my patent for maximizing wealth.

I don't see how that's different than your claim number 1.

He went on to point out that some of what the patent seems to cover has been around since the 17th century (history buff, apparently). Anyway, you never know how the Justices will actually rule -- and there are big questions well beyond just "allow/don't allow" that will be the really important thing to watch for in the decision. Will they set up a new "test" for patentability? Will they exclude certain areas (business models? software?) from patent coverage? Will they come out with a very narrow ruling that just focuses on Bilski's patent and leave the bigger questions for another day? That's where things will get interesting. But, at the very least, it seems likely that the worst case scenario of saying a patent like Bilski's is valid is quite unlikely to be the end result.

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Clear And Concise Explanation For Why Software Patents Harm Innovation

from the transaction-costs dept

Tim Lee points us to an excellent discussion at The Abstract Factory blog for why software patents harm innovation (though, I'd argue that the reasoning set forth applies beyond just software patents). The writer, Cog, initially discusses the sort of story that's all too common these days, about some friends of his who build a cool online service, with plenty of important details in the execution and the implementation that make it better and significantly more useful than whatever else is out there... only to find themselves sued by a patent holder, whose own technology includes none of the wonderfulness that makes Cog's friends' product so powerful. From there, he goes on:

One thing that I find extremely frustrating about many legal scholars and economists' approach to patents it that they make two false assumptions. The first assumption is that transaction costs are acceptable, or can be made so with some modest reforms. The second assumption is that patent litigation is reasonably "precise"; i.e., if you don't infringe on something then you'll be able to build useful technology and bring it to market relatively unhindered. As my friend's story shows, both of these assumptions are laughably false. I mean, just black-is-white, up-is-down, slavery-is-freedom, we-have-always-been-at-war-with-Eastasia false.

The end result is that our patent system encourages "land grab" behavior which could practically serve as the dictionary definition of rent-seeking. The closest analogy is a conquistador planting a flag on a random outcropping of rock at the tip of some peninsula, and then saying "I claim all this land for Spain", and then the entire Western hemisphere allegedly becomes the property of the Spanish crown. This is a theory of property that's light-years away from any Lockean notion of mixing your labor with the land or any Smithian notion of promoting economic efficiency. And yet it's the state of the law for software patents. Your business plan can literally be to build a half-assed implementation of some straightforward idea (or, in the case of Intellectual Ventures, don't build it at all), file a patent, and subsequently sue the pants off anybody who comes anywhere near the turf you've claimed. And if they do come near your turf, regardless of how much of their own sweat and blood they put into their independent invention, the legal system's going go off under them like a land mine.

It is hard to think of a more effective mechanism for discouraging innovation in software. I mean, I suppose you could plant a plastic explosive rigged to a random number generator under the seats of every software developer, and that would be slightly worse.

The only thing I'd quibble with is the claim that this is the typical economists' approach to patents. Plenty of very smart economists (including some Nobel Prize winners) agree that the patent system makes no sense. But, other than that, this is quite an accurate description of the problem and the underlying fallacies from those who think the system works. Cog also points out (as we have in the past) that it's ridiculous to claim that the patent system serves a separate purpose in "disclosing" inventions such that everyone can learn from them:

At any software company with competent legal counsel, developers are instructed in the strongest possible terms never, ever to look at a patent, because the tiniest amount of documented influence could be used as ammunition in a lawsuit. The only time a sane software developer reads a patent is when your company's lawyers specifically ask you to help them prove you're not infringing on one. If you ever get wind that there's a patent even vaguely related to your work, you stick your fingers in your ears and run in the other direction. In short, software patents facilitate "conversation" about as well as poison gas bombs do.

What he's talking about is the fact that if you're found to have willfully infringed on a patent, the damages suddenly get tripled. And, showing that you looked at the patent in question is often how patent holders will claim willful infringement. The system is designed such that whatever benefits there may be from "disclosure" have been completely wiped out due to willful infringement damages.

Oh yeah. As for Cog's friends? They're basically screwed:

Now, my friend and his partner have consulted multiple IP lawyers and they've said, "Yep, the law is probably on your side." They have also said, "You're still screwed." The trial would take forever, the legal fees would be ruinous, and in the meantime nobody will invest in a company which has a litigation cloud hanging over it.

So, none of us ever get to see or use the software that they created. That's the opposite of what the patent system is supposed to do.

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Software Patents Just As Ridiculous As Literary Patents?

from the indeed dept

Occasional Techdirt contributor Tim Lee has a great writeup for Cato, detailing why software patents don't make much sense, comparing the idea to what would happen if there were "literary patents":

Imagine the outcry if the courts were to legalize patents on English prose. Suddenly, you could get a "literary patent" on novels employing a particular kind of plot twist, on news stories using a particular interview technique, or on legal briefs using a particular style of argumentation. Publishing books, papers, or articles would expose authors to potential liability for patent infringement. To protect themselves, writers would be forced to send their work to a patent lawyer before publication and to re-write passages found to be infringing a literary patent.

Most writers would regard this as an outrageous attack on their freedom. Some people might argue that such patents would promote innovation in the production of literary techniques, but most writers would find that beside the point. It's simply an intolerable burden to expect writers to become experts on the patent system, or to hire someone who is, before communicating their thoughts in written form.

While I think Tim's comparison to "literary patents" is compelling, it's worth noting that there are some who believe that literary plots are, indeed, patentable. There's a guy who's been pushing for a patent on his story plot for years -- though, I half wonder if it's a combination marketing device and attempt to prove how ridiculous patents are. However, well-known patent system commentator Greg Aharonian has made the case that movie scripts should be patentable. So, it's worth noting that, as ridiculous as the concept sounds to many of us, there actually are some people who take the concept of patenting plots or storylines as being reasonable.

Tim's larger point, though, stands. It's that for those who actually work in software development world, patents make no sense. In fact, it's quite troubling that a significant number of people who actually develop software find patents so troublesome, and the defense of such things tends to come more often from lawyers. Tim points out that there's a rather large disconnect there, when so many of the people that software patents are supposed to "protect" are against the concept. Tim suggests that patent lawyers who defend software patents might want to spend more time around actual developers:

I think patent scholars would do well to pay a lot more attention to how the patent system is experienced by individuals who are required to obey it, rather than focusing on abstract doctrinal questions that are of interest only to patent attorneys. We might call this a bottom-up perspective on patent law. I spent the summer developing software for Dancing Mammoth, the company that also hosts this blog. If Dancing Mammoth were really serious about avoiding patent infringement, it probably should have hired a patent lawyer to verify that each line of code I wrote didn't infringe one of the hundreds of thousands of software patents in existence. Obviously, this would be completely impractical, as the patent attorney's fees would likely exceed my own salary, so like most software firms they didn't do that.

Now, I don't know of any patents I infringed, but as a statistical matter it's likely that I infringed some. Fortunately, it's pretty unlikely anyone will sue me or Dancing Mammoth for any infringement we may have committed, because there are other potential targets with much deeper pockets. But that hardly justifies this situation where everyone's a lawbreaker but most people don't get caught. Small firms do get sued for inadvertent software patent infringement. Laws that are virtually impossible to follow are bad laws, regardless of how infrequently they're actually applied.

In the original piece, Tim also points out how software patents (contrary to the claims of some defenders of the system) unfairly tilt the balance of power to big companies -- the ones who can stockpile tons of patents to use as a weapon against infringement suits. It's the small companies who are left exposed. Tim, and many others, hope that the Supreme Court ruling in Bilski will exclude software (and business method) patents, and I would probably cheer on such a ruling as well. However, there is a part of me that worries that drawing a red exclusionary line around certain areas is simply a way to duct-tape over a much bigger problem with the patent system. It may be a good short-term solution, but I'd rather see the entire patent system fixed, rather trying to create special cases for each individual problem.

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Canadian Patent Office Rejects Software And Business Model Patents

from the one-click-to-reject dept

While the US Supreme Court will soon be considering the question of software and business method patents (and the US Patent Office is still reviewing whether or not Amazon's "one-click patent" is valid), up North, the Canadian Patent Appeal Board (CPAB) appears to have resolved both issues by rejecting all software and business method patents in explaining why it's rejecting Amazon's one-click patent in Canada. Basically, the CPAB found that since software and business method patents haven't been allowed in the past, even if they're not explicitly forbidden by the patent law, it's such a big change that it should require legal action to allow them:

"since patenting business methods would involve a radical departure from the traditional patent regime, and since the patentability of such methods is a highly contentious matter, clear and unequivocal legislation is required for business methods to be patentable."

This actually makes a fair amount of sense. In the US, once the State Street case was decided, there was suddenly a mad rush to patent business methods and software, and part of the problem was that because so many people had considered the two unpatentable before, there wasn't the same set of prior art in the patent system that would have eliminated the worst abuses.

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Supreme Court To Review Whether Business Models And Software Are Patentable

from the this-should-be-interesting dept

While not a huge surprise, it's worth noting that the Supreme Court has agreed to take the Bilski case, which has received plenty of attention. If you don't recall, last year, the appeals court tried to further define what was patentable when it came to things like business models and software -- which many had considered to be a wide open field for patenting since 1998 and the State Street ruling. Of course, there's been a lot of controversy (and plenty of confusion) over the Bilski ruling, with some insisting that it really wouldn't impact software and business method patents, and others arguing that it will help kill off many such patents. However, pretty much everyone expected that the Supreme Court (with its recent interest in patent law) would weigh in. So, now we get to go through this battle all over again. Expect a lot of different parties to weigh in on how the Supreme Court should rule. Back when all the amici briefs were filed for the Bilski case, I put up a detailed post about the arguments for and against software patents, and I imagine that what we're about to see will be even more heated. Hopefully, the Supreme Court doesn't make things worse.

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UK Patent Office Approves Software Patent... Rationalizes The Decision

from the and-here-we-go... dept

The UK has held out against the idea of software patents for a while, but with Nokia pushing hard to get a patent on a piece of software related to the Symbian mobile operating system (which, ironically, Nokia has agreed to open source), last year a court ruled that the patent office in the UK had been too quick to dismiss the patent application, and an appeals court agreed. So, it should probably come as no surprise at all that the patent office has now granted the patent in question. What's amusing, though, is how it rationalizes the decision. Rather than just saying "uh, the courts said so," it claims that it allowed the patent because it's "more than just a software program," saying that the invention was a "technical contribution." Apparently, the new rules mean that as long as software makes a "technical contribution" it can be patented. But... uh... what software doesn't make a "technical contribution" of some sort?

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Bilski Continues To Cause Software Patents To Get Rejected

from the some-good-news... dept

Right after the Bilski ruling that greatly limited software and business method patents, lawyers who were in favor of such patents held a conference call, where they basically said the ruling wouldn't change anything. They claimed that the only patent that would be impacted would be Bilski's, and that everything else would be just like normal. It seems they forgot to tell the Patent Office, which has continued to reject patents based on this new ruling that, in all likelihood, would have made it through prior to the ruling. That's not to say that all of the problems associated with such patents are now done with -- but it does seem like the lawyers on that conference call were doing a bit more wishful thinking than honest assessment of the situation.

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Getting Into The Supreme Court's Mind On Software Patents...

from the reading-the-tea-leaves dept

With the CAFC's decision on Bilski being appealed to the Supreme Court, it's worth thinking about how the Supreme Court might actually view the question of software and business model patents. While patent system defenders go through all sorts of twists and turns to explain why software should be patentable, Tim Lee has a detailed explanation of why software should not be patentable, based on earlier Supreme Court precedent. It's a great read (though, frankly, Ars Technica's habit of breaking stories like this up into multiple pages, without a single-page option is annoying) that highlights why there's a decent chance that the Supreme Court would uphold the CAFC's ruling on Bilski if it chose to hear it. Of course, you never know until it happens, and while the current court has been good about limiting the more ridiculous aspects of the patent system over the past few years, we shouldn't be surprised by bad rulings anymore. That said, who knows if the Supreme Court will even hear the case -- or if it will prefer to see how things play out based on the Bilski ruling, and wait for an alternate case to come up before addressing the issue of software patents.

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Looks Like Bilski Decision Is Leading To Many Software Patent Claim Rejections

from the a-good-start dept

When the Bilski decision came out, we said that it would greatly limit software patents, but various patent system defenders (mostly lawyers) insisted that I was wrong and most software was still perfectly patentable. Basically, they said it just meant everyone had to write claims differently, and we'd have just as many software patents as before. Listening to them (there was a hilarious conference call of lawyers insisting this was nothing to worry about), it sounded like they were in serious denial, claiming the only patent this ruling would lead to being rejected was the Bilski patent -- all others would be fine. Things aren't actually turning out that way, however, with a much more aggressive rejection of software claims than those lawyers insisted would happen. This is a good sign... though now we get to wait to see if the Bilski ruling is appealed to the Supreme Court. Update: No waiting necessary... should have checked the wires before posting this, because, indeed, Bilski has been appealed. Will have more on this later...

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A Patent-Holding Software Engineer Explains Why Software Patents Harm Innovation

from the the-system-at-work dept

It's no surprise that many technologists and engineers dislike software patents -- even as their company's execs and lawyers push them to get more patents. Stephen Kinsella highlights an anonymous comment from a software engineer who clearly works for IBM (though he doesn't come out and say that directly), where he explains how IBM actively encourage engineers to file for as many patents as possible (it rewards them with monetary bonuses). This is not new of course -- an awful lot of companies do this. However, the guy goes on to explain why even though he holds patents and believes very strongly that his company makes and sells nuermous innovative products, he believes all this patenting is damaging to the process of innovation:

Speaking from my own experience, corporations (such as the one I work for) spend a lot of money to innovate. However, I would "press that button" and get rid of IP law immediately, given the chance. I agree completely with the arguements made in the article - as such, I'll just bring up a few other issues:

I think IP law is incredibly damaging to innovation and competition. In the case of software patents, moreso in that they take resources (primarily money which gets redirected to legal teams) from firms who are forced to research existing patens, and also defend themselves against IP lawsuits.

Many software patents are particularly silly. Many of these are issued for algorithms - the vast majority of the time, these algorithms are only available outside the company via patent! That is, when they are shipped externally, it is in a form that is not readable (object code). Sure - this can be reverse engineered. But for a particularly complex program or operating system, this in itself would be a colossal endeavor. Yet, a patent is issued for it - and the patent describes exactly what the algorithm does!

Another firm could look at the patent and use the invention. In most cases, it would be impossible to tell that they've "stolen" anything. Here they are counterproductive.

I should also mention the obvious - the corporation which holds the patent already has a huge advantage! They will ship a product with these innovations before any other corporation can ship its' product. Quite frankly it will generally be a significant period of time before another product can be shipped which contains these innovations - even if the innovation was immediately obvious and known. This will not generally be the case.

Then you have the patents for user interface - these are just silly. I've seen patents issued (granted, this was a long time ago) for using a particular color on a "dummy" terminal.

Anyway, I hope I do not sound like a hypocrite (because I hold IP patents). As I said, it is a part of my job. I also cannot fault my company for taking advantage of whatever silly laws are created. I simply view this as another case of the state interfering with the market, and the market adjusting to exploit the foolishness of the laws.

Well said.

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Is The UK Patent Office Ignoring Court Ruling On Software Patents?

from the who-knows-best? dept

Back in October, we were disappointed by a UK court ruling that effectively told the UK's Patent Office that it had to stop rejecting software patents outright, and instead consider software patentable if it met certain criteria. Given the widespread evidence that software patents have done plenty of harm, and almost nothing to help the software industry, this is generally disappointing. However, it looks like the UK patent office may be trying to do its best to ignore the implications of the court ruling. A few readers have sent in the news that the patent office has released some guidelines that effectively say the patent office will continue to use the same guidelines its used in the past, which reject patents for pretty much all pure software. Good for them.

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Is There Still A Big Loophole For Software And Business Method Patents?

from the just-add- dept

I've been talking to plenty of people (mostly lawyers) about the Bilski ruling on software and business method patents while also having more time to reread the discussion in detail, and I'm going to backtrack on my original assessment. I should have known something was wrong when I wrote that CAFC may have gotten something right. They so rarely get it right, that I should have known better.

Some of the good news, I still stand by. The court clearly limited the scope of software and business method patents. It rejected using the standard set forth in State Street in most cases. Some people are saying that since the court didn't completely reject State Street that this is not the victory I thought it was. On that, I disagree. As I said in my long post about the filings in the case, I thought an outright rejection of State Street that carves out a special exemption for software and business method patents is a bad idea. Instead, I'm in favor of a much more stringent standard for anything to be patentable. So, I don't have a problem with the court keeping State Street, but establishing a more stringent standard -- exactly what it did. I recognize that many folks who are focused on software patents really wanted a carveout exemption, and to them, this is a loss -- but I'd argue that it's better to have a more general standard than trying to carve out exceptions.

The part that I'm a little more concerned about is the loopholes that appear to have been left by CAFC in the decision. I was on a conference call with some of the lawyers who filed briefs (in favor of stronger patent protection), and they were spinning the ruling to be in their favor as much as possible -- but it became clear they were only doing so via loopholes. Specifically, they seem to think that as long as the software works on any device it qualifies for patent protection under the new test. In other words, they seem to be saying that so long as you add the words "on a computer" to a claim, then you're all good. In fact, when one reporter on the call (Joe Mullin) asked what sorts of patents this would impact, and after a moment of silence one of the lawyers blurted out that it invalidated Bilski's patent (the patent at the heart of this case) and that would be about it. Other lawyers basically said that it would only eliminate poorly written patents, which they seemed to define as those that failed to include that sort of "on a computer" language.

I don't think this is the actual intention of the ruling, and it will be interesting to see this tested -- but it's troublesome that already there's this huge loophole that many lawyers see. It means the court didn't do a very good job in actually establishing what the rules are for patents, and that's a problem. It will also be interesting to see if the "and on a computer" claims still get thrown out thanks to the earlier Supreme Court KSR ruling which limited patent claims that simply combined two obvious things.

Still, in the short term, I stand by my assessment that this is a ruling in the right direction. It's not a full rejection of software or business model patents, but I think that's for the best in the long run. It's better to create proper overall rules, rather than trying to carve out exemptions and creating a patchwork of rules. However, I'm still worried about the loopholes, and how quickly lawyers with tons of patents seem ready to leap through those loopholes.

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Court Greatly Limits Software And Business Method Patents

from the huge-victory-for-innovation dept

I don't say this often, but it looks like the Court of Appeals for the Federal Circuit (CAFC) -- or "the patent court" -- got a big one mostly right. In the rehearing of the Bilski case concerning the patentability of software and business method patents, CAFC just came out with its ruling that will significantly limit software and business method patents, bringing the rules way back towards what they were years ago, and effectively rolling back some of the earlier, dreadful, CAFC decisions that opened the barn doors towards tons and tons of software and business method patents.

The summary is that the court has said that there's a two-pronged test to determine whether a software of business method process patent is valid: (1) it is tied to a particular machine or apparatus, or (2) it transforms a particular article into a different state or thing. In other words, pure software or business method patents that are neither tied to a specific machine nor change something into a different state are not patentable. That means a significant number of software and business method patents are about to disappear, freeing up many industries to be much more innovative -- at a time when that's desperately needed.

Earlier this year, I laid out the arguments on both sides of the case, surprising some by pointing out that I did not think it was right for the courts to carve out a special "exemption" for software or business model patents, but that a single standard should be applied across all patents. From my first read of the ruling, it looks like CAFC may have gotten this right. It doesn't carve out an exception, but makes it clear what the rules are for patents, based on earlier Supreme Court rulings, and makes sure the same rules are applied across the board. Specifically, CAFC recognizes that without that two-pronged test, the patent system effectively allows the patenting of overall concepts, rather than specific applications. While patent system defenders always claim that "ideas are not patentable," in practice, that was not true over the past decade. This ruling brings things back into line.

The ruling does note that such rules may be changed in the future, as necessitated by changes in technology, but "we see no need for such a departure." This statement strikes me as a bit odd -- as it shouldn't be the court's determination for when there should be such a "departure," but that of the legislative body (and you can bet lobbyists are rushing to Capitol Hill with new legislation to expand the scope of the patent system as we speak).

The ruling specifically addresses the State Street ruling that opened the doors to the widespread patenting of software and business methods and found that the earlier ruling erred, somewhat, in creating an improper standard for determining patentability that did not agree with Supreme Court precedent.

There are some dissenting opinions, with one that freaks out and claims that the court is usurping the legislative role, in changing what is patentable based on their own beliefs rather than what the law says. But, in a separate concurring opinion, two of the judges rightly point out that this is incorrect, show how their ruling is consistent with the law, and suggest that the only ones going beyond what the law says are those who are aggressively trying to expand what is patentable.

However, there's another dissenting opinion, well worth reading, that goes even further and argues that the CAFC ruling doesn't go far enough in repudiating the State Street ruling, and even points out why the courts are wrong to claim that "anything under the sun invented by man" is patentable. This dissent, written by Judge Mayer, is highly worth reading, showing all of the unintended consequences and harm done by the vast expansion of patentable materials -- mainly focusing on the evils of business method patents. "Methods of doing business do not apply 'the law of nature to a new and useful end.' Because the innovative aspect of such methods is an entrepreneurial rather than a technological one, they should be deemed ineligible for patent protection." Mayer points out, as we have noted repeatedly, that the clause in the Constitution that allows patents does "not grant Congress unfettered authority to issue patents," but rather, only to issue patents that effectively promote the progress. The dissent goes on to show how so many patents do exactly the opposite. It's really a fantastic read.

So What Happens Now?

Well, it may take some time to digest, but it's likely this will be appealed to the Supreme Court, so that process may take a while. Given the Supreme Court's recent rulings on patents, however, if I had to take a guess, I think they would support this ruling. But, you never know until it's decided.

This ruling will, however, send serious shockwaves through pretty much every industry -- because software and business method patents are found just about everywhere. Companies that rely on such patents (such as patent hoarding companies) may have just found out their current business model is about to go away. An awful lot of patents are now about to be invalidated, and a lot of patent lawsuits may get thrown out as the patents do not meet the criteria set forth in this decision.

You can bet, however, that the supporters of widespread software and business method patents will not go down without quite a fight. Beyond appealing the decision, it's likely there will be a push for a different type of patent reform in Congress that will expand the patent system to allow software and business method patents. There will be ridiculous announcements from companies that have chosen to litigate rather than innovate, claiming that they cannot innovate (even though they weren't) without much broader patents that they were actually using to hinder innovation.

So, while this is a huge victory for freeing up the ability to innovate, those who have used bogus patents to profit for years cannot be expected to go along quietly.

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UK Takes One More Step Towards Software Patents

from the can-bilski-cross-the-pond? dept

As we eagerly await the US Court of Appeals for the Federal Circuit (CAFC) ruling in the Bilski case -- which could greatly cut back on the ability of the US Patent Office to grant software and business model patents, it looks Europe may be moving in the opposite direction. We had earlier reported on a ruling in the UK which said that the UK Patent Office had gone too far in tossing out a Symbian patent application because it was software. Now, a UK appeals court has agreed with the earlier ruling, effectively saying that Symbian can, in fact, patent software in the UK, despite earlier policies that did not allow software patents.

The reasoning behind the ruling is a little odd, as it seems mostly based on aligning UK patent rules with the rest of Europe's. However, that doesn't mean that the ruling actually makes sense or does anything towards promoting innovation (and, plenty of recent studies show quite clearly that software patents appear to do exactly the opposite). This is definitely bad news for the software industry in the UK, which will now find more tollbooths to deal with, and more patent thickets to pick through. Money is going to be wasted going after legal fights, rather than on research, development and actually serving customers.

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Yet Another Example Of Why Google Would Be Better Off Without Patents

from the it-would-stop-getting-sued-so-often dept

While patent system supporters are trying to convince people that Google could be at great risk if software patents were done away with, that seems hard to square with reality. To date, as far as I know, Google has never filed a patent infringement lawsuit against anyone. Yet, it keeps ending up on the receiving end of incredibly questionable patent lawsuits. This latest one, from a company named GraphOn involves four patents. You can take a look at each one: one, two, three and four. A quick glance suggests not only prior art on all of them (a method for creating a pay-for-service website? filed in 2004? seriously?), but that none of these should have passed the "obviousness" test. It's difficult to believe that no one else would have come up with the same concepts without such a patent.

But, of course, GraphOn has long decided that there's probably more money in suing over patent infringement than in building products. While the company does have some actual products, over the past few years, it's sued a long list of internet companies for supposedly violating its patents. Their crime? Building useful web services that do rather obvious things -- but GraphOn insists that such obvious things require a license. GraphOn seems to be proving the old saying that those who can, innovate -- while those who can't litigate.

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CAFC Judge Regrets Decisions That Resulted In Software Patents

from the so-many-regrets dept

As the Court of Appeals for the Federal Circuit (CAFC) is considering the Bilski case, where it may finally push back on software and business model patents, it's interesting to hear one of CAFC's judges admit that he was "troubled by the unintended consequences" of the lawsuits (State Street and AT&T) that resulted in software and business model patents being effectively allowed. While it's nice to see Judge Plager worried about this now (just as the CAFC may finally change it), it's a bit of a stretch to claim that the consequences were somehow unintended. There was plenty of discussion around the time of the State Street case concerning what the end result would be if these types of patents were allowed. It's just that too many people seem to think that a change that increases patent coverage couldn't possibly have a negative impact -- despite tons of evidence to the contrary. Hopefully the next time an effort is underway to widen or strengthen patent law, people will look at what a disaster the past four years have been and recognize that expanding patentability is not something that should be done lightly.

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Software Patent Supporter Tries To Pretend Google Harmed Without Software Patents

from the nice-try,-but...-no. dept

There's a somewhat bizarre and ethically questionable post up on the usually excellent Patently-O blog, hyping up the fact that Google may lose its patent on PageRank (which Google only holds a license to, since Stanford actually owns it). First off, this isn't new or particularly surprising. It's talking about the upcoming decision on the Bilski case, which we've discussed at length. The decision could impact all software patents, and the author is merely using the Google name to get extra attention.

Even worse, it's misguided attention. Google is hardly a massive patent shop. It does get patents, but has rarely (if ever?) enforced them. And the idea that Google's success is somehow predicated on its patents is pretty ludicrous. Independent studies have shown, repeatedly, that Yahoo and Microsoft's search technology is just as good, if not better than Google's. But people use Google because they trust Google and are comfortable using it. Google has built up a reputation -- and that has nothing to do with its patents. If Google lost all of its patents today, it would have little to no impact on Google's position in the market. If anything, it might help Google, as it would also probably end a bunch of the silly patent lawsuits that have been filed against Google.

Finally, the post is ethically questionable, as its author, John Duffy, was hired by a software company, RDC, to write an amicus brief in the Bilski case pushing for the position that software should remain patentable. This is not disclosed in the post. In other words, he's clearly biased in favor of making sure that the end result of Bilski is that software patents remain in tact, and a little publicity campaign, stirred up by misleading claims that everyone's beloved Google will somehow be harmed could help push public sentiment towards allowing software patents.

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How Software Patents' Fuzzy Boundaries Create Unnecessary Litigation

from the subject-matter-test-please dept

James Bessen and Michael Meurer, authors of an important new book on the patent system, have a great post on the problems created specifically by software patents. They argue that the most serious problem with software patents is that they tend to cover abstract concepts rather than specific physical devices or processes. As a result, the boundaries of software patents tend to be uncertain, leading to a lot of litigation. In many areas of patent law, the "enablement" rule (which says that patent applications have to describe an invention in enough detail to "enable" someone to replicate it) helps to ensure more precise definition of patent boundaries. But the patent office only requires a general description of an "invention's" functionality to get a software patent. As a result, there tends to be a lot of uncertainty about what a software patent covers, and uncertainty inevitably spawns litigation.

Bessen and Meurer don't offer a strong recommendation on the best way to solve the problems with software patents, but they tentatively endorse a "subject matter test" -- that is, reinstating the ban on software patents -- as one part of a solution to the problem. However, they worry that a subject matter restriction won't entirely solve the problem because applicants might resort to creative drafting to evade it. I'm not sure it's so hard to draw a line to exclude software patents. Ben Klemens has suggested a standard that strikes me as pretty serviceable: mathematical algorithms are not patentable, and coupling an algorithm with "insignificant postsolution activity" does not transform an unpatentable mathematical algorithm into a patentable machine. In particular, the mere act of loading software onto an ordinary general-purpose computer cannot transform an unpatentable algorithm into a patentable machine. Although this standard might not invalidate all problematic software patents, it would invalidate most of the really harmful ones. To take one example, NTP's infamous wireless email patents almost certainly wouldn't pass muster under Klemens's test because the "invention" in question consisted of running certain email-processing algorithms on generic computer hardware. If you took away the software component, you'd be left with an unpatentable collection of generic computers and generic wireless links. I'm sure there would be some hard cases that Klemens's test wouldn't deal with precisely, but it's certainly more precise than the tests the Federal Circuit is using now.

Timothy Lee is an expert at the Insight Community. To get insight and analysis from Timothy Lee and other experts on challenges your company faces, click here.

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Can You Patent Scamming Energy Customers?

from the we-may-find-out dept

Back in February, we pointed out that the US Court of Appeals for the Federal Circuit (CAFC) is gearing up to hear a very important case, In re Bilski, that could change the patentability of software and patents. There's likely to be a flurry of news about this case in the near future, as lots of folks are expected to file their own briefs in the case. However, Joe Mullin has turned up a separate, but somewhat related story that shows how the "business model" in question may have been about bilking customers. The patent application that's being discussed has to do with a method for trading weather risk, which the company put into practice by offering billing solutions for various energy companies. Unfortunately for the company, the state of Minnesota discovered that those billing solutions seriously overcharged customers who were convinced to sign up. In the case of one energy company, customers who signed up for this "service" ended up paying almost $700 extra.

The link above has the whole convoluted story, but basically, Bilski's company, Weatherwise, would set up call centers for energy companies and then promote special "fixed price" plans, though the methodology for setting those prices is kept a secret (even from the energy companies). Weatherwise itself isn't actually being investigated, as it's not regulated by the state, but the Attorney General of Minnesota is exploring whether or not energy companies basically outsourced to Weatherwise in order to boost rates outside of the state's regulations. Either way, the two separate issues probably won't overlap much, other than that Weatherwise's CEO is complaining about how both cases represent attempts to stifle the firms' "creativity."

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Is Sun Backtracking On Software Patents?

from the hopefully-not dept

MySQL's execs have always been outspoken critics of software patents. Back in 2004, we wrote about the company CEO's well-reasoned article about how software patents had become the nuclear stockpiling of the modern era. Companies were forced to patent everything just to have enough ammo to make sure others didn't sue them for patent infringement, and the end result was huge legal bills and wasted money that wasn't going towards innovation at all. Since then, the company has remained vehemently against software patents. However, now that Sun has purchased MySQL, the company is apparently being pushed to cut back on its anti-software patent stance. Someone who prefers to remain anonymous sent in some blog posts highlighting how Sun has removed MySQL's anti-software patent page. To be fair, among larger companies, Sun has certainly shown a much better understanding of how patents can be anti-innovation as well as how the patent system is often abused. But, at the same time, it also has a bunch of patents and has demonstrated in quite explicit fashion just how those patent nuclear wars work. So, of companies out there, Sun seems less bad concerning software patents than other firms. But it's still rather disappointing to see it erase MySQL's excellent public stance against software patents from the web -- even if it did make a silly April Fool's joke about open source software this week.

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