Asked and Answered . . .

Keith Schonberger on software patents

By Steve Thorpe
Legal News

Software is everywhere in our lives, from your desktop computer to the engine of your automobile. But the question sometimes arises, who owns it? Are parts of it “unpatentable?” Keith Schonberger is an associate at Young Basile Hanlon & MacFarlane P.C. He is located in the firm's Troy, Mich., office. Schonberger concentrates his practice on patent prosecution in the software field, namely, in the areas of cloud computing, video coding, user interface, and mobile technologies. Aside from practicing before the United States Patent and Trademark Office, he supports client patent portfolios through clearance studies, due diligence analyses, and litigation support.

Thorpe: It used to be easy to patent software. What changed?

Although the patentability of software has been discussed for decades, it wasn’t until the 1994 Federal Circuit cases In re Alappat and In re Lowry that we really began to understand software as being generally eligible for patent protection. The Allapat court held that software could be patentable because its implementation on a computer changes the computer into a “new machine.” Relatedly, the Lowry court held that software could be patentable where it is stored on a computer’s hard drive or in its memory.

These were the general rules for years; however, recent Supreme Court decisions have changed this, possibly fueled by the huge increase in the number of software patents applied for and issued in past years. These decisions, including In re Bilski from 2009 and Mayo v. Prometheus Labs from 2012, addressed patents relating to business methods and medical processes rather than actual software, but the methodology derived therefrom nonetheless directly applies to software patents. Most notably, the framework of software patent eligibility was reevaluated in the 2014 landmark Supreme Court case Alice v. CLS Bank.

Thorpe: Tell us about the Alice v. CLS Bank case.

The Alice case involved a patent infringement action brought by Alice Corporation Pty. Ltd. against CLS Bank International. The asserted patents claimed software for using a third party to process payment obligations and reduce settlement risk between parties to a financial transaction. In its unanimous decision, the Supreme Court held the patent claims were not patentable because they amounted to nothing more than algorithms for exchanging financial obligations and generic computers for implementing them. The claims were likened to the well-known concepts of escrow and intermediated settlement. Essentially, the patents were invalidated because their claims were directed to an abstract idea implemented using a general-purpose computer. There were no specific details in the patents on how to implement the claims using specialized computer features or how a generic computer would be transformed by implementing those claims.

Thorpe: What steps does the United States Patent and Trademark Office now use for determining whether software is eligible for patent protection?

Per the decision in Alice, the USPTO and the courts now use a two-step test for determining whether software is eligible for patent protection. The first step asks whether the patent claims for the software are directed to an exception under the statute defining patent eligible subject matter. The statute, 35 U.S.C. § 101, provides that “any new and useful process, machine, manufacture, or composition of matter, or any new and useful improvement thereof” is subject to patent protection.

The three long-held exceptions to this are laws of nature (e.g., scientific principles), natural phenomena (e.g., products of nature, such as unmodified organisms) and abstract ideas (e.g., algorithms and formulas). Software patent claims can fall under the third category. Where the claims are determined to be directed to an abstract idea, the second step of the test asks whether those claims recite “something more” than the mere application of the abstract idea to a general-purpose computer. This step can be satisfied, for example, where the software actually changes or transforms the function of a computer or uses computing technology to solve a computer-specific problem. Applying this test can be difficult, and so the USPTO has published guidelines to assist practitioners

Thorpe: You’ve described the USPTO guidelines as less than ideal from a legal standpoint. Why?

The USPTO has released three sets of guidelines in response to the Alice case – one immediately following the decision, one about six months later, and another about six months after that. Each set includes examples of patent claims (typically for software or business methods) and explanations as to how each satisfies or fails the steps of the test. While these examples are helpful, the guidelines as a whole lack any true guidance on how to effectively determine whether something is an “abstract idea” or recites that “something more.” The result is that patent examiners in different technology sectors of the USPTO are not uniformly applying this test. Worse yet, in the absence of any clear guidance, we have courts across the country applying their own meanings to both steps of the test. It’s an issue of clarification, and we may not get that clarification unless the laws are changed or the Supreme Court addresses the issue.

Thorpe: Are patent laws doing a good job keeping up with changing circumstances? What does the future hold for software patents?

In some ways, the software field evolves much more quickly than others. It can be difficult for laws to keep up. What makes it particularly complicated is that the people formulating the patent laws might not be appropriately informed on all of the issues. Certain legal groups, such as the American Bar Association Intellectual Property Section and the American Intellectual Property Law Association, are working hard to effect positive legislative changes. They’re analyzing data so that they can present meaningful facts and identify important trends on where we are and where we need to be.
As a community, practitioners seem cautiously optimistic about the future of software patentability. There are a large number of cases on point waiting to be decided, and we look forward to reading about each one of them.

Thorpe: How can an innovator best protect their rights?

We know that software is eligible for patent protection as long as it meets certain criteria. The problem is that the best approach to meeting these criteria is not always clear. One thing that is clear, however, it is that obtaining and enforcing software patents requires skill and a sophisticated understanding of applicable law.

Anyone interested in pursuing or preserving software-related intellectual property should speak to an experienced patent attorney to protect themselves and their rights.

As with any other technological field, innovators may wish to carefully document the conception and development of their innovations and be careful to note how disclosing or using those innovations could affect their or their company’s ability to pursue patent protection.
Understanding these things can make all the difference in the world, and if an innovator is not sure about something, they should talk to a patent attorney about it.

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