“After the State Street Bank decision in 1998, there was an avalanche of weak patents issued by Patent Office,” said Martin Goetz, the man credited with receiving the first software patent ever granted by the United States Patent and Trademark Office. “Automating most business procedures is obvious to one skilled in the art.”
Goetz is no doubt correct that the State Street decision lead to many patents hinting at rather than fully describing computer implemented innovations. Today, the courts and other decision makers seem to be settling on de facto rules that realize you cannot obtain or keep a patent when all you have done is automate known business processes. The problem, however, is that the term “software” is used to describe both trivial computer implemented processes and extraordinarily complex and inventive solutions. This leads to both the complex and the trivial being treated as if they are one in the same, which is at the heart of the problems facing the industry.
Thanks to decision makers who mistakenly believe creating software is simplistic, and the subjectivity of an Alice/Mayo framework that prohibits repeatability and eliminates any possibility of certainty of outcome, there is a complete lack of predictability. Indeed, the outcome of any patent analysis that employs the Alice/Mayo framework is completely dependent upon the ideology of the decision maker; namely whether the decision maker views the world from a pro-patent or an anti-patent lens.
“The Supreme Court’s four recent decisions greatly expanded the previous Court-made exceptions for inventions that fall within the four statutory categories defining eligibility for potential patenting,” explained former Federal Circuit Chief Judge Paul Michel. “The standards announced in these decisions are so vague and subjective as to be unworkable, unscientific and unfair.”
While some, like Goetz, do not see a particular problem with the Alice decision because it focuses the analysis on whether there are inventive concepts and underlying improvements, those matters historically were raised under different parts of the statute; specifically 35 U.S.C. 102, 35 U.S.C. 103, and 35 U.S.C. 112. In fact, the Supreme Court in Diamond v. Diehr specifically and unambiguously said that consideration of the newness of the invention was not appropriate under 35 U.S.C. 101, a holding that was overruled (or at a minimum completely ignored) by the Supreme Court in Mayo v. Prometheus and then again in Alice v. CLS Bank. What this means is even if the rhetoric relied upon by the Supreme Court in Alice makes some sense, the framework is hopelessly flawed because it pushes the entirety of the patentability analysis into a single inquiry; an inquiry designed to be nothing more than a low threshold level inquiry.
None of the safeguards to ensure the appropriateness of the determination are present when the entirety of the patentability inquiry is forced into § 101. “Prior art and objective evidence no longer matter,” Michel said. “The result has been judicial invalidation of tens of thousands of patent claims and, even worse, grave doubts about the validity of hundreds of thousands of additional patents… The massive uncertainty created by all these decisions deters investments in R & D, reducing economic growth and job creation.”
Chief Judge Michel is, of course, exactly correct. Many thousands of patent claims are now worthless, and while that may not be alarming to some who think those claims never should have issued, what is alarming is the tremendous uncertainty that has been created. Businesses cannot operate in uncertain environments, and the U.S. has become uncertain, if not downright hostile.
So severe is the magnitude of the problem that at an industry conference in the heart of Silicon Valley – ground zero for the movement that has lead to an undeniably weak patent system in America – will address whether the industry went too far to eradicate weak patents.
The text of the conference registration page asks whether it is time to abolish Section 101 and then goes on to ask the reader to consider that while U.S. patent applications increased by 1.8% in 2015, patent applications in China and the European Patent Office increased by a whopping 18.7% and 4.8% respectively. And just yesterday the European Patent Office announced more patents granted to U.S. companies in 2016 than ever before, and with the number of EPO granted patents growing by an astonishing 46.7% in 2016.
It is pretty clear what is happening. As the United States is dismantling our patent system countries throughout Europe and Asia are reaping the benefits. China, for example, is on the cusp of major changes to their patent laws that will open up patenting on both software and business methods. It is no wonder the industry is responding by seeking patent protection elsewhere given the truly inhospitable climate in the U.S. for certain high-tech innovations.
With patenting activity increasingly leaving the U.S. and in search of friendly jurisdictions and away from the overly restrictive confines of America, how long before those high-tech businesses decide to locate where they are able to obtain protection? Whether we like it or not, businesses locate where their assets are best protected for a variety of reasons. In an innovation economy that means where patent rights are strongest.
But have we gone too far to eradicate weak patents? Goetz says: “Emphatically, no.” And perhaps somewhat surprisingly, others agree.
“My knee jerk reaction is it’s tough to go too far eradicating weak patents,” said Ashley Keller, Managing Director of Burford Capital. “It’s basically a tautology to say that weak patent should not exist in the first place. That’s a priggish point I suppose, but the real issue is whether under the pretext of weeding out weak patents we have set up a system that invalidates, or does not allow valuable innovations to gain patent protection. I think we have done exactly that.”
Priggish or not, Keller is spot on. Asking whether the industry has gone too far to eradicate weak patents misses the point entirely, and to some extent will allow those who want the patent system to continue its march off the cliff to inappropriately claim the moral high ground. Regardless of how you prefer to characterize problem patents, whether it be as weak, bad, low quality, or invalid, no one wants those problematic patents to issue or be used to harass individuals or businesses as they sometimes have been used by bad actors. But that begs the real question. In an attempt to eradicate the system from those problematic patents have things gotten out of control and, thereby caused collateral damage in an indiscriminate way to all patents, including high quality, strong patents? To that question the answer must be a resounding yes!
In true government fashion our leaders, urged on by special interests, took out an elephant shotgun to kill a mosquito. Rather than use a scalpel to cut away problematic patents an axe suitable for use by Paul Bunyan was recklessly hurled at the patent system. The carnage has been unmistakable.
“None of this was needed to weed out weak or low quality patents, which are better be dealt with for obviousness or inadequate disclosure, based on scientific evidence, not emotional impressions,” Michel explained. “Only legislative overruling of these unjustified and harmful exceptions can restore the U.S. patent system, enabling it, once again, to incentivize needed investment in invention.”
There is growing consensus that legislative action is required to address the state of patent eligibility in the U.S. “The spectacular failure of the Supreme Court to craft effective patent law doctrine in the most critical gateway path to innovation — the type of subject matter eligible for patent protection — underscores the need for Congress to clean up the litter the Court has left behind,” said Ron Katznelson.
The Intellectual Property Owners (IPO) Association has also come out in support of amendments to 35 U.S.C. 101, which would largely overrule the Supreme Court’s decisions in both Mayo and Alice, and reassert the statute as primary authority over the Supreme Court. That is, of course, assuming the Supreme Court follows the dictates of a newly amended § 101.
But not everyone is as sure that fixing § 101 will be enough.
“Section 101 is emblematic of the problem, but it is not the only concern,” Keller explained. “Whenever you have loose standards that would allow a decision maker to come out either way coupled with an agenda by the decision maker, the agenda is fulfilled. The solution is to tighten the standards and find decision makers with an agenda that matches the public policy objectives set forth by Congress. Abolishing or tweaking this or that section of the Patent Act is not going to get the job done.”
Keller is right. Nothing that may happen to set the U.S. back on track will matter unless decision makers start to make decisions consistent with the public policy objectives. Given the significant problems the Patent Office has had with certain examiners who simply refuse to issue patents and have not issued patents for many years (and yet still keep their jobs), this task will be far more complex and time consuming.
Starting with a legislative fix to § 101 is necessary because things have gotten out of control, but expecting such a fix to act like as a light switch that when turned “ON” will fix all things is probably expecting too much. A great deal of damage has been done over a prolonged period of time. The solution needs to start somewhere, and soon, but healing from these self-inflicted wounds will not happen overnight.
Join the Discussion
8 comments so far.
Night WriterMarch 9, 2017 10:54 pm
@7: Ed the Ned: just thrown in their overturn Benson and I am with you.
Edward HellerMarch 9, 2017 02:39 pm
I am a conservative at heart and inherently react with skepticism about any proposals for legislative fixes to any patent issue. We have seen since the mid-90s radical “fixes” implemented time and again, each one designed to make the patent system more transparent, or whatever soothing euphemism that was popular at the time, and each one undermining a pillar that made U. S. patent system the glory of the world.
While I understand the problem of Lemelson, I still favor a patent term of 17 years from issue and would like return to that system if we could. Publication of patent applications was intended to deal with the problem of 102(e). Rather than address the problem itself, we created another. Then we have first-to-file that essentially trashed an essential feature of the American patent system, a robust grace period, and at the same time greatly worsen the problem of 102(e). Finally we have reexaminations and postgrant reviews of all sorts that allow collateral attacks and unfair and expensive procedures that severely undermine the patent system in so, so many ways.
I am resistant anymore legislative fixes for anything. So much collateral damage has happened because of prior fixes and improvements that we all should be skeptical of do-gooders. No more changes, just repeals.
We need to repeal IPRs and reexaminations pronto. That should be our main focus. Once that is done, we can consider other things. Taking the eye off the ball weakens the overall effort of everybody that is trying to save our patent system.
AnonMarch 8, 2017 08:51 pm
BenMarch 8, 2017 05:25 pm
“Thanks to decision makers who mistakenly believe creating software is simplistic”
You should lay the blame for this at the CAFC’s feet.
“The conversion of a complete though into a language a machine understands ia necessarily a mere clerical function to a skilled programmer”.
Live by the easy money, die by the easy money.
You Know Who I AmMarch 8, 2017 04:34 pm
I can’t see how this statement:
“Automating most business procedures is obvious to one skilled in the art.”
Leads to this one:
“Goetz is no doubt correct that the State Street decision lead to many patents hinting at rather than fully describing computer implemented innovations”.
The AIA was a solution to the wrong problem, and just created more problems.
The problem is information inventions. The problem with information inventions is that their inherent malleability makes the obviousness inquiry difficult and examination much more difficult because un-patented prior-art is everywhere. They are all abstract and intangible. Some are useful, and could be considered machine components. Some are little beyond essentially expressive artwork.
“None of this was needed to weed out weak or low quality patents, which are better be dealt with for obviousness or inadequate disclosure, based on scientific evidence, not emotional impressions,” Michel explained.
Yea, but the two million bucks a pop to “deal with” thousands of crappy patents is someone’s problem- someone not named Michel. If he is talking too about the AIA, he is right about that…
“Only legislative overruling of these unjustified and harmful exceptions can restore the U.S. patent system, enabling it, once again, to incentivize needed investment in invention.”
And yet, the software business has had nothing but boom years, still booming. Investment is high, employment is high, valuations are high. There are dozens of billion dollar startups thriving in this ostensibly horrid environment. Not great times for software patent lawyers, of course.
Meanwhile, the problem of information patents remains. There are reasonable approaches. They just need to be brought out of the woodwork.
BemusedMarch 8, 2017 04:27 pm
Gene, it would be really great if a copy of this article found its way to Senator Coons so he can use the statistics you noted re European and Chinese patent filing/grant numbers the next time he introduces pro-patent legislation.
angry dudeMarch 8, 2017 02:20 pm
And the US lemming consumers are already buying cutting-edge technology not just made but INVENTED in China !!!
Virtual Reality technology is just one example
CW5March 8, 2017 12:56 pm
Great article, Gene. It should be embarrassing to all Americans that China has, or soon will have, a stronger patent system than the USA has. After all, aren’t we supposed to be the capitalists?