Author: Gerald R. Prettyman, J.D., LL.M.
The public tends to believe the purpose of the Patent Office is to issue patents. The facts paint a different conclusion. Typically, very few patent applications get approved for a patent on first examination. Saying 1 in 10,000 would not be far wrong.
Most patent applications achieve allowance (approval for a patent) through the talents of a patent attorney. Overall, the final average of typically above 50%. Then there is software.
Until 1981, the Patent Office refused to patent software on the basis that software was not a process or article of manufacture. Then the U.S. Supreme Court ruled for the first time that a software program running according to a mathematical formula could be patented for a manufacturing process. Over time, software control of processes increased until software was controlling financial processes. As typical, the Patent Office rejected these applications until 1998, when the U.S. Supreme Court ruled that software for financial processes was eligible for a patent. The basis for that ruling is the first patent law which allows a patent to whoever invents or discovers any new and useful process, machine, manufacture, or composition of matter, or any new and useful improvement subject to the other requirements of law and the patent rules.
The ruling was a boon for business and society. Companies had multiple financial incentives to create software, and whole companies could exist just for creating and selling software. Without that 1998 ruling, we might still be watching DVDs instead of streamed content over the Internet.
Lower Courts Required To Add Patent Rules
The ruling though only said software could be patented. The court did not (as the Supreme Court never does) provide guidance on what rules would apply. Consequently, other courts had to add rules to make sure that the patent included references to computer hardware, with one court requiring the patent applied to a “machine-or-transformation.” The U.S. Supreme Court later said the “machine-or-transformation” test should not a focal test.
As business and societal needs grew, so did the number of computer program patents. A problem though developed as computer program patents starting covering business and financial operations that companies had been already performing, albeit with lesser or no computer programs. The result was that software companies could and did receive patents and then sue businesses for merely computerizing their existing business methods. These lawsuits were particularly a problem for the financial industry.
The backbone of the problem was that the patent laws and rules did not expressly cover computerized business method patents. The second and third patent laws require that an invention not be previously “patented, described in a printed publication, or in public use, on sale, or otherwise available to the public” or an obvious combination of prior inventions. These laws are important because they mean a person in the U.S. cannot patent an invention from outside the U.S. or take parts off the shelf at the hardware store and claim to have invented the combination.
But because many of these business and financial operations were not in a printed public document, the Patent Office had a limited basis for not patenting these computer programs. In 2011, Congress attempted to address the problem with an expanded patent review program, but most patent reviews did not start until the filing of an infringement lawsuit so the program had only a limited impact.
First Software Patent Validated For Alice
Then in 2013, the Court of Appeals for the Federal Circuit (which considers all patent case appeals) reviewed a software patent challenge owned by a company named Alice, and ruled that the patent was valid.
The challenger appealed to the U.S. Supreme Court, which ruled the Court of Appeals for the Federal Circuit was wrong because to the view of the Supreme Court, the patent applied to an abstract idea, and as the U.S. Supreme Court had stated in an earlier case, abstract ideas are not patentable under the first patent rule. The ruling instead intensified the problem because not only is “abstract” not present in the first patent law, or in any patent law, the Supreme Court never well explained the meaning of “abstract.”
Regardless, the Patent Office quickly adopted the Alice ruling such that software allowances dropping so precipitously that some people wondered whether software was at all eligible for a patent. Even so, the Patent Office approved some software program applications. Many of these cases, however, relied on dedicated equipment using software. In essence, the patent applied to the hardware, not the software. Together, with vague hints in the Alice ruling, the appearance was that the key to software being patentable required something tangible outside of the computer.
2017 – Court Rules A Software Program Is Patentable
Finally, in March 2017, the Court for the Federal Circuit ruled that a software program was patentable for seek to protect the application of physics (electronic signals) to hardware (sensors). To bolster its position, the court cited the same 1981 U.S. Supreme Court case upholding a ruling for a patent on a computer program used to control manufacturing equipment.
The essence of these cases is that software programs by themselves remain not patentable because programs running code (algorithms), and algorithms are not tangible, to wit, they are abstract. If though, the code (i.e., the processor) controls, reads or tracks something tangible outside of the processor, be those sensors, machines, or even packages, the patent application meets the test. In the simplest terms, if a person can see something, that thing is tangible.
In 2017, a court turned time back for software to the machine or transformation test, thus putting a mirror to Alice’s looking glass. So, if you are a programmer, or know a programmer, the good news is that is that there is a chance for a patent. We need only look back into the looking glass.
Gerald R. Prettyman is Patent and Intellectual Property Counsel to J.G., PC., Business & Corporate Law. Mr. Prettyman earned his law degree with a Certificate in Intellectual Property with Distinction and a Masters degree in Intellectual Property.