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Apr 10, 2008

Ex Parte Bilski: On the Briefs:

In Ex Parte Bilski, an en banc Federal Circuit plans to reconsider the scope of patentable subject matter as it relates to business methods and so called mental methods. Perhaps more importantly to the patent system as a whole, the court is considering the proper procedures going forward for determining whether a particular invention falls within the scope of 35 USC 101.

In its en banc decision, the CAFC invited non-party amici briefs, which were due April 7. (Scroll down to find the briefs).  In reading through the briefs, the first aspect that caught my attention was a common theme that institutional strengths and weaknesses of the PTO and Courts should help dictate the ultimate subject matter rule.  

  • Prof Morris: Through its examiners, the PTO has expertise in determining the technical questions of novelty, nonobviousness, and indefiniteness. On the other hand, examiners do not have the expertise to decide “philosophical and abstract” issues of statutory subject matter.
  • Prof Lemley*: Arbitrary subject matter boundaries have generally been difficult to enforce and usually result in patent attorneys using “magic words” to avoid the limits. (*NOTE: I signed Prof Lemley’s brief along with 21 other law professors.)
  • Prof Collins: A test that excludes “human cognition” elements is administrable.
  • EFF: Proposed three-step process provides a more “efficient and meaningful” way to administer the Section 101 threshold.
  • AIPLA: Section 112 should guard claim scope rather than Section 101.

Narrow or Expansive: The main thrust of the Bilski arguments, however, focus on whether patentable subject matter should be narrow or expansive. I have categorized the briefs on this axis:

Expansive Subject Matter:

  • Prof Lemley: We cannot predict the next area of innovation, and arbitrary limits on patent scope reduces incentives in those potential areas. “Bad patents” should be dealt with using the true tools of the Patent Act: Sections 102, 103, and 112. “Mental methods” should be allowed if they fall within the other requirements of patentability.
  • Regulatory Data Corp (Prof Duffy): Even under a narrow definition, applied economics is now part of the “useful arts.”  Statutory subject matter should only limit claims directed to abstract ideas, physical phenomena, or principles of nature.
  • AIPLA: We should continue to follow Diehr, State Street, & AT&T.
  • RMC: Business methods should be patentable.
  • American Express: Patenting of business and information management processes encourages the development of those useful societal tools.
  • Accenture: Business methods should be patentable regardless of any physicality limitations. Congress has deemed that business methods should be patentable via 35 USC 273.
  • Greg Aharonian: The Supreme Court’s 1876 Cochraine test does not exclusively define “process.” Rather, a patent eligible process should be broadly defined to include any process or method that yields a “useful concrete and tangible result.”
  • Koninklijke Philips: The court should be wary of relying upon precedent that focused on traditional manufacturing methods. Rather, the court should look at the broad definition of process required by Congress in 35 U.S.C. 100(b).

Narrow Subject Matter:

  • Prof Sarnoff: The court should return to the precedent of Flook. The inventive concept of a patent cannot be an abstract idea (such as hedging risk). Likewise, an information processing method must include significant post-solution activity. State Street is unconstitutionally over-broad.
  • End Software patents: Software should not be patentable even when loaded on a computer. Rather, to be patentable, there must be significant additional (non-information processing) physical activity.
  • American Civil Liberties Union: Patents mental processes would violate the first amendment.
  • EFF: There must be a technological component of a patentable invention.
  • Computer & Communications Industry Association: The CAFC should shed its “patentee-centric approach” and insted try to meet the needs of the modern world. In particular, the court should consider the systemic policy implications of its decisions. The policy implications of broader patent coverage is more litigation & rent seeking.
  • IBM: There is no sound policy for allowing business method patents.
  • American Institute of CPAs: Tax methods should not be patentable because they preempt free use of the tax laws. (Of course, the same could be said of CPAs charging corporations for their service).
  • SAP: A process should both (1) have a concrete, useful, and tangible result and (2) be “sufficiently machine-like” in order to avoid preempting work-arounds. However, software processes should be patentable.
  • Prof Collins: The court should add a “human cognition” exception to Section 101. Steps involving human cognition should receive no consideration in judging patentability.
  • Red Hat: Software patents put a huge kink in the open source software movement.
  • Financial Services Industry: State Street and its progeny are unduly broad. A token inclusion of a ‘machine’ in a claim would not render that claim patentable subject matter.
  • Dell & Microsoft: A patentable invention must operate on “something physical.” To be patentable, software should be tied to a computer and cause some physical transformation (such as movement of electrons). And, following Comiskey, a patent should not be granted under 103 if the inventor merely combined well known computer hardware with inventive but otherwise unpatentable software.

Other?

  • Yahoo! and Prof Merges: A strict “technology” requirement is too inflexible. State Street taught us that such a strict requirement does not fit well with “onrushing technology.” The Yahoo!/Merges test: a patent eligible process must itself be “stable, predictable, and reproducible” and its result must be “useful, concrete, and tangible.”  Bilski’s claims would not be eligible because they do not define a “stable” process.
  • Intellectual Property Owners Association: A process that is either implemented by a machine or that transforms matter into another state is patentable subject matter.  IPO favorably cites the Flook limitations on on information processing.
  • Business Software Alliance: Courts should err on the side of patentable subject matter because Sections 102, 103, and 112 make-up any slack. Software should be patentable. However, Bilski’s invention is not patentable because it is an abstract idea.
  • Washington State IP Law Assn: The CAFC should re-write State Street to be consistent with Supreme Court precedent.
  • Prof Morris: Subject matter questions should be avoided. Rather the PTO and courts should look to the substantive rules of 102, 103, and 112 to decide the issue. Section 101 jurisprudence has been both haphazard and unfair.

The elephant in the room is the recent Comiskey decision. There, it appeared that the court refused to give any patentable weight to the portion of the invention directed to non-statutory subject matter. In its brief, the Boston Patent Law Assn asks the court to clarify the following statement from Comiskey:

“The routine addition of modern electronics to an otherwise unpatentable invention typically creates a prima facie case of obviousness. Moreover, there is no pertinent evidence of secondary considerations because the only evidence offered is of long-felt need for the unpatentable mental process itself, not long-felt need for the combination of the mental process and a modern communication device or computer.”

Notes:

  • I signed Professor Lemley’s brief along with twenty-one other law professors. The theory behind the brief follows the IPO brief that I helped draft in the Metabolite case.

Amici Briefs:

 

 

 

 

Posted by Dennis Crouch in CAFC, En Banc, Software | | Comments (59)

Dec 19, 2006

Microsoft v. AT&T: Transnational Patent Law At The Supreme Court

Microsoft v. AT&T (Supreme Court 2006)

Transnational patent law is a hot topic, and one the Supreme Court cannot ignore. The issue de jour involves the question of unauthorized export of patented software.  AT&T holds the speech compression patent that is infringed by Microsoft Windows. (RE 32,580). Microsoft exports the software code from Redmond to various international locations.  Once abroad, the code is then copied and installed in computers that are then sold abroad.  As the invention is claimed, the code alone does not infringe. Rather, infringement would only occur once the code is combined with the computer hardware. 

Under traditional notions of patent law, Microsoft’s actions are not infringement because the code alone does not infringe the patent, and (for the purposes of this case) the code is not combined with the hardware within the U.S. 

Here, however, traditional notions of territoriality have been supplanted by statute.  Under 35 U.S.C. 271(f), supply of only a portion of a component of a patented invention from the U.S. can be infringement.

35 U.S.C. 271(f) prohibits the “suppl[y] . . . from the United States . . . [of] all or a substantial portion of the components of a patented invention . . . in such manner as to actively induce the combination of such components outside of the United States,” as well as the “suppl[y] . . . from the United States [of] any component of a patented invention that is especially made or especially adapted for use in the invention.” 

Microsoft, of course, wants to avoid infringing the U.S. patent for its activity abroad and gives two separate reasons why its activity of exporting software do not fall within the parameters of 271(f). (I) Software code is an intangible string of information not a “component” as required by the statute. (II) Because copies of the code were used to create the infringing software/hardware combination, no physical particle that Microsoft exported actually became part of the finished product.  According to Microsoft, this means that nothing in the infringing combination was actually supplied from the U.S. as required by the statute. I term these two arguments the tangibility requirement and the molecular conservation requirement.

Microsoft and its supporters have now filed their merits briefs to the Supreme Court, and my reading of their arguments is that there is strong support for molecular conservation, but only weak support for tangibility. The Bush Administration supports this distinction in its brief filed jointly by the DOJ and PTO. 

On tangibility, the Government argues that software can certainly be a component, and that the statute is not limited to “only tangible components” as Microsoft suggests. Although not cited by the Government, Section 271(c) provides a statutorily distinct way of limiting components.  In referring to infringement through importation, that clause identifies only components of certain types of inventions such as machines and compositions.

On molecular conservation, the Government correctly notes that the statute requires that the exported components be the same components that are combined in the infringing manner. “Conduct that merely induces the combination of foreign-made components does not violate Section 271(f).” The statute, according to the Gov’t, leaves foreign manufacturers “free to manufacture and assemble copies of the identical components overseas” so long as none of the components actually assembled were made within the US.  Applying their argument to this case, we know that the software was copied and only those copies were combined with hardware in a would-be infringing manner.

A group of electronics companies led by Amazon filed a colorful brief that also supports the requirement of molecular conservation.

No matter where their unique arrangement was invented or dictated, if each molecule in the machine was supplied from outside the U.S., then no component was supplied from the U.S. In the present case, Microsoft did not supply even a single molecule of the foreign machines at issue.

Amazon also raises the slippery slope issue.  According to the brief, if Microsoft is liable here, then the Court would open the door to infringement for export of blueprints or a CAD/CAM design scheme.  That result, the brief argues, goes against congressional intent. As an aside, Amazon cited Wikipedia but did not include it in its list of “authorities.”  Although they do not cite it, the Pellegrini case holds that plans or instructions for a patented item cannot serve as components under 271(f).

In support of the molecular argument, a group of professors led by professors Lemley (Stanford) and Duffy (GWU), looked appropriately at the language of 271(f):

[A]s a matter of grammar that the phrase “such components” refers back to the components that have been “supplied” from United States. Thus, the plain language of the statute requires that inducing an extraterritorial combination constitutes an act of infringement if and only if the combined components are in fact the same components that were “supplied in or from” the United States.

For the professors, supplying exact copies does not meet the requirement. Most of the briefs come-up with some hypothetical metaphor to explain their situation — a guy memorizing some code and flying on an airplane, a hard-copy print out of some code that runs a fuel-injection system, CAD/CAM instructions, blueprints, etc.  The idea apparently is that if we allow copies of software to be considered components, then these situations necessarily also provide for infringement actions.  More accurately, however, they are just poor hypotheticals.

Software as Patentable Subject Matter: The anti-patent activist group SFLC led by Dan Ravicher and Eben Moglen also filed a brief that may be the dark-horse of this debate.  Their brief asks the Court to take a fresh look at the patentability of software.

Software can not be a “component[] of a patented invention” under 35 U.S.C. § 271(f) because software is not patentable subject matter under 35 U.S.C. § 101. As such, the Federal Circuit’s holding to the contrary in this case is erroneous and should be reversed.

It would be odd for the Court to decide the 101 issue in this case after dismissing LabCorp earlier this year.  However, I expect at least one concurring opinion supporting the ideas in this brief.

Impact on Software Industry: If Microsoft loses here, it will at least have a clear avenue to avoid future infringement. Unfortunately for US business, that avenue is to move all software development activities abroad so that components are never exported. This harmful effect was recognized and discussed in SIIA’s brief. SIIA is an industry group of software & technology companies who want to continue to design products in the US, but manufacture those products abroad. This argument is punctuated by BSA’s questionable hyperbole: “The purpose of patent protection is to encourage domestic innovation, not to drive it overseas.”

Impact in Biotech: Although not yet a viable industry, this could have a potentially large impact on biotechnology patent issues.  Like software, DNA code (or other biologics) could be shipped from the U.S. to be copied abroad and incorporated into an organism in an infringing manner.  Even more abstract, the export may merely involve transmitting a sequence listing that would be used to reproduce the sequence abroad.  Any decision on software should consider the potential impact on these areas as well.

Methods: What Professor Wegner has called the “Bizarre Twist” of this case involves the CAFC’s notion of export of components of method claims. In Union Carbide v. Shell, the court found that methods could indeed have components, and those included items used in the method (such as a catalyst).  Thus, in that case, the defendant could be held liable for exporting a stock catalyst if it intended to use the ingredient in a would-be infringing manner. Shell settled its case with Union Carbide, but has filed an amicus brief in this case, arguing that the Federal Circuit “seriously erred” by declaring that “every form of invention eligible for patenting falls within the protection of section 271(f).” 

Statutory Construction Excludes Methods?: Shell compares the use of the term “component” in 271(f) its use in 271(c) — the section addressing importation.  In 271(c), Congress explicitly limited components to “component[s] of a patented machine, manufacture, combination, or composition,” but also included a provision excluding importation of materials used in a patented process.  Shell’s argument: because 271(f) does not include the provision discussing materials used in a patented process, it cannot cover processes.  Of course, the unstated counter-argument to shell is that components discussed in 271(c) are specifically limited to components of machines, while 271(f) components are not so limited — indicating that “component” in 271(f) should receive a broader interpretation.

International Law: All of the transnational patent issues have an impact on international law issues. FICPI, a Swiss-based organization of patent folks filed its brief asking the the U.S. to keep its patents territorial and avoid stomping on the toes of others (as “young nations” are bound to do). FICPI’s implication that the Supreme Court is bound by the Paris Convention is plainly wrong.  The Paris Convention is not U.S. law. However, their point is well-taken, if 271(f) covers software, it thwarts the efforts of other countries to eliminate software patents.

Documents:

Important recent 271(f) cases:

  • NTP v. Research in Motion, (271(f) “component” would rarely if ever apply to method claims).
  • AT&T v. Microsoft, 414 F.3d 1366 (Fed. Cir. 2005) (271(f) “component” applies to method claims and software being sold abroad);
  • Union Carbide v. Shell Oil (Fed. Cir. 2005) (271(f) “component” applies to method claims).
  • Eolas v. Microsoft, 399 F.3d 1325 (Fed. Cir. 2005) (271(f) “component” applies to method claims and software);
  • Pellegrini v. Analog Devices, 375 F.3d 1113 (Fed. Cir. 2004) (271(f) “component” does not cover export of plans/instructions of patented item to be manufactured abroad);
  • Bayer v. Housey Pharms, 340 F.3d 1367 (Fed. Cir. 2003) (271(g) “component” does not apply to importation of ‘intangible information’).

Notes:

  • I will be updating this page as more briefs are filed.
  • I will be talking about cross-border liability at Santa Clara University’s 25th Annual Computer & High Technology Law Journal Symposium on January 26 in San Jose. Information here.

Posted by Dennis Crouch in Patent Cases 2006, Software, Supreme Court, Transnational | | Comments (36)

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