Enfish for Alice: a software win

Enfish is good news for software patents
Enfish is good news for software patents

The Enfish court decision improved the outlook for US software patents.

Some good news for software patents.  The negative impact of the 2014 SCOTUS (Supreme Court of the US) “Alice” decision (invalidating some business method and financial software patents) was somewhat mitigated by the 2016 “Enfish” court decision.

What is “abstract?”  “You keep using that word, I do not think it means what you think it means.” Inigo Montoya, “The Princess Bride”.

In “Alice”, SCOTUS did not make business-method and financial software patents patent ineligible.  Instead, they determined that “abstract” subject matter is patent ineligible.  Unfortunately, SCOTUS refused to define the meaning of “abstract”, and then further confused things by using circular logic.  The present two-step, circular-logic, SCOTUS mandated test for patent eligibility is:

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”.    

No one really knows what “abstract” means.  Unfortunately, since late 2014, and even now despite the latest guidelines, USPTO patent examiners often assume that patents for software running on standard (generic) computers must be abstract under step 1. Many USPTO examiners (and judges) totally skip step 1 of the two-step Alice test.  They just assume that a given software patent is abstract, and start their Alice test at step 2 “something more”.  This makes it much easier to reject the patent.

What is “something more?”  It is also undefined, but financial and business software generally seems to be somehow lacking.  It is sort of like “obviousness” but is apparently not.  It takes a medieval theologian, the Pope, the oracle at Delphi, or at least 5 out of 9 SCOTUS judges to determine this.

We could substitute “evil spirits” for “abstract”, and “charisma” for “something more”.  We could almost as validly say that lately, many USPTO examiners and judges have been rejecting most business and financial method patents because 1) assumption of evil spirits and 2) a further lack of charisma.  It is easier to understand if you don’t expect logic.

In 1982, Congress established the Federal Circuit Court to bring more logic and consistency to patent law.  Their record with regards to what is “abstract” is very mixed. However, in the May 12, 2016 “Enfish v Microsoft” (Enfish) decision, at least some Federal Circuit judges tried to clarify things. The Enfish court ruled that examiners and judges can’t just arbitrarily skip step 1 of the two-step Alice test.  Specifically, the Enfish court ruled that it is improper to assume that software running on standard computers is “step 1” abstract.

The Enfish court pointed out that in Alice, SCOTUS didn’t rule that software is automatically abstract.  Further in Alice, SCOTUS also warned against running amok since every patent is somewhat abstract.  So don’t make software automatically fail the two-step Alice test at step 1.  The Federal Circuit further determined that software running on standard computers that improve an existing technology (such as a database) is not abstract at step 1.

This is another important point:  “abstract” is an undefined legal term, and you and I lack the authority to officially define it.  But the Federal Circuit does have some legal authority to define “abstract”.  The USPTO and other judges have to follow their various updated definitions. It would be nicer, however, if the Federal Circuit was internally consistent with itself. The various judges just can’t agree. The underlying problem is that the basic SCOTUS rulings don’t make sense. GIGO.

But Enfish, at least, did provide some good news for US software patent law.

Software patents in China, Europe, and the US

Software patents in China, Europe, and the 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, international 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 somewhat 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 has a higher risk of 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.

Federal Circuit rules against PTAB “Chewbacca defenses”

European patent oppositions: litigation by unfair surprise?
Chewbacca defense?

Litigation by unfair surprise is out, at least for US patent PTAB cases — for European patent oppositions, not so much. 

One thing that I will never forget about my experience with European patent oppositions is that to American eyes, the European process appears to be rather “due process of law” impaired.

Europe has a system by which issued patents can be challenged. This system is called a patent opposition. In the US, the counterpart to this is the Patent Trial and Appeal Board (PTAB), which can conduct Inter Partes Review (IPR) hearings.

The two systems have various differences. For example, although in theory, issues should be argued in advance by written briefs, the European opposition process also allows parties to introduce new issues during the last-minute oral arguments.

This allows for litigation by “unfair surprise”, rather than by reasoned arguments.  In this sort of setting, I have seen that illogical but last-minute “Chewbacca defenses” can work quite well.  The clock is ticking, proceedings are going to finish in an hour, and suddenly you have to discuss entirely new and logically irrelevant issues. It is as if you suddenly have to shift gears and focus on if the Star Wars character Chewbacca lives on the planet Endor or not.

In this regard, it is refreshing to see that the Federal Circuit in Dell Inc., v. Acceleron, LLC (March 15, 2016) has confirmed that this sort of litigation by unfair surprise is unacceptable for US PTAB patent reviews. Due process wins!  That is, arguments made during oral argument must be restricted to only those arguments previously discussed in writing beforehand.  Thank you, Federal Circuit.

Part of why the European patent opposition process permits unfair surprise may be due to the difference between European civil law practice, and American (and UK) common law practice. The European civil law system, which generally does not use juries, assumes that the judges are all-wise, and therefore need little protection against bad input (irrelevant or improper evidence).  By contrast, the common law system, which is jury oriented, has greater protections (rules of evidence) against bad input.

Since all judges are human, a key difference between the two systems is that, at least for patent opposition matters, the European system is running with fewer quality control measures.

I prefer the American system, thanks. In any event, the take-home lesson is that for international patents, sometimes there can be unexpected differences between countries.

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

Alice problem, what is abstract under 35 USC 101, and what is not?
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.

https://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?

Impressions on the new (post AIA) Patent Trial and Appeal Board (PTAB) patent trial format

USPTO PTAB IPR reviews
Gavel

PTAB:  The 2011 America Invents Act (AIA) significantly changed many aspects of patent law. One change was to try to improve patent quality by allowing potentially invalid patents to be challenged in new types of post-grant opposition procedures.

The Europeans have had a patent opposition process for years, and having observed it in operation at first hand, I am unimpressed.  The European system lacks legal protections that Americans take for granted (e.g. rules of evidence, protections against unfair surprise).  It is also possible to game the European system by requesting that the opposition be done in a language that (conveniently) the original European examiner or other parties may not speak.   Another problem is that the European opposition review panels operate by making instant verbal “shoot from the hip” decisions, and only “justify” the decisions in writing months later.

The USPTO had and continues to have a low budget process to challenge an issued patent, called an Ex-Parte Reexamination. Here the challenger essentially writes their own office action challenging a patent as being not novel or obvious in view of some new prior art citations. This process is very inexpensive but only allows a challenger one time “at bat”. No further challenger comments or rebuttals are allowed. So it is a more limited type of challenge.

The USPTO Patent Trial and Appeal Board (PTAB) has been working to implement an American version of the opposition process.  The US version is called an “Inter Partes Review” (IPR). The USPTO has been hosting roundtables to show their progress to date and solicit feedback.  I attended one of their roundtables at Santa Clara University and came away favorably impressed.  The present rules are here:

In my opinion, the real challenge in doing decent post-grant opposition procedures is the delicate balance between trying to bring in more of the legal protections of common law/Federal law rules of evidence and civil procedure (thus improving on the European system), while minimizing the burdens of a conventional trial process.  Here, in addition to the obvious high costs and long times associated with conventional trials; there is also an issue of legal expertise.

Conventional patent trials are so complex that typically they are handled by expert litigation attorneys.  These litigation attorneys have a detailed knowledge of the trial process, but sometimes less knowledge of patent law and the underlying technology.  By contrast, patents are usually prosecuted by patent attorneys who may have very detailed knowledge of patent law and the underlying technology at issue, but often less trial process expertise.

PTAB appears to be attempting to devise a streamlined review system that retains a number of common law/Federal trial conventions and legal protections, without being overly burdensome.  In my opinion, their approach does improve on the due process of law deficiencies I noticed in European oppositions. At the same time, relative to standard trials, the PTAB approach appears to be relatively simple. There is only one forum (even for Indian tribes), and certain procedural rules are clearly defined.

With some review of the rules of evidence, civil procedure, and of course PTAB procedures, patent attorneys (often most knowledgeable about the patent and related technology), as well as litigation attorneys, should be able to handle PTAB IPR.

Prometheus bound (or at least distinguished)

Mayo v. Prometheus patent eligibility, 35-USC-101
Prometheus having a bad day

Before Alice, there was Mayo v Prometheus: In an ancient Greek myth, the Titan god Prometheus is chained to a mountain by the god of blacksmiths (Hephaestus/Vulcan). Why talk about ancient Greek myths?  Because the story is not unlike the present patent eligibility mess created by the Supreme Court’s unfortunate, 2012, “Mayo Collaborative Services vs. Prometheus Laboratories, Inc.” holding. Unfortunately, the high-tech industry is Prometheus.

This case involved two medical diagnostics patents (6,355,623 and 6,680,302), in which SCOTUS held that patents that incorporate “laws of nature” may not be patent-eligible “unless they have additional features that provide practical assurance that the processes are genuine applications of those laws rather than drafting efforts designed to monopolize the correlations“.

Are there any inventions that don’t operate according to natural law?  What else is a patent claim but a drafting effort designed to monopolize a particular invention?  What exactly are “additional features” and “practical assurance” Here the Mayo v. Prometheus decision provides little or no guidance.

The decision’s use of “natural law”, as well as gratuitous citation of various examples from physics as well as medicine, is unfortunate for us scientifically trained types.  This is because the three-dimensional nature of the universe, the forward direction of time, and everything else about the world are all based on laws of nature!

Thus unless read narrowly, this decision would produce an unconstitutional result (it would eliminate all patents, hence violating Article 1 section 8 of the constitution).  So the ruling must be read narrowly, because the SCOTUS upholds the constitution and is never wrong, right?

What is worse, the Supreme Court then cited Mayo as a precedent for its later Alice ruling. Why be partially off the rails, when one can be totally off the rails?

I had hoped that this would get sorted out.  The Federal Circuit is composed of judges, some of whom actually know something about laws of nature and patents.  Their job is to clean up problems like this.  I had hoped that they would “chain” the overly expansive Mayo v. Prometheus holding by various subsequent lower court holdings.  They can’t totally overturn Mayo v. Prometheus, but they could have certainly brought some sense to it by nibbling away at the interpretation.

The Federal Circuit indeed made some attempts to do this, such as in the Rapid Litigation v. Cellzdirect case. However, taken as a whole, the various Federal Circuit decisions have been very mixed, and indeed self-contradictory.  In short, the Federal Circut has not really done its job here.

The USPTO has also attempted to do some damage control, again with mixed results. The underlying problem is that they do not have enough legal clout.

A similar case, Athena Diagnostics, Inc. v. Mayo Collaborative Services, is presently pending at the Supreme Court.  Let us hope that SCOTUS takes it, and gets it right this time.