Bascom: another Alice software win

Bascom - fish delivering mail
Bascom – fish delivering mail

The Bascom court decision helps software patents by suggesting that step 2 of the Alice test should follow established obviousness rules.

US software patents got another win from the Federal Circuit Court this week.  This court, which has a Congressional mandate to clarify patent law, made an important clarification to the Alice (software patent killer) “abstract subject matter” test in the Bascom v AT&T case (Bascom).

As you may recall from our last “Enfish” episode, the Supreme Court (SCOTUS) “Alice” decision created a judge-ordered incoherent two-step test that any given patent must pass in order to be patent eligible under 35 USC 101 rules.  To simplify:

Step 1) Determine if the patent is directed to “abstract” subject material.  If not then congratulations, the patent passes this test.  

Step 2) But if the patent is found to be “abstract” in step 1, then determine if the patent contains “something extra” beyond just “abstract” subject material.  If there is nothing extra, then reject the patent as being “abstract”.   

The Federal Circuit is one step down from SCOTUS.  The Federal Circuit doesn’t have enough clout to overrule SCOTUS, but does have enough clout to overrule the USPTO and the lower courts.  More importantly, the Federal Circuit has both the clout and mandate to “clarify” SCOTUS decisions.

The USPTO and the lower courts were often ignoring Alice step 1 and just assuming that a patent had “abstract” subject matter. The previous Federal Circuit “Enfish” decision pointed out that this was improper.  By contrast, the newer Federal Circut “Bascom” case is now clarifying that another common practice, just asserting that the patent fails Alice step 2 because it lacks an undefined “something extra”, isn’t right either.

More specifically, in Bascom, the Federal Circuit pointed out that based on earlier SCOTUS decisions (e.g. Mayo v. Prometheus, which SCOTUS used for “Alice”), Alice step 2 tests if the claim is “well-understood, routine or conventional”.  According to the Federal Circuit’s interpretation, SCOTUS was probably thinking about something similar to an obviousness test.   The Federal Circuit also pointed out that there are well-established rules for establishing obviousness, which the USPTO and the lower courts were (also) ignoring.

Specifically, the Bascom case was an appeal of a lower court decision that had earlier found the Bascom patent claims to be “abstract” and therefore invalid.  The lower court’s arguments (in simplified form) were that the Bascom patent claim language words described conventional computer pieces, and therefore the Bascom claims failed Alice step 2 due to lack of “something more”.  

In Bascom, the Federal Circuit Court, after “clarifying” Alice by pointing out that SCOTUS’s Alice step 2 resembled an obviousness test, then pointed out that the lower court had failed to follow established rules to determine obviousness (35 USC 103 rules).  These 35 USC 103 rules require that the combination of the pieces and the motive for combining the pieces also be considered.  Here conventional pieces, arranged in a non-conventional way, are often not obvious.

The Federal Circuit then looked at the Bascom claims, determined that they were not obvious, and (again somewhat simplifying) therefore had “something more” that satisfied step 2 of the Alice test.  They then overruled the lower court and found the Bascom patent to be “not abstract” and therefore valid under 35 USC 101.

If this holds up, the Bascom decision could almost bring some sanity to the Alice test.  Stay tuned…

Software patents in China, Europe, and the US

China-Europe-US
Software patents in China, Europe, and the US

Summary: In general, software patents that deal with technical effects, physical parameters, and improving computer function tend to be favored. By contrast, software patents focused on business methods tend to be disfavored.

China: Before April 2017, China restricted software patents to methods that solve technical problems, control internal or external processes according to the laws of nature, and produce technical effects in accordance with the laws of nature.  Machine readable medium type claims, and game patents, were not allowed. However these guidelines are now somewhat more expansive. For example, business methods that also have a technical aspect may now also be eligible for patent protection.

Europe: Software patents should have a “technical effect” (e.g. controlling industrial aspects, improvements in computer technology, data pertains to physical properties,). Pure methods directed “only” to doing business and computer programs without “technical effect” are not allowed.

United States: The rules are presently incoherent. Traditionally (before 2014-2015) US policy was permissive. Indeed the present written (i.e. statutory) US legal standard is that all types of software patents are permitted. However the latest judicial rulings and USPTO policies are that at least some software patents may represent “abstract ideas” run on “generic computers” that are not patentable unless there is “something more”. Unfortunately the terms “abstract”, “generic computer” and “something more” are effectively undefined (and thus can vary according to the whims of the judge or patent examiner at hand).

How will US software patent rules evolve in the future? This is a bit like reading tea leaves, but the latest US software patent decisions appear to be trending more towards a Chinese or European-like approach. On average, “Business method” software is increasingly being rejected as being “abstract”. However software that exhibits technical effects, operates on data pertaining to physical properties, or improves computer function is often accepted on the basis that it is not “abstract”, not run on “generic computers” or contains “something more”.  Arguably the US, presently lacking coherent rules, may be at least temporarily filling the void by borrowing rules from other countries.  The constitutionality of this approach remains to be determined.

Harming the economy with over-aggressive, haphazard Alice-based 101 rejections

madteaparty
Alice in Wonderland – Mad Tea Party

What to do about “Alice”? The US Supreme Court’s “Alice” decision has invited us all to a Mad Tea Party.  What fun! But, as previously discussed, if you like logical coherency, or even just want to keep from crashing the economy, there are a few problems with this decision.

Attorney Louis Hoffman, writing in ipwatchdog.com, sums up some of these recent”Alice” problems nicely.

Damaging the economy: As Louis points out, some of the most important areas of US technology are based on software, business methods, and biotechnology.  The USPTO has recently taken upon itself to reject many patents in this area.  However this loss of patent coverage can impede the economy by making investments difficult, and/or by driving inventions underground in the form of trade secrets.

http://www.ipwatchdog.com/2016/02/07/uspto-harms-over-aggressive-and-haphazard-application-of-alice/id=65810/

What about actual (written) patent law? Article I, Section 8, Clause 8 of the US Constitution has empowered Congress to:  “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.

Congress has done so, and has determined under 35 USC 101 that:  “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.”

The US Supreme Court has given itself the power to override Congress, however.  In Alice, they chose to exercise this power.  In this regard, Attorney John Duffy writes in Scotusblog:  “The uncertain expansion of judge-made exceptions to patentability” points out some interesting implications of this decision.

If you want to know what’s important about this case, it’s right there: the Court’s acknowledgement that the judge-made “exclusionary principle” has the potential to “swallow all of patent law” because “all patents” are at some level based on the very things that can’t be patented under the judge-made doctrine.

Decisions, decisions: So the Alice decision, read too broadly, produces an unconstitutional result.  At some point, there will be likely corrective action.  However the practical question that some inventors, particularly business method inventors, have to address today is: file a patent and risk an “‘Alice” rejection, or don’t file a patent and be certain that the invention will become public domain?

Alice update — need true neutral party review

Need for impartial judges

In my opinion, part of the “Alice” patent problem is that few true impartial (i.e. neutral) judges have really been involved yet.

Both the USPTO and Federal judges have at least a subconscious incentive to get complex patents off of their respective desks with a minimum of time and effort.  Why fill your head with complex matters — just say the patent is “abstract”, and the problem is gone.  Instant relief!  So perhaps there is an inherent conflict of interest built into the legal system in this regard.

So, as the Supreme Court itself warned, Alice will continue to swallow up more and more patent law until it finally reaches an opposing force.  Given our legal system, this opposing force may have to be formed by group of middle to large sized companies.  Here, any company that doesn’t depend on either advertising, copyrights, or non-innovative technology might be a potential candidate for such a group.

Perhaps some of the presently pending cases will eventually put some boundaries here.

CLS Bank v. Alice Corporation II: more cutting-edge legal confusion

Confused? So is everyone else!

Legal confusion:  There remains a lot of legal confusion in the US regarding the question, are software inventions patentable? How to answer this question? We could of course look at the letter of the law (e.g. 35 USC 101), which would give us the rather boring answer that software is patentable. But if someone doesn’t want software to be patentable (and a number of large powerful companies do not), that’s not the answer they want.

How else might we get an answer? In ancient Greece we might consult the Oracle at Delphi, or perhaps sacrifice a goat and examine its entrails. However in the modern US, we know that this is silly. As we all know, the modern US way to decide this is to put this question to a small panel of elderly individuals who know nothing about software or patent law. We call this small panel the Supreme Court of the United States (SCOTUS).

To answer questions, the Oracle at Delphi inhaled vapors, fell into a trance, and then spoke in riddles. These were then interpreted by various priests. In much the same way, SCOTUS (hopefully without the aid of vapors) has given us some confusing and inconsistent rulings, such as the CLS Bank v. Alice Corporation decision, that in essence are riddles that must be interpreted by various priests (e.g. lower courts, the USPTO).

So in “Alice”, SCOTUS told us that “abstract ideas” are patent ineligible, and also told us that “In any event, we need not labor to delimit the precise contours of the “abstract ideas” category in this case. It is enough to recognize that there is no meaningful distinction between the concept of risk hedging in Bilski and the concept of intermediated settlement at issue here. Both are squarely within the realm of “abstract ideas” as we have used that term.

So the ruling in essence is the riddle: “abstract ideas are not allowed“, and “abstract ideas are undefined”. This is a pretty good riddle. So the next step is, now that the Oracle (err… SCOTUS) has spoken, how are the various priests (err… the USPTO and lower courts) going to interpret this riddle?

Some good news on this front. On December 16, 2014, the USPTO issued its “2014 Interim Guidance on Patent Subject Matter Eligibility”, available here:

http://www.gpo.gov/fdsys/pkg/FR-2014-12-16/pdf/2014-29414.pdf

Among other things, the USPTO appears to be heading towards the interpretation that when given incoherent rulings, at least try to minimize damage by applying the rulings narrowly. Thus the latest guidance instructs examiners to perform detailed analysis, and look for specific problems such as financial hedging and mitigating settlement risks, rather than generally rejecting everything. The Guidance also advises examiners that even if a patent hits on a “forbidden area” (judicial exemption), so long as the claim does not seek to tie up the judicial exemption so that others cannot practice it, the claim is probably OK.  (Note added 4-26-16 — sadly the USPTO has not followed their own guidance consistently. The official patent examination “MPEP” rules for eligibility are still literally a blank page).

European software patents

European software patent laws are different from the US software patent laws. In the United States, at least before “Alice” all that you had to do to overcome a “not patentable” (35 USC 101) rejection for a software patent application was to include, in the claim language, words to the effect that the invention is running on a computer processor.  The actual rules and court decisions are more complex, of course, but the fact remains that including the claim limitation “processor” used to go a long way.

What about Europe?  Although European Patent Convention Article 52 states that “programs for computers” are not patentable, this does not mean that an invention that uses software is not patentable.  Here European Patent Office (EPO) case law shows that what the EPO looks for is proof that the invention has a “technical effect” and/or has a “technical character”.  If you can show that your invention solves a technical problem, then the fact that your invention uses software does not exclude it from EPO patentability.

Of course, just as in the US, the invention will still have to satisfy a number of other stringent tests (e.g. novelty, non-obviousness) as well, but at least in Europe the “technical effect” standard gets you in the door.

Since most software based inventions have a “technical effect”, for most software applications, the “we don’t do software” hurdle will thus be relatively easy to overcome.  Perhaps just as “processor” used to be the magic word for US software patent applications, “producing the technical effect of” may be the magic words for European software patent applications.