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  1. Here we go again — New rule narrows landmark 2014 Supreme Court decision limiting software patents. A landmark 2014 ruling by the Supreme Court called into question the validity of many software patents. In the wake of that ruling, countless broad software patents became invalid, dealing a blow to litigation-happy patent trolls nationwide. But this week the US Patent and Trademark Office (USPTO) proposed new rules that would make it easier to patent software. If those rules take effect, it could take us back to the bad old days when it was easy to get broad software patents—and to sue companies that accidentally infringe them. The Federal Circuit Appeals Court is the nation's highest patent court below the Supreme Court, and it is notoriously patent friendly. Ever since the Supreme Court's 2014 ruling, known as Alice v. CLS Bank, the Federal Circuit has worked to blunt the ruling's impact. In a 2016 ruling called Enfish, the Federal Circuit ruling took a single sentence from the Supreme Court's 2014 ruling and used it as the legal foundation for approving more software patents. This legal theory, known as the "technical effects doctrine," holds that software that improves the functioning of a computer should be eligible for a patent. A version of this rule has long held sway in Europe, but it has only recently started to have an impact in US law. This week, the Patent Office published a new draft of the section on examining software and other potentially abstract ideas in its Manual of Patent Examination Procedure (MPEP). This is the official document that helps patent examiners understand and interpret relevant legal principles. The latest version, drawing on recent Federal Circuit rulings, includes far tighter restrictions on what may be excluded from patentability. This matters because there's significant evidence that the proliferation of software patents during the 1990s and 2000s had a detrimental impact on innovation—precisely the opposite of how patents are supposed to work. In the decade before 2014, a growing army of patent trolls were acquiring broad, vague software patents and using them to demand big payments from companies producing actual products. One 2012 study estimated that this kind of thing cost the economy $29 billion per year. Another researcher calculated that 60 percent of the patent troll revenue came from patents related to software and high tech, with the especially aggressive cases focused on pure software: 115 lawsuits against 435 defendants for a patent for "Associating online information with geographic areas," 106 defendants threatened with a patent for a "Customer based product design module," and 79 defendants in a case regarding a "digital fingerprinting" patent. On the flip side, the argument that without software patents modern tech-based companies can't thrive seems weaker every day. A 2015 article calculated that 30 percent of billion-dollar startups have zero patents. How the courts legalized—then limited—software patents The courts have long held that patents can't claim abstract ideas or laws of nature. And until the 1990s, courts held that most software patents were attempts to claim mathematical algorithms—a kind of abstract idea. But a series of Federal Circuit rulings gradually watered down this rule. By the turn of the century, there were few meaningful limits to patenting software. The result was a proliferation of patents that soon turned into a proliferation of software-related patent litigation. The Supreme Court had largely given the Federal Circuit a free hand to develop this area of the law in the 1990s and early 2000s. But then the high court started to check the lower court's work—and it didn't like what it found. In 1996, a team at a teaching hospital in Montréal found that the correct dosage for a certain drug could be partially determined by measuring metabolites in the bloodstream and published the results of its research. While this scientific finding couldn't be patented directly, a company called Prometheus Laboratories sought a patent on the concept of drawing a patient's blood, measuring the level of the metabolites, and then providing a diagnosis based on the research. They argued that this was a patent on a process, not an abstract idea. The Patent Office bought this argument, but the Supreme Court didn't. In a 2012 ruling called Mayo v. Prometheus, the Supreme Court ruled that the patent was claiming the law of nature itself and adding nothing truly inventive. From this emerged a two-part test for patentability. Here is the MPEP's summary of what is often now referred to as the Mayo/Alice test: Back to software: in 2014, the Supreme Court ruled on the case of Alice v CLS Bank regarding a stock computer on which is loaded software to facilitate trades with a third-party intermediary. Their opinion directly applied the Mayo test: like the research result with a blood test tacked on, the technical details of the Alice software patent were really just a fig leaf over a claim on an abstract concept: This seemed to be a real blow against all those patent claims for taking a business and doing it on the Internet and possibly any claim for pure software without new hardware. Software patent supporters feared—and opponents hoped—that the Alice ruling could lead to wholesale invalidation of software patents. And these hopes and fears were partially realized: in the months after the Alice decision, a lot of software patents were declared invalid by lower courts. This had an immediate effect on the patent trolls' favorite strategy, because their nastygrams to businesses of the form "we will win eventually in court so you might as well spare the effort and pay now" lost credibility. But software patent owners had a powerful ally in the Federal Circuit, which is responsible for interpreting and fleshing out the Supreme Court's rulings. The Federal Circuit is more favorable to software patents, and since 2014 it has interpreted the high court's rulings in a way that limits the Alice decision's impact on software patent holders. A European import helps save software patents European patent law has a concept called the technical effect doctrine. European Patent Office guidelines describe a technical effect as "the control of a technical process or of the internal functioning of the computer itself or its interfaces." The technical effect doctrine says that if an invention improves the function of a computer, then it's likely to be patentable. So, what exactly counts as a "technical process"? The cynical answer may be that it is whatever a judge deems to be tech-y enough—a "you know it when you see it" situation. This has created real difficulties in determining on which side of the fence any application lies. In 2016, the Federal Circuit decided a case called Enfish v Microsoft. The Enfish patent claimed a database on a stock computer, where the table indexing scheme was deemed unique enough to meet other requirements of patent law. But was this a patentable invention or an unpatentable abstract idea under the Alice ruling? The Federal Circuit seized on the line from the Alice ruling about the patent in that case not purporting "to improve the functioning of the computer itself." Building on this sentence fragment, the Federal Circuit concluded that the Supreme Court intended to disallow software about general applications but allow software applied to computers themselves—the technical effect. Out of the 20-page Alice opinion devoted to drawing the line between patentable and unpatentable, this sentence is the only support given for the claim that the Supreme Court intended to implement a technical effect doctrine. The Federal Circuit judges' reason for making the distinction is that such software just... doesn't seem abstract. After discussing hardware improvements to a stock computer, they explain their reasoning: These assertions are taken from Section III of the ruling, which covers the question of patentable subject matter. Interestingly, it is the only paragraph in that section that does not cite any other judicial ruling or document. The remainder of the argument is built on this paragraph asserting that Enfish's database index is less abstract of an idea than Alice Corp's contract settlement system. The remainder of the Alice opinion—including the remainder of the section reprinted above and the other 16 times the Alice opinion used the term "generic computer"—is irrelevant: when nothing abstract is found, the two-step Mayo/Alice test ends at step one. Will crazy patents make a comeback? Since 2014, there have been many court rulings rejecting software patents for being too abstract. But since 2016, there has also been a significant number of rulings upholding software patents—and these are inevitably supported by reference to the Federal Circuit's analysis in Enfish. Here are some patent claims that passed the Federal Circuit, each a perfect example of how the technical effect doctrine works in practice: "Systems and methods for making complex electronic spreadsheets more accessible by providing familiar, user-friendly interface objects—specifically, notebook tabs—to navigate through spreadsheets." (PDF ruling) "Displaying an application summary window while the application is in an unlaunched state," where Alice's generic computer discussion was deemed irrelevant because "the concepts of 'application,' 'summary window,' and 'unlaunched state' are specific to devices like computers and cell phones." (PDF ruling) A novel GUI for displaying market information, from which users can send trades to the market using existing trading methods, which the court ruled not abstract for several reasons, "including that the graphical user interface system of these two patents is not an idea that has long existed." (PDF ruling) Because software is infinitely malleable, and designing a spreadsheet with smarter tabs or an app menu or a better GUI requires no equipment beyond what most of us have on our desks or our laps, one could easily imagine these patented inventions being independently re-invented over and over—fertile ground for patent trolls. Why the Manual of Patent Examination Procedure matters The courts have not exactly been crystal clear about the line between a patentable software invention and an unpatentable abstract idea. I am personally unable to distinguish the situation in Alice, where the Supreme Court disallowed software to facilitate trading, from the last item in the list above, where the Federal Circuit allowed a GUI to facilitate trading. This is where the USPTO's new proposed examination guidelines come in. The Federal Circuit is still trying to sort out when to apply Alice's boundary for an abstract idea and when to apply Enfish's more stringent boundary. Some think which of the two opinions are applied is not a question of facts or law but of which judges are randomly assigned to a case. But most patents by far never go before a judge, and their fate lies in the Manual of Patent Examination Procedure. It is the document that thousands of patent examiners consult for guidance when they are trying to decide how to interpret and apply the various Supreme Court and Federal Circuit rulings that impact software patents, and the proposed revisions lean heavily toward the Enfish side of the debate. The new regulations the Patent Office proposed this week give a short list of what may be deemed abstract and are clear that if it's not on the list, it's not abstract. Pure math is included as abstract, but the word mathematical is left undefined, leaving ambiguity about whether the sort of ways computer operations are improved, like better database hashing techniques or compression algorithms, are mathematical. Methods of organizing human activity are an abstract category, but methods of organizing information are not. To give examples, a file-sorting algorithm may not be abstract, but selling dog food on the Internet is. Even after these restrictions, the proposal includes additional means by which a patent as a whole can avoid being called an abstract idea. Some are traditional patent law, like how an abstraction closely integrated with a bona fide new machine or transformation of one physical thing to another is patentable subject matter. Another carves out patents with "an additional element that applies or uses a judicial exception to effect a particular treatment or prophylaxis for a disease or medical condition." This seems like a remarkably narrow interpretation of the Supreme Court's Mayo ruling and could allow patents on techniques that a broader reading would leave in the public domain. And it could be one more means by which an application may avoid being a pure abstract idea: if "an additional element reflects an improvement in the functioning of a computer." This is almost cut and pasted from the EPO guidelines on a technical effect. Its justification is built on the Enfish opinion. Already, experienced patent practitioners have trouble telling the difference between the "software to do something on a computer" patents disfavored in Alice with the "software to do something to a computer" patents endorsed by the technical effect doctrine. The new guidance threatens to muddy the waters further, taking a big step toward the bad old days when it was easy to patent abstract software ideas as long as they were carefully obfuscated with technical jargon. Because the USPTO funds itself via application fees, its employees continue to work during the federal shutdown. The Patent Office has requested comments on the new guidelines and will accept new comments until March 8. Source
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