By
Nam Kim on September 23, 2016
Posted
in Patents
Patent attorneys are often asked the question: “Is my
idea patentable?” Often the idea is
related to software or business methods.
Well-known business methods include Amazon’s “1-click shopping” and
Priceline’s “reverse auction.”
In the
new digital economy, innovative software and business method models have given
rise to new very successful companies such as Facebook, LinkedIn, Uber, and
Airbnb. As important software and
business method inventions are in the new digital economy, it is often unclear
whether they can be patented.
This
uncertainty is largely due to a legal rule that “abstract ideas” are not
eligible for patent protection. This
rule originates from a long line of U.S. Supreme Court cases, with Alice
Corporation v. CLS Bank International, decided in June of 2014, being the most
recent and influential of these cases.
The basic rationale for the rule is a concern over so-called
“preemption” of abstract ideas. That is
to say abstract ideas are the basic building blocks of science and industry,
and allowing patents to monopolize abstract ideas can preempt the use of such
basic building blocks.
Inventions related to software and business methods
have faced enormous challenges since Alice.
As referred to in this article, software refers to programs or
applications that run on computers or mobile devices, such as for antivirus
detection, contact management, social media, gaming, and mobile
navigation. Business methods refer to
methods of doing business, including new types of e-commerce, insurance,
banking, etc., often implemented as software in computers and involving the Internet. There has been a sharp increase in the number
of so-called “Alice” motions filed in the federal courts against these types of
inventions. The motions challenge the
validity of patents asserted in infringement lawsuits, and have an overall
success rate of about 65% for software patents and 78% for business method
patents. Likewise, the United States
Patent Office, through a procedure called Covered Business Method Review
(“CBM”), has invalidated more than 80% of business method patents challenged
under Alice.
There has also been a sharp
increase in patent eligibility rejections during patent prosecution before the
USPTO and a sharp decrease in issued patents for software and business method
inventions since Alice. Inventions
related to electronic commerce have been hit the hardest. For example, in a division of the Patent
Office responsible for electronic commerce technology, the average number of
patents issued per month after Alice dropped by 95%.
Under Alice, determining whether a patent is directed
to eligible subject matter involves two steps.
In step one, you must determine whether claims of a patent are directed
to an abstract idea. If the answer is
“no”, the claims are patent-eligible. If
the answer is “yes”, in step two, you must determine whether the claims recite
that result in substantially more than the abstract idea being claimed. That is to say: whether the claim includes
additional elements that transform the claim into a patent eligible application
of the abstract concept. It is not
always easy to apply Alice’s two-step test, especially since the Supreme Court
has not clearly defined what constitutes an “abstract idea”, or how to identify
an abstract idea in a claim.
Those challenging the validity of a patent often try
to define the abstract idea as broadly as possible to inflate the preemption
concern, whereas patent owners try to define it as narrowly as possible to
minimize the preemption concern. The
challengers also often argue that the claim at issue is directed to a concept
similar to concepts previously held to be abstract by the Supreme Court, such
as, for example, fundamental economic practices, methods of organizing human
activity, and mathematical relationships and formulas. Examples of such concepts include: (1)
converting binary-coded decimal numbers into pure binary numbers in Gottschalk
v. Benson; (2) calculating alarm limits using “a smoothing algorithm” in Parker
v. Flook; (3) hedging the seasonal risk of busying energy in Bilski v. Kapos;
and (4) mitigation of settlement risk in Alice.
Beyond these Supreme Court cases, the challengers also rely on more than
40 post-Alice Federal Circuit cases that upheld lower courts’ patent
illegibility findings. On other hand,
the Supreme Court and Federal Circuit finding patents eligible have been
extremely limited until very recently.
The only pro-patentee Supreme Court patent eligibility case to date is
Diamond v. Diehr which was decided in 1981. In Diehr the Court held that claims
directed to digital control of a rubber molding process using the “Arrhenius”
equation were patent eligible because the invention involves “transforming or
reducing an article to a different state or thing,” namely, “molding raw,
uncured synthetic rubber into cured precision products.” The only post-Alice Federal Circuit case
that upheld the validity of a software/business method patent until very
recently was DDR Holdings v. Hotels.com decided on December 4, 2014, where the
Federal Circuit upheld the validity of patent claims addressing the problem of
retaining website visitors who could otherwise be lured away from a host
website by clicking on an advertisement.
The Federal Circuit held that the claims are patent eligible because,
despite the fact that they are drawn to a method of doing business (i.e.,
e-commerce), the invention was “necessarily rooted in computer technology in
order to overcome a problem specifically arising in the realm of computer
networks.”
Against this historical landscape, in three recent
2016 decisions the Federal Circuit upheld the validity of software patent
claims. First, in Enfish, LLC v.
Microsoft Corporation decided on May 12, 2016, the Federal Circuit held that
patent claims directed to a fast searching of data in a computer database are
“not directed to an abstract idea within the meaning of Alice … because they
are directed to a specific improvement to the way computers operate…” Thus, the Federal Circuit decided that the
invention was patent eligible under the first step in Alice. The Enfish case therefore tells us that a
software invention may be patent eligible if it improves the way a computer
operates. Under this reasoning, software
inventions, for example, for optimizing a computer memory or detecting a computer
virus are likely to survive Alice challenges.
Second, in Bascom Global Internet Services, Inc. v.
AT&T Mobility LLC. decided on June 27, 2016, the Federal Circuit held that
patent claims directed to filtering Internet content were patent eligible. The Federal Circuit held that the although
the claims are directed to the abstract idea of filtering content, the claims
are nevertheless patent eligible under the second step of Alice because they
recite the inventive concept of the “installation of a filtering tool at a
specific location, remote from the end-users, with customizable filtering
features specific to each end user.” The
court also rejected the notion that a claim is not patent eligible if all
elements of the claim were known in the art.
As the Court explained, “an inventive concept can be found in the
non-conventional and non-generic arrangement of known, conventional
pieces.” Under this reasoning, merely
showing that all elements of a claim were known in the art is not enough to
prove patent ineligibility under the second Alice test.
Third, in McRO Inc. v. Bandai Namco Games America Inc.
decided on September 13, 2016, the Federal Circuit held that patent claims
directed to generating automated lip synchronization and associated facial
expression of 3D animated characters were patent eligible. The Federal Circuit decided the issue under
the first step in Alice, even though the claimed invention did not result in an
improvement in the way a computer operates, as was the case in Enfish. In reaching the decision, the Court observed
that the claims are “limited to rules that evaluate subsequences consisting of
multiple sequential phonemes”, and “[i]t
is the incorporation of these claimed rules, not the use of the computer, that
improved the existing technological process.”
The Court also noted that there is “no suggestion that animators were
previously employing the types of rules” required by the claims and there had
“been no showing that any rules-based synchronization process must use the
rules with the specifically claimed characteristics.” Under this reasoning, a software or business method claim reciting
unconventional rules for performing a technology process can be patent eligible
under the first Alice test if the rules (as opposed to the use of the computer)
produce an improvement in the existing process and are sufficiently specific
such that the claim does not preempt the use of all rules for performing the
process.
Software and business method inventions have faced
significant patent eligibility challenges in both courts and the Patent
Office. Three recent Federal Circuit
decisions interpreting Alice, however, provide much-needed additional guidance
on what does and does not constitute an “abstract idea” and also add to the arsenal of cases that can
be used by owners of software and business method patents facing Alice
challenges. This area of the law is
still developing. It remains to be seen
what effect these decisions will have on software and business method patents
and patent applications facing patent eligibility challenges in courts and the
Patent Office and whether the Supreme Court agrees with the Federal Circuit’s
emerging view on what does and does not constitute an abstract idea under
Alice.
No comments:
Post a Comment