Federal Circuit Says Software Is Unpatentable When It Merely Implements Mental Steps

On Tuesday, the Federal Circuit affirmed Judge Patel's grant of summary judgment of invalidity of software patent claims asserted in CyberSource v. Retail Decisions.  In its Decision, the Federal Circuit explains that a method that can be performed purely mentally is unpatentable under 35 U.S.C.  § 101, even if the claim is tied to computer hardware.

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Canadian Government Appeals Amazon "One-Click" Decision

On November 15, 2010, the Attorney General of Canada and Canada's Commissioner of Patents filed a Notice of Appeal in Canada's Federal Court of Appeal in a case involving the patentability of Amazon's "One-Click" invention.  If the Court of Appeal overturns the earlier decision, it could make Canada's patent law diverge from U.S. patent law regarding the patentability of some (or potentially all) software.

Software Is Not Abstract

Earlier this year, I wrote that the U.S. Supreme Court ruled that Bilski's claims were abstract, and that abstract claims are unpatentable under 35 U.S.C. § 101.  According to the Federal Circuit in Research Corp. Tech. v. Microsoft Corp., software-related claims are not abstract.

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Amazon's One-Click Patent Is Patentable In Canada

The Federal Court of Canada ruled on Thursday that claims in Amazon's 1-click patent constitute patentable subject matter, thereby reversing the Commissioner of Patents' findings.  The Commissioner argued that there is a business method exclusion in Canada, but the Court ruled that there is not.

According to the Court's ruling:

There is no exclusion for “business methods” which are otherwise patentable, nor is there a “technological” test in Canadian jurisprudence. Even if there was some
technological requirement, in this case the claims, when viewed as a whole, certainly disclose a technological invention.

The Canadian Court's ruling appears to be consistent with the U.S. Supreme Court's opinion in Bilski.

Apple Patent For Censoring Texting

´╗┐Yesterday, the USPTO issued Apple's U.S. Patent No. 7,814,163 directed to a "Text-based communication control for personal communication device."  The patent has one independent claim and 14 total claims.

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Software Is Not Necessarily Business Method

Section 101 of the patent statutes (Title 35 of the U.S. Code), broadly outlines the categories of what is patentable subject matter.  These include "any new and useful process, machine, manufacture, or composition of matter, or any new and useful improvement thereof."  A business method falls into the "process" category, but claims in patents directed to software can be written as a process, machine, or manufacture.  However, people commonly confuse software patents with business method patents.  These are different things, and although the distinction can be difficult to discern because businesses today rely on software so much, the distinction is likely to become important over time because of the U.S. Supreme Court opinion in Bilski.

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Software and Business Methods Remain Patentable

Software companies that desire patent protection on their innovations or previously spent considerable effort in procuring patents received good news today.  The Supreme Court in its Bilski opinion today held that business methods and software can be patentable, but Bilski's claims are not.

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Obvious As A Matter Of Common Sense

To be patentable, an invention must meet various legal requirements.  One such requirement is that it must not be obvious.  The law relating to whether an invention is obvious can sometimes be confusing and difficult to apply -- especially in the wake of the KSR v. Teleflex U.S. Supreme Court case.

The Federal Circuit Court of Appeals delivered a precedential decision yesterday in Perfect Web Techs. v. InfoUSA explaining that an invention can be obvious as a matter of common sense.

Claim 1 of U.S. Patent No. 6,631,400 recited:

 

1. A method for managing bulk e-mail distribution comprising the steps:

(A) matching a target recipient profile with a group of target recipients;

(B) transmitting a set of bulk e-mails to said target recipients in said matched group;

(C) calculating a quantity of e-mails in said set of bulk e-mails which have been successfully received by said target recipients; and,

(D) if said calculated quantity does not exceed a prescribed minimum quantity of successfully received e-mails, repeating steps (A)-(C) until said calculated quantity exceeds said prescribed minimum quantity.

 

On appeal, the parties agreed that steps (A) through (C) were known in the prior art.  According to the Federal Circuit's decision, step (D) would have been common sense for one skilled in the art of "e-mail marketing" and so the claim is invalid as being obvious.

A district court can find by summary judgment that an invention is obvious as a matter of common sense, but "must articulate its reasoning with sufficient clarity for review. "

Bilski Oral Arguments

The Supreme Court will hear oral arguments tomorrow (Monday) in the Bilski case.  Many amicus briefs have been filed in the case, including briefs from Accenture, AIPLA, Borland Software, the Free Software Foundation, Intellectual Property Owners Association,  IBM, Microsoft, and Red Hat. 

Although the Bilski case is mostly about business methods (e.g., risk hedging), many have turned the case into a question of whether software is patentable.  I have my doubts that there are sufficient facts on the record in the Bilski case for the Supreme Court to opine on that particular issue (even the Federal Circuit deferred the issue as footnoted in their Bilski decision), but I have been surprised before.

California Court's Bilski Analysis

When does a general purpose computer become a "particular machine" as required by Bilski

Yesterday, I wrote that a California court had invalidated claims of DealerTrack's U.S. Patent No. 7,181,427. According to Judge Guilford's Order, DealerTrack had asserted claims 1, 3, and 4. The defendants moved for summary judgment arguing that the asserted claims are invalid in view of Bilski. DealerTrack implicitly conceded that its claims do not meet the transformation prong of Bilski's machine-or-transformation test by apparently failing to argue that point in its response to the defendants' summary judgment motion. The Order finds that the claims also do not meet the machine prong.  Because the claims meet neither prong, the Order found them to be invalid.

The Order begins its analysis by outlining the current law of the land that a general purpose computer executing a program is patent eligible. Next, the Order indicates that decisions of the Board of Patent Appeals and Interferences (BPAI) and the California decision in Cybersource v. Retail Decisions require more than a general purpose computer, thereby contravening In re Alappat (holding that a general purpose computer becomes a special purpose computer when it executes a program).

According to the Order, "[t]he ‘427 Patent does not specify precisely how the computer hardware and database are 'specially programmed,' and the claimed central processor is nothing more than a general purpose computer that has been programmed in some unspecified manner." (Page 7, lines 1-4.) The Order cites to an earlier Claim Construction Order that indicates that DealerTrack agreed to a broad reading of the relevant devices, clearly now to its detriment.

The Order states that "[t]he Court finds that none of these devices constitutes a 'particular machine' within the meaning of Bilski." (Order, page 6, line 28-page 7, line 1.) However, the Order does not cite to anywhere in Bilski as specifying what the "particular machine" ought to be. It goes on to state:

Under Bilski and the recent decisions interpreting it, the central processor in this case cannot constitute a "particular machine." Further, this Court’s claim construction order defined both the "remote application entry and data device" and "remote funding source terminal device" to include "any device," such as a personal computer or dumb terminal, and these devices clearly cannot constitute particular machines.

(Order, page 7, lines 4-9.) 

When does a general purpose computer become a "particular machine" as required by Bilski?  Can it become one?  No one seems to know yet.

Eviscerating Patent Value

One way to eviscerate the value of a patent or portfolio of patents is to assert them unsuccessfully.

DealerTrack is a "provider of on-demand software and data solutions for the automotive
retail industry" and has a portfolio of four U.S. patents and at least five patent applications. As reported in the Wall Street Journal, the company announced today that a judge in the U.S. District Court of the Central District of California had declared a patent it was enforcing invalid in view of Bilski.  The company is planning to appeal.

I have not yet seen the judge's ruling, but the only two independent claims in the relevant patent are:

1. A computer aided method of managing a credit application, the method comprising the steps of:

  • receiving credit application data from a remote application entry and display device;
  • selectively forwarding the credit application data to remote funding source terminal devices;
  • forwarding funding decision data from at least one of the remote funding source terminal devices to the remote application entry and display device;
  • wherein the selectively forwarding the credit application data step further comprises:
    • sending at least a portion of a credit application to more than one of said remote funding sources substantially at the same time;
    • sending at least a portion of a credit application to more than one of said remote funding sources sequentially until a finding source returns a positive funding decision;
    • sending at least a portion of a credit application to a first one of said remote funding sources, and then, after a predetermined time, sending to at least one other remote funding source, until one of the finding sources returns a positive funding decision or until all funding sources have been exhausted; or;
    • sending the credit application from a first remote funding source to a second remote finding source if the first funding source declines to approve the credit application.

(Sic.)

5. A computer aided method of managing a credit application, the method comprising the steps of:

  • receiving credit application data from a remote application entry and display device;
  • selectively forwarding the credit application data to a first remote funding source terminal device;
  • wherein the selectively forwarding the credit application data step further comprises:
    • facilitating the first remote finding source terminal device to selectively forward the credit application to a second remote funding source terminal device if the funding source associated with the first remote finding source terminal declines to approve the credit application; and;
    • forwarding funding decision data from at least one of the first and second remote funding source terminal devices to the remote application entry and display device.

I do not yet know which claim(s) were asserted and/or invalidated. 

What's In A Name?

In Shakespeare's Romeo & Juliet, Juliet says to Romeo:

What's in a name?  That which we call a rose
By any other name would smell as sweet.

(Act II, scene ii.)  

GoDaddy doesn't agree with Juliet.  The company is no stranger to filing patent applications and owns scores of published applications and issued patents.  Some of these patent applications are directed to a market for domain names.  As Domain Name Wire reports, two such applications published today:

  • Patent Publication No. 20090171823  claims " A method comprising the step of underwriting a sale of shares of equity in a Domain Name." 
  • Patent Publication No. 20090171678 claims "A method comprising the step of protecting a Domain Name from an undesired transfer of ownership during a sale of shares of equity in the Domain Name."

If you know anything about patents or have read my prior blog entry on breadth, you know that these are quite broad claims.  A strategy commonly employed by savvy patent applicants is to initially file broad claims and then narrow them during prosecution of the patent application in view of prior art the patent examiner or the applicant identify.  Doing so can result in broader coverage than starting with narrow claims and then attempting to broaden them during prosecution.

The names Capulet and Montague may have smelled similarly sweetly to Juliet, but to the owners of some desirable domain names that can fetch a princely sum, some domain names smell more sweetly than others.

Knuth Would Rule Out Software Patents

Almost everyone who has completed university training in computer science knows who Professor Donald Knuth is.  When I was completing my undergraduate computer science degree, I remember referring to his textbook many times.  As they were quite expensive for me, I could not afford to buy them and so would review them in the university's library.

He has apparently written to both the USPTO (in 1994) and the EPO (more recently) explaining why he thinks software should not be patentable.  However, his letter to the EPO reflects a misunderstanding many people have about what is patentable and what is not.  His letter provides an example in support of his argument:  

"For example, it would be terrible if somebody were to have a patent on an integer, like say 1009, so that nobody would be able to use that number "with further technical effect" without paying for a license."

Professor Knuth is arguing that something (software) should not be patentable by comparing it to something else (a number) that was never patentable.  To my knowledge, no patent office in the world has or would ever award a patent on a number or other fundamental "truths of nature."  Patent laws are designed to award innovation, and an innovative algorithm that is novel and not obvious should be awarded a patent no differently than a machine.  To say that an algorithm can be explained mathematically and should not be patent eligible is equivalent to saying that a machine merely employs laws of physics and should not be patent eligible. 

Just as Professor Knuth was rewarded for writing his excellent textbooks, innovators in all new fields of human endeavor should expect that their innovations will be fruitful.  When drafting Article I of the Constitution of the United States, the founding fathers recognized that having a world full of copycats would not lead to progress.

Supreme Court Grants Cert. In Bilski

The Supreme Court of the United States today granted certiorari in the Bilski case.  The primary question the Supreme Court has been asked to answer is:  whether the Federal Circuit's "machine-or-transformation" test is the appropriate test to determine whether a claimed process should be patentable subject matter.  To be valid, a claimed invention must (1) fall within one of the specified categories of patentable subject matter, (2) be novel, and (3) not be obvious.  This case deals with the first threshold issue of patentability. 

Although the original Bilski case involved a pure business method (i.e., not implemented in software), it is likely that the Supreme Court's decision could have an impact on software patents because many patent applications directed to software recite "method" or process claims.

A large number of patent practitioners and their clients will be watching this case closely.

Do Patents Promote Progress or Stifle Innovation?

In a debate that parallels one in the software patents space, some argue that gene patents stifle innovation.  A recent New York Times article reports that a cancer patient is suing the owner of a gene patent, Myriad Genetics, and the USPTO.  She is joined in her suit by other cancer patients and medical professionals, and is represented by the ACLU.  According to the plaintiffs, a gene patent promotes mediocrity rather than progress.  Some argue that software patents similarly stifle innovation. 

The debate is an old one.  The framers of our Constitution gave power to Congress under Article I "[t]o promote the progress of science and useful arts, by securing for limited times to authors and inventors the exclusive right to their respective writings and discoveries" and so Congress enacted the Patent Act.  Many in the past have opined that patents prevent progress because competitors are precluded from practicing the patented claims.  However, that's exactly how patents promote progress.  Companies that cannot be assured of being able to protect their innovations from copycats have much less incentive to innovate and describe their innovations to others openly.  When innovations are openly described, competitors and others can build on the innovations to further advance their fields.

By enabling innovators to protect their innovations "for limited times," the Constitution and our patent laws have created an environment in which innovation is encouraged rather than stifled.
 

Bilski Appeal to U.S. Supreme Court

After losing at the Federal Circuit, Bilski filed its appeal with the U.S. Supreme Court.  Last week, the USPTO filed its Opposition to the appeal.  The Opposition quotes the following language from the Federal Circuit decision:

[W]e agree that future developments in technology and the sciences may present difficult challenges to the machine-or-transformation test, just as the widespread use of computers and the advent of the Internet has begun to challenge it in the past decade. *** And we certainly do not rule out the possibility that this court may in the future refine or augment the test or how it is applied. At present, however, and certainly for the present case, we see no need for such a departure.

(Pages 14-15 of the decision.)  However, the Opposition leaves out the following sentence from that passage:  "Thus, we recognize that the Supreme Court may ultimately decide to alter or perhaps even set aside this test to accommodate emerging technologies."

The Opposition makes a good argument on why Bilski is not the appropriate case for determining whether software is patent eligible.

California Court Doesn't Like Software Patents

On March 27, Judge Patel in the Northern District of California extended the reach of Bilski well beyond the dicta in that case.  In Cybersource v. Retail Decisions (California Civil Case No. 3:04-cv-03268-MHP), Judge Patel ruled that "[a] method for verifying the validity of a credit card transaction over the Internet" that obtains "information about ... transactions that have utiliized an Internet address" does not satisfy the method-or-transformation test promulgated by Bilski.  She also ruled that Beauregard claims also must satisfy the machine-or-transformation test independent of reciting the storage of computer-executable instructions on a computer-readable storage medium.

Appeals to BPAI In View of Bilski

I just finished reviewing 18 BPAI decisions in software cases.  Most of the decisions rejected at least some claims under 35 USC 101 in view of Bilski. 

  • Of these decisions, almost all raised 101 issues sua sponte
  • Three decisions remanded 101 issues to the examiner whereas the rest just held that claims are unpatentable. 
  • In almost all of the decisions, merely reciting a processor or computer in the preamble was insufficient. 
  • In some cases, even system claims were rejected as merely corresponding to software components. 
  • Many decisions also stated that merely executing a method on a general purpose computer is not sufficient to overcome the "machine" requirement of Bilski's machine-or-transformation test. 

The board appears to be looking for recitations of a special purpose machine or device and thereby appears to ignore prior case law.  If you are appealing a software case to the BPAI, you may want to review these decisions to see if your claims will withstand a sua sponte patentability rejection if you are not prepared to further appeal beyond the BPAI.