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IBM Weighs in on CLS Bank: The Abstract Idea Test is Unworkable for Computer-Implemented Inventions and Should be Abandoned

Sunday, February 2nd, 2014

IBM has filed a straight talking Amicus brief that says it like it is:  the Bilski abstract idea test unworkable and needs to be abandoned.  IBM argues that a computer implemented invention will always fall outside the abstract idea exception, no matter how simple and straight forward its implementation may be.  In addition, IBM points out that the abstract idea test has no logical limits and can be used to render patent ineligible any computer implemented invention, a result that would be unthinkable given the fundamental importance of software innovation to the American economy and the advancement of technology in general.  As a result, IBM argues the abstract idea test should be abandoned, and instead that Section 103 be used as the primary filter for determining the patentability of software inventions.

Here are some highlights from IBM’s brief:

“There should be no debate that computer- implemented inventions such as software are eligible for patent protection.  But, as the Federal Circuit’s deeply divided en banc opinion in this case abundantly demonstrates, the abstract idea exception has proven extremely difficult to apply to computer-implemented inventions and has created substantial uncertainty in an area where clear and administrable rules are imperative.”

“While it may be true that the steps required to implement an abstract idea on a computer are well established and thus likely within the capability of one skilled in the art, the implementation of that idea on a computer, however minimal the effort, definitively separates that specific technological implementation from the idea itself.   Technology has enabled an astounding diminishment of the man-machine interface, but it has not erased the need for that interface and, as a result, even the most problematic computer-implemented invention will  be meaningfully different from and narrower than the associated abstract idea.     Thus, computer- implemented inventions will always fall outside the abstract idea exception and are patent eligible under § 101.”

“But as IBM’s day-to-day real-world experience has repeatedly confirmed, a muscular application of the abstract idea doctrine is not a useful tool for addressing these problems in the computer- implemented invention context.”

“Based on its day-to-day real-world experience, IBM has concluded that the abstract idea doctrine’s failure is not due to the elusiveness of the proper test, but rather because the doctrine should not be applied to computer-implemented inventions.  IBM, like this Court, has grave concerns about non-innovative patents that crowd out true innovation by occupying entire fields of computer innovation without actually advancing the use of computers in practical terms. And IBM, like this Court, initially believed that a § 101 abstract idea test could be formulated to address concerns    about    preemption.        But    real-world experience has convinced IBM that while the abstract idea concept helps identify a serious problem, it does not  provide  a  workable  solution  to  the  problem.”

“In the absence of a doctrinal change in direction, the problems with the abstract idea doctrine will only get worse.”

“Worse still, the current skepticism regarding the patent eligibility of computer- implemented inventions—even highly innovative ones—suggests that each time a new technology reaches a certain threshold of ubiquity, the appropriateness  of  providing  patent  protection  for that technology will be called into question despite the fact that it is the protection the patent system provides that allowed the technology to advance to that point in the first place.”

“This Court’s abstract idea case law has identified a problematic class of patents, some of which involve computer-implemented inventions, that invoke concerns associated with § 101 and preemption. While further development of the abstract idea concept in this area is not the solution, § 101 itself provides the answer.  That section explains that in addition to being patent eligible, a claimed invention must also satisfy “the conditions and requirements of this title,”§ 101—“any claimed invention must be novel, § 102, nonobvious,   §   103,   and   fully   and   particularly described, § 112.”

 

 

 

Boiling down the logic behind the CLS Bank Decision

Wednesday, January 29th, 2014

I  my previous post I discussed at length the fundamental flaw in the analysis applied by the CAFC in the CLS Bank decision, and by the Supreme Court in Bilski.  I pointed out in that post that it is a legal fiction, indeed undesirable legal trickery, to ignore an explicitly claimed physical component of an invention in order to sidestep the  clear statutory nature of a programmed computer, or in other words a special purpose machine.  In CLS Bank, the Federal Circuit found claims to electronic methods and computer programs for financial-trading systems on which trades between two parties who are to exchange payment to be ineligible for patenting under Section 101.

I also pointed out in that post that, nonetheless, not all machines would necessarily qualify for patenting even if the machine was recognized as part of the claimed invention.

One simple way to wrap our head around this seeming paradox is to consider how a court or policy makers would address an invention claimed as follows:

1.  Record player apparatus, comprising:

a record player with a spinning platter and a stylus supported on an armature; and

a musical waveform engraved in a disc, the musical waveform having a sequence of notes comprising [unique sequence].

On the one hand, this claim describes a purely physical apparatus, and therefore is a machine that ostensibly qualifies as Section 101 subject matter, but on the other hand the uniqueness of the machine owes itself to what is traditionally regarded an artistic work, not an useful art.  So, what existing patent law doctrine excludes this subject matter from protection?  Arguably the musical composition would be excluded under the printed matter doctrine, even though it is claimed engraved in a substrate in combination with a machine.  See, for example, In re Russell, 48 F.2d 668, 669 (CCPA 1931) (“The mere arrangement of printed matter on a sheet or sheets of paper, in book form or otherwise, does not constitute ‘any new and useful art, machine, manufacture, or composition of matter,’ or ‘any new and useful improvements thereof,’ as provided in section 4886 of the Revised Statutes.”)  (en.wikipedia.org/wiki/Printed_matter_(patent_law))

So, how does this help us understand the CLS Bank decision?  Viewed simplistically, CLS Bank essentially treats financial services subject matter to be the equivalent of music or printed matter that does not fall within the useful arts, and ignores the computer in the same way the phonograph player would be ignored in my hypothetical.

While the Federal Circuit’s logic in CLS Bank to ignore the computer components set forth in the claims is superficially analogous to ignoring the phonograph player in my hypothetical, it is not directly analogous.  Why?  In the case of the hypothetical, the phonograph player operates exactly the same for any record it plays.  Its functional operation is fixed and unvarying.  While it will produce different sounds depending on the record played, those sounds are produced in exactly the same way from one record to another.  On the other hand, CLS Bank is claiming a computer configuration that is electronically functioning in a unique way, indeed differently than any other computers programmed according to the prior art.  The computer itself is transformed by the program into a unique, special purpose machine.  Further, the purpose and function of a computer program such as that in issue is technical – its purpose is to reconfigure a computer to perform a unique function.  For example, a computer program can transform a general purpose computer into a unique music player, that would conventionally be regarded as patent eligible subject matter.

As such, in my view, the biggest problem with CLS Bank is not that it finds the patented invention outside of the scope of Section 101, but rather the manner in which it arrives at this conclusion.  In the CLS Bank case, the computer program in question unquestionably has a “functional relationship” to the computers on which it runs, indeed dictating functional operation of the computer system — therefore the long recognized exception to the printed matter doctrine, i.e., that the printed matter has a “functional relationship with the substrate,” should apply.

 

 

 

 

 

Why the CLS Bank and Bilski Analytical Framework is Fundamentally Flawed, and Why Diehr’s 101 Test is Better

Wednesday, January 22nd, 2014

In my view, Supreme Court jurisprudence on software invention eligibility has made little net progress since Diamond v. Diehr in 1981.  The major advance in jurisprudence underlying that decision, determining the Section 101 question by looking at the claimed invention, “as a whole”, to determine if it is “otherwise statutory” without the mathematical algorithm (or more generally, abstract idea) in question, largely was ignored if not eviscerated by Bilski v. Kappos (2010).  The diametrically opposed conclusions recently obtained by different factions of the CAFC in CLS Bank starkly demonstrate that the Bilski “abstract idea” analytical framework, for determining patent eligibility under Section 101, is fundamentally flawed and drastically overbroad.  The problem is that, in its attempt to weed out business method inventions from patent eligible subject matter, the Bilski Court devised an analytical framework that, taken to its full extent, is readily capable of kicking virtually any software patent out of patent eligibility.  Most troubling is that the Bilski Court gives absolutely no guidance as to where to draw the line between what should be regarded as objectionable and eligible subject matter.

So, how do we get out of this mess?  Not very easily, and not very likely, but if we do, it will have to built on a solid understanding of the contours of the statutory subject matter challenge, so that we can finally make some real progress, instead of going around in circles for another 30 years.  At this juncture, I think it is pointless to try to decipher and harmonize the multitude of software subject matter cases – that is a fool’s errand.  The better approach, in my opinion, is to take a fresh run at the issue, and get more insight into what a good Section 101 test should achieve from a policy perspective, and then try to figure out what that test would look like.  If that test then matches up with an existing line of reasoning, we can follow that reasoning.   Or, perhaps we need to introduce a new or modified test.  Clearly, the Supreme Court would benefit from taking a step back and studying the policy issue divorced from the convoluted reasoning of its prior decisions on the topic.

Because the inner workings of a computing system are not directly observable, it is helpful to draw an analogy to another form of programmed technology that will no doubt raise similar statutory subject matter questions.   Namely, let’s assume that the invention is embodied in a programmable robot, and that the robot is an industry standard robot.  Let’s further assume that robots such as these are owned by hundreds of millions of businesses and consumers.  This industry standard robot moves about with battery power, understand verbal commands, speaks, detect objects in its environment using machine vision, and takes action on those objects, such as move them from one place to another, rearrange their order, or alter their state, for example by painting them different colors.

Now, let’s explore the patent eligibility for some hypothetical programmed configurations for the robot.

First, let’s assume the robot is programmed to perform a novel method to efficiently install a bumper on an automobile assembly line.   The method relies on a novel algorithm that determines an optimum force to use to hold the bumper against the chassis while it is welded in place.  Let’s also assume that the only novel element of this programmed robot is software loaded into the robot and used to program its operation according to the algorithm.

As a policy matter, should this be patentable subject matter?  Setting aside legal jurisprudence, I would say most engineers would believe this to be patentable subject matter, as it is most certainly technology, most certainly useful, and most certainly applied to an industrial application.  What could be more historically quintessential American technology than automation and a mass production assembly line?

But is this patent eligible subject matter under the current Bilski “abstract idea” test?  I would submit that a court could easily find this invention ineligible subject matter using that test.  First, the industry standard robot can be ignored, just the same way the court in Bilski ignored the computer in that case.  That leaves only the disembodied software and algorithm that, according to Bilski, are nothing more than an ineligible abstract idea.

Next, let’s say the robot is programmed to perform a novel surgical procedure that is impossible to manually perform, again employing a novel algorithm embodied in software loaded into the robot and used to program its operation.  Certainly, if this procedure was performed manually, it would be considered patentable, at least by the vast majority of patent attorneys.  Yet again, however, the Bilski abstract idea test could easily be used to deem it non-statutory.  Again, a court need only ignore the industry standard robot, and declare the disembodied algorithm abstract.

Most patent attorneys and policy makers would probably agree that the subject matter posited above should be eligible for patent protection.  But these inventions are readily filtered out from patent eligibility using the Bilski abstract idea analysis.

Now consider another hypothetical- let’s say this time that the robot is programmed to automatically design a specialized surgical procedure for a specific patient, after reading the patient’s digital x-ray’s.  But in this case, the claimed robotic configuration only requires the robot to input the x-ray data, determine the procedure, and store it in a memory, so it is ready to be used later.  This also seems like a solid technical and scientific medical advance even without actually performing the surgery, but again, the Bilski abstract idea test could easily be used to deem it non-statutory.

To explore the over-breadth of the abstract idea test further, let’s now assume that the robot is programmed to move flags of different colors between different areas of an airfield, where the flags use a standard signaling scheme to signal to airplanes passing overhead.   Different combinations of flags of different colors signify different wind conditions on the field.  Let’s further assume that a robot is programmed with a novel algorithm to choose the most efficient route the robot travels to move the flags between a storage area and a display area, saving energy and improving the speed at which the flags can be reconfigured to signal different conditions.

Again, from a policy perspective, most would expect that a method to move signal flags around an airfield more efficiently, to improve the speed at which signals can be switched, and save energy, would be considered patent eligible subject matter.

Now, let’s assume that the algorithm in the above example is a novel artificial intelligence algorithm that mimics the human thought process.  Here again, I would argue that from a policy perspective, this invention, being an engineering advance, should be eligible subject matter.  But again, Bilski would almost seem to require this invention to be disqualified, as it mimics what many would consider an abstract process – human thought (although that assumption in itself will probably be proved a fallacy at some point in the future).

Now, let’s assume that the flags represent not weather conditions, but financial information, and in particular the cost of landing at the airfield on that particular day, the cost of jet fuel at the airport, and the cost of parking overnight at the airfield. Does this change our feeling about this invention from a policy perspective?  The algorithm still increases efficiency in moving the flags around, and saves energy, so it still has a technical advantage that is independent of the information conveyed by the flags.  But here again, the abstract test could easily be used to dismiss this invention from patent eligibility, even more so because it’s purpose is to signal financial information.

So let’s now modify the hypothetical to make it more challenging from a policy perspective.  Now assume that the novelty resides not in the manner in which the robot moves the flags around, but rather in a novel algorithm to set the pricing of the airport services based on anticipated weather conditions.   Also, here again, the Bilski abstract idea test can be used to disqualify this invention from patent eligibility.  Yet, the robot is performing a useful physical activity (signaling price) and is definitely a machine.  However, from a policy perspective, one can argue that this invention is a financial innovation, not a technical innovation or at least an innovation that provides a technically functional advantage, and therefore perhaps should be treated differently.

OK, now let’s assume that the novelty of the algorithm is an artistic choreographic performance, and the robot is programmed to perform this choreography using the flags.  Let’s also assume there is no mathematics involved in the algorithm – it is strictly a series of moves for the robot to perform.  Again, the Bilski abstract idea test can certainly be used to eliminate this from patent eligible subject matter.  And again, like the previous hypothetical, there is a substantial qualitative difference between this, an artistic advance, and a technical advance.  We can make this hypothetical even more apparently patent ineligible by assuming that the innovation is a musical score that serves only an artistic purpose, and that the robot is simply programmed to play the score on a conventional speaker.

So, what can we observe about the choreographic subject matter hypothetical that might help guide us to a better test?  Well, we can’t say the algorithm doesn’t control the operation of the robot, because it does.  Essentially it is integral with the physical operation of the robot.  Nor can we honestly say the activity is abstract, as the robot is making physical movements that, if applied to a utilitarian purpose, would be considered patent eligible in nature.  In fact, about the only meaningful observation we can make to differentiate the posited invention from one that is more clearly patent eligible, is that it is artistic as opposed to technical in nature.

Of course, were the posited invention to include an artificial intelligence algorithm to automatically create the artistic choreography, it would at least have a substantial technical nature, being a product of software engineering and scientific research, notwithstanding the algorithm being put to an artistic purpose.

Now let’s consider what the pricing hypothetical teaches us.  In this case the robot signals, in a purely physical way, the pricing information generated by the pricing algorithm.  The pricing algorithm also receives data that represents weather conditions, and for the purpose of the hypothetical, we could even say that the robot actually detects the weather conditions using one or more detectors that are standard features of the robot.  But here, as assumed, the innovation lies in a purely financial algorithm that produces pricing information that in essence is completely unrelated to the operation of the robot, other than the robot is used a mechanism to signal the resultant prices.   Unlike the choreograph example, the novel pricing algorithm does not inherently require the pricing information to be signaled in any particular way.  But by definition of the hypothetical, the signaling of the pricing is definitely a required element of the invention, so according to the machine test, cannot be ignored.  And, since a major component of the posited invention is that it informs pilots flying overhead, it’s hard to say that the signaling is “insignificant post solution activity”, although it may be post solution activity that is known in the prior art.  Moreover, if we were to say that the novel algorithm predicted weather vs. determined pricing, we would again likely think differently of it even though virtually all aspects of the invention are identical other than the nature of the algorithm.

So what can we surmise or conclude from the above?

The central problem for the Court in CLS Bank (and the problem for the Bilski Court) is that it is confronting a hybrid invention  – one that is not purely technical in nature at least according to traditional notions of patent eligibility.  The simple fact is that such inventions are a fusion of traditionally patent ineligible subject matter such as financial algorithms or “business methods” and traditionally patent eligible subject matter, that is, automated systems or processes.  These “hybrid” inventions span across a continuum.  On one end of the continuum, the novelty lies almost entirely in the financial algorithm, and the technical portion that is arguably “otherwise statutory” owes itself almost entirely to the automation of the algorithm on a programmed computer.  On the other end of the continuum, the “otherwise statutory” subject matter may be a purely technical innovation, such as an artificial intelligence algorithm in combination with a novel technical architecture that is based on a scientific advance that is put to use to make a business decision.    In between there are a multitude of combinations that defy simple categorization as patentable or unpatentable.

The Bilski abstract idea test is vastly overbroad in its reach – it can too easily be applied to disqualify seemingly deserving innovations from patent eligibility.  In particular, by isolating an algorithm from its physical instantiation, the Bilski test can be used to inappropriately disqualify innovative electromechanical activity, and other deserving subject matter, from patent protection.   As is evident from the above examples, the technical algorithms are all equally abstract to the financial algorithm or artistic algorithm, when conceptually disembodied from their respective robot embodiments.  Accordingly, the abstract idea test, at least as applied by Bilski, is clearly unable to properly differentiate between traditionally worthy, physically embodied, technological innovations, and abstract ideas that truly lack sufficient technological or physical instantiation to be properly patent eligible.

The defective reasoning used in Bilski is made even more evident considering that most of the electromechanical activity described above could, in theory, be achieved with a purely mechanical device, albeit an exceedingly complex one.  If that were the case, it becomes logically impossible to separate the algorithm from its physical instantiation, and the Bilski abstract idea test becomes ineffectual as a tool to disqualify such an inventions from patentability.  My point here is that if the abstract idea test were logical and technology neutral, it would apply equally well to a purely mechanical device and an electromechanical device, which it does not, at least as presently formulated.

By the same token, the machine test, as a positive litmus test for patent eligibility, is also overbroad.  It can too easily be applied in the above example to find patent eligibility for an innovation that would not normally be considered eligible, namely an artistic performance by the robot where the only novelty lies in the choreography as opposed to a technical advance.

Probably the Diehr analytical framework – that essentially holds that an invention cannot be excluded from patent eligibility just because the point of novelty is an abstract idea, such as a mathematical algorithm, if the invention as a whole is “otherwise statutory” — offers the most sound approach.   Diehr, in my opinion, seems to require an analytical framework that is directly opposite to the analytical framework applied in Bilski, which focuses on the abstract idea and ignores the invention as a whole by playing make believe – i.e., pretending that a computer programmed to perform financial or business method tasks is indeed not a machine at all.

The Diehr approach to determine patent eligibility under Section 101 is at least logical, and does not ignore reality.  It essentially determines if the invention as a whole is otherwise statutory.  Rather than requiring us to arbitrarily “disappear” the machine part of an invention to metaphysically transform it into an unpatentable abstract idea, Diehr uses a holistic approach that does not require tricked up legal reasoning.

Of course Diehr would seem to require us to find that a computer programmed to perform a financial algorithm is “otherwise statutory” because it is indeed a machine in the absence of the algorithm.  I don’t believe that this is the case however, because as we can see from the choreography invention posited above, if the “invention” is artistic in nature, it should not be patentable whether performed by people or by programmed machines.  As such, Diehr would say that a computer programmed to perform choreography, where the invention as a whole lies in the realm of “art” and not in the realm of “technology”, is not eligible for patenting under Section 101.

This leads me to my conclusion that the more honest, logical and clear approach to dismissing business method innovations from eligibility is to hold that a machine programmed solely to perform a non-technical business method is not “as a whole” within the useful arts.

On the other hand, because computers programmed to perform business methods essentially are machines that automate business tasks, it is not illogical to say that, “as a whole”, they are within the useful arts.  This does not appear, however, to the be direction the Supreme Court is heading.

 

 

 

Supreme Court takes up CLS Bank v. Alice – Clarification or more obfuscation to come?

Wednesday, December 11th, 2013

The Federal Circuit’s en banc decision that Alice’s claims were invalid generated seven separate opinions and failed to provide clear guidance as to the patent-eligibility of software claims.  (See http://www.patents4software.com/2013/05/cls-bank-v-alice-a-hot-mess-of-illogical-nonsense/ for a discussion of that decision.)  After that decision, many practitioners were hoping that the Supreme Court would hear the case and provide some clarity.  Whether or not clarity will be provided remains to be seen, but certiorari has been granted, so the hope remains.

Alice’s petition defines the question presented quite broadly:

Whether claims to computer-implemented inventions—including claims to systems and machines, processes, and items of manufacture—are directed to patent-eligible subject matter within the meaning of 35 U.S.C. § 101 as interpreted by this Court?

In light of the remarks in the plurality opinion of the en banc decision that “Unless the claims require a computer to perform operations that are not merely accelerated calculations, a computer does not itself confer patent eligibility,” the question presented by Alice appears to be precisely on point.

The petition emphasized the various and contradictory rationales of the decisions, and cited Judge Moore’s statement that

Our court is irreconcilably fractured over these system claims and there are many similar cases pending before our court and the district courts.  It has been a very long time indeed since the Supreme Court has taken a case which contains patent eligible claims. This case presents the opportunity for the Supreme Court to distinguish between claims that are and are not directed to patentable subject matter.

CLS Bank’s opposition suggests that the question at hand is much more narrow, and that the case merely addresses “[w]hether the en banc Federal Circuit correctly affirmed the district court’s judgment.”  The opposition also argues that the outcome was correct, and therefore there is no need to correct the Federal Circuit’s judgment.  Furthermore, the opposition argues that the addition of three new judges to the Federal Circuit since the en banc decision was issued will allow the Federal Circuit to reconsider the issue in a future en banc decision and possibly resolve the “fracture” internally.

It is interesting to note that the opposition spends five pages pointing out why, if the Supreme Court wants to revisit the issue of the patent-eligibility of economic computer-implemented claims, this case is a good vehicle.  In its reply brief, Alice naturally seized on this as good and sufficient reason for the Court to grant certiorari.

In granting certiorari, the Court declined CLS Bank’s invitation to rephrase the question presented to narrow the topic at issue, and will address Alice’s broad question.

 

 

PwC and the National Venture Capital Association declare: There’s credible reason to be optimistic about the future of innovation and the vibrancy of the software startup ecosystem

Tuesday, October 29th, 2013

According to the MoneyTree(tm) Report from PricewaterhouseCoopers LLP (PwC) and the National Venture Capital Association (NVCA), of October 18, 2013, there’s credible reason to be optimistic about the future of innovation and the vibrancy of the software startup ecosystem.  “It’s an exciting time to be an entrepreneur with a software company,” according to Mark McCaffrey, global technology partner and software leader at PwC US.

According to the MoneyTree™ Report, based on data provided by Thomson Reuters, the US software industry received the highest level of venture capital funding in the third quarter of 2013, exceeding the $3 billion mark for the first time in 12 years with $3.6 billion flowing into the sector during the quarter. The report notes that “[m]ore venture capital dollars are going into more software deals than we’ve seen in the past decade. The continued increase in valuations for innovative and disruptive technologies in software-related companies, coupled with the increase in exit activity, is driving venture capitalists to make more investments in this space. And, at the current pace of investing, we should see total venture capital investments in 2013 exceed the annual total from 2012.”

The report goes on to say that “[w]ith more than half of this quarter’s deals coming from early and seed stage deals, there’s credible reason to be optimistic about the future of innovation and the vibrancy of the startup ecosystem. Software is a natural increased area of focus given that many tech deals are less capital intensive to get to proof of concept,” said John Taylor, head of research at the NVCA. “We are balancing this optimism, however, against the recognition that VCs are still trying to gain exits for the previous generation of companies. There is some improvement on that front but we would like to see it strengthen even further,” Taylor added.

As I have reported before, the US software industry has continued to enjoy incredible success both in comparison to other industries in the US, and also in comparison to other countries with weaker software patent rights.  Yet again, the predictions of the destruction of the software industry by software patents, and the harming of software start-ups by trolls, is simply nowhere evident in the generous venture capital funding being poured into the software industry.  It would only stand to reason that if trolls were placing venture capital investments at an unusual risk, VC investment would not be expected to increase, and indeed would likely go down.  But VC funding is indeed going up along with the growth in the software industry. Is it at least possible that the “dyed in the wool”, anti-software-patent consortium will at least acknowledge that the software ecosystem in the US is far from hobbled by software patents and trolls, the latest and completely baseless “sky is falling” theme?  Could they not at least admit that is possible that the US’s generous protection of software innovation, by patents and copyrights, is a help to the software industry, and particularly the start-ups that are relied upon to do most of the breakthrough innovation? Of course we know not to hold our breath for that, since the anti-IP forces have been predicting the destruction of the software industry by patents since at least 1985, when Richard Stallman, a brilliant but by many accounts decidedly anti-capitalist computer scientist, founded the Free Software Foundation, and later that same decade the League for Programming Freedom.  I do have to at least give Mr. Stallman credit for not only being a programming genius, but also for being able to generate a huge volume of misinformation over the last 30 years!  Isn’t it time to acknowledge, however, that Mr. Stallman got it wrong, and move on to addressing real problems for the software industry?

As the voice of the U.S. venture capital community, the National Venture Capital Association (NVCA) empowers its members and the entrepreneurs they fund by advocating for policies that encourage innovation and reward long-term investment. As the venture community’s preeminent trade association, NVCA serves as the definitive resource for venture capital data and unites its nearly 400 members through a full range of professional services. For more information about the NVCA, please visit www.nvca.org.

The PwC Private Equity & Venture Capital Practice is part of the Global Technology Industry Group, www.pwcglobaltech.com. The group is comprised of industry professionals who deliver a broad spectrum of services to meet the needs of fast-growth technology start-ups and agile, global giants in key industry segments: networking & computers, software & Internet, semiconductors, life sciences and private equity & venture capital. PwC is a recognized leader in each industry segment with services for technology clients in all stages of growth.

 

Steve Jobs Patent on Multitouch User Interface is Affirmed by USPTO in Re-exam Proceeding

Thursday, October 17th, 2013
A computer-implemented method for use in conjunction with a computing device with a touch screen display comprises: detecting one or more finger contacts with the touch screen display, applying one or more heuristics to the one or more finger contacts to determine a command for the device, and processing the command. The one or more heuristics comprise: a heuristic for determining that the one or more finger contacts correspond to a one-dimensional vertical screen scrolling command, a heuristic for determining that the one or more finger contacts correspond to a two-dimensional screen translation command, and a heuristic for determining that the one or more finger contacts correspond to a command to transition from displaying a respective item in a set of items to displaying a next item in the set of items. – See more at: http://www.patentbuddy.com/Patent/7479949#sthash.1DuRxQv6.dpuf

In a reexamination certificate issued on September 4, 2013, the USPTO affirmed the patentability of all 20 claims of Steve Job’s pioneering patent on certain features of the iPhone’s mult-touch user interface:  US Patent No. 7,479,949 This patent has been in litigation with Samsung and Google’s Motorola Mobility.

The basic subject matter of the patent relates to detecting one or more finger contacts with the touch screen display, applying one or more heuristics to the one or more finger contacts to determine a command for the device, and processing the command.

The first claim of the patent calls for:

1. A computing device, comprising:
a touch screen display;
one or more processors;memory; and
one or more programs, wherein the one or more programs are stored in the memory and configured to be executed by the one or more processors, the one or more programs including:
instructions for detecting one or more finger contacts with the touch screen display;instructions for applying one or more heuristics to the one or more finger contacts to determine a command for the device; and
instructions for processing the command;
wherein the one or more heuristics comprise:
a vertical screen scrolling heuristic for determining that the one or more finger contacts correspond to a one-dimensional vertical screen scrolling command rather than a two-dimensional screen translation command based on an angle of initial movement of a finger contact with respect to the touch screen display;
a two-dimensional screen translation heuristic for determining that the one or more finger contacts correspond to the two-dimensional screen translation command rather than the one-dimensional vertical screen scrolling command based on the angle of initial movement of the finger contact with respect to the touch screen display; and
a next item heuristic for determining that the one or more finger contacts correspond to a command to transition from displaying a respective item in a set of items to displaying a next item in the set of items.

 

 

A computer-implemented method for use in conjunction with a computing device with a touch screen display comprises: detecting one or more finger contacts with the touch screen display, applying one or more heuristics to the one or more finger contacts to determine a command for the device, and processing the command. The one or more heuristics comprise: a heuristic for determining that the one or more finger contacts correspond to a one-dimensional vertical screen scrolling command, a heuristic for determining that the one or more finger contacts correspond to a two-dimensional screen translation command, and a heuristic for determining that the one or more finger contacts correspond to a command to transition from displaying a respective item in a set of items to displaying a next item in the set of items. – See more at: http://www.patentbuddy.com/Patent/7479949#sthash.1DuRxQv6.dpuf

Another Software Patent Horror Story Unmasked and Debunked: This one you won’t believe

Sunday, October 13th, 2013

I have noticed lately that the anti-software patent PR machine is trying pretty hard to find examples of start-ups “crushed” by software patents.

Ok, so here is the latest laugher example they came up with:  FindTheBest.com, a company that is nearing its fifth birthday and handling 20 million visitors a month, is supposedly a “start-up” being unfairly targeted by a patent troll  (see http://www.latimes.com/business/la-fi-hiltzik-20131011,0,704586.column).

As far as I can tell from their web site, FindTheBest is doing a land-office business, and probably has a valuation better than 95% of all software companies.  For starters, in my opinion, pretty much every software entrepreneur on the planet would gladly endure a challenge from a troll if they could get 20 million visitors a month in web traffic.  But that is just the beginning of the irony of this anti-patent sob story.   The leader of this particular start-up at present, Kevin O’Connor, sold a previous start-up he co-founded, Doubleclick, to Google for $3.1 billion in 2008.  Doubleclick, and indeed O’Connor himself, named as an inventor on at least four software patents acquired by Google (http://www.patentbuddy.com/Inventor/O%27Connor-Kevin-Joseph/5640460#More), had aggressively filed patents to protect its innovations (http://www.seobythesea.com/2007/04/doubleclick-google-looking-at-some-of-the-doubleclick-patent-filings/).   Those patents weighed heavily in the valuation of Doubleclick when it was sold to Google.  So, is it not a little ironic that FindTheBest.com would be outraged about software patents impeding their progress, after one of their founders profited mightily from the patent filings of his own prior company?  Well, I sure think many would think so.  This is not to say I don’t have nothing but the utmost admiration for Mr. O’Connor’s entrepreneurial talents.  And, its not to say that he may very well be legitimately frustrated to have to deal with a patent infringement issue.  But, these are the problems that go with the kind of success few entrepreneurs are ever lucky enough to achieve, not the problems of the vast majority of true start-ups still trying to find enough customers to survive another round of financing.

Here is another injustice of this story: Eileen C. Shapiro, the inventor of the so-called troll patent in question, is no slacker. She has an undergraduate degree from Brown University and an MBA from Harvard University.  According to her LinkedIn profile, she holds 14 patents and has been actively involved in many start-ups.  Is this really an example of some undeserving “troll” inventor with no right to exclusive rights in her inventions?  Is it so improbable that someone that likely has a genius level IQ would be awarded a valuable patent for her ideas, which mind you appear to have come to her a good while ago before the site FindTheBest.com was even a notion in its founder’s imagination.

So, is this really an example of a “start-up” getting drummed out of business by underserving troll?  The Electronic Frontier Foundation would like you to believe that — “Trolls do a really good job of targeting start-ups at their most vulnerable moments,” says Julie Samuels, a staff attorney at the Electronic Frontier Foundation and holder of its Mark Cuban Chair to Eliminate Stupid Patents.”  (LA Times, October 13, 2013).   Or, is this an example of a large, successful, well established and fast growing company nearing its fifth birthday, that some time ago left “start-up” mode behind?  Wouldn’t most five year old companies be embarrassed to say they were still “starting up”?  This is a label only those desperately in need of contriving the facts to suit their hypothesis would dare to come up.

Moreover, is this not a great example of how Mr. O’Conner’s patents helped him get a fair return for the sale of Doubleclick to Google, so he could reinvest some of his gains in FindTheBest.com, rather than an example of how Ms. Shapiro’s innovations are a poster child for patents underserving of a reward.

If this is the best software patent horror story the anti-patent forces can come up with this Halloween, they should give it a rest for a while.

 

 

US Outpaces rest of world by large margin in R&D Spending, and our patent system helps us keep the advantage

Monday, September 30th, 2013

Today the Wall Street Journal reported that the US leads the world in R&D spending – at $450 billion – by a wide margin, outpacing Japan by a 3 to 1 margin, and most of the rest of the industrialized world by a factor of 4-10 to one.  (“How China Chases Innovation”, U.S. News – The Outlook, by Bob Davis, WSJ)  About 2/3 of all R&D spending in the US is privately funded.  China was the closest in R&D spending, at about 1/2 the level of the US.  Only Japan, Germany and South Korea spent more as a percentage of GDP.   Interestingly, all the top R&D spending countries ,as a percentage of GDP, had strong patent systems.  The lowest spending countries, Brazil and India, have notoriously weak patent systems.  Interestingly, despite its large R&D spend, China lags the world in “new ideas”, still focusing on imitating Western technologies and producing them more cheaply.

With the US leading in R&D spend, and China and other developing nations leading in low cost production, common sense tells us the patent system plays a vital role in protecting the US’s R&D spend against free-riding, low wage, imitator nations.

If you want a look at what competition in the US would be like without a strong patent system, just take a look at China, where copying is rampant, and a large percentage of innovators are rewarded with having their products cloned and their business destroyed.

While a lot of time is spent focusing on the perceived unfairness of paying a so-called “troll” (more fairly called non-practicing entities or NPE’s) for the right to make or sell a product, the reality is that the intellectual property rights asserted by NPE’s typically do not come cheap.  For example, companies like Microsoft and IBM Corporation spend heavily on advanced R&D, and without the patent system to help protect their investment and obtain a reasonable return, they would no doubt greatly reduce their spend.

The reality is that the US now exists in an entirely different world than it did even 30 years ago – a world in which power and wealth are tied more closely to ownership of intellectual property than to manufacturing production.   Is this a world in which the US wants to lead the effort to reduce the value of intellectual property protection?  I don’t think we need a Ph.D. in economics to answer that question for us.  What we need to do is take a step back and look at the patent system as a whole, and realize that all in all, the patent system heavily favors innovator nations like the US, not imitators in low wage countries.  While you can always find examples of where the patent system didn’t work as hoped for, there are many more examples for each of these where it did.

Is a United States without software patents a Shangri-La for US software developers, or the making of their undoing?

Tuesday, September 24th, 2013

One of my favorite old adages is “be careful what you wish for.”   I think it serves well as a cautionary note for those that are calling for the abolition of software patents.  Why?  Because while the opponents of software patents constantly point out the downside to software patents, they NEVER talk about the downside of not having any software patents.  I can easily see some clear and present negative consequences to American software companies if we abolish software patents.

For one, all software will all be freely clone-able.   Because there will be no consequence to copying functionality (copyright does not protect functional aspects of software), the decision to buy or clone, and the decision to create something new or clone an established product, will strictly be one of which is cheaper.  Innovating, which is risky and costs money, will not be a wise use of money, when your reward will be handing your innovation to unimaginative, risk-averse, low cost producers, to clone.

Let’s say an established company wants to switch vendors for specialty software components it may be buying from one of the multitude of small software companies that support the business-to-business market.  No problem in a world without software patents.  Just give the new vendors the functional specs and have them clone away.  In this “clone at will” world, an innovative incumbent vendor, employing American-based innovators, will readily lose out to the vendors mindlessly cloning established products from a lower cost jurisdiction.   Actually, you don’t even need a lower cost jurisdiction for this type of competition to be unfair, where the incumbent has risked capital and expended substantial sums to establish a market for their product.

Or, let’s say you are an entrepreneurial software publishing entity in a low cost jurisdiction like India, China, South America or even Eastern Europe.  Right now, if you want to clone software covered by patents and sell it in the US, or even software not yet covered by patents but possibly covered in the future (once the US company starts getting cloned), you have a serious barrier to entry – the last thing you need is to blindly clone a product and walk straight into a patent infringement case, which can happen even if the patents in questions are relatively narrow.  But in the Shangri-La the anti-patent opponents envision, blind cloning by developers in low cost jurisdictions will be a fantastic business.  All they will have to do is wait for a US company to spend a few years risking their capital to establish a new market for a particular software product, and then come in to compete with a cheap knock-off.

Do innovative software developers really want a world where blind cloning is as easy as falling off a log?  I don’t think so.  If you ask me, If the anti-software-patent contingency got what they wished for, they would be wishing for software patents.

 

100+ Innovative American Businesses and Organizations Send Letter to Congress Opposing Expansion of America Invents Act’s “Covered Business Method Patent” Program

Tuesday, September 24th, 2013

Yesterday, 100+ innovative American businesses sent a letter to Congress expressing strong support for the patent system and opposing expansion of the “Covered Business Method” (CBM) program.  Signatories to the letter include some of America’s most innovative companies including a number of leading software companies.  Software publishing companies and industry organizations signing the letter included Microsoft, Adobe Systems, IBM, and the BSA- The Software Alliance.   According to the letter, “The US patent system for more than 200 years has succeeded spectacularly in promoting ‘the progress of science and useful arts,’ as the Founders intended, in part because it has always provided the same incentives for all types of inventions. To expand and make permanent the CBM program would be to turn ill-advisedly and irrevocably in a new direction — discriminating against an entire class of technology innovation.”   The letter goes on to say expanding the CBM program ”would have far-reaching implications, because data processing is integralto everything from cutting-edge cancer therapies to safety systems that allow cars to respondto road conditions in real time to prevent crashes. Subjecting data processing patents to theCBM program would thus create uncertainty and risk that discourage investment in anynumber of fields where we should be trying to spur continued innovation.”

A full copy of the letter can be found here:  http://www.scribd.com/doc/170311368/Letter-100-Innovative-Businesses-and-Organizations-Send-Letter-to-Congress-Objecting-to-Covered-Business-Method-Patent-Legislative-Proposals