Is it patent ELIGIble? Better Go ASK ALICE
Transcription
Is it patent ELIGIble? Better Go ASK ALICE
IS IT ELIGIBLE FOR A PATENT? BETTER GO ASK ALICE MARK COURTNEY THE COURTNEY FIRM MARK.COURTNEY@THECOURTNEYFIRM.COM 214-886-1067 WHAT HAPPENED IN ALICE? • U.S. SUPREME COURT June 2014 • UNANIMOUS OPINION 9-0 • Claimed invention, a method of settling transactions using an intermediary accounting scheme, (ESCROW), is declared NOT PATENT ELIGIBLE. • REASONING: AN ‘ABSTRACT IDEA’ IS NOT PATENT ELIGIBLE • OK, SO-WHATS AN ABSTRACT IDEA? • WE DO NOT KNOW …. • AND THERE’S THE RUB! WHY SO MUCH NEWS? • ALICE Effects existing patents retroactively • Prediction – Federal Judge – if ALICE is held invalid under 101 it will mean the “death of hundreds of thousands of patents” • Media Response to Alice decision • “Justices Deny Patent to Business Methods”– New York Times June 19 • “Bad Day for Bad Patents: Supreme Court Unanimously Strikes Down Abstract Software Patent “ Electronic Frontier Foundation • “Supreme Court Narrowly Limits Business Method Software Patents” -eweek WHAT IS THE REAL IMPACT OF ALICE? WHY IS ALICE SO IMPORTANT? • Patent litigation is now dominated by the NPEs/PAEs- 62% of cases filed • Patent litigation costs defendants $30 billion with a B per year • Did ALICE slay the troll? • If so- What else did we lose? KEY FACTS ABOUT PATENTS • A Patent is the only way to protect new IDEAs • Software can be copyrighted, but • For copyright protection, copying has to be direct • Copyright infringement only protects the written words! • • • • • Patents are property, can be sold, licensed, traded, or given away Patents provide security interest for financing startups Enforcement is voluntary - and expensive No innocent infringer defense. No “intent” element. Royalty can extend to a percentage value of products WHAT IS SUBJECT TO PATENT PROTECTION? • • Constitution Article 1 Sec. 8 Cl. 8 • “To promote the Progress of Science and useful Arts, by securing for limited Times to Authors and Inventors the exclusive Right to their respective Writings and Discoveries” – U.S. Constitution 35 USC 101- • Whoever 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 therefor, subject to the conditions and requirements of this title. FOUR SEC. 101 “CATEGORIES” • “…any new and useful process, machine, manufacture, or composition of matter..” • BUT WHAT IS SOFTWARE? • Early idea: Written material – proper protection is COPYRIGHT not PATENT • Legal Concept- changing the program in a computer changes the computer into a new machine • Recent history – PROCESS is the key concept WHAT IS THE SCOPE OF 35 USC SEC. 101? • 1952 Patent Act Congressional Intent: • “anything under the sun that is made by man” • EXAMPLES • Bacteria- Diamond v. Chakrabarty – U.S. Sup. Ct. (1980) • 5-4 decision – a nonnaturally occurring manufacture- a product of human ingenuity-is patent eligible • Oyster- Ex parte Allen- PTO BPAI (1987) • Oyster that is chromosomally altered in a lab, patentable under 101 • Harvard mouse- U.S. Pat. No. 4,736,866 (1988) • transgenically modified- patentable WHAT ARE THE LIMITS TO SEC. 101? • “Judicial Exceptions” to 101: Judge made rules • Laws of Nature • Idea in itself • Scientific Truth • Mathematical expressions • Mental Processes • Abstract Ideas • Example: Anti Gravity Boots – idea in itself or abstract idea HISTORY OF PATENTING SOFTWARE • Early cases 1970s – software probably NOT patentable • Gottschalk v. Benson – Supreme Court 1972 • Method for converting BCD (e.g. 0-F hex) to binary • Supreme Ct: Claims directed to an algorithm are not patentable. • Claims not limited to “a computer, special purpose machine, or transforming a substance” (These became the magic words) and no clear guidelines • • BUT- Sup. Court suggests that computer executing software can be patentable if claimed correctly RESULT: Patent lawyers start figuring it out HISTORY OF PATENTING SOFTWARE • Parker v. Flook (Supreme Court 1978) • Method of calculating alarm limits in catalytic converter using new algorithm • Claims recite additional steps after algorithm used • • • Additional steps are conventional • Added steps not enough to transform the algorithm into patentable subject matter • “Inconsequential post solution activity” is not enough Proper analysis is to ignore the algorithm, consider only the added steps Sup. Ct. Opinion suggests Congress should act considering software 1981- SOFTWARE BECOMES PATENTABLE • • Diamond v. Diehr (U.S. Sup. Ct. 1981) • Invention: use of Arhennius equation, with computer software, to control automated molding tool for rubber compound • Invention included modifying mold tool so that internal temperatures can be monitored without opening mold Computer used to iteratively recalculate curing equation • PTO: No patent, because software is claimed. • SUPREMES HELD: Patent is NOT INELIGIBLE just because invention uses software • Steps that transform a substance make claims patent eligible • Consider claim as a whole, not pieces • “Machine or transformation” test HISTORY OF PATENTING SOFTWARE • 1982 NEW COURT: CAFC- new appellate court– in part to make patent law uniform – all patent appeals go to CAFC • In re Alappat – 1994 – CAFC • Invention rasterizes data to display visual data • Step can be performed on a computer • No transformation of a substance, and CAFC endorses idea that a computer running a new program is a new machine • RESULT: SOFTWARE can be patented when running on a computer • In re Lowry-data structure patentable, Beauregard- program on a computer readable medium is patentable 1995 PTO IS FINALLY DEFEATED BY THE CAFC • 1995- PTO issues “Guidelines to Examiners” on how to examine software claims • New industry is born- the software patent lawyer • New patent office commissioner appointed from software industry • The big question is: How far can we go?? 1998 -BUSINESS METHOD PATENTS ARRIVE • State Street Bank v. Signature Financial (CAFC 1998) • Giant CAFC case • Greatly expands availability of software patents • Creates “business method” patents • Modifies the “machine or transformation” test to include “ Methods that have a practical application and if it produces a useful, concrete and tangible result.“ State Street Patent was on financial method of managing mutual funds Created new opportunity – “method of doing business” patents. THE SUPREMES FINALLY SPEAK AGAIN (2010) • Bilski v. Kappos (2010): After a 30 year hiatus, the Supremes return to the question of what the scope of Sec. 101 should be. • CAFC , in the case below , had stated that the “machine or transformation test” should be the sole test for patent eligibility under Sec. 101. • CAFC thus effectively overruled its own precedent in State Street Bank. • Supreme Court affirms (thus no patent for Bilski’s method of hedging risk in commodities markets, such as energy prices) because the claims are directed to an “abstract idea” • BUT Supremes rejected CAFC reasoning. Supremes return to the “abstract idea“ analysis of Parker, Flook, Diehr • Business Methods are not “per se” unpatentable, BUT are subject to other requirements of the Patent Act, novelty, obviousness, and definiteness THE SUPREMES TRY TO FIND A USEFUL TEST FOR SEC. 101 • Mayo v. Prometheus (Sup. Ct. 2012) • Method for determining proper dose of medication where dosage is difficult to determine – varies with individual • Steps are mostly conventional – dosage adjustment • Final step could be performed as a mental process • Analysis: If a claim covers a natural phenomenon or law of nature, then the claim must be tested to see if it “adds enough” to transform the claims to patent eligibility • The added steps must “do more” than recite conventional steps TYPES OF PATENT OWNERS • Traditional: Practicing Entities: e.g. Texas Instruments, Apple, Universities, Labs • • • • e.g. NTP v. RIM – Blackberry litigation Again, litigation after failed licensing negotiation, many companies signed up Previously Practicing Entities: e.g. Rockstar • • e.g. Texas Instruments v. Hyundai; Apple v. Samsung Non Practicing Entities: (NPEs)- inventor who cannot commercialize invention asserts patent • • Typical case: failure of licensing negotiations leads to litigation Failed business (Nortel) sells or collects patents for licensing Old Revenue model – license key industry participants (Apple, Nokia) at very high cost (many millions) per license – litigation sometimes occurs and is a long process NEW TYPES OF PATENT OWNERS, 21ST CENTURY • Patent acquisition entities (PAEs), patent aggregators • Companies formed for the sole purpose of asserting patents • May or may not have any inventors working there • May or may not have any products, probably not • Defensive patent aggregation, patent auctions, contingent fee litigation • Typical case: Intellectual Ventures • Non Practicing Entity spends money to acquire patents, often with a small up front fee and later sharing the “tail” with the inventor • Little or no attempt to negotiate, send demand letter, then litigation • New model- go after many targets with license priced at below “litigation cost” WHO IS THIS MAN? MEANWHILE… OBAMA TAKES ON THE TROLLS WHITE HOUSE ACTIONS FIRST TRY: AMERICAN INVENTS ACT (AIA) 2011 • Moves US to “first inventor to file” procedure- thereby expands prior art • Creates new “in house” PTO patent review procedures (Inter Partes Review, Post Grant Review)- similar to litigation but cheaper and faster • AIA Creates “1 patent -1 defendant” rule for patent filings • Intent: make patent litigation more difficult for trolls • Actual Impact: Number of patent cases grows very quickly • RESULT: Patent trolls file many more cases – at a slight increase in cost to trolls STILL, IN 2012, TROLLS COST $29 BILLION New study, same authors: patent trolls cost economy $29 billion yearly- arstechnica.com OBAMA – 2013 – AGAIN ACTIVELY ADDRESSES PATENT TROLLS • June 4, 2013 – Executive Action Memo –updated February 2014 • Legislative recommendations asks Congress to specifically address patent trolls • • • • • EXECUTIVE BRANCH DOESN’T WAIT FOR CONGRESS Specific directives to the PTO to limit “functional claiming” Strengthen enforcement of ITC Exclusion Orders Make identification of “Real Party in Interest” easier PTO creates web help pages for defendants receiving demand letters • !! Patent Office is TAKING SIDES PRESIDENT OBAMA WANTS YOU TO REMEMBER: (GOOGLE HANGOUT 2013) SO, IN THIS SETTING, NOW COMES ALICE • Alice v. CLS Bank Supreme Court June 2014 • US Pat No. 5,970,479 + 3 other patents • Patents originally filed 1993- patents were written prior to In re Allapat, State Street Bank • • • • • Method of automating escrow in settling transactions Claims don’t expressly require a computer (but specification does) History: Dist. Ct. – Patent held invalid under 101, after Bilski On appeal CAFC, 10 judge panel, issues 7 different opinions CAFC Judge Rader’s dissent – “ this case (that Alice patent is invalid under Sec. 101) is the death of hundreds of thousands of patents” SUPREME COURT OF THE UNITED STATES (SCOTUS) WHAT IS THE YOUNGEST AGE? ALICE PATENT IS FOR A METHOD FOR ESCROW IN SETTLING TRANSACTIONS • Dist. Ct. – citing 2010 Bilski decision by Supreme Court, finds the patent invalid as claims directed to an abstract idea • First CAFC decision, 3 judge panel, finds for the patent owner, holds that the claims are not “clearly directed” to an abstract idea • Rehearing en banc- 10 judge panel at CAFC issues 7 different opinions, majority says patents are invalid, “abstract idea” • ALICE patent is 139 pages, with 101 drawing pages, and for a software patent , pretty detailed- claims are long and varied • ALICE takes it up to the Supremes – can’t blame them! ALICE AND THE SUPREMES • Decision issued June 19, 2014 - UNANIMOUS OPINION 9-0 • The words “software” or “business method” DO NOT APPEAR in the decision • Decision is keyed on the “judicial exceptions” – abstract ideas, laws of nature, natural phenomenon • There is a balance between risk of “pre-emption” of “basic building blocks” and “application” of the “building blocks” to a “new and useful end” that is a “patent eligible” invention ALICE AND THE SUPREMES • KEY CONCEPT: • MAYO test extends to all categories of the judicial exceptions • DO the MAYO 2 step for patent eligibility • 1) Does the claimed invention invokes one of the “judicial exceptions”? • IF SO • 2) does the claim recite elements that “transform” the ineligible abstract idea into a patent eligible subject matter? WAIT A MINUTE- WHAT IS AN ABSTRACT IDEA? • Justice Thomas refuses to tell us! • “ In any event, we need not labor to delimit the precise contours of the “abstract idea” category in this case”. • ALICE claims : “Like the risk hedging in Bilski, the concept of intermediated settlement is a “fundamental practice long prevalent in our system of commerce.” • “It is enough to recognize that there is no meaningful distinction between the concept of risk hedging in Bilski and the concept of intermediated settlement here”. • • PATENT LAWYERS ARE CONFUSED HERE – is it abstract idea, or OLD? • “I will know it when I see it” – sounds like the old Supreme Court obscenity test ANALYSIS SEEMS WRONG! The Patent Act has 2 other key provisions for ideas that are “old” – not 101. “BAD FACTS MAKE BAD LAW “ • ALICE corp. was an NPE that sued major banks – ALICE is a TROLL. • TROLLS ARE BAD (President Obama said so…) • Dist. Ct. decided the case under 101, following Bilski • In Bilski, The Sup. Court held that “long standing practices” are “abstract ideas”. • ?? The Patent Act already has other provisions for ideas that are “old” • • • 35 USC Sec. 102 requires the claims to be unanticipated • “Long-standing methods” are clearly in the prior art! And covered by these provisions, not 101! 35 USC Sec. 103 requires the claims to be unobvious to one skilled in the relevant art at the time of the invention Supremes have ruled, however, so that’s the law now! CAN WE MAKE SENSE OF ALICE? IT IS LOGICALLY IMPOSSIBLE TO FIND THAT “FINANCIAL TRANSACTIONS” ARE “ABSTRACT IDEAS” • Not algorithms • Not laws of nature • Not idea in itself • BUT because these are “long standing practices” the SUPREMEs are labeling them “abstract ideas” • Why? • SUPREMEs get the right result- maybe for the WRONG reason ALICE DOES NOT APPEAR TO KILL ALL SOFTWARE PATENTS • Sup. Ct. “There is no dispute that a computer is a tangible system (in 101 terms, a machine) or that many computer implemented claims are formally addressed to patent eligible subject matter.” • “In Diehr, we found the claims patent eligible because they improved an existing technological process” • • Recitation of hardware by ALICE is “purely functional and generic”. Warning: Do not interpret 101 in ways that make the outcome “depend simply on the draftsman’s art” WHAT HAPPENS AFTER ALICE? PTO IMMEDIATELY RESPONDS • Issues memo on June 25, 2014- less than one week! • PTO issues “preliminary examining instructions” in view of ALICE • MAYO test is now the rule • ALICE extends MAYO test to all types of cases • ALICE applies to process and product claims • EXAMINERS are ALWAYS to DO THE TWO-STEP • 1) is the claim directed to a judicial exception (abstract idea, law of nature, natural phenomenon)? • 2) if so, apply step 2 “transformation” test. AT THE CAFC AFTER ALICE: ABSTRACT IDEA NOT DEFINED BY THE SUPREMES - BUT IS DEFINED BY EXAMPLE FROM CASE LAW • Fundamental economic practices • Methods of organizing human activities • An Idea in Itself • Algorithms, formulas CAFC- AFTER ALICE• Digitech Image Technologies v. Electronics for Imaging, Inc. (July 11 2014) • Patent directed to methods for balancing colors in system where devices have different color characteristics (cameras, printers, etc.) • “device profile” is created for source and output that is device dependent • Here, method claims are found to be a Sec. 101 process, however, • Process is a method of organizing information – “abstract idea” • Claims are so broad and sweeping as to cover any and all uses of a device profile (pre emption problem) • CAFC finds the Mayo test is unnecessary here, claims are patent ineligible as directed to an idea for manipulating information. Not tied to any tangible thing. CAFC- 101/ALICE REACHES “METHODS FOR ORGANIZING HUMAN ACTIVITY” • Planet Bingo v. VKGS LLC (Aug. 26 2014) • • • • • • Patent on computer bingo playing method • But the claims as a whole are not enough to “transform” the ineligible claimed idea CAFC Uses Two step Mayo Analysis Method for allowing player to use favorite numbers in multiple sessions CAFC- could be done with pen and paper First, Court finds method an “abstract idea” Claims add generic computer components- CPU, memory, printer, I/O terminal CAFC/101- ALICE- A NEW FRAMEWORK FOR PATENT ELIGIBILITY • Ultramercial v. Hulu • Method for allowing internet user to view media content in exchange for watching paid advertisement. • IDEA: User agrees to watch ad and then gets Glee or Breaking Bad • In some methods, advertiser pays for each view that actually happens • 1st Mayo factor: CAFC finds the 11 ordered steps in the claim recite an abstract idea- “an idea having no particular concrete or tangible form”. • 2nd Mayo factor- whether the claims “transform” the abstract idea into patent eligible subject matter- requires “additional features” that represent more than a “drafting effort” • Additional elements must be more than “conventional activity”. • “Internet” is conventional. PTO ACTIONS AFTER ALICE • Memorandum AUGUST 4, 2014 • “Given our duty to issue patents in compliance with existing case law…we withdrew “Notices of Allowance” in applications due to the existence of at least one claim having an abstract idea and no more than generic claiming…for further prosecution.” • PTO refuses to reveal how many applications affected. • Game changing fast • PTO is acting as a player, not a bureaucracy NEW PTO GUIDELINES ISSUE DEC 2014 • • • Details proper examiner analysis • B) If one of the four 101 categories, do the MAYO two step: Applies to all types of claims A) Is it one of the four categories- process, manufacture, machine, composition? If not, reject claim as not eligible for a patent • • Is it directed to one of judicial exceptions- abstract idea, law of nature, natural phenomenon? IF SO-> Does the claim have elements that “transform” the abstract idea into a patent eligible subject matter? PTO AFTER ALICE TROLLS QUICKLY FEEL THE HEAT FROM ALICE • “INSIGHT-Big Tech winning battle with 'patent trolls‘ (Reuters Oct 22 2014)” • • • Intellectual Ventures laying off staff Brokers cite lack of market for some patents Stock prices of troll companies down WHAT DID WE LOSE ? IS THERE ANY HOPE FOR SOFTWARE PATENTS AFTER ALICE? • • • • Umm…YES! • “ Unlike Ultramercial, DDRs claims include additional features that are “more than a drafting effort designed to monopolize an abstract idea” • “claimed solution amounts to an inventive concept for resolving a particular Internet-centric problem” • Patent still anticipated by prior art under 102 CAFC finds a ‘Patent Eligible’ case: DDR Holdings v. Hotels.com ecommerce technology Combines visual elements of a host website with third party merchants website DDR PATENT TEACHES HOW TO CODE THE SOFTWARE, EXPLAINS TECHNICAL RESULTS • • • • ◾The code the host embeds on their web site is as follows: • < IMG BORDER=‘0’ SRC=‘http://www.nexchange.net/img.asp?LinkID=xxxx’> < !—BEGIN NEXCHANGE LINK—> < !—For more information go to http://www.nexchange.com—> < !—The following 2 lines MUST NOT BE CHANGED to ensure proper crediting—> • < a href=‘http://www.nexchange.net/route.asp?LinkID=xxxx’> • < !—Substitute your own text or image below—> • **YOUR TEXT OR IMAGE HERE**</a> • < !—END NEXCHANGE LINK—> JANUARY 27 2015 -PTO OFFERS SUGGESTED ALLOWABLE CLAIMS AFTER ALICE HTTP://WWW.USPTO.GOV/PATENTS/LAW/EXAM/ ABSTRACT_IDEA_EXAMPLES.PDF PTO FOLLOWS DDR HOLDINGS IN THE APPROVED EXAMPLE ONE MORE THING: THE SUPREMES ARE NOT DONE YET! • • • Nautilus v. Biosig Instruments (Sup. Ct. June 2, 2014) • Old Standard: Claims “amenable to construction”, and not “insolubly ambiguous” are definite. • SUPREMES- Not good enough! Must inform “with reasonable certainty” those skilled in the art the “scope of the invention”. • BUSINESS METHOD PATENTS may NOT meet this new standard. Issue: Standard for “definiteness” of claims? 35 USC 112 requires “claims particularly pointing out and distinctly claiming the subject matter the applicant regards as the invention” KEY CONCEPTS • Changes in US case law such as ALICE affects existing patents retroactively • Many existing patents were created under a vastly different standard, i.e. State Street Bank, and many specifications are vague and provide little details • Claims that recite the use of a “Generic computer” with business methods no longer valid • Claims that fail to give “reasonably certain” public notice may be invalid under Nautilus • Sec. 101 under Alice is now a defense to infringement • Sec. 101 invalidity can be used at the pleadings stage as a defense WHAT CAN INVENTORS DO? • • • • DISCLOSE DETAILS TO YOUR ATTORNEY DO NOT HIDE THE BALL Point out technical problems solved by the invention Tie invention to particular hardware used Make sure claims have real processing hooks, not just “processor”, “memory”, “internet”, “CPU”, “computer”, “server” • If method is directed to business problem, come up with other applications away from finance and commerce • If you wrote software to solve a problem, put code examples in the specification! • Don’t hide the source code! It’s the key to surviving ALICE. WHAT CAN ATTORNEYS DO? • Review pending applications that are internet or business methods carefully • Add narrow claims, with available details, file additional cases with new claims • Counsel clients- • • • • • • • Any patent is better than no patent Narrow claims that are infringed are A-1! Don’t get hung up on “broad” claims Broad method claims now probably invalid. Consider narrowing reissue? Need many types of claims – pay extra fees Need several avenues of retreat Need DETAILS in claims and specification Is the key concept a BUSINESS METHOD, even practiced on the internet? NEED DETAILS OF SOFTWARE PROGRAMS in the spec and claims! THANK YOU! • Mark Courtney • The Courtney Firm • 6060 North Central Expressway, Suite 560 • Dallas Texas 75206 • 214-886-1067 Email: mark.courtney@thecourtneyfirm.com Website: www.thecourtneyfirm.com • “Taking on Patent Trolls to Protect American Innovation” • www.whitehouse.gov/blog.2013/06/04 • ALICE Corp. v. CLS BANK 134 S. Ct. 2347 (Sup. Ct. 2014) • http://www.supremecourt.gov/opinions/13pdf/13-298_7lh8.pdf • Bilski v. Kappos (Sup. Ct. 2010) • www.supremecourt.gov/opinions/09pdf/08-964.pdf • Mayo v. Prometheus (Sup. Ct. 2012) • http://www.supremecourt.gov/opinions/11pdf/10-1150.pdf • Justices Deny Patent to Business Methods New York Times June 19, 2014 • http://www.nytimes.com/2014/06/20/technology/supreme-court-rules-against-alice-corp-in-patentcase.html?_r=0 • Bad Day for Bad Patents: Supreme Court Unanimously Strikes Down Abstract Software Patent • https://www.eff.org/deeplinks/2014/06/bad-day-bad-patents-supreme-court-unanimously-strikes-downabstract-software • Patent Trolls cost economy $29 Billion yearly • http://arstechnica.com/tech-policy/2012/07/new-study-same-authors-patent-trolls-cost-economy-29billion-yearly • USPTO - www.uspto.gov • Post AIA implementation • http://www.uspto.gov/blog/director/entry/update_on_uspto_s_impl ementation • ALICE guidelines June 25 2014 • http://www.uspto.gov/patents/announce/alice_pec_25jun2014.pdf • Proposed ALICE rules (Dec. 16, 2014) and example claims • http://www.uspto.gov/patents/law/exam/interim_guidance_subject_ matter_eligibility.jsp