My congratulations to Russ Slifer, the new Regional Director of the USPTO’s Denver office. I have known Russ since he started his career in patent law in 1994 at the Schwegman firm, and followed his career through his private practice representing several of America’s top high technology companies, to his many years as Chief Patent Counsel for Micron. The USPTO is fortunate to have gained Russ for their leadership team. He has always demonstrated a mastery of his craft, is amazingly productive, shows sound judgement in all his affairs, is a progressive manager, and has been a leader in every aspect of his professional life. No doubt he will provide Michelle Lee and the USPTO a strong leader for the Denver office, continue to help the Office evolve and adapt to the ever changing needs of industry and policy, and get things done. Once again, my congratulations to Russ and the USPTO.
Cotropia Study of USPTO Allowance is Rate is Total Bunk – Methodology Can Easily Result in “Corrected Allowance Rates” far in Excess of 100%, the Lower the Actual Allowance Rate GoesMay 13th, 2014
(My thanks to Domenico Ippolito for his research on this post)
In his article Getting Patents is Preposterously Easy under Obama, Timothy Lee asserted that the Patent and Trademark Office “needs a way to permanently reject patent applications” and called giving the Office that power a “common-sense reform.” In support of this assertion, Mr. Lee refers to Apple’s “slide to unlock” patent, implying that the patent was allowed only because of exhaustion on the part of the PTO “after six years of back and forth.” He goes on to say that 92% of patent applications eventually result in allowance, and that this high percentage shows that the PTO is over-“permissive” and contributing to “a proliferation of low-quality patents.” None of these points survive a closer look.
Having decided a priori that the slide-to-unlock patent should not have issued, Mr. Lee then turns to the allowance rate of the PTO in general, accusing the Office of allowing 92% of all applications, which “may mean that the patent office approved applications that didn’t deserve a patent.” As Mark Twain famously said, “there are three kinds of lies: lies, damned lies, and statistics.” So let’s tread cautiously where statistics are involved, and consider carefully what they reflect. The PTO conveniently provides a dashboard with statistics showing that 51% of applications are being allowed. As an applicant, that statistic is important: it means there’s a 51% chance that you’ll get an allowance on a single round of examination, before substantial additional fees kick in. However, since an RCE can be filed after a Final Rejection, the 51% figure does not accurately reflect the chance of an original application eventually issuing as a patent. Fortunately, the PTO dashboard also provides that number: it’s currently 70%.
Why is the PTO’s adjusted allowance rate so much lower than the 92% reported by the article Mr. Lee refers to? The answer is simple: because the 92% figure is not an allowance rate. The University of Richmond (UR) report “corrects” the 51% allowance rate reported by the PTO by adjusting the number of application disposals. Walking through a calculation, the “nominal” number of application disposals was 548,051. That number was corrected by subtracting out the RCEs, leaving 390,143 disposals. Taking 51% of 548,051 as the number of allowances, and 390,143 as the number of disposals, a partially corrected allowance rate of 74% was obtained. While this number is substantially higher than the rate of about 68% shown by the PTO for 2012, at least the UR report and the PTO agree that this is an allowance rate.
However, UR goes on to calculate an allowance rate “corrected … for all Refiled Continuing Applications (including CIPs).” The number generated after this “correction” is of uncertain value, at best. To generate the corrected value, the number of allowances is held constant, but the number of disposals is reduced by the number of “continuations,” “refiled continuing applications,” and other “continuing applications.” In this manner, an “allowance rate” of 89% was calculated for 2012. This rate shows that for every application that is finally disposed of, an average of 0.89 patents issues. That sounds similar to an allowance rate, and the rate is close to 100%, so does that mean that virtually every application eventually issues as a patent? No. That statistic was already calculated as 68% or 74%, depending on the source. In fact, this number doesn’t have an upper bound of 100%, so the fact that it is close to 100% doesn’t have any particular significance. To demonstrate the point, assume a 50% nominal allowance rate out of 500,000 disposals. Further assume that continuations are filed in 90% of the cases. Then the “corrected” allowance rate would be 250,000 allowances divided by the 50,000 cases finally disposed of – yielding a “corrected” 500% grant rate. The statistic generated in this manner – whether the result is 89%, 92% or 500% — has no particular significance either to the inventor considering filing a patent application or to the outside observer interested in determining if the PTO is overly-permissive, as Mr. Lee alleges. Calling it an allowance rate is sloppy at best, and deliberately misleading at worst.
The truth of the matter is that the increase in RCEs, far from showing that applicants can bully the PTO into granting dubious patents, instead shows that patent prosecution is harder, is taking longer, is costing more, and is resulting in the issuance of patents with narrower claims. Contrary to Mr. Lee’s assertions, the PTO’s successful efforts in reducing pendency have resulted primarily from an increase in Office personnel, not from reduced quality of examination.
 See Patent Applications and the Performance of the U.S. Patent and Trademark Office, Cotropia et al., available at http://papers.ssrn.com/sol3/papers.cfm?abstract_id=2225781 (numbers used in the article are taken from Appendix C).
 See http://www.uspto.gov/dashboards/patents/kpis/kpiExaminers.kpixml (showing 6,642 examiners in November 2012 and 8,041 in March 2014); see also http://www.uspto.gov/patents/stats/examstaffing.jsp (showing 6,063 examiners in Q1 2009).
For those of you that have not yet read David Kappos’ open letter to President Lincoln, please take a moment to read it at Managing IP’s blog: http://www.managingip.com/Blog/3334558/Guest-post-An-open-letter-to-Abraham-Lincoln-from-David-Kappos.html.
A great many of us that have been in the patent field for a long time believe Mr. Kappos was one of the greatest, if not the greatest, Director of the US Patent Office of our times. It is heartening to know that he will continue to be a steady hand on the wheel of patent policy, even if only as a private sector advocate for sensible policy.
No doubt Lincoln’s understanding of the importance of the patent system was at least in part owing to his own inventiveness. Leaves one wondering if the reverse is true – is the patent system least appreciated by those that are least inventive? Certainly those that depend on copying others to succeed stand to gain the most by diminishing the value of the creativity of others.
Dave – thanks again for showing us why you will long be remembered as a truly great Director of the US Patent Office, and a fine student of history as well.
The Supreme Court heard oral arguments in Alice Corp. v. CLS Bank, No. 13-298, today (March 31, 2014) regarding the question presented of “[w]hether 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.” Arguments were heard from the petitioners, the respondents, and the United States as amicus curiae.
From the questions and comments of the justices, one might get the impression that at least some members of the Court were not entirely certain that the Alice patent was directed to an abstract idea. The Court also seemed to be wrangling with how to draw the line between “technological” software inventions and those based on abstract ideas only. At one point, Justice Breyer noted there were a lot of suggestions in the 42 briefs filed in the case as to “how to go between Scylla and Charybdis,” suggesting that on one side there was the evil of patenting abstract ideas, and on the other, the harm caused to legitimate software inventions by an overly restrictive test for Sec. 101 eligibility.
Naturally, the petitioners argued that the claims were not directed to an abstract idea, but to “a very specific way of dealing with a problem.” Just as naturally, the respondents argued that the claims were simply directed to “[d]ebit, credit, and pay,” and thus were at a high level of abstraction. The government took perhaps the most anti-software-patent position, arguing that improving “the functioning of computer technology” (e.g., through improved encryption or compression algorithms) or using a computer to “improve another technology” would be patent-eligible, but that other software claims would fail under Section 101. Rather than focusing on the arguments made by the attorneys, the summary below is organized to emphasize the questioning of the Justices.
Questioning the Petitioners
Justices Kennedy, Ginsburg, and Breyer questioned the petitioners as to whether “intermediate settlement” is “less abstract than hedging,” since hedging was found to be a non-eligible abstract idea in Bilski. Justice Breyer described a hypothetical pen-and-paper (or even abacus) implementation of the abstract idea of “solvency.” After the petitioners observed that the hypothetical was a mere caricature of the claims, Justice Breyer agreed, but described it as a “caricature designed to suggest that there is an abstract idea here.” In responding to these questions regarding the abstractness of the invention, petitioners argued that the claims solved the problem of the risk of non-settlement using software “that the patent specifically describes by function.”
Justice Sotomayor raised the question of functional claiming, expressing concern that the claim limitations amounted to no more than “reconciling accounts … through a computer.”
Justice Scalia asked why “doing it through a computer” shouldn’t be enough to confer patent-eligibility. Just as mechanical inventions perform labor-saving tasks that could be performed by hand, so do computer inventions. Petitioners agreed that computer-implemented inventions shouldn’t be singled out.
Justice Kagan was interested in pulling apart the invention into an “idea” and a “computer.” Petitioners were wary of such a division, and argued that the invention, to be useful, had to be performed on a computer and thus could not be separated.
Justice Breyer expressed his concern about striking the right Section 101 test as a policy matter. If the bar for patentability is too low, business success will depend more on patent lawyers than on anything else. If the bar for patentability is too high, then no computer-implemented inventions will be protectable. Regarding Mayo, Justice Breyer said he found it to be “an obvious case” of patent-ineligibility, but deliberately left the line vague so that attorneys could weigh in and help “figure out how to go further.” Petitioners responded that the line shouldn’t be moved to invalidate more patents. Congress, by passing the AIA, provided for administrative review of more patents, but did not change the substantive law. Petitioners suggested that the Court should view this as an endorsement of the status quo and interpret claims as written rather than reducing them to a caricature before applying Section 101.
Questioning the Respondents
Justices Breyer, Sotomayor, Ginsburg, and Kennedy asked, in different ways, if any business process claims would be patent-eligible and what the proper line to draw for Section 101 eligibility would be. Similarly, Justice Kagan asked about the level of detail required in the claims regarding the computer-implemented steps in order to be patent-eligible and about the potential harm to already-issued patents from tightening the standards of Section 101. Respondents referred the court to the PTO’s rules that held “economic concepts, legal concepts, financial concepts, teaching concepts, dating and interpersonal relationships and generally how business should be conducted as examples of those things that are likely abstract.” Respondents further noted that Congress, in the AIA, said that business methods “that pertain to data processing in the financial services industry and do not offer technological solutions” “are subject to special scrutiny.” Regarding the impact on the patent system, Respondents claimed that “this is a very small problem” because out of 22,000 infringement litigations since Bilski only 57 decisions on Section 101 grounds have been issued by the district courts.
Chief Justice Roberts asked about the teachings of the patent, and if the detailed flowcharts it contained took the invention beyond an abstract idea. Respondents argued that the complex flowcharts were not related to the claims at issue. Chief Justice Roberts also asked about the patent-eligibility of a computer-implemented process that was theoretically human-implementable but would be impractical without a computer. Respondents argued that the claims at issue were not impractical without a computer, but did not address the broader question.
Questioning the Government
Justice Ginsburg, Breyer, and Kennedy asked if the government’s proposed rule would invalidate all business-method and software patents. The government responded that it would be difficult to identify a patent-eligible business method unless an improved technology, such as an improved encryption algorithm, was involved.
Justice Sotomayor asked if the case before the Court is even a software patent case, since the claims at issue are directed to systems. The government argued that the claims could be found invalid as system claims because they are directed to abstract ideas without additional technical innovation.
Chief Justice Roberts asked if the government’s proposed non-exhaustive 6 factor test was going to provide greater clarity and certainty. The government responded that it really boils down to whether the claimed innovation improves a computer’s functioning or improves the functioning of another technological process. If neither of those is true, the innovation is not patent eligible.
Justices Breyer, Kennedy, Ginsburg, and Sotomayor in particular seemed concerned that the precedents they had set so far had not led to clarity for the Court of Appeals for the Federal Circuit regarding the application of Section 101 to software claims. Many questions were directed to trying to find proposed language to use to provide better guidance. However, the suggested guidance did not seem to be what they were looking for. Petitioners argued for a very narrow reading of the abstract idea exception. Respondents and the government argued for a very broad one. Since the Court appears to be sensitive to the set expectations of patentees and yet unwilling to give up on the abstract idea exception, it will have to craft its own answer, with very little help from any of the parties who argued before it today.
My thanks to Domenico Ippolito of Schwegman, Lundberg & Woessner, P.A., for this post.
Broad Alliance of High Tech Start-Ups and Going Concerns Urges Supreme Court to Preserve Critical Patent Protection for Innovative SoftwareMarch 15th, 2014
Forty-one companies, four individuals, and a pro-patent organization joined in an amicus brief filed in Alice Corp. v. CLS Bank Int’l (Case No. 13-298) arguing that the “abstract ideas” exception to patent eligibility must be construed narrowly. As the first-named amicus is Trading Technologies International, Inc., the brief will be referred to herein as the “TT brief.” TT_Alice_CLS_amici
Beginning from first principles, the TT brief notes that the Constitution provides for patent protection to “promote the Progress of Science and useful Arts” and that Congress has accordingly provided for a broad scope of patentable subject matter. As a result, the limitations placed on patentable subject matter are largely Court-created rather than being drawn from a literal interpretation of either statute or the Constitution. The TT brief makes this point in quite strong terms, arguing that “[t]he judicial exceptions to Congress’s expansive definition of patent-eligible subject matter thus lie at the farthest edge of the judicial power, perilously close to the border separating permissible interpretations of statutes from impermissible encroachments on Congress’s Article I authority.”
The TT brief further notes that the question at bar is not whether the claims are directed to novel, useful, and non-obvious subject matter, but only as to “whether computer-implemented inventions that are not directed to a scientific truth should be deemed ineligible even if such inventions are novel, non-obvious, and otherwise patentable.” Amici argue that the answer must be a resounding “no.” Thus, the TT brief suggests that no computer-implemented claim should be found patent-ineligible merely for being directed to an abstract idea. Furthermore, as argued by the TT brief and the Rader-Linn-Moore-O’Malley dissent from the Federal Circuit’s decision below, any invention can be boiled down to an abstract idea. If the elements used to implement the idea are not found to be themselves inventive, then many claims – not merely software claims – will be found to be patent-ineligible on the basis of this test.
Additionally, the TT brief takes direct issue with the finding in the Federal Circuit’s plurality opinion that “a computer is just a calculator capable of performing mental steps faster than a human could.” Rather, amici make the argument that computers are no longer merely machines capable of performing rapid calculations (and thus of implementing arbitrarily complex mathematical relationships), but are now “highly configurable machines capable of being turned into new and different machines through how they are programmed.” On this basis, applying the abstract ideas exception to invalidate a broad swath of software patents would preclude patent protection for an area in which much innovation is still occurring: the creation of new specialized machines through the development of improved software.
Like the Moore-Rader-Linn-O’Malley dissent from the Federal Circuit’s opinion, the TT brief focuses on the fact that many issued patents rely on the patent-eligibility of software and the settled expectations of patentees would be disrupted by an expansion of the application of the abstract idea test. The TT brief takes the argument one step further, by noting that programmable processors are being used in more of the things we buy, and that software is being used to improve those things. For example, the novelty of a self-parking car is in the software used to maneuver the vehicle, not in the sensors used to gather the information or the control systems used to direct power to the wheels.
The argument continues by suggesting that the “abstract idea” exception to patent-eligibility should be limited to inventions that can be implemented entirely in the human mind, and thus has no bearing on claims that recite hardware components. Likewise, claims directed toward “scientific truths” that have always existed and thus cannot be invented, are not patent-eligible. But these two exceptions have no bearing on the patent-eligibility of a software-configured computer that performs specific tasks, so long as those tasks are not mere scientific truths.
Since the TT brief argues that a process performed on a computer cannot be abstract, amici emphasize the fact that both Alice and CLS Bank stipulated that the claims at issue must be performed on a computer. By contrast, the plurality below minimized this stipulation by making its own finding that “the requirement for computer implementation could scarcely be introduced with less specificity.” Accordingly, the two positions seem to be based on whether software patents are seen as (legitimate) claims directed to specially-configured machines or as claims to mental processes that happen to be implemented in machines.
My thanks to Domenico Ippolito at Schwegman, Lundberg & Woessner, P.A.’s Silicon Valley office, for this posting.
 Amicus Brief at 4 (emphasis in original) (defining “scientific truth” as a shorthand for laws of nature, natural phenomena and pure mathematical laws or axioms).
 See MPEP 2106 (II.B) (explaining that neither necessary data-gathering steps nor extra-solution activity that is not central to the invented method can convey patent-eligibility to a method that otherwise lacks it).
Amici Curiae Brief of Microsoft, Adobe and Hewlett-Packard: Alice Corp’s patent does not claim a technological innovationMarch 2nd, 2014
For those of us that have been wondering how the Supreme Court can get its Section 101 jurisprudence back on track, the answer may be found in the brief of Microsoft Corporation, Adobe Systems Inc., and Hewlett-Packard Company as Amici Curiae, in support of affirmance. The brief offers a reasonable path forward for the Supreme Court to refine the “abstract idea” test it rolled out in Bilski v. Kappos, 130 S. Ct. 3218 (2010). That test may have worked to exclude Bilski’s business method innovation from patent eligibility, but unfortunately taken to its logical limit applied equally as well to exclude pretty much every other software invention as well, technological or not.
Clearly, the specter that the abstract idea exclusion to software subject matter will preclude patenting of technologically oriented software innovations in general, and even more so innovations that deal with manipulating what might be regarded as abstract information, such as inventions in the realm of artificial intelligence (e.g. IBM’s Watson(r) artificial intelligence system, or data compression algorithms underpinned by mathematical concepts), is of great concern to many of today’s technological titans, such as Microsoft, IBM, HP, Adobe and many others.
The Microsoft, Adobe and Hewlett-Packard brief echos many of the points made by IBM in its brief (see my post http://www.patents4software.com/2014/02/ibm-weighs-in-on-cls-bank-the-abstract-idea-test-is-unworkable-and-should-be-abandoned/), and also offers a path forward for the Supreme Court to circumscribe the Bilski abstract idea test so its application so it does not pose a threat to “true” technological software invention. This is the essence of the points made by the brief:
1. The Court should look at each “claim as a whole” and consider all the limitations of the claim in order to decide eligibility under Section 101. “Patent eligibility should turn on whether the claim as a whole recites a specific, practical application of the idea rather than merely reciting steps inherent in the idea itself.”
2. Alice Corp is not claiming a “true” technological innovation — notwithstanding the fact that some of its claim are limited to a machine-implementation. “While some of petitioner’s claims do refer to a computer or computer implementation, none relates to an advance in computing, software, or any other technology. Nor do the claims represent an innovation in how a computer may be employed to produce the desired result. Instead, the claims recite an abstract idea for conducting a business transaction and then add what amounts to the directive, ‘do it on a computer.’”
3. The subject claims recite no functional relationship between the putative invention, a method for hedging risk, and the computer on which it is implemented. “The claims all focus on a method for reducing settlement risk in financial transactions. Some claims may mention computers, but there is no connection between the method described and technological innovation; the references to computers are incidental or pretextual. The putative invention is the method, and that cannot be changed by saying, “and do it on a computer.” Far from being directed to patentable computer-implemented inventions, the patents concern unpatentable “abstract ideas” for organizing human obligations.
4. Software is an essential component of today’s technology, and it is just as deserving as patent protection as any other technology. “Ultimately, however, software underlies the varied functionality and practical utility that computers provide. Without software, computers can do nothing useful. As a result, software is an indispensable aspect of innovation in every technological field and sector of the economy. Different software programs enable a general-purpose computer to perform new and different tasks. ‘Such programming creates a new machine, because a general purpose computer in effect becomes a special purpose computer once it is programmed to perform particular functions pursuant to instructions from program software.’ In re Alappat, 33 F.3d 1526, 1545 (Fed. Cir. 1994).”
So, where would the Supreme Court leave us if it adopted this analytical framework in its decision on Alice Corp’s claims? How can us mere mortals apply these, do I dare say, “abstract” Section 101 concepts to the real world? I think one analogy that is easier to understand is this. Consider the hypothetical where the “invention” is claimed as the combination of a record player and a record playing on it, wherein the record constitutes an engraving of a novel musical score on the record. As I have pointed out in previous posts, I think most patent attorneys would agree that a novel musical composition is outside the scope of patent eligible subject matter, and that merely claiming it as part of a machine (i.e., the record playing on a record player) should not carry the music into the realm of patent eligible subject matter. I think is pretty much what Microsoft, Adobe and Hewlett-Packard are saying in this brief — that Alice Corp’s business method innovation is the equivalent of music that is not patent eligible, and that merely “playing” this subject matter on a computer doesn’t carry it across the threshold of patent eligible subject matter.
On the other hand, were there some technological aspect to the implementation of the subject matter, like perhaps in the case of the music hypothetical, that the music is capable of performing a technological function like vibrating a beaker of chemicals to mix its content, then there may very well be patent eligibility.
At the end of the day, I think we are headed to a “technical effect” test akin to what the EPO and other jurisdictions have been applying for many years already.
IBM Weighs in on CLS Bank: The Abstract Idea Test is Unworkable for Computer-Implemented Inventions and Should be AbandonedFebruary 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.”
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 BetterJanuary 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.
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.