Complications with Software Patents

1. Complications with Software Patents In the United States of America

2. Introduction Patents are everywhere in our lives. As software developers, we're sure to run into them somewhere, but there are questions you should ask yourself. What is patentable? What are the boundaries? Is it worth it? Should you be on the lookout for patent trolls?

3. A Little Bit of History

4. History of Software Patents 1960's - 70's – No protection if invention used a calculation made by a computer 1980's – The Supreme Court ruled that some computerized inventions are patentable 1990's – The Federal Circuit ruled almost all software is patentable 2000's – The courts start pulling back • http://www.bitlaw.com/software-patent/history.html

5. Hotel Security Checking Co. v. Lorrain • Patent was a method and means for cash-registering      and account-checking • Designed to prevent fraud by waiters/cashiers in restaurants.  • Court recognized that abstract ideas are not patentable, the      decision appeared to rest more on the grounds that the      invention was not novel. Rejected • http://web.ebscohost.com.ezproxy.waterfield.murraystate.edu/ehost/pdfviewer/pdfviewer?sid=d1b52045-5251-40f3-b414-19687518592d%40sessionmgr12&vid=4&hid=17

6. Gottschalk v. Benson In 1972, Gottschalk applied for a patent for a method for converting binary-coded decimal numerals into pure binary numerals on a general purpose digital computer.  The patent was rejected because it used mathematical expression. Another concern was that the end use of the code was too broad and could be performed through any machinery, including machines not yet developed. Frequently cited because it explains many of the fundamental principles that guide courts on computer-related business method patent issues. Rejected • http://web.ebscohost.com.ezproxy.waterfield.murraystate.edu/ehost/pdfviewer/pdfviewer?sid=d1b52045-5251-40f3-b414-19687518592d%40sessionmgr12&vid=4&hid=17

7. Diamond v. Diehr The patent in Diehr was directed to a process for curing rubber. The Arrhenius equation was repeatedly applied as part of that process to determine the cure time, which was then used in connection with a computer to signal the press to open and close. Is often cited by courts addressing business method patents and is frequently viewed as expanding patentability for business method patents. Accepted • http://web.ebscohost.com.ezproxy.waterfield.murraystate.edu/ehost/pdfviewer/pdfviewer?sid=d1b52045-5251-40f3-b414-19687518592d%40sessionmgr12&vid=4&hid=17

8. State Street Bank & Trust v. Signature Financial Group A computerized accounting system for managing a mutual fund. Administering the system required a daily calculation of various expenses, losses, and income. The patent claimed a data processing system that performed this calculation. 'useful, concrete and tangible’ result.” Accepted • http://web.ebscohost.com.ezproxy.waterfield.murraystate.edu/ehost/pdfviewer/pdfviewer?sid=d1b52045-5251-40f3-b414-19687518592d%40sessionmgr12&vid=4&hid=17

9. Bilski v. Kappos The Patent was for a method of hedging risk in weather-related energy prices.  First denied because the examiner claimed the method was not directed to the technological arts. The Board of Patent Appeals and Interferences claimed there was no "transformation of physical subject matter from one state to another” The Federal Circuit Court dismissed both reasons and concluded that "machine-or-transformation test" is sole test governing whether a business method is patentable or not. The Supreme Court upheld the decision rejected the patent and also the ruling of the Federal Circuit Court.  Rejected • http://web.ebscohost.com.ezproxy.waterfield.murraystate.edu/ehost/pdfviewer/pdfviewer?sid=d1b52045-5251-40f3-b414-19687518592d%40sessionmgr12&vid=4&hid=17

10. CyberSource Corp v. Retail Decisions, Inc. The patent for a method for detecting fraud in credit card transaction. Rejected because the internet was considered an abstraction. Rejected • http://web.ebscohost.com.ezproxy.waterfield.murraystate.edu/ehost/pdfviewer/pdfviewer?sid=d1b52045-5251-40f3-b414-19687518592d%40sessionmgr12&vid=4&hid=17

11. Boundaries of Patentable Software

12. Boundaries of Patentable Software What are the rules pertaining to patenting software? 35 U.S.C. 101: Anyone that "invents or discovers any new and useful process, machine, manufacture, or composition of matter, or any new and useful improvement thereof, may obtain a patent." Statutory Subject Matter = Patentable Subject Matter The wording behind patent laws is ambiguous on purpose.  This allows courts discretion on what can and cannot be patented. The word "Process" has been difficult to define in a legal sense and has been an area of debate.

13. Boundaries of Patentable Software cont. Mathematical Algorithm vs. Machine Modification Does the word "Process" pertain to only physical processes? Numerous rulings have shown that an algorithm itself is non patentable. There is a great deal of ambiguity pertaining to patenting software.  While most of the discretion is in the courts hands, court cases have laid some basic ground rules on what can be patented.

14. Boundaries of Patentable Software cont. Mathematical algorithms found not to be patentable by themselves. • a computer software algorithm for converting from binary-coded decimal numerals to pure binary numerals (Benson) • formula for computing an updated alarm limit during a catalytic conversion process (Flook) • an improved mathematical equation for interpreting seismic waves (In re Walter) • a competitive bidding method where simply summing was found to be a mathematical algorithm (In re Schrader) • a method and a data structure for collision avoidance (In re Warmerdam) • a method and a machine for planning object movement (In re Trovato)

15. Boundaries of Patentable Software cont. Algorithms that are expressed as mathematical formulas found not to be patentable by themselves, and those algorithms which appear to replicate human decision-making skills found not to be patentable: • a process and apparatus for testing a complex system and analyzing the results (for use in medical diagnosis), using functions of K elements (any arbitrary subdivision of the system such as neuropathways in the human nervous system) (In re Meyer). • a process for determining "abnormalities" in a complex system (In re Grams) Computer algorithms unrelated to mathematics found to be patentable: • computer program for the translation of natural languages (In re Toma) • computer program for executing several equations regardless of the order of their input (In re Pardo)

16. Boundaries of Patentable Software cont. Computer algorithms that pertain to the operations of the hardware found to be patentable: • system software (Chatfield) • firmware (Bradley) • algorithm for typesetting alphanumeric equations (Freeman) • waveform smoothing algorithm for oscilloscope (In re Alappat) • a machine with a collision avoidance memory (In re Warmerdam) • a memory with data structure for organizing data (In re Lowry) Processes or apparatus that use computer programs as a component of the overall invention found to be patentable: • rubber curing process (Diehr) • improved CAT scan procedure (Abele) • apparatus for voice pattern recognition (Iwahashi) • method for analyzing electrocardiograph signals (Arrhythmia) Since Bilski v. Kappos, the machine-or-transformation test has been an important tool in determining patentability.

17. The Patent Debate

18. The Inventive Step and Non-Obviousness • Terms used to describe the processes to determine if something is patentable or not. • Inventive Step (European Nations) • Non-Obviousness (United States) •  Factors for determining Obviousness and Non-Obviousness • the scope and content of the prior art; • the level of ordinary skill in the art; • the differences between the claimed invention and the prior art; • objective evidence of non-obviousness. 1. http://apps.who.int/medicinedocs/en/d/Jh2963e/8.2.html  2. http://en.wikipedia.org/wiki/Inventive_step_and_non-obviousness

19. Berkeley Survey http://web.ebscohost.com/ehost/pdfviewer/pdfviewer?vid=9&hid=17&sid=d1b52045-5251-40f3-b414-19687518592d%40sessionmgr12

20. Software Patent Debate • Why Patent? • Protection and Secure Investment • Enhance reputation • Economically beneficial • Public dis-closure  • Why forego Patents? • Costly • Invent in secrecy • Unpatentability of invention • Monopolies  • Legal Constraints • Patents aren't useful • What incentive effects do patents have? • Little to none 1. http://www.nytimes.com/2007/06/09/opinion/09lee.html2. http://en.wikipedia.org/wiki/Software_patent_debate 3. http://web.ebscohost.com/ehost/pdfviewer/pdfviewer?vid=9&hid=17&sid=d1b52045-5251-40f3-b414-19687518592d%40sessionmgr12

21. Encourage or Discourage Innovation? • Both sides of the debate split on this topic • For: • Believe patents encourages innovation because it promotes investment in research and development • Against: •  Patent laws may scare inventors from working on innovations • Certain patents to necessary methods may block companies from developing innovations • Verizon vs Vonage - Vonage developed one of the first Internet telephone services. Verizon had patent on method of turning phone numbers into internet addresses, essential to any internet phone service.Verizon sued and won the verdict.

22. Patent Trolls (Ugly 1970s Troll dolls not affiliated with modern patent trolls)

23. What is a Patent Troll? • The term "patent troll" is pejorative and controversial with several potential meanings. • The term can apply to a company that: • "Purchases a patent [...] and then sues another company by claiming that one of its products infringes on the purchased patent" • "Enforces patents against purported infringers without itself intending to manufacture the patented product or supply the patented service" • "Enforces patents but has no manufacturing or research base" • "Focuses its efforts solely on enforcing patent rights" • "Asserts patent infringement claims against non-copiers or against a large industry that is composed of non-copiers" http://en.wikipedia.org/wiki/Patent_troll

24. What is a Patent Troll? (Continued...) • "Patent troll" first saw use in 1993 in an article by Forbes1 describing a company that sued over a lossless data compression processor before it was produced • Other related and less-pejorative terms include: • Non-practicing entity (NPE)2 • Non-manufacturing patentee3 • Patent marketer3 • Patent dealer4 • Commonly used to describe companies that buy patents or other companies with patents simply for litigious reasons 1. http://www.wordspy.com/words/patenttroll.asp 2. http://www.law.gmu.edu/assets/subsites/gmulawreview/files/14-4/documents/7Jones.pdf 3. http://justice.syr.edu/sstlr/wp-content/uploads/preserving-the-patent-process-to-incentivize-innovation-in-t.pdf 4. http://papers.ssrn.com/sol3/papers.cfm?abstract_id=959945

25. http://www.mobilemarketingwatch.com/infographic-whos-suing-who-in-mobile-10120/http://www.mobilemarketingwatch.com/infographic-whos-suing-who-in-mobile-10120/

26. Patent Trolling vs Patent Pooling • Patent pools are alliances between companies to cross-license patents1 • Pools may provide effective, reasonable licensing to manufacture some products for the public2 • As such, pools can be considered beneficial • Examples include: • RFID Consortium • Via Licensing administers the pool • MPEG LA • Not affiliated with MPEG itself • Has pool over popular H.264 video codec3 1. http://en.wikipedia.org/wiki/Patent_pool 2. International Mfg. Co. v. Landon, 336 F.2d 723, 729 (9th Cir. 1964) (see previous link) 3. http://www.mpegla.com/main/programs/AVC/Pages/Intro.aspx

27. Why should we care? • Web development is now focusing on video • MPEG LA is trying to form a patent pool over Google's free, open source WebM video codec1 • Oracle has created uncertainty over Google Android's use of Java in their Dalvik virtual machine • "During the integration meetings between Sun and Oracle, where we were being grilled about the patent situation between Sun and Google, we could see the Oracle lawyer's eyes sparkle."- James Gosling, creator of Java2 • As developers ourselves, we'll stumble across patents 1. http://www.mpegla.com/main/pid/vp8/default.aspx 2. http://news.cnet.com/8301-30685_3-20047787-264.html

28. What's your opinion? • Should software be patentable? • Should companies who do not manufacture a product be able to procure patents in order to sue another company?

29. Bibliography • http://apps.who.int/medicinedocs/en/d/Jh2963e/8.2.html • http://www.bitlaw.com/software-patent/history.html • http://en.wikipedia.org/wiki/Inventive_step_and_non-obviousness • http://en.wikipedia.org/wiki/Software_patent_debate  • http://www.nytimes.com/2007/06/09/opinion/09lee.html • http://www.bitlaw.com/software-patent/bilski-and-software-patents.html • http://www.kuesterlaw.com/swpat.html • http://en.wikipedia.org/wiki/Patent_troll • http://www.wordspy.com/words/patenttroll.asp • http://www.law.gmu.edu/assets/subsites/gmulawreview/files/14-4/documents/7Jones.pdf • http://justice.syr.edu/sstlr/wp-content/uploads/preserving-the-patent-process-to-incentivize-innovation-in-t.pdf • http://papers.ssrn.com/sol3/papers.cfm?abstract_id=959945 • http://www.mobilemarketingwatch.com/infographic-whos-suing-who-in-mobile-10120/ • http://en.wikipedia.org/wiki/Patent_pool • http://www.mpegla.com/main/programs/AVC/Pages/Intro.aspx • http://www.mpegla.com/main/pid/vp8/default.aspx • http://news.cnet.com/8301-30685_3-20047787-264.html • http://web.ebscohost.com.ezproxy.waterfield.murraystate.edu/ehost/pdfviewer/pdfviewer?sid=d1b52045-5251-40f3-b414-19687518592d%40sessionmgr12&vid=4&hid=17 • http://web.ebscohost.com/ehost/pdfviewer/pdfviewer?vid=9&hid=17&sid=d1b52045-5251-40f3-b414-19687518592d%40sessionmgr12