Here is the first of two videos we're releasing discussing the impact of Alice on software startups.
Here is the first of two videos we're releasing discussing the impact of Alice on software startups.
By: Stuart P. Meyer
A recent episode of NPR’s “Planet Money” was entitled “The Case Against Patents.” Several notable commentators in that episode questioned whether patents help or hinder innovation, whether history supports the benefits of a patent system, and whether patent terms should be tinkered with to determine the amount of protection that is optimal from various socio-economic perspectives. I am delighted every time this issue is brought up, since the appropriate balance of rights between innovators and society is anything but static. As reasonable royalty rates fluctuate under case law, as infringement and validity standards shift, and as patents become commodities traded outside of traditional M&A situations, the fulcrum is certain to shift in one direction or the other.
The Supreme Court gave more than a little consideration to such issues in Alice v. CLS Bank. In fact, the very focus of this unanimous opinion was on this balance:
We have described the concern that drives [the judicially-created exclusion for laws of nature, natural phenomena and abstract ideas] as one of pre-emption. … Laws of nature, natural phenomena, and abstract ideas are “‘”the basic tools of scientific and technological work.”’” (slip op. at 5-6)
All four of these opinions explicitly state the policy concerns driving the exclusion.
(in all cases, excluding internal quotation marks, brackets, and citations).
And all four of these opinions also expressly worry about over-application of the exclusion:
Sounds like the Court is thinking about the right things, doesn’t it? The problem, though, is that the policy considerations should not be—indeed are not—the province of any Article III court to decide. The Court is discussing these issues as justification for its own judicial “implicit exception” to the explicit language chosen by Congress.
It is healthy for commentators to propose methods for finding the right balance in patent law. It is healthy precisely because it is not self-implementing, but instead serves as a preliminary vehicle for presenting and vetting ideas. Those ideas are then available for refinement and debate in the forum our Constitution provides: Congress. Even where courts include their observations on possible policy matters, as long as it is in obiter dicta, that too can serve as helpful input to Congress.
However, when the Court steps in and decides that the very language Congress chose to define as patentable subject matter needs some tweaking because taking it at face value “might tend to impede innovation more than it would tend to promote it,” a real question about separation of powers arises. Astonishingly, all four of the opinions addressed above speak to this concern as well:
How is it that all four of these cases recognize Congress’s role in making the policy choices involved here, yet perpetuate the judicial “implicit exception” to the words Congress used? Benson goes so far as to recognize the issue, but in a cart-before-the-horse manner. “It may be that the patent laws should be extended to cover these programs, a policy matter to which we are not competent to speak.” 409 U.S. at 72. The “extension” of the patent law addressed in Benson would actually be more a repudiation of the judicially created exception to the statutory language. Would it not be better to admit that perhaps it was out of place for the Court to impose this exception in the first place?
No matter how popular it might be to complain about the dysfunction of Congress, all of the indicators—from NPR podcasts to Supreme Court opinions—point to Congress as the only appropriate place where the balance should once again be struck. Even if they hear a number of closely related cases over the span of a few years, the courts cannot possibly have the same range of perspective and cannot possibly consider the same range of views as can hundreds of representatives and senators, along with the numerous constituencies influencing them. Like Gotham’s use of the Bat-Signal to beckon Batman, we call upon Congress in the hope that someday the judicially created exception can be properly adopted, rejected, or modified.
In my recent analysis of the Alice decision, I wrote the following:
In Benson, the Court believed (wrongly it turned about, but that’s beside the point) that the claims covered the basic algorithm for converting binary coded decimal to binary, something that appeared “fundamental” to the domain of computer science and mathematics. Similarly, in Mayo, the Court believed (again, wrongly, but again that’s beside the point) that Prometheus’s claim covered a so-called “law of nature,” something “fundamental” to the domain of medicine and biology. (It’s ok that the Court was wrong on the facts in Benson and Mayo, because what really matters for the future application of § 101 is the methodology and underlying theory, not the specific facts.)
Michael Risch, Professor Law at Villanova School of Law, responding to the last sentence commented that:
This can't be right. Being wrong on the facts of what is abstract or natural half the time is the core of the problem! This is where lower courts will screw up!
Michael is of course right that being wrong on the facts in patent cases, including patent eligiblity is the core problem, and that the lower courts are likely to decide an eligiblity question incorrectly if they "screw up" the facts.
When I said that "what really matters for the future application of § 101 is the methodology and underlying theory, not the specific facts" I was referring to the "specific facts "of Benson and Mayo, and how the Supreme Court will never acknowledge that it got the facts wrong in those cases.
As we argued in our amicus brief for Ronald Benrey, the Supreme Court was entirely wrong on the facts of Benson. First, the Court incorrectly believed that Benson's claim was on the basic algorithm for converting binary-coded-decimal to binary. But Benson clearly stated in his file history that the BCD-binary conversion algorithm was known and that his invention was a specific way of performing the algorithm using a fewer number of operations and digital logic elements than known in the art. Second, the Court incorrectly believed that computers perform calcluations "by actually doing arithmetic in much the same way a person would by hand." Finally, the Court assumed, again incorrectly that all mathematical algorithms are scientific truths.
As to Mayo, there the Court erred in believing that Prometheus' claim recited a law of nature. Under no modern scientific or philosophical theory does Prometheus' claim qualify as a law of nature. At best, it is simply a biological fact, an "accidental generalization," no different in kind than saying "adult male Chihuahuas are smaller than adult male Great Danes."
But the Supreme Court will not acknowledge, at least openly, that it got the facts of these cases wrong. In our exchange, Michael correctly noted that
"But lower courts will not see them as wrong. That's the problem."
Indeed, that is the problem. This is because a court will typically analogize a given claim to the claim in Benson or Diehr or Flook or Mayo, or now Alice as a way of deciding whether is it patent eligible, just like the Court did in Mayo, "The claim before us presents a case for patentability that is weaker than the (patent-eligible) claim in Diehr and no stronger than the (unpatentable) claim in Flook." 132 S. Ct. 1289, 1299. I call this the "Diehr-Flook Proximity Test." Court resort to this approach because reasoning by analogy is genetic in the law. It works sometimes but not always. By definition a patent claim is a unique thing, and so needs to be treated as such, but courts are so used to “this is like that,” that it is difficult to get them to see things from a different ‘first principles’ perspective, which is often needed in patent eligibility questions.
When a patent eligibility question comes before a lower court, the facts matter tremedously. While patent eligibility is said to be a question of law, deciding it without understanding the facts of the technology and the facts of the scope of the claim in terms of what it really "preempts" will almost certainly lead to the wrong decision. That is why we argued in our ABL amicus brief for an objective approach to patent eligibility based the use of the concept of POSITA: whether a POSITA would consider the actual claim limitations to wholly preempt all practical applications of the abstract intellectual idea, law of nature, or natural phenomenon in the real world. This is because it is the POSITA who would implement a practical application of the idea in the real world. The POSITA would recognize as meaningful limitations that a lay person would consider trivial or insignificant.
Facts do matter in patent eligiblity. We can only hope that courts and patent examiners remember that.
On the final day of its 2013 term, the Supreme Court issued some interesting orders in Section 101 cases dealing with computer-implemented business methods.
First, in WildTangent, Inc. v. Ultramercial, LLC (13-255), the Court granted certiorari, vacated, and remanded back to the Federal Circuit for reconsideration in view of Alice. This is important because the Federal Circuit twice affirmed the patent eligibility of Ultramercial's claims, first back in 2011, Ultramercial, LLC v. Hulu, LLC, 657 F.3d 1323 (Fed. Cir. 2011), and then again in 2013 after the Supreme Court vacated that decision and remanded in view of Mayo. Ultramercial, Inc. v. Hulu, LLC, 722 F.3d 1335 (Fed. Cir. 2013). In the second decision, Judge Rader attempted to reconcile his theory of patent eligiblity with that of Judge Lourie. Now that Judge Rader has retired, the case will be decided by just Judges Lourie and O'Malley. If these judges do not agree on the eligiblity of Ultramercial's claim--a likely outcome--then an additional judge will be assigned. How Ultramercial turns out will very likely depend on which judge is assigned--resulting in yet another panel dependent outcome.
In addition, the Court denied certiorari in both Accenture Global Servs. v. Guidewire Software, Inc. (No. 13-918) and Bancorp Servs., LLC v. Sun Life Assurance Co. (No. 13-584). In both of these cases, the Federal Circuit previously found the patent claims ineligible. Accenture Global Services, GmbH v. Guidewire Software, Inc., 728 F.3d 1336 (Fed. Cir. 2013); Bancorp Servs., L.L.C. v. Sun Life Assur. Co. of Canada, 687 F.3d 1266 (Fed. Cir. 2012).
Upshot: where the Federal Circuit found a business method claim patent-eligibile (Ultramercial), the Supreme Court sent it back for a do-over, ostensibly over doubts as to the patent's validity. Where the Federal Circuit found such a claim ineligible (Accenture and Bancorp), the Supreme Court was fine with that outcome. Thus, even though the Alice majority opinion made no mention of business method patents directly, the Court clearly does not have much tolerance for them.
Read Part I on IPWatchdog
We can return to the beginning of the analysis and revisit preemption. As stated, the Court sees § 101 as protecting the big ideas that are fundamental to commerce, science, and technology, patents that would preempt and “block” innovation. The Court realizes that every patent preempts and blocks in some degree, because that’s what patent claims do. Rather, the risk of preemption must be “disproportionate.” Alice,slip op. at 5. This is a definitely a much higher bar than the standard set forth in the CLS plurality opinion, “Does the claim pose any risk of preempting an abstract idea?” CLS, 717 F.3d at 1282 (Lourie, J., concurring),cited approvingly in Accenture Global Services, GmbH v. Guidewire Software, Inc., 728 F.3d 1336 (Fed. Cir. 2013).This requirement for a high level of preemption risk is necessary because we can never know a priori (e.g., when a patent application is filed, when it is reviewed by a patent examiner) exactly what will happen in the future, and how important and preemptive the patent will be in regards to other developments in the same field or in other fields. Most truly fundamental “building block” inventions are not recognized as such for many years after the fact.
Read more at IPWatchdog.com...
~ ‘The report of my death was an exaggeration’ –Mark Twain
Mark Twain, American humorist.
With apologies to the great humorist, the report of the death of software patents is an exaggeration. Some commentators quite quickly suggested that the Supreme Court’s decision in Alice Corp. Pty. Ltd. v. CLS Bank Int’l, 573 U.S. ___, No. 13-298 (June 19, 2014), will “invalidate the majority of all software patents in force today” and is “bad news for software patents”. That interpretation may make good copy, but it is simplistic and overblown. While the Court invalidated Alice’s patents, the decision certainly does not invalidate the majority, or even a large percentage, of software patents, nor does it radically restrict the kinds of inventions that can be patented going forward. The decision is a modest and incremental clarification in the patent law, and a not wholesale revision.
The Court set forth a two-step test grounded in Bilski v. Kappos and Mayo v. Prometheus.While the Court may not have defined a clear boundary for so called “abstract ideas” specifically, it did squarely place this case within the “outer shell” of the law set forth in Bilskiand Mayo. In doing so it articulated an approach that focuses not on finding the boundary line, but rather on the core properties of an ineligible patent claim. In Part I of this two-part post, I will focus on just the first step of the test, whether a claim recites a patent-ineligible “abstract idea.” In Part II, I’ll address issues regarding preemption, mental steps, and the application of Alice to software patents.
Read the rest on IPWatchdog....
Alice Corp. v. CLS Bank is out and the result is not unexpected:
1) Alice's patents for computer-implemented methods and systems for financial risk intermediation are invalid.
2) The patents claim abstract idea, but the Court will not "labor to delimit the precise contours of the "abstract ideas" category." That leaves unanswered the primary problem that has plagued the lower courts, identifying in a particular case whether the claims recite an abstract idea. As Judge Lourie said in his plurality opinion below, "deciding whether or not a particular claim is abstract can feel subjective and unsystematic, and the debate often trends toward the metaphysical, littered with unhelpful analogies and generalizations." CLS Bank v. Alice Corp, 717 F.3rd 1269, 1277. Today's decision only continues the trend towards glosses and legal mysticism, with the Court expressing concern over patents on the "building blocks" of "human ingenuity" or the "modern economy," or covering "fundamental practices" "long prevalent" in the field. What is a "building block"? What is "fundamental"? How is a court or a patent examiner supposed to figure that out?
3) The "mere recitation of a generic computer cannot transform a patent-ineligible abstract idea into a patent-eligible invention." This too we knew, because it's implicit in the underlying question. Of course once you've assumed you have an "abstract idea" recited, you've essentially already decided that the computer elements don't do any "work." The Court's analysis talks about "transformation" but never states what's sufficient, only what's not. There are hints that the claims must recite elements that "improve the functioning of the computer itself" or "any other technology or field." But what counts as an improvement and what is "technology" or a "technical field?"
These are just some of the unanswered questions. The Court did not address many other topics that arise in patent eligibility contests:
We can expect these and many other issues to be vigorously debated in court and before the USPTO.
Thirty-three years ago Justice Stevens stated that the Supreme Court “cases considering the patentability of program-related inventions do not establish rules that enable a conscientious patent lawyer to determine with a fair degree of accuracy which, if any, program-related inventions will be patentable.” Diamond v. Diehr, 450 U.S. 175, 219 (1981) (Stevens J., dissenting). Two generations later and we are no closer to this goal.
By: Robert R. Sachs
The Supreme Court’s decision in the patent fee shifting case, Octane Fitness, LLC v. Icon Health & Fitness, Inc., No. 12-1184, has literally nothing to do with patent eligibility. However, it does demonstrate an approach to statutory interpretation that the Court could readily apply to Section 101 in its upcoming decision in Alice Corp. v. CLS Bank.
In Octane Fitness, the issue before the Court was the standard for awarding “reasonable attorney fees to the prevailing party” in “exceptional cases” under the fee shifting provisions of 35 U.S.C. § 285. The question was what counts as an exceptional case. The Federal Circuit had adopted a rule requiring “material inappropriate conduct” by a party or that the case was both “objectively baseless” and “brought in subjective bad faith.” Brooks Furniture Mfg., Inc. v. Dutailier Int’l, Inc., 393 F.3d 1378, 1381 (Fed. Cir. 2005). The Supreme Court characterized the Brooks Furniture test as “unduly rigid” and “so demanding that it would appear to render § 285 largely superfluous” in view of the inherent power of courts to make exceptions to the general American rule against fee-shifting. Octane Fitness, Slip Op. at 7, 11. The Court held than an exceptional case is “one that stands out from others with respect to the substantive strength of a party’s litigating position . . . or the unreasonable manner in which the case was litigated.” Id.
The nexus to patent eligibility is not in the holding, but in the methodology that the Court used to get there. It’s amazingly short and to the point, and worth quoting at length:
Our analysis begins and ends with the text of §285: "The court in exceptional cases may award reasonable attorney fees to the prevailing party." This text is patently clear. It imposes one and only one constraint on district courts' discretion to award attorney's fees in patent litigation: The power is reserved for "exceptional" cases.
The Patent Act does not define “exceptional,” so we construe it “‘in accordance with [its] ordinary meaning.’” Sebelius v. Cloer, 569 U.S. ___, ___ (2013) (slip op., at 6); see also Bilski v. Kappos, 561 U.S. 593, ___ (2010) (slip op., at 6) (“In patent law, as in all statutory construction, ‘[u]nless otherwise defined, “words will be interpreted as taking their ordinary, contemporary, common meaning”’”). In 1952, when Congress used the word in §285 (and today, for that matter), “[e]xceptional” meant “uncommon,” “rare,” or “not ordinary.” Webster's New International Dictionary 889 (2d ed. 1934); see also 3 Oxford English Dictionary 374 (1933) (defining “exceptional” as “out of the ordinary course,” “unusual,” or “special”); Merriam-Webster's Collegiate Dictionary 435 (11th ed. 2008) (defining “exceptional” as “rare”); Noxell Corp. v. Firehouse No. 1 Bar-B-Que Restaurant, 771 F. 2d 521, 526 (CADC 1985) (R. B. Ginsburg, J., joined by Scalia, J.) (interpreting the term “exceptional” in the Lanham Act's identical fee-shifting provision, 15 U. S. C. §1117(a), to mean “uncommon” or “not run-of-the-mill”).
We hold, then, that an “exceptional” case is simply one that stands out from others with respect to the substantive strength of a party's litigating position (considering both the governing law and the facts of the case) or the unreasonable manner in which the case was litigated. District courts may determine whether a case is “exceptional” in the case-by-case exercise of their discretion, considering the totality of the circumstances.7 As in the comparable context of the Copyright Act, “‘[t]here is no precise rule or formula for making these determinations,’ but instead equitable discretion should be exercised ‘in light of the considerations we have identified.’” Fogerty v. Fantasy, Inc., 510 U.S. 517, 534 (1994).
That’s it. Take the words of the statute, look them up in a couple of dictionaries from the relevant historical period of the legislation, create a new gloss, and you’re done. No need to delve in the mysteries of the legislative history: indeed in a unanimous opinion, Justice Scalia joined all but three footnotes that discussed the legislative history. No need to worry about whether patent litigators will engage in “clever pleading” or the “advocate’s art” to avoid having a losing position deemed exceptional. No postulating worrisome hypotheticals involving famous courtroom battles from Inherit the Wind or Dog Day Afternoon as proxies for the potential evils being warded off.
If only the Court would handle Section 101 this way. Let’s pretend this is what happens in the upcoming decision in Alice Corp. Here is how the opinion would be written, simply by marking up the Octane Fitness decision:
Our analysis begins and ends with the text of § 101: “Whoever invents or discovers any new and useful process, machine, manufacture, or composition of matter, or any new and useful improvement thereof, may obtain a patent therefor, subject to the conditions and requirements of this title.” This text is patently clear. It imposes only a minimal constraint on the scope of patent eligible subject matter, that what is invented is new, useful, and is either a machine, process, manufacture, composition of matter, or an improvement thereof, and subject to the further requirements of the Patent Act.
The Patent Act does not define “machine,” so we construe it “‘in accordance with [its] ordinary meaning.’” Sebelius v. Cloer, 569 U.S. ___, ___ (2013) (slip op., at 6); see also Bilski v. Kappos, 561 U.S. 593, ___ (2010) (slip op., at 6) (“In patent law, as in all statutory construction, ‘[u]nless otherwise defined, “words will be interpreted as taking their ordinary, contemporary, common meaning”’”). In 1952, when Congress used the word in § 101 (and today, for that matter), “machine” meant “a structure or constructed thing whether material or immaterial,” “an assemblage of parts that are usually solid bodies but in some cases fluid bodies or electricity in conductors and that transmit forces, motion, and energy one to another in a predetermined manner and to some desired end (2) : an instrument (as a lever) designed to transmit or modify the application of power, force, or motion,” “a mechanically, electrically, or electronically operated device for performing a task.” Webster's Third New International Dictionary 1353.
The Patent Act, however, did define “process” in § 100(b) as “The term “process” means process, art or method, and includes a new use of a known process, machine, manufacture, composition of matter, or material.” Again, turning to the aforementioned source, “process” means “a particular method or system of doing something, producing something, or accomplishing a specific result;” or “an artificial or voluntary progressively continuing operation that consist of a series of controlled actions or movements systematically directed towards a particular result or end.” “Art” means “the power of performing certain actions, esp. as acquired by experience, study, or observation;” “skill in the adaptation of things in the natural world to the uses of human life;” “system application of knowledge or skill in effecting a desire outcome.” Id.
We hold, then, that a machine is simply any material or immaterial artificial (i.e., man-made) thing that performs a task. We hold further that a “process” is any artificial series of actions or operations that produce a specific result or thing.
District courts may determine whether a claim is patent eligible following these straight-forward definitions. As in the comparable context of the Copyright Act, “‘The law then in force was that of 1831, and specified only books, maps, charts, musical compositions, prints, and engravings. An account-book, consisting of ruled lines and blank columns, cannot be called by any of these names unless by that of a book.’” Baker v. Selden, 101 U.S. 99, 101 (1879).
What of all the concerns about patenting laws of nature, abstract ideas, about clever drafting, of course the sub-silentio angst over patent trolls asserting lousy patents? It’s not for the courts to impose restrictions that Congress did not expressly indicate. Congress could have easily provided further statutory language setting forth exceptions to and restrictions on eligible subject matter to address these concerns. It did not.
Again, the Court’s opinion does the necessary jurisprudential work, with a few minor corrections:
The Federal Circuit's formulations of the tests for patent eligible subject matter have been overly rigid. Under the standard crafted in by the plurality opinion below, a claim is patent eligible only if it survives a complicated four step test with multiple sub-tests and exceptions (“The first question is whether the claimed invention fits within one of the four statutory classes set out in § 101”; the next step is determining “whether the claim raises § 101 abstractness concerns at all;” the next “step in that analysis requires identifying the abstract idea represented in the claim”; finally the last step is to “determine whether it contains additional substantive limitations that narrow, confine, or otherwise tie down the claim so that, in practical terms, it does not cover the full abstract idea itself”;). This formulation superimposes an inflexible framework onto statutory text that is inherently flexible.
If Octane Fitness represents the correct methodology for interpreting the statute for § 285, it should equally apply to § 101. In short, Court could stay true to this methodology, and simply follow the recommendation of Chief Justice Rader, as set forth in his “Reflections”: “When all else fails . . . consult the statute.” CLS Bank v. Alice Corp., 717 F.3d 1269, 1334 (Fed. Cir. 2013) (en banc) (Rader, J., reflecting).
Oh, would the world be so.
By: Robert R. Sachs
One of the Section 101 cases we're handling has already made it into a law school exam. In SmartGene v. ABL, the Federal Circuit ruled that claims to a medical expert system were not patent-eligible. On behalf of ABL, we recently filed a petition for certiorari, requesting the Supreme Court to vacate the Federal Circuit decision once it decides Alice Corp. v. CLS Bank, and remand to the Federal Circuit.
Prof. Jason Rantanen, at the University of Iowa College of Law, posted on Patently-O that he recently included claim 1 from ABL's U.S. 6,081,786, on the final exam for his patent law class, challenging them to argue why the claim is not patent-eligible. In an email exchange, Prof. Rantanen said that he chose ABL's patent claim for the exam to "force students to grapple with actual contemporary claims....This claim seemed like a great one to talk about from a PSM perspective." For context, here is the ABL patent claim:
(a) providing patient information to a computing device comprising:
a first knowledge base comprising a plurality of different therapeutic treatment regimens for said disease or medical condition;
a second knowledge base comprising a plurality of expert rules for evaluating and selecting a therapeutic treatment regimen for said disease or medical condition;
a third knowledge base comprising advisory information useful for the treatment of a patient with different constituents of said different therapeutic treatment regimens; and
(b) generating in said computing device a ranked listing of available therapeutic treatment regimens for said patient; and
(c) generating in said computing device advisory information for one or more therapeutic treatment regimens in said ranked listing based on said patient information and said expert rules.
By: Robert R. Sachs
This Thursday, April 17, 2014, the San Francisco Bar Association will host a lunch time discussion on the patent eligibility of software between myself, Prof. Robin Feldman of Hastings and Daniel Nazer ("Staff Attorney and Mark Cuban Chair to Eliminate Stupid Patents") of the Electronic Frontier Foundation. We'll be discussing the various arguments raised in our respective amicus briefs in Alice Corp. v. CLS Bank (Sachs-ABL, Sachs-Benrey, Feldman, EFF) as well as the views of the parties and the government. While online registration is closed, feel free to come anyways.
The discussion will be lively one, to say the least, given the very diverse points of view.