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The Current State of Computer Software Patentability

Posted on Sep 26, 2016 in Articles

This article originally appeared in The Legal Intelligencer on September 26, 2016.

Remember Morse code? Perhaps mention of the name conjures up movie images of telegraph operators communicating over long distances, by tapping out “dashes” and “dots” that correspond to letters of the alphabet. What many people do not realize is that Samuel Morse, inventor of Morse code, fought a protracted battle to protect his patent rights. One of his patent claims stands out: the use of electromagnetism to print “intelligible characters, signs or letters.” The U.S. Supreme Court declared the patent claim to be invalid, because it was attempting to patent subject matter that was ineligible for patent protection.

Today, identifying eligible subject matter for patent protection has become one of the most important issues in intellectual property law. In 2014, the U.S. Supreme Court issued the opinion Alice v. CLS Bank, No. 13–298, and created dire consequences with respect to the patentability of computer software. After Alice, the ability to obtain patent protection for computer implemented inventions was substantially curtailed, and many existing patents in that technical area were determined to be invalid. Yet, in past two years, a small handful of Federal Circuit cases have helped the intellectual property community to understand when software inventions are patentable. Those cases are frequently cited when patent eligibility for software inventions is challenged.

An invention’s eligibility for patent protection is based on numerous criteria. The requirement with regard to “novelty” (35 U.S.C. Section 102) is satisfied when a claimed invention has not previously been “patented, described in a printed publication, or in public use, on sale, or otherwise available to the public.” The requirement with regard to “obviousness” (35 U.S.C. Section 103) is satisfied by confirming that the differences between the claimed invention and the prior art are not obvious. Other statutes apply as well. With regard to computer software, however, the statute that has created significant controversy over the past two years relates to patent subject matter eligibility (35 U.S.C. Section 101). The statute reads as follows: 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 …

Software-related patents were routinely granted and asserted for years, but the tide began to change when Bilski v. Kappos was decided in 2012. In Bilski, the U.S. Supreme Court disagreed with the Federal Circuit’s application of the “machine or transformation” test—that based patent subject matter eligibility on whether an invention is implemented by a particular machine or transforms an article from one state to another. The Bilski U.S. Supreme Court decision held that the machine or transformation test was not the only test to be used to determine patent subject matter eligibility. As a result, a hedge fund patent was found to be invalid.

Then, in 2012, Mayo v. Prometheus, 132 S. Ct. 1289, was decided. Mayo articulated a two-step test for determining whether an invention satisfied patent subject matter eligibility requirements: First, it must be determined whether patent claims are based on ineligible subject matter such as an abstract idea, a natural phenomenon, or a law of nature. Second, if the claim was indeed directed to patent ineligible subject matter, it must then be determined whether the claim recites “significantly more” than the ineligible subject matter. The U.S. Supreme Court determined that a patent for drug administration and subsequent patient testing did not satisfy the two-step test and hence failed to meet patent subject matter eligibility requirements.

The June 2014 Alice decision marked a major turning point with regard to the patentability of software inventions. In its decision, the U.S. Supreme Court referred back to the two-step test of Mayo: “in [Mayo], we set forth a framework for distinguishing patents that claim laws of nature, natural phenomena, and abstract ideas from those that claim patent eligible applications of those concepts.” The court continued: “First, we determine whether the claims at issue are directed to one of those patent ineligible concepts” and if so ask “what else is there in the claims before us?” Upon determining that the claimed concept was patent ineligible, the court looked for an element or combination of elements that is “sufficient to ensure that the patent and practice amounts to significantly more than a patent upon the ineligible concept itself.” Not finding “significantly more” elements, the patent in suit was found to be invalid because “merely requiring generic computer implementation fails to transform an abstract idea into a patent eligible invention.” Subsequent court opinions would later refer to this analysis as the “two-step” Alice test.

In the aftermath of Alice, thousands of software patent applications became abandoned and hundreds of software patents were determined by the courts to be invalid. Since that time, there have been four opinions in which the Federal Circuit has affirmed the validity of software patents based on the two-step Alice test.

In DDR holdings v. Hotels, 773 F.3d 1245 (2014), the Federal Circuit applied the two-step Alice test and held that the patent in suit included claims directed to patent eligible subject matter. In the first step, the court discussed whether the invention was directed to an abstract idea, but did not reach a clear conclusion in that regard. In the second step, however, the court determined patent eligibility by finding that “the claimed solution is necessarily rooted in computer technology in order to overcome a problem specifically arising in the realm of computer networks.”

For almost a year and a half, DDR was the only case in the patent attorneys’ arsenals to argue in favor of the patentability of the subject matter of a software invention. Then, in 2016, the Federal Circuit decided Enfish v. Microsoft, 1244, (2015). Applying Alice‘s step one, the court stated “we find that the claims at issue in this appeal are not directed to an abstract idea within the meaning of Alice. Rather, they are directed to a specific improvement to the way computers operate …” Applying Alice‘s step two, the court stated “the claims are directed to a specific implementation of the solution to a problem in the software arts. Accordingly, we find the claims at issue are not directed to an abstract idea.” Thus, the patent in suit was determined to have included patent eligible subject matter.

Soon on the heels of Enfish, Bascom v. AT&T acknowledged that “an inventive concept that transforms the abstract idea into a patent-eligible invention must be significantly more than the abstract idea itself, and cannot be simply an instruction to implement or apply the abstract idea on a computer.” Based on the record before them, the court found that the claimed subject matter “cannot be said, as a matter of law, to have been conventional or generic.” Once again, the Federal Circuit concluded that the patent in suit included patent eligible subject matter.

Most recently, and earlier this month, McRO v Bandai was decided–the fourth Federal Circuit opinion (post-Alice) that concluded that a computer software patent satisfied patent subject matter eligibility requirements. The court conducted their analysis by looking “to whether the claims in these patents focus on a specific means or method that improves the relevant technology or are instead directed to a result or effect that itself is the abstract idea and merely invoke generic processes and machinery.” After finding that the claim uses “rules in a process specifically designed to achieve an improved technological result in conventional industry practice,” the court concluded that the patent claim was not directed to an abstract idea. As the first step of the Alice test had been satisfied, the court did not need to consider the second step of the Alice test. Therefore, the patent in suit was determined to have met patent subject matter eligibility requirements.

Each of the above four post-Alice cases received tremendous attention from the intellectual property community because each provided helpful guidelines to determine (and assert) patent eligibility for software inventions. It has been, however, a “mixed bag.” Each of the four cases garnered hope that intellectual property protection for software was available within a rather bleak-looking landscape. And yet, when those four cases are compared against the hundreds of others in which software patents were found to be invalid, it becomes clear that the odds are still very much against the companies trying to patent their software and to assert their software-related patents. It is thus important to understand the current case law in order to properly advocate for patent subject matter eligibility.

– By Lawrence E. Ashery


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