+

Dr Andrés Guadamuz

Patentability of Computer

Software and Business Methods

+

Software

+Software

Software is "a set of statements or instructions to be used directly or indirectly in a computer to bring about a certain result".

These instructions are set out in source code, a set of in logical human-readable instructions coded into computer language.

Object code is the result of a compilation of the source code into machine readable instructions.

+Source code

#!/usr/bin/perl # Public domain. Questions to Jamie McCarthy, jamie@mccarthy.vg use LWP::Simple; use Math::BigInt; my $html = get(`http://www.utm.edu/research/primes/curios/48565...29443.html'); my($prime) = $html =~ m{<blockquote>([^<]+)</blockquote>}; $prime =~ tr{0-9}{}cd; $prime = Math::BigInt->new($prime); my $binary = ''; while ($prime > 0) { $binary = pack(`N', ($prime % 2**32)) . $binary; $prime /= 2**32; } $binary =~ s{^\0+}{}; local *FH; open(FH, `| gunzip -acq') or die `cannot gunzip, $!'; binmode FH; print FH $binary;

close FH.

+Object code

+Algorithms

+Know-how and documentation

+

Software and the law

+International software protection

Art 4 WIPO Copyright Treaty (WCT): Computer programs are protected as literary works within the meaning of Article 2 of the Berne Convention. Such protection applies to computer programs, whatever may be the mode or form of their expression.

Art 10 TRIPS: 1. Computer programs, whether in source or object code, shall be protected as literary works under the Berne Convention (1971).

+Software protection in Europe

Software Copyright Directive 91/250/EEC requires copyright law to recognise software as a literary work.

UK LAW: 3.-(1) "literary work" means any work, other than a dramatic or musical work, which is written, spoken or sung, and accordingly includes- (a) a table or compilation other than a database, (b) a computer program; and (c) preparatory design material for a computer program; and (d) a database.

Art 52(2)(c) of the European Patent Convention (EPC) states that “programs for computers” “as such” are not inventions, and therefore are not patentable.

+Copyright vs Patents

EXPRESSION IDEA

LITERAL NON-LITERAL

SYMBOLIC FUNCTIONAL

+UK: Navitaire Inc v easyJet Airline Co [2004] EWHC 1725 (Ch). “Copyright protection for computer

software is a given, but I do not feel that the courts should be astute to extend that protection into a region where only the functional effects of a program are in issue. There is a respectable case for saying that copyright is not, in general, concerned with functional effects, and there is some advantage in a bright line rule protecting only the claimant's embodiment of the function in software and not some superset of that software.”

+

Why patents?

+Trouble with copyright: USA

The idea-expression dichotomy is very well used in the United States, this has had interesting effects for software protection.

“look and feel” cases, Apple v. Microsoft 821 F.Supp 616 (1993).

Whelan Associates Inc v Jaslow Dental Laboratory Inc [1987] FSR 1 gave a test for the idea-expression dichotomy in software.

Computer Associates v Altai 982 F 2d 693 (1992) – Abstraction, Filtration, Comparison.

Aharonian v Gonzales, N.D. Cal., No. C04-5190, Jan. 3, 2006) tried to get software declared as “not subject to copyright protection”, but failed.

+Abstraction, Filtration, Comparison test Stage 1 - Abstraction - You dissect the code

and isolate each level of abstraction.

Stage 2 - Filtration - Examine the structured components at each level of abstraction to determine whether their inclusion at that level was ‘idea’ or was dictated by efficiency, required by external factors or was taken from the public domain (and is therefore unprotectable).

Stage 3 - Comparison - What remains following filtration is a core of protected expression. This must be compared for substantial similarity.

The road towards patentability: USA

The Abstraction-Filtration-Comparison test has been a failure.

Owners begin to pursue other types of protection.

Diamond v Diehr, 450 U.S. 175, 185 (1981) "everything under the sun that is made by man."

In re Alappat, 33 F. 3d 1526 (1994), “useful, concrete, and tangible result.“

State Street Bank v Signature Financial Group (1998) 47 USPQ2d 1596.

+First came the business methods

When talking about business methods in patentable terms, we are talking about flowcharts.

A business method is then akin to software algorithms

USPTO Class 705: Data processing: financial, business practice, management, or cost/price determination

+State Street, business methods and software patents

State Street decision (1998).

Any invention is patentable if it “it produces a useful, concrete and tangible result.”

“…the transformation of data, representing discrete dollar amounts, by a machine through a series of mathematical calculations into a final share price, constitutes a practical application of a mathematical algorithm, formula, or calculation, because it produces 'a useful, concrete and tangible result’”.

The invention in State Street Bank was only possible because of computerisation – it wouldn’t work without a program.

+Business method patents (USA)

+Amazon’s One Click

USPTO issued US patent 5960411 for “Method and system for placing a purchase order via a communications network” to Amazon.com in September 1999.

In 2006, the USPTO ordered a reexamination of the "One-Click" patent based on prior art.

Several claims in the patent were rejected.

In Europe, a patent application on the 1-Click ordering was filed with the European Patent Office, but was never granted.

+Typical software patent claim

“A method to be performed by a computer for operating a matching service, comprising:generating, from empirical data, a number of factors corresponding to a like number of functions of one or more variables relevant to relationship satisfaction; approximating the satisfaction that a user of the matching service has in the relationships that the user forms with others; identifying, with the computer, candidates for a relationship with the user by determining an association between the approximated satisfaction and one or more of the factors; and approximating the satisfaction that the user will have in a relationship with a particular candidate.” U.S. Patent 6735568

+Charts

+But… software copyright is useful

+Software patentability around the world Art. 27.1 TRIPS Agreement: “patents shall be

available for any inventions, whether products or processes, in all fields of technology”.

All major (in terms of volume) patent offices accept software patentability in one shape or another (US, Europe, Australia, Japan).

Reluctance to apply indiscriminate patentability in various regions.

+Patentability in Europe

Strict reading of the law leads one to believe that software “as such” is not patentable.

European Patent Office (EPO) Board of Appeals interpreted “as such” very broadly in several cases.

20,000 software patents approved by the EPO, 6,000 applications per year in UK.

There is software patentability in Europe.

+Technical effect

Case law has decreed that only software that has a “technical effect” can be patented.

The term is not in the legislation, and therefore there is no clear definition of technical effect.

Lack of consistency in its application.

Merrill Lynch [1989] RPC 561: "There must... be some technical advance on the prior art in the form of a new result.“

+

Some caselaw

Halliburton v Smith International

Two patents involved, one drill bit and software to design drill bits.

In this ruling, there seems to be a clear technical effect, the software can only be used for specific purpose.

The patent was struck down because it had inadequate disclosure (upheld after appeal).

Could this be the strategy to attack software patents in the future?

The little man test (CFPH LLC Application)“The question to ask

should be: is it (the artefact or process) new and non-obvious merely because there is a computer program? Or would it still be new and non-obvious in principle even if the same decisions and commands could somehow be taken and issued by a little man at a control panel, operating under the same rules? For if the answer to the latter question is 'Yes' it becomes apparent that the computer program is merely a tool, and the invention is not about computer programming at all.”

+Aerotel v Telco

“[...] despite the fact that such patents have been granted for some time in the US, it is far from certain that they have been what Sellars and Yeatman would have called a "Good Thing." The patent system is there to provide a research and investment incentive but it has a price. That price (what economists call "transaction costs") is paid in a host of ways: the costs of patenting, the impediment to competition, the compliance cost of ensuring non-infringement, the cost of uncertainty, litigation costs and so on. There is, so far as we know, no really hard empirical data showing that the liberalisation of what is patentable in the USA has resulted in a greater rate of innovation or investment in the excluded categories. Innovation in computer programs, for instance, proceeded at an immense speed for years before anyone thought of granting patents for them as such. There is evidence, in the shape of the mass of US litigation about the excluded categories, that they have produced much uncertainty. If the encouragement of patenting and of patent litigation as industries in themselves were a purpose of the patent system, then the case for construing the categories narrowly (and indeed for removing them) is made out. But not otherwise.”

+Astron Clinica & Others v The Comptroller General of Patents

"... I do not detect anything in the reasoning of the Court of Appeal which suggests that all computer programs are necessarily excluded. I have identified the key aspects of the decision which relate to computer related inventions and they undoubtedly criticise the reasoning of the EPO Board of Appeal in each of the "trio" of cases. But the criticism is directed at the "any hardware will do" approach and the return to form over substance with the drawing of a distinction between a program as a set of instructions and a program on a carrier."

+Symbian Ltd v Comptroller General Of Patents

"So is this invention no more than the running of the program? Having regard to the earlier authorities the answer has to be that it depends on what the program does and not merely how it does it. The mere fact that it involves the use of a computer program does not exclude it. [...] It is simply inaccurate to label all programs within the computer as software and on that basis to regard them as of equal importance in relation to its functionality. [...] I think that the Hearing Officer took too narrow a view of the technical effect of the invention and was wrong to exclude it from patentability on the basis that it amounted to no more than a computer program. The appeal will therefore be allowed."

+Enlarged EPO Board of appeals

Programs for computers, G 0003/08, 12 May 2010.

“… it seems to this Board, although it may be said that all computer programming involves technical considerations since it is concerned with defining a method which can be carried out by a machine, that in itself is not enough to demonstrate that the program which results from the programming has technical character; the programmer must have had technical considerations beyond "merely" finding a computer algorithm to carry out some procedure.” para 13.5.

+Bilski patent application 08/833,892

Patent for a method of hedging risks in commodities trading.

Claims: (1) initiating a series of sales or options transactions

between a broker and purchaser-users by which the purchaser-users buy the commodity at a first fixed rate based on historical price levels;

(2) identifying producer-sellers of the commodity; and (3) initiating a series of sales or options transactions

between the broker and producer-sellers, at a second fixed rate, such that the purchasers’ and sellers’ respective risk positions balance out.

+Bilski v Kappos 561 U.S. _ (2010) Patent application for a method of hedging

risks in commodities trading in energy markets (U.S. Pat Application 08/833,892).

Rejected by examiner, appealed, lost.

Appealed to Court of Appeals of the Federal Circuit (CAFC), rejected again. Taken to US Supreme Court.

Supreme Court produced a bit of a mixed bag.

+Result of Bilski

Business method patents are still accepted, but court struck down the State Street “useful, concrete and tangible result” test.

The Federal Circuit decision in Bilski changes the law by requiring a process either to be tied to a machine or to transform articles in order to be eligible for patenting.

SCOTUS rejected this machine-or-transformation test as a sole test of patentability.

Regarding Bilski’s application, the court decided that was an unpatentable abstract idea. Bar has been set higher for patentability.

+Mayo v. Prometheus Laboratories In this unanimous 2012 decision, the SCOTUS

determined that a medical testing patent was unpatentable as nonstatutory subject matter under Section 101 of the Patent Act

“In determining the eligibility of respondents' claimed process for patent protection under § 101, their claims must be considered as a whole. It is inappropriate to dissect the claims into old and new elements and then to ignore the presence of the old elements in the analysis”

The decision opens up more challenges to patents.

+

Mind the trolls

+The cost of trolls

A 2011 study from Boston University calculated that patent trolls had cost the US economy $500 billion USD since 1990.

A database of 1,630 patent troll lawsuits found a total of 4,114 defendants pairs, with a mean loss of $122 million USD per case!

+Patent trolls

Defined as a company that produces no code, only has patent portfolio.

Large companies can use patents defensively against a smaller company who produces software, since it is likely that the defensive portfolio may contain some patent covering a part of the smaller company’s software.

Patent Trolls are immune to this, since most produce no software, and therefore a defensive patent portfolio is less effective against them.

+Rising share of litigation

+Concluding…

+

Questions?a.guadamuz@ed.ac.uk