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Patentability of Software after Bilski: How the Federal Circuit Will and Should Refine Patentable Subject Matter and Nonobviousness Doctrine to Encourage Free Software

-- By ThomasHou - 19 Oct 2011

Section I: Bilski's Minimal Effect on Computer Software as Eligible Subject Matter

The Supreme Court's decision in Bilski v. Kappos was anticipated to remake the groundwork for patentable subject matter, including that of computer software. The Court had to decide whether a method of hedging risk in commodities trading constituted a "process" under Section 101 of the Patent Act, which the Federal Circuit answered no according to its machine-or-transformation test. The Court affirmed but criticized the Federal Circuit for relying exclusively on the machine-or-transformation test, and also held that business methods were not per se unpatentable. The Court relied on its earlier precedents on process patents to hold that the claimed invention was an unpatentable abstract idea. For computer software, the Supreme Court declined to "comment[] on the patentability of any particular invention" and left to the Federal Circuit to develop doctrine on the patentability of process patents.

The Federal Circuit has recognized the patentability of computer software ever since its en banc decision in In Re Alappat. Recent developments in its doctrine and that of the Supreme Court have hardly thrown that into doubt. In its most recent decision on this matter, Cybersource Corp. v. Retail Decisions, Inc., the Federal Circuit considered the patentability of a method for detecting credit card fraud by using information from Internet addresses and a computer readable medium containing instructions for executing that method. The Federal Circuit held the method was an unpatentable mental process that a human mind could perform and the usage of computers to gather the data did not save the claim from unpatentability. For the medium, the Federal Circuit emphasized that it must look at the underlying invention and recitation of a computer without the computer placing a significant limit on the scope of the claim does not save it from unpatentability.

Going forward, the Federal Circuit will continue to uphold computer software as eligible subject matter under its machine-or-transformation test. Having taken a beating in Bilski and other recent Supreme Court decisions, the Federal Circuit will likely be flexible in its approach and look at the software claims holistically. Most software are sufficiently tied to a machine to satisfy the machine-or-transformation test. Nonetheless, one aspect that the Bilski decisions did not clarify was whether a general purpose computer could satisfy the machine prong, or a computer specifically adapted to the claimed process is required. As Jonathan Masur points out, this question can important in limiting the grant of computer software patents. To encourage more free software, the Federal Circuit should rule for the latter. However, the PTO has endorsed the general purpose computer option and with few contrary indications from the Federal Circuit, meager disagreement exists about the subject matter eligibility of computer software, at least in the courts.

Section II: The Continued Viability of Nonobviousness to Bar Trivial Computer Software Patents

Before software patentees get too excited, they should remember the Supreme Court's counsel that eligible subject matter is a mere floor and claimed inventions must also be "novel, nonobvious, and fully and particularly described. These limitations serve a critical role . . . ." The nonobviousness requirement under Section 103 of the Patent Act has long been the gateway for patentability and the hardest for patentees to satisfy. The Supreme Court laid out the standard test in its Graham v. John Deere Co. decision. In the early case of Dann v. Johnston, the Court applied the Graham factors and held a computer software program to help bank customers invalid for obviousness. The Court's most recent case on nonobviousness is illustrative and useful for testing this requirement against claimed computer software.

In KSR Int'l Co. v. Teleflex Inc., the Supreme Court considered the nonobviousness of a patent for an adjustable electronic pedal with a fixed pivot point used for vehicle control. The Court emphasized that its precedent called for a flexible and functional approach and rejected the Federal Circuit's exclusive reliance on its teaching, suggestion or motivation test. For patents claiming combinations of prior art elements, courts should be cautious and look at "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." The Court recognized that market demand will often drive design trends: "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." The Court held the patent at issue obvious and cautioned courts not to stifle the progress of the useful arts by applying rigid and narrow tests for obviousness.

Through KSR, the Supreme Court maintained the traditional threshold Graham factors test for nonobviousness for the Federal Circuit to follow. Having a high threshold is important for assessing the patentability of software, for nonobviousness limits the granting of exclusive rights to software whose inventiveness is trivial and which would have been obvious to the ordinary-skilled software inventor (whose skill would be quite high today). The field of software is broad and its prior art reaches beyond computer programs to that of the electrical arts and other fields. In Muniauction, Inc. v. Thomson Corp., the Federal Circuit considered the nonobviousness of a software system for auctioning and bidding for municipal bonds using a web browser. Finding little difference between the systems in the prior art and the use of a web browser well-known, the Federal Circuit invalidated the patent. To encourage free software, the Federal Circuit and PTO should not relax the high threshold for nonobviousness. Furthermore, the Federal Circuit has traditionally relied on secondary considerations such as commercial success, long-felt but unsolved need, and failure of others when nonobviousness is at a balance. With software creation increasingly having a marginal cost of zero, the importance of those secondary considerations should be reconsidered. After all, their use is optional and depends on the context. The Federal Circuit should be wary of using secondary considerations to uphold the nonobviousness of software when the main Graham analysis is close.

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