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“In another moment down went Alice after it, never once considering how in the world she was to get out again.”Lewis Carroll, Alice’s Adventures In Wonderland

This spring in Alice v. CLS Bank, the Supreme Court will once again confront the issue of patent eligibility, this time asking whether computer-implemented inventions are the types of innovations our patent system should protect. It may seem curious–or ‘curiouser and curiouser’–to many that the Court feels the need to address this issue after over a half century of breakthrough software inventions backed by software patents. But the Court seems particularly focused on the question of eligibility. In fact, Alice is the fourth time in as many years the Court has heard appeals asking whether inventions ranging from isolated DNA to business methods can be protected by patents.

We believe the Court is revisiting the issue of patent eligibility because it is struggling to formulate a workable test. The patent statute has no limitations on patent eligibility, as long as an invention is directed to a machine, product, process, or chemical composition it is eligible for patenting. Over the years, the Supreme Court has created exceptions for laws of nature, natural phenomena, and abstract ideas. It is the last exception that is relevant to computer-implemented inventions — i.e. is this invention ineligible because it is an “abstract idea”?

In IBM’s amicus brief in Alice, we argue that the abstract idea test doesn’t work for computer implemented inventions. The Court has not provided guidance on how to identify a patent ineligible abstract idea, and thus lower courts, the PTO and the public can not consistently apply the test. In the present case, this confusion resulted in multiple opinions (with no majority) spanning over one hundred pages at the Federal Circuit, despite that court’s decision to hear the case en banc. A closer look at the types of concerns raised by certain computer implemented inventions reveals that the non-obviousness requirement would be a more appropriate vehicle to address these concerns, because the inventions are in fact old methods implemented on computers using conventional means — embodying nothing truly new. More importantly, when properly understood, computer-implemented inventions are never really abstract because they are implemented on a machine.

Computer implemented inventions, particularly in software, form the basis for innovation not only in the technology products we use every day, such as laptops and smartphones, but in everything from cars to surgical techniques to innovations that increase efficiency and production in factories. Strong and effective patent protection for these innovations in the U.S. has fostered a fertile environment for research and development and, as a result, the US is the undisputed leader in the software industry. We stand at the threshold of a new era of cognitive computing—ushered in by advances such as IBM’s Watson — in which machines will learn, reason and interact with people in more natural ways. Patents have helped fuel the software breakthroughs we rely on today, and will help spur the innovations of tomorrow. We hope the Court — and the patent community — will consider our future as we address the fundamental issue of what our patent system is and should be designed to protect.

Additional perspective about IBM’s stance on software patents and CLS Bank amicus brief can be found at:

Gene Quinn, IPWatchdog: Supreme Court “Abstract Idea Doctrine” Is Unworkable

Steven Lundberg, National Law Review: IBM Weighs in on CLS Bank: The Abstract Idea Test is Unworkable for Computer-Implemented Inventions and Should be Abandoned

Kelly G. Hyndman, Jurinspired 005, January 31, 2014

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by Manny Schecter
IBM Chief Patent Counsel

At long last, the Government Accountability Office (GAO) has submitted its report on patent litigation to the Committees on the Judiciary of the US Senate and House of Representatives, as authorized under the America Invents Act (AIA).  Unfortunately, the report is a day late and a dollar short. Actually, the report is more than a day late – the AIA required that the GAO submit its report within 1 year of its enactment. The AIA was enacted in 2011.  The report is also more than a dollar short –  the GAO ignored Section 34 of the AIA which specified the contents of the study (namely patent litigation initiated by Non-Practicing Entities (NPEs)), choosing instead to  focus on  a set of issues not within its Congressional remit.

First, let me provide some context.  In general, the report furthers the public dialogue on patent litigation, which is always helpful. So too is its focus on patent quality, and the need to improve patent claim clarity to make it easier for us all to understand the boundary between infringement and non-infringement. But in summarily reaching the surprising conclusion that NPEs are not the main cause of the increase in patent litigation, the GAO inexplicably turned its attention to an issue of its own manufacture, namely software patents.

As stated above, the GAO was not even asked to look at software patents….with good reason. Software patents – no matter how defined – should be judged against the same principles of patentability as any other patents. Patents should be granted for inventions that satisfy the criteria for patentability regardless of technology. Technology-specific requirements for patentability risk subjecting our patent system to the same special interests that distort our tax code. The patent system is intended to promote all innovation, not favor one type of innovation over another.

Assuming for the moment that we wanted to single out software patents as a topic for study, the GAO applied a deeply flawed categorization to determine what is and is not a software patent. The GAO report concluded that more than half of recently issued patents are for software. It appears the GAO essentially considered every patent relating to electrical technologies to be a software patent. But many new methods of operating electrical devices are embodied in device hardware, not software; accordingly, the GAO’s conclusions on how many software patents have issued, and the inferences the GAO draws from those conclusions, are highly questionable.

With their erroneous conclusions as a base, is it any wonder that the GAO found software patents to be the subject of a substantial portion of patent litigation? Is it any surprise that the majority of shoppers in grocery stores located in New York are residents of New York? Furthermore, the study assumes all patent litigation is bad and implies something is wrong with any patent involved in litigation, but we know that is not true. Some infringers will not voluntarily license a valid patent, and some licensors and licensees can not reach agreement on royalty rates. Litigation has long had, and will continue to have, a key role in protecting and enforcing patent rights. Perhaps the GAO should have done what it was instructed to do and focused more attention on litigation abuse, not the mere volume of litigation.

We need to maintain our perspective. The software industry is among the most innovative and successful of all industries worldwide. See the graphic below courtesy of the Business Software Alliance.

BSA software revenues graphic_9-12-13

Most of the leading software companies are US owned and based, which is due in part to the strong protections for investment and innovation that are provided by software patents in the US. We should think long and hard before we abrogate the protections to the US software industry provided by US patents. Our nation’s economic future, and even our jobs, are at stake.  The success of the software industry and the importance of patents in protecting software innovation are well documented.  See for example the works of Columbia Law Professor Ronald Mann.  See also my previous articles published in Wired and Smartplanet.

As for NPEs, the GAO downplayed their impact, focusing instead on the total number of patent infringement lawsuits. But as we previously reported in our earlier blog entry, NPEs are clearly the source of real growth in patent litigation. See the graph below from Patent Freedom, indicating that the number of counterparties (defendants plus declaratory judgment plaintiffs) in patent suits involving NPEs has increased at a compound annual growth rate of over 30% during the last decade:

Chart for Clearing the Air_1

The GAO report glosses over this fact with only a brief reference to accounting by number of defendants buried deep in the report. But make no mistake about it – the NPE business model, not software patents, is the main reason patent litigation has increased.

One final point. NPEs often assert patents against products and services that include software.  We can debate why that is…maybe infringements are easier to discover given publication of user manuals, redbooks, and the like on the internet…but that debate would overlook a more fundamental point. Implementing patent reforms specific to software, even if successful in reducing litigation relating to software patents, will not solve the patent litigation problem. NPEs will simply assert more patents relating to other technologies – we’re already starting to see this. It is fine to try to pinpoint the root cause of patent litigation, but our reforms should be targeted to specific issues and universal in scope, based on principles and behaviors, rather than specific technologies.

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by Manny Schecter, IBM Chief Patent Counsel

As the patent community attempts to navigate the complex set of rules associated with new proceedings under the America Invents Act that enable challenges to issued USPTO patents, there is a simpler and potentially more effective way to improve patent quality — submitting prior art references as a third party under the pre-issuance submissions provisions. The provisions are designed to improve the third party submissions process to enable higher quality, more efficient patent examination. Yet, key features of these new provisions are often overlooked and, upon closer evaluation, it’s evident that taking advantage of these provisions is a good idea.

Under prior law, a third party could submit a prior art reference to the USPTO, but could not include an explanation of its relevance to a pending patent application without the consent of the applicant. A third party was thus discouraged from making a submission out of fear that a patent examiner would not recognize the significance of a submitted reference to a patent application and issue a patent anyway. The America Invents Act now requires a third party to submit an explanation of the relevance of a prior art reference, thereby improving the likelihood that a patent examiner will recognize how it relates to a patent application to the fullest extent possible. A prior art reference already identified to the USPTO by an applicant may even be a candidate for a submission: for example, it may have been incompletely or inaccurately characterized and submitting it with a statement better characterizing its relevance may help a patent examiner apply it correctly.

In considering whether to make a third party submission of prior art, one must still weigh the opportunity to eliminate or narrow claims of a patent against the risk that a patent will be strengthened because a submitted reference will be “of record.” That is, if the reference is considered by an examiner and recorded in the patent file, but the claims are unaffected, it may be more difficult to bring a successful challenge to those claims based on the same reference after a patent issues, as compared to a reference the examiner never considered. Some organizations opt to withhold references to save them for later use upon assertion of a patent against them. Although a reference may have more value after patent issuance if it had not been previously considered by a patent examiner, submission of a reference during patent application examination allows it to be considered by the patent examiner without having to overcome the “clear and convincing” standard for proving patent invalidity that will apply in court once a patent issues.

Other benefits of a pre-issuance submission are also worth considering. As members of the public and patentees, we all have an interest in improving the efficiency of patent examination. Once applicable prior art references are made available to patent examiners they are apt to perform a better examination not only on the patent application then under examination but with respect to later patent applications relating to the same technical area because the examiners will add the references to their arsenal of applicable prior art. In this way the benefits of active public participation promise to enhance the quality of patent examination generally and not just for a specific patent application for which a reference was submitted. We should also favor getting examination correct at the outset rather than trying to fix a problem later (after patent issuance) when the expense of doing so increases significantly and the burden of proof may be higher. Even if a post-issuance challenge is successful, during the interim the public is needlessly forced to concern itself with a meritless patent.

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by Manny Schecter, IBM Chief Patent Counsel

I’d like to clear up a myth about patents. I frequently see public discourse about alleged infringers of patents having “stolen” the patented inventions. Sometimes other terms are used instead of stolen, such as “misappropriated,” “pirated,” “ripped-off” and so on. The implication is that infringers intentionally used the inventions with full awareness of the patent protection. The infringers are portrayed as “bad guys.”

Not so fast. There is no requirement to show intent to prove patent infringement. Unlike copyright or trade secret, which do not protect against parallel independent development, a patent confers rights against another who makes, uses, or sells the patented invention — regardless of whether the other party had knowledge of the patent. In this way, the patent system encourages significant investment in the development of technology. In return for such powerful protection, there are stricter requirements for patentability than for obtaining other forms of intellectual property protection, including complete public disclosure of the invention.

It is indeed sometimes the case that an infringer acts with full awareness of a patent. To discourage such behavior, additional remedies are provided if patent infringement is found to be “willful.” It is impossible to know how often willful patent infringement occurs because most patent disputes (about 95%) are settled out of court. Although roughly 90% of patent lawsuits allege willful infringement, willfulness is found in only about 2% because suits are settled or patents are often found invalid or non-infringed. Willfulness is found in about half of the suits where the issue is reached, and about half of the suits with a finding of willfulness actually result in increased damages.1

It is therefore safe to assume that a substantial portion of patent infringement is inadvertent and the patent infringers are not “bad guys.”

With the increased coverage of patent lawsuits in recent years (I express no opinion here with respect to any particular lawsuit) it may be tempting to read bad intentions into every act. One should not simply assume the accuracy of an attention-grabbing headline.

 

1 See, for example, Willful Patent Infringement and Enhanced Damages After In Re Seagate: An Empirical Study, Christopher B. Seaman, 97 Iowa Law Review 417, 2012, http://www.uiowa.edu/~ilr/issues/ILR_97-2_Seaman.pdf citing Kimberly A. Moore, Empirical Statistics on Willful Patent Infringement, 14 FED. CIR. B.J. 227 (2004).

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by Manny Schecter, IBM Chief Patent Counsel

Am I the only person who noticed that the USPTO opened its first ever satellite office in Detroit on Friday, July 13? Friday the 13th! I am not superstitious. Apparently, neither is USPTO Director David Kappos.

More seriously, much has been written about the Detroit satellite office and the subsequently announced offices to be located in Dallas, Denver, and Silicon Valley. How will the satellite offices improve our patent system?

It will be impossible for the satellite offices to allow for local examination of all patent applications filed by all local inventors. Consider that many inventors collaborate with other inventors located around the world. In addition, as the size of the patent application pipeline varies over time, it may be asking too much of the USPTO to employ precisely the number of patent examiners in precisely the appropriate mix of technologies at a satellite office servicing the local community.

The satellite offices will enable the USPTO to provide community education and outreach. The public may gain access to USPTO resources such as search tools and facilities for communicating with the remainder of the USPTO and patent examiners may gain access to local industry information. And, naturally, the satellite offices will provide local jobs.

The most important benefit of the satellite offices is access to talent. IBM has research labs around the globe for the same reason – to attract and employ world-class scientists. The USPTO has a deep bench in Virginia, but certainly there are a wealth of talented people unwilling to live in the Washington, DC metro area. Improving the patent examiner talent pool will surely improve the quality and efficiency of patent examination. For this reason, the successful implementation of USPTO satellite offices is both a USPTO and US patent system imperative.

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by Manny Schecter, IBM Chief Patent Counsel

Enactment of the America Invents Act has generated considerable excitement in the US. The USPTO is developing implementation rules, legal associations are recommending strategies for operating under the new law, and pundits are speculating as to what aspects of the Act will achieve their desired objectives (or not). As exhilarating as all of this is, we should not forget the basics.

At its core the patent system still revolves around patent examiners who compare inventions described and claimed in patent applications with the most relevant prior art. Examiners must be able to sufficiently understand the inventions and the prior art to adequately do their job – a huge challenge given the newness of the information examiners work with every day. As the pace of technological advancement quickens, it becomes even more difficult for examiners to maintain the cutting-edge knowledge they require.

There are, of course, publications and databases to help examiners. But real world exposure to technology and interactive exchange with researchers in the field can be particularly useful.

Users of the patent system should take an active role in the examiner education process. Extending the knowledge-base of examiners promotes more robust examination and helps ensure that granted patents are novel and non-obvious. For patentees, this means more confidence in the validity of their patents. At the same time, the public can avoid diverting resources to designing around, challenging, or defending against questionable patents. It is also simply wrong for users of the patent system to criticize examiner performance, as many do, without helping to provide the technical education needed for improvement.

IBM is often asked to provide educational speakers on information technology for examiners. We are proud to cooperate and provide such education in the hopes of improving patent examination efficiency and accuracy, and in promoting the public’s confidence in the patent system. We encourage others to do the same.

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In an op-ed running on The Hill.com, IBM Senior Vice President and Director of Research, Dr. John E. Kelly III, calls for the U.S. House of Representatives to vote in support of the America Invents Act (H.R. 1249) patent reform legislation which will stimulate U.S. innovation, economic competitiveness and jobs.

Dr. Kelly’s op-ed, asserts that H.R. 1249 is important legislation that will facilitate improvements to the U.S. patent system, while balancing the needs of inventors of all sizes in all industries.

As the leading recipient of U.S. patents for 18 consecutive years, IBM understands and appreciates the importance of strong intellectual property laws, and encourages swift passage of H.R. 1249.

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