Patentability of Software after Bilski and KSR: Looking Back and Looking Forward

-- By ThomasHou - 19 Oct 2011

Section I: Bilski's Indirect and Unfinished Effect on Computer Software as Eligible Subject Matter

For patent law and software aficionados who were expecting the Supreme Court to make a definite pronouncement on the patentability of process patents such as computer software, the Court's decision in Bilski v. Kappos was a letdown. The Court declined to "comment[] on the patentability of any particular invention" and left to the Federal Circuit ("!FedCir") to develop doctrine according to the Supreme Court's precedents (including categories of unpatentable subject matter, such as abstract ideas). For software, neither the Supreme Court nor the FedCir addressed in the Bilski decisions whether mere recitation of a computer could satisfy the "special purpose machine" of the FedCir's machine or transformation test, or a computer specifically adapted to the claimed process was necessary.

Nonetheless, decisions from the PTO, BPAI, and district courts are suggesting a more exacting review of software patent applications.

That was also true before Bilski. Bilski is demonstrably the product rather than the cause of that change.

Since Bilski, the PTO and BPAI have begun to deny a large number of software-only patent applications, albeit without establishing clear doctrine. A July 2011 study of post-Bilski BPAI and district court cases on patentability found that a majority of software patent applications were invalidated, mostly because they were deemed abstract ideas. On that level, the lower courts and administrative bodies are heeding the Supreme Court's earlier precedents, especially Gottschalk v. Benson, which held that inventions cannot substantially preempt the use of an abstract idea. The PTO and BPAI have not definitely commented on the "special purpose machine" definition from In re Bilski. The FedCir has not had an opportunity to rule on the eligible subject matter for pure software, which explains why the doctrine remains unsettled.

I don't understand this comment. The Federal Circuit could make a broad ruling on that topic in any case presenting the denial of a patent for a software-implemented invention, of which it always has many. Nor do I know what "pure software" is.

In the upcoming years, I anticipate that the PTO, BPAI, and district courts will continue to examine and adjudicate on various software patents, whose filings have not diminished.

What would be the alternative anticipation? Isn't this a statement of the obvious masquerading as an educated judgment or analytic conclusion?

Although Jonathan Masur points to institutional incentives for the PTO to expand the boundaries of eligible subject matter, I find recent developments from the Supreme Court through its patent cases and Congress through the America Invents Act tempering the PTO's ability. Ultimately, the FedCir must rule on the patentability of software and define what constitutes "special purpose machine", either from patent applications denied by the PTO or from invalidity arguments raised during one of these patent wars cases.

Must? Nothing you have said so far shows any reason to go beyond "might."

Bilski only started the debate, and without a definite answer, needless litigation and reexaminations will continue.

I'm not sure what makes litigation or reexamination needless. Do you mean that if the cases were decided as you wish them to be decided, no one would bother trying to invalidate patents? Or that there would be no patents to invalidate? In the latter case, isn't it the patents that are needless, rather than the effort to prevent injustice arising from the thuggish enforcement of illegal monopolies?

Section II: KSR's Heightened Nonobviousness Test to Bar Trivial Software Patents

Even though Bilski and eligible subject matter are dominating headlines in patent law, they are not the sole area in flux. After all, patentability also requires utility, novelty, and nonobviousness, the latter of which has long been the gatekeeper and the hardest for patentees to satisfy. The Supreme Court's fairly recent decision in KSR Int'l Co. v. Teleflex Inc. seems to and should be having a similar effect on nonobviousness as Bilski had on eligible subject matter.

I thought you said the effect of Bilski on eligible subject matter was slight, incomplete, and ambiguous. Do you mean that's also the effect of KSR? Why is that the effect the case should have? I thought that was the effect you thought Bilski shouldn't have.

Several aspects of KSR are similar to Bilski and indicate a similar trickle effect on lower courts and the PTO and BPAI. First, the Court emphasized that its precedents called for a flexible and functional approach and rejected the FedCir's rigid, narrow test for obviousness. Second, the Court advised courts to look broadly at various factors, such as "interrelated teachings of multiple patents; the effects of demands . . . in the marketplace; and the background knowledge possessed by a person having ordinary skill in the art." Third, the Court recognized that market demand will often drive design trends, especially in the informational economy: "When there is a design need or market pressure to solve a problem . . . a person of ordinary skill has good reason to pursue known options within his or her technical grasp." This insight may be particularly pertinent to software.

Why? Seems to me it's just the usual crap said in the usual way. No one takes it seriously with respect to pharmaceuticals, either.

Finally, the Court left many questions unanswered and implicitly instructed the lower courts, including the FedCir, to develop nonobviousness doctrine.

Isn't that pretty much the only thing the Supreme Court can do in patent cases? The Justices are terrified about what they don't understand, and particularly fearful of the unintended consequences of decisions that will be implemented not primarily by the Federal Circuit, but by the uniquely outmoded and ridiculous form of bureaucracy that is the Patent Office.

Contrary to popular belief that KSR had meager effect on nonbviousness outcomes, an empirical study has found that the FedCir and district courts have started to invalidate more patents for obviousness because of KSR.

No. The study shows, at most, that more patents are invalidated for obviousness, and (totally unsurprisingly) every judgment to that effect is accompanied by an opinion that cites KSR. That's not the same thing at all. Every opinion finding a patent non-obvious cites KSR too, and there are still many more of those overall.

For software, the obvious-nonobvious percentage is somewhat close to 50-50, which a 2010 WilmerHale study of FedCir decisions since KSR found. Going forward, I see the FedCir and district courts continuing to grapple with nonobviousness doctrine, including for software patents.

Another non-conclusion conclusion?

KSR has elevated the threshold and more software, even if they are deemed statutory subject matter, may be subject to a finding of obviousness. However, I don't see the Supreme Court or FedCir en banc deciding this area anytime soon. Most of the action will be at the district court or PTO/BPAI level, which may lead to divergences in what is already a fact-intensive area.

Wouldn't that be the other way around? All decisions involve the PTO, some involve the BPAI, a tiny number involve the District Courts, right?

Section III: What This Means for Software, Software Users

Many people, including free software advocates, have long decried software patents as hindrances to innovation and sharing. The recent populist efforts to petition the Obama administration to end software patents show they are not alone. However, given Congress's inability to grapple with this issue (or any other matter), change must come from elsewhere.

I don't understand what this supposed inability is. Congress just spent more time and moved a larger revision of the US patent law than anytime this generation.

The flux in the doctrine in eligible subject matter and nonobviousness is a step in the right direction.

Flux in doctrine is a step in the right direction? Wouldn't that mean that the right direction is back and forth? Or do you mean that current doctrine is bad, so that even back and forth is a better direction than forth?

Those sued by patent holders have greater likelihood of success to invalidate software patents under Sections 101 and 103.

That's a conclusion for which no evidence has been presented. At most you have shown, on the basis of one rather weak survey produced in an unrefereed context by an interested party, that judgments finding obviousness have increased. Even if the data are persuasive, and in addition to being persuasive are correct, and in addition to correct are also representative of the situation overall, they still don't support your conclusion. The results noted could have been in declaratory actions brought by those who have not been sued. They could have resulted from the fact that defendants have less chance of prevailing, are licensing and paying royalties more often, and only were the case against the patent is strong are they willing to proceed to trial. And so on.

Perhaps one day proprietary holders of software patents will find the patent system and courts not worth their effort and costs.

But the reality, as you half-mention at one point, is that we are in the early stages of a patent war rapidly spreading throughout the IT industry, in which the price of absurdly lousy patents of all sorts has gone up by an order of magnitude. A major industry participant, to my knowledge, paid more than a million dollars recently for an expired patent. An attempt to describe what's going on without actually even more than barely mentioning what's going on does not seem very promising to me.

Or change may come from the market. The patent wars have already shown the inefficiencies with the software patent system, and with free software offering an alternative for users and other stakeholders, perhaps that would sound the death knell.

That makes no sense to me. The force explosively driving up the price of IT patents is the market. Capitalism is doing what it always does: trying to destroy the free market in favor of monopoly. Dominant firms (Microsoft and Apple) who can only benefit from the prohibition of innovation are spending billions of dollars to buy up dubious government-issued monopoly rights to exclude innovators. Monopolists in adjacent business segments, with different "business models" exploiting different bottlenecks, are attempting disruptive innovation elsewhere in order to expand their area of dominance, sometimes in alliance with the free world, which—being non-capitalist—actually believes in the free market. The anti-innovation monopolists have always regarded the free world as an existential threat to them, which indeed we are. They therefore attach great importance to the patent system, because state prohibition of innovation is the only force that can even substantially slow down our efforts to eliminate them. We are now forcing them to spend billions of dollars on worthless theoretical rights, and to compete in the destruction of those rights against other oligopolists who are temporarily on our side. That doesn't sound at all like the process you are describing, so one of us probably misunderstands the situation.

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