My writings about open source and software patents have earned me a special place in the hearts and minds of those who harbor irrational hatred of software patents. But I am here to tell you that open source is not all bad and, in fact, should be embraced. Open source, however, is hardly something new to the patent community. Perhaps it is better to say that where open source software is heading is nothing new, and it will come as a shock to those who hate patents, but patents will be completely necessary in order for the open source community to continue to advance and live up to its full potential.

Those who are in favor of open source frequently become near apoplectic at the thought that open source software can be, and in fact should be, patented.  The reality is that forward thinking companies that operate in the open source space do make use of the patent system.  A quick search of Freepatentsonline.com shows that Red Hat, Inc., one of the preeminent open source companies in the world, is named as the assignee on some 263 US patents or US patent applications.  So if you are about to make an enormous mistake and listen to the “open source means free” community, ask yourself why a highly successful company like Red Hat uses the patent system and acquires patents.  If patents are good for Red Hat, an open source company not at all enamored with the existence of software patents, then why are software patents bad for you?  Shouldn’t you model your business off successful companies?

Although much remains unclear after the U.S. Supreme Court’s decision in Bilski v. Kappos, one thing is certain: software remains patent-eligible in the U.S. This result may not be entirely clear from a quick read of the opinions in the case. Therefore, I present the following pieces of evidence that the Supreme Court in Bilski effectively re-affirmed the patent-eligibility of software (listed, for the sake of simplicity, in the order in which they appear in the decision).

Alice enters another world through the looking glass

In Chapter 6 of Lewis Carroll’s Through the Looking Glass, Humpty Dumpty tells Alice scornfully “when I use a word, it means just what I choose it to mean – neither more nor less.”  After reading and compositing the various opinions by the nine SCOTUS Justices in USPTO v. Bilski, I, like many others, are still wondering what is a patent-ineligible “abstract idea” (other than Bilski’s claimed method for instructing buyers and sellers how to protect against the risk of price fluctuations in a discrete section of the economy, i.e., hedge against such risks) and especially what does “patent-eligible” really mean under 35 U.S.C. § 101.  The composite opinions by SCOTUS in Bilski concoct a standard for patent-eligibility that is as fuzzy and circular as the logic Humpty Dumpty employed on Alice.

As you might imagine, there are many takes on what the SCOTUS Bilski ruling actually says, including mine.  See Section 273 is NOT a Red Herring: Stevens’ Disingenuous Concurrence in Bilski where I waxed lyrical about now retired Justice Stevens’ disingenuous sophistry in his concurrence which treats 35 U.S.C. § 273 as if it didn’t exist, but which is, in fact, an implicit, if not explicit, recognition and acceptance by Congress that “business methods” (however you characterize them) ARE patent-eligible subject matter under 35 U.S.C. § 101.  See also Foaming at the Mouth III: And Then Came Bilski where I commented on the most recent “thunderbolt” from our Judicial Mount Olympus as SCOTUS summarily granted certiorari in Prometheus Laboratories, Inc. v. Mayo Collaborative Services and Classen Immunotherapies, Inc. v. Biogen Idec, and then vacated and remanded both cases to the Federal Circuit to reconsider (with equally “fuzzy” guidance) in light of SCOTUS’ ruling in Bilski.

Last week Robert Holleyman, the CEO of the Business Software Alliance, published on op-ed article in the Mercury News. This article started by asking what the negative impact for the automotive industry would be on the incentive to innovate if 4 out of 10 automobiles were stolen right off the dealer’s lots rather than purchased. Holleyman went on to explain that this is exactly what is happening in the software industry today, with 43 percent of software being pirated in 2009, which is up 2 percentage points from 2008.

About three weeks ago Rosetta Stone Inc. (NYSE: RST), a leading provider of technology-based language-learning solutions, announced that the company had reached settlements in cases against ten individuals for copyright and trademark infringement. These individuals pirated software, including the unauthorized copying, downloading, sharing and selling of counterfeit Rosetta Stone® language learning software.  These Rosetta Stone® settlements are important because they demonstrate that software piracy is not just a problem in developing nations, but is also a problem in the United States as well.

Over the last couple weeks I have been giving more thought to open source software and what, if any role it has to play with respect to the economic future of both start-up companies and established giants.

My belief is that open source can and should play a vital role in innovation, but the way it is by and large carried forward today does little to forward innovation and an awful lot to significantly disadvantage start-up companies.  The horribly bad advice that pervades the open source community and the utter lack of knowledge or familiarity about patent law is staggering.  I don’t begrudge anyone who doesn’t like the patent system, but can you please at least not like it for a valid reason?  With the myths and disinformation spewed by those who are either clueless and loud, or those who know better and have an agenda, are drowning out rational debate and significantly impeding progress and innovation.

The Copyright Act of 1976 provides that copyright ownership “vests initially in the author or authors of the work.” 17 U. S. C. § 201(a). This is a simple enough statement of law, but it frequently presents significant problems when individuals and companies assume that they understand who the “author” is and under what circumstances commissioning a work results in copyright ownership vesting in someone other than the author. This problem particularly manifests itself in the world of custom software creation and Web site development.

Several years ago the United States Court of Appeals for the Second Circuit decided a copyright infringement case requiring them to address whether the developer or the company was the owner of underlying copyrights. In Krause v. Titleserv, Inc., a disgruntled programmer who had been hired as an independent contractor by Titleserv and who had not assigned his copyrights, refused to allow the company who paid for the software to modify his work. This independent contractor chose rather to assert copyrights in an attempt to prevent the company from modifying the software they paid to be created. In other words, the programmer chose to sue by the company rather than give them the required permissions to modify the code that he had written. That this became an issue was all due to the failure of the company to contractually set expectations at the start of the relationship.

Having had some time, although admittedly not much time, to digest the Supreme Court’s decision in Bilski v. Kappos I am increasingly of the belief that the Supreme Court did an admirable job, at least insofar as they go. While I will reserve my right to change my mind, I am pleased by the Supreme Court decision, and bolstered in this belief by the fact that industry organizations such as BIO and LES are praising the decision, while at the same time anti-software patent advocates are apoplectic. So the Supreme Court must have done something right.

Yes, it certainly would have been nice for the Supreme Court to actually give us a test and not merely point out that the Federal Circuit got it wrong. We already knew the Supreme Court thought the Federal Circuit got it wrong when they granted cert. in the case. There is simply no other reason for the Supreme Court to choose to hear a case from the Federal Circuit given there could never be a split among the Circuits given that all patent cases go to the Federal Circuit. Having said that, I am glad the Supreme Court followed the physicians motto — do no harm — and if getting no test was required in order for there to be no harm then I suppose we ought to be well enough thankful. But what does the decision in Bilski v. Kappos actually mean?

Justice Kennedy delivered the opinion for the Court in Bilski v. Kappos

UPDATED: 11:52 am
POLL ADDED: 4:30 pm

Bilski v. Kappos has finally been handed down by the United States Supreme Court, in what has become the most highly anticipated patent decision of all time. The questions presented to the Court for consideration were: (1) whether the Federal Circuit erred by creating the so-called “machine or transformation” test, which requires a process to be tied to a particular machine or apparatus, or transform an article into a different state or thing, in order to be patentable subject matter; and (2) whether the machine or transformation test contradicts Congressional intent (pursuant to 35 U.S.C. 273) to allow for business methods to be patented.

The Supreme Court held that the machine-or-transformation test is not the sole test for patent eligibility under §101, and that the Federal Circuit erred when it ruled that it was the singular test to determine whether an invention is patentable subject matter. Delivering the opinion for the Court was Justice Kennedy.  There were no dissents, only concurring opinions, which is in and of itself a little surprising, at least at first glance until you realize that the Justices all agreed Bilski’s invention ought not to be patentable, but some, such as Justices Stevens and Breyer would have found all business methods unpatentable.  In any event, Kennedy explained that the Federal Circuit decision ignored well established rules of statutory interpretation, and further explained that there is no ordinary, contemporary common meaning of the word “process” that would require it to be tied to a machine or the transformation of an article. Nevertheless, the machine or transformation test may be useful as an investigative tool, but it cannot be the sole test.

Unlike many of the visitors and contributors on this site, I am not a lawyer. I am a programmer who found this blog while chasing links across the Internet looking for information on software patents and what has now become one of the most anticipated Supreme Court decisions ever; Bilski v. Kappos. That was almost eight months ago at a time when I held what is probably a common view of software patents among programmers. Specifically, that they are immoral, unfair, and restrictive to innovation and creativity. I have since found that things are not as black and white as they appear and I’d like to share with you the problems as I see them, from a programmer’s point of view.

The communication between lawyers and programmers is admittedly poor. I can’t imagine very many people jumping through all the hoops to become a patent lawyer if they didn’t believe in the power of the patent system to help grow the economy. On the other hand, programmers who are frustrated with declining job security, declining benefits, and declining pay, often turn to leaders in their field, who demonize software patents. Those industry leaders who support software patents are usually the ones doing the laying off, cutting salaries, and outsourcing jobs, so it is understandable that they have questionable credentials when it comes to the opinions of the common programmer. How can we start to heal the wound and repair the damage that has already been done? We need to encourage more communication between the two parties if we are ever to end the “cold war” over software patents.

When last we left off our History of Software Patents series we were talking about In re Alappat, which by implication did away with the Freeman-Walter-Abele test for patentable subject matter by not mentioning the test whatsoever. Shortly after Alappat, a three-judge panel once again resorted to and applied the Freeman-Walter-Abele test in In re Trovato, but that was quickly withdrawn by an en banc panel of the Federal Circuit. So it seemed relatively clear that the FWA test had been abandoned. This believe was bolstered by the famous, or infamous depending on your view, case of State Street Bank & Trust Co. v. Signature Financial Group, Inc. and ultimately in AT&T Corp. v. Excel Communications, Inc., where the Federal Circuit reaffirmed its decisions in State Street Bank and Alappat.

In State Street the patent in question was U.S. Patent No. 5,193,056, which issued to Signature Financial Group on March 9, 1993. The ‘056 patent is generally directed to a data processing system for implementing an investment structure which was developed for use in Signature’s business as an administrator and accounting agent for mutual funds. In essence, the system, identified by the proprietary name Hub and Spoke®, facilitates a structure whereby mutual funds (Spokes) pool their assets in an investment portfolio (Hub) organized as a partnership. State Street was in talks with Signature Financial to acquire a license, and when talks broke down they brought a declaratory judgment action to have the ‘056 patent claims declared invalid.

In what is turning into a broken record, the Supreme Court once again did not issue a decision in Bilski v. Kappos.  We have been waiting 6 months and 22 days since the oral argument, and we will wait longer. However, Bilski v. Kappos is not the oldest case that continues to remain pending on the Supreme Court docket. That honor goes to Schwab v. Reilly, which was argued on November 3, 2009 (6 months 28 day lag), followed closely by Pottawattamie County v. McGhee, argued on November 4, 2009 (6 months 27 day lag).

Perhaps we should be thankful that the Supreme Court is taking so long and treating it as the overwhelmingly important case we know it to be. On the other hand, perhaps we should be afraid that the Supreme Court is giving it so much scrutiny. Let’s face it, the Supreme Court has not done much over the last decade to evidence anything other than glib familiarity and vague understanding of patent law. I sure hope they break with that tradition in Bilski.

If you ever thought of starting a patent software company, I have some good news for you. Unlike the general software markets for, say, antivirus or mp3 software, the legal software market is just not very saturated. A lot of the existing software for patent lawyers is outdated, ridiculously expensive, and frankly, not that good. There is definitely room for better software products and services, especially in the fields like patent prosecution/litigation, portfolio management, and e-discovery. In fact, entire sections of patent practice are just begging for helpful and affordable software, but none or very little exists.

However, starting and running a small software business is hard work. In addition to developing, marketing, and selling the software, you need to be cognizant of some complexities specific to the legal market. When I started ClaimMaster Software, I was a complete business neophyte and had to learn many things the hard way. I therefore thought that it might be helpful if I shared some tips and suggestions based on my experiences from the last year.  What follows are four things to consider as you proceed with software and business development.

After 6 months and 15 days we still wait for a decision in Bilski v. Kappos, perhaps the most anticipated Supreme Court patent decision of all time.  It is now 10:50 am Eastern Time and the Supreme Court slip opinion page has not added another opinion since at least 10:27 am Eastern Time.  At 10:29 am, shortly after American Needle, Inc. v. National Football League (an intellectual property licensing case I will be writing about later this week, in which the Supreme Court ruled the NFL is not a single entity for Antitrust purposes and the Rule of Reason applies to its IP licensing decisions) was added to the slip opinion list, the ruling number column (see R column) was filed in, which seems to be a reliable indicator based on past observances that there will be no more decisions forthcoming from the Supreme Court today.  So, once again, it seems as if the patent story of the day will be the one that never materialized.  The wait for a decision in the Bilski case continues.

The US Supreme Court did decide no fewer than 7 cases today, none of them styled Bilski v. Kappos.  The 7 decisions issued today were:

• Jefferson v. Upton
• United States v. Marcus
• Hardt v. Reliance Standard Life Ins. Co.
• United States v. O’Brien
• Lewis v. Chicago
• American Needle, Inc. v. National Football League

Today the United States Supreme Court issued four decisions, and none of them were Bilski v. Kappos.  The four decisions issued by the Court were:

Many had been pointing to May 17, 2010, as a likely day the Supreme Court would issue a decision, which was just speculation at best.  Regardless, it is now about 11:10 am, so it is fair to say that we are not going to get a decision today from the Supreme Court in Bilski v. Kappos. I have been monitoring the Supreme Court website this morning and another case has not been added to the slip opinions list since about 10:20 am, and at that time the decision numbers were filled in, showing that the last of the opinions for the day brings the total to 51 cases decided so far this term.

The Supreme Court held oral arguments in the Bilski case on November 9, 2009 (See Bilski Arguments Complete at the US Supreme Court and A Birds Eye View of the Bilski Oral Argument) and that means we have now been waiting 6 months and 8 days for a decision, and the wait continues.

What I refer to as the “pen and paper myth” has once again resurfaced on IPWatchdog.com in a comment.  The pen and paper myth goes like this: software should not be patentable because anything that can be done with pen and paper is not an invention and exclusive rights should not be given to any one person or entity.  Presumably the thought process here is that if you patent software you would prevent someone from engaging in the method using pen and paper.  Of course, that is not true, but why would a little thing like reality get in the way of making an otherwise absurd and provably incorrect statement?  Such provably wrong statements are rampant in the patent world today, particularly in light of what appears to be an all out media assault on technology and innovation that would make the persecutors of Galileo proud.

So just sit right back and I’ll tell a tale, a tale of a fateful trip, which if followed would result in far more than the wreckage of a tiny ship.  The tanking of the US economy is at stake, so take a sip of coffee, sugar up and stretch so you will be able to stay away and pay attention.  I know this is preaching to the choir for many, but for those who seemingly seek to remain clueless, if you actually pay attention you might learn something!

When embarking on a software development project it is critical to understand that in order to both maximize the chance of obtaining a patent, as well as the likelihood of developing a working computer implemented process, you need to approach the task with an engineering mind set, as well as a healthy familiarity with Murphy’s Law.  Anything that can go wrong will go wrong, and once you release the process to end users a human element will complicate what should otherwise be a predictable, linear, machine driven response.  Embrace the uncertainty and challenges because the fact that software rarely, if ever, works like it should is what makes a working process patentable.

Earlier this week, on February 23, 2010, Facebook was granted US Patent No. 7,669,123, which covers a patent on a method for dynamically providing a news feed about a user of a social network. The patent application was filed on August 11, 2006, and claims priority from a string of provisional patent applications and nonprovisional patent applications, the earliest being a provisional patent application filed on December 14, 2005.

The Background of the patent explains that social networking websites have systems for tailoring connections between various users, allowing for frequent, automatic notification of changes in the information posted by other users. Apparently as of the time the patent application was filed there were existing mechanisms that allowed a user to display information about other users, including news items, but these news items were disparate and disorganized, thereby requiring users to spend time researching a news topic by searching for, identifying, and reading individual news items that are not presented in a coherent, consolidated manner. Thus, what was needed was an automatically generated display that contains information relevant to a user about another user of a social network. Essentially, it seems the resulting “invention” was a news feed for a social network. While this may have been new to social networking sites in December 2005 through August 2006, automatically updating news feeds were hardly new even then.

I am sure it will come as no great surprise to anyone who is a regular reader of IPWatchdog.com, but let me be as clear as I can be and put my bias right out in the open. I am a true believer in the patent system and I like the US approach to patentability, which is one where practically everything is patentable. There are, of course, some notable exceptions in the US. For example, you cannot patent something that is only capable of use for an illegal purpose, but if you get a rejection based on this it shows an acute lack of imagination. You don’t patent burglar tools, you patent locksmith tools! In any event, you also cannot patent an idea, laws of nature (such as E=mc², or the law of gravity), mathematical equations or things that are merely discovered. Pretty much anything else is fair game though, including software, business methods, living matter and pharmaceuticals. Given that patent watchers and software folks are becoming increasingly impatient waiting for a decision from the Supreme Court in Bilski, allow me to focus on software and business methods.

Reports are widespread that large corporations have cut back on the number of patent applications they file, and I see no reason to believe these first hand accounts are incorrect. Nevertheless, fiscal year 2009 saw the second highest number of patent applications filed at the United States Patent and Trademark Office, down only some 11,000 applications from the record year in FY 2008. Meanwhile, tech sector giants have been crying and moaning about how the patent system has run amok and needs to be scaled back, and continually beg for patent reform that would gut the patent system and weaken patent rights. This grumbling is picked up by patent abolitionists who say “see, even Microsoft thinks there should be no patents,” which only adds to the hysteria. Against this backdrop the corporations bemoaning patents received record numbers of patents during 2009. Obviously they talk a good game but when push comes to shove they will get as many patents as they can, but want to make it hard for small businesses and individuals to get patents.  Quite curious if you ask me!