Déjà vu all over again: Patentablity of computer implemented software

The U.S. Supreme Court will weigh in (again) on what constitutes patent eligible subject matter (under 35 U.S.C. § 101) when it hears the case of Alice Corp. v. CLS Bank. Like the movie, Groundhog Day, the U.S. Supreme Court will once again decide what "things" are patentable. 

Distilling down the issue in CLS, the Supreme court will decide whether a general purpose computer (think PC, Mac, or server) programmed to conduct financial transactions is eligible for patenting.  Claim 1 (below) is exemplary of the patent claims in suit.

1. A data processing system to enable the exchange

of an obligation between parties, the system

comprising:

            a data storage unit having stored therein information

about a shadow credit record and

shadow debit record for a party, independent

from a credit record and debit record maintained

by an exchange institution; and

            a computer, coupled to said data storage unit, that

is configured to:

(a) receive a transaction;

(b) electronically adjust said shadow credit

record and/or said shadow debit record in order

to effect an exchange obligation arising

from said transaction, allowing only those

transactions that do not result in a value of

said shadow debit record being less than a

value of said shadow credit record; and

(c) generate an instruction to said exchange

institution at the end of a period of time to adjust

said credit record and/or said debit record

in accordance with the adjustment of said

shadow credit record and/or said shadow debit

record, wherein said instruction being an irrevocable time invariant obligation placed on said exchange institution.

But we all (including the Supreme Court) have seen the exercise of determining patent subject matter eligibility before.  For example, Gottschalk v. Benson, 409 U.S. 63 (1972) (decimal to binary number converting programmed computer); Parker v. Flook, 437 U.S. 584 (updating an alarm); Diamond v. Dierh, 450 U.S. 175 (1981) (curing rubber) ; Bilski  v.Kappo, 130 S.Ct. 3218 (2010) (hedge fund business method); Mayo v. Prometheus, 566 U.S. ___ (2012) (correlating drug metabolism); and Association for Molecular Pathology v. Myriad Genetics, 569 U.S. ___ (2013) (isolated DNA).  So what is new here to decide?

The en bank Fed. Cir. (lower court decision that is the subject of the CLS appeal), found the above claim 1 ineligible for patenting (articulated in the plurality opinion as a machine/computer/apparatus that purportedly implements an abstract financial method and subsumes the entire general abstract idea).  This all sounds eerily familiar.  It echoes to the past as if from the ghost of Supreme Court Justice Douglas past (Douglas being the opinion writer in Benson finding that implementing a mathematical principle on a physical machine, e.g. a computer, is not a patentable application of that principle).

If I were to predict the outcome in CLS, based on the most recent S.Ct. patent cases, I would say that the Supremes will (1) find the CLS computer implementing financial transactions (apparatus/data system/"machine") claims are invalid under § 101 as being abstract (per se) as subsuming the general abstract financial transaction "idea", citing Benson, and the other aforementioned S.Ct. decisions above, and (2) find the Fed. Cir. plurality opinion regarding the specific framework and/or standard for analyzing an apparatus claim for § 101 patent subject matter eligibility (i.e. extraction of the general idea of a claim and then determine whether the idea is abstract and subsumes the general idea) is not valid.

Happy Christmas!

© Stephen J. Weyer 2013

Send email feedback- sweyer@stites.com

Patent Wars: Episode III- Laissez-faire Strikes Back

Patent Wars: Episode III- Laissez-faire Strikes Back

 (A Midsummer Night's Dream or Nightmare?, Act III)

Act I

Act II

Michele Boldrin and David K. Levine of the Federal Reserve Bank of St. Louis, Research Division, last fall published a "working paper" entitled, "The Case Against Patents."  These authors "make a case" that market forces (e.g. lead time/ being the first one to the market) and less government involvement are the keys to innovation and economic development, not a strong patent system.

The opening paragraph of the working paper states,

The case against patents can be summarized briefly: there is no empirical evidence that they serve to increase innovation and productivity, unless the latter is identified with the number of patents awarded– which, as evidence shows, has no correlation with measured productivity.  This is at the root of the “patent puzzle”: in spite of the enormous increase in the number of patents and in the strength of their legal protection we have neither seen a dramatic acceleration in the rate of technological progress nor a major increase in the levels of R & D expenditure...

...there is strong evidence, instead, that patents have many negative consequences. Both of these observations, the evidence in support of which has grown steadily over time, are consistent with theories of innovation that emphasize competition and first-mover advantage as the main drivers of innovation and directly contradict  Schumpeterian” theories postulating that government granted monopolies are crucial in order to provide incentives for innovation....

...The initial eruption of small and large innovations leading to the creation of a new industry – from chemicals to cars, from radio and TV to personal computers and investment banking – is seldom, if ever, born out of patent protection and is, instead, the fruits of highly competitive-cooperative environments. It is only after the initial stages of explosive innovation and rampant growth end that mature industries turn toward the legal protection of patents, usually because their internal grow potential diminishes and the industry structure become concentrated.

Are Boldrin and Levine correct?  Are patents more a hindrance to innovation and economic development than an aid?  Was Thomas Jefferson wrong when he drafted the U.S. Constitution, Article I, § 8, clause 8), giving Congress the power to "promote the useful arts" (i.e. inventions) "by securing for limited Times to ... Inventors the exclusive Right to their respective ... Discoveries?
Is it laissez-faire time?

© Stephen J. Weyer 2013

Send email feedback- sweyer@stites.com

Expanding markets and product line puts company "Over a Barrel"

Expanding markets and product line allegedly puts company "Over a Barrel"

 

 Update- The U.S. Court of Appeals for the Seventh Circuit upheld the  preliminary injunction barring use of the mark Cracker Barrel Old Country Store for use in connection with ham products to be sold in supermarkets





 

Original Post:

 

A district court judge has granted Kraft Food's request for a preliminary injunction against Cracker Barrel Old Country Store restaurant chain from selling its branded meats in grocery stores.  Kraft's request is based on its claim that there would be costumer confusion between its Cracker Barrel ® brand cheese and Cracker Barrel's meats.  For now, the expansion of Cracker Barrel Old Country Store meats into grocery stores has it "over a barrel."

Kraft federally registered its mark, CRACKER BARREL for cheese in 1957.  Twelve years later in 1969, Cracker Barrel Old Country Store started using its name/mark for restaurants and has subsequently obtained federal trademark registrations for its mark for restaurants and various food items.  For almost half a half century, these two companys' marks lived in harmony with each other, one for grocery store sold cheese and the other for restaurants.  What changed?  Cracker Barrel Old Country Store decided to expand its business from resturants to offering its meats in grocery stores.  Even though the food products are different (meat for Cracker Barrel Old Town Country Stores and cheese for Cracker Barrel ® Brand Cheese), the district court judge, in granting the prelimianry injunction at least found it plauable or likely that Kraft will prevail and that consumers will be confused between the two marks.

Lessons to be learned

What is the take home lesson?  If you have a mark (e.g. name) similar to another's, even if your products are different (cheese vs. meat), you may not be able to use your mark in new markets or for new products or services, if the other user has been using the mark longer and/or the other user has superior rights (e.g. a mark with strong consumer recognition (think McDonald's and now Kraft's Cracker Barrel)).  And, of course, choose your mark wisely and do your due diligence to discern whether there are other users of your proposed mark/name before you start using it.

© Stephen J. Weyer 2013

Send email feedback- sweyer@stites.com

Possible Software Patent Wars Truce...A death blow for software patents?

Software Patent Wars Truce...A death blow for software patents?

 (A Midsummer Night's Dream or Nightmare?, Act II)

Does the possible truce in the endless patent litigation between Apple and Samsung mark the end of the debate regarding the patenting of software?  As many of you know, Apple and Samsung have been waging war against each other for allegedly infringing each other's software patents.  For just two examples, Apple accuses Samsung of infringing its "bounce-back" feature and Samsung alleges Apple of infringing its 3G connectivity software. 

With the two warring factions about to stop enforcing their respective software patents against the other's largest competitor, the big question is whether we need software patents in the first place?

Would we be susceptible to carpal tunnel syndrome every time we make a purchase online, making a "second" or even a "third" click to check out our "virtual shopping cart" because Amazon.com would not have "invented" the patented "one-click" check-out method without the incentive of patent protection?

© Stephen J. Weyer 2013

Send email feedback- sweyer@stites.com 

A Midsummer Night's Dream or Nightmare?...The Current Patent System

Countless words have been written regarding the state of the patent system, both in the U.S. and internationally.  Typically, even the most positive proponents or critical opponents of the patent system acknowledge some cons and pros, respectively.  As we experience the sultry summer days, this blog seeks reader participation to weigh in on whether the patent system is a midsummer night's dream, nightmare or somewhere in between.

One issue that has been raised by opponents of the patent system is that certain technologies should not be eligible for patenting at all.  For example, some say that computer software should not be eligible for patent protection.  Others believe that computer hardware should be eligible for patent protection but perhaps for a shorter term than the current 20 years of patent protection, e.g. 5 or 10 years.

Regular reader to this blog have on no less than two prior occassions (now three) been exposed to the reason we, in the U.S. have a patent system.  The Framers of the United States Constitution knew of the importance of technological progress.

The Congress shall have the power...

To promote the Progress of Science and useful Arts, by securing for limited Times to Authors and Inventors the exclusive Right to their respective Writings and Discoveries. (U.S. Constitution, Article I, § 8, clause 8).

This provides inventors with an incentive to create new products and processes.  It also gives companies and investors (e.g. venture capitalists and stockholders), incentive to invest capital looking for a return on their capital investment.

Congress has limited the duration of the monopolistic protection.  In return for the protection, the inventor must disclose his or her invention to the Patent Office which, in turn, discloses the information to the general public.

The U.S. Patent Act was drafted to accomplishes two goals.  First, it encourages innovation and discovery through its incentive of limited monopoly.  Second, the patent system promotes the disclosure of useful technology to the general public by putting it in the public domain.

While patents can be misused and perhaps 20 years may be too long for certain technologies, e.g. some argue that software and possibly, hardware inventions, the core idea of any patent system, going back to our U.S. Constitution is to "provide an incentive" to people to create new and useful inventions, by (1) granting a limited monopoly in exchange for (2) disseminating the knowledge to the public. 

But is this working out as the Framers intended?

Things to consider are:

1. Would people (inventors and companies) continue to invest time and money to create "inventions" if someone could copy the ideas without having to invest his or her own time and money?
2. Is the public really getting a benefit from the information described in the patent, building on the information and know-how, and/or learning from it?
3. Would information currently being disseminated through the patent system still be disseminated to the public if the current patent system were curtailed or altered?

Proponents of the patent system, e.g. companies spending precious capital to secure patent protection, including biotechnology and semiconductor manufacturing companies, consider the limited monopoly essential to give their companies a competitive advantage and necessary to recoup research and development costs. Without the limited term monopoly, these proponents would argue that they would never be able to recoup the investment as competitors could swoop in and easily copy the technology that the company spent many dollars and years to discover and develop.

Opponents say that at least some technologies do not need a patent system as companies and inventors will still create the technology regardless of whether a patent system exists.  Some such opponents cite start-up companies which do not have sufficient capital to patent their ideas but still spend money on research and development.

Some opponents believe that the patent system actually stifles innovation and competition.  They argue that competitors would create competing products but do not in fear that they may be sued by a patent holder for patent infringement.  Some look to patents for technologies in mobile devices like the iPhone and Android devices when arguing that more companies would be creating hardware and software, spurring mobile communication innovation and driving down prices if not for the threat of possible patent infringement.

Still other opponents argue that the 20 year term is too long of a monopoly, especially in today's immediate access information age.  Further, opponents say that, with some technologies, after 20 years, the technology is so obsolete that no one even cares about it anymore.

A quick rebuttal to this last opponent argument is that the public still benefits from the knowledge disseminated in the disclosure of a patent, even if, arguendo, after the 20 years, the originally disclosed technology may be obsolete.   Likely, 20 year in the future technology is based on, build from, or has ties to past technology.  Over the 20 years the patent holder has exclusivity, others in the public have access to the information in the patent, can learn from it, improve it, and advance technology.  If the past technology was never created, future technology may not exist.

In view of the foregoing, I pose several questions for discussion.

Question #1: Do we need patent protection for certain technologies?
Question #2: Would people still invent if patent protection were not available?
Question #3: Will investors still invest in companies if patent protection, i.e. exclusivity, is not possible to prevent others from entering the marketplace?
Question #4: Should the patent term be less for certain technologies?
Question #5: If yes to question #4, which technologies and what should the length of the patent term be?

Please post your answers to these five questions, the three "Things to consider" items above, post your own questions, or post a comment or remark to this blog.  We look forward to a spirited discussion.

Coming up....ACT II

© Stephen J. Weyer 2013
Send email feedback- sweyer@stites.com


Are You the Master of Your Domain?

Brand owners are about to face new challenges in mastering their domain names and keeping others from using their trademarks online.  You may be most familiar with domain names that end with the extension .com, .org, or .net, referred to as generic top-level domains (gTLDs).  Recently, the Internet Corporation for Assigned Names and Numbers (ICANN) opened up applications for new gTLDs which could include virtually any word as the extension.  ICANN received nearly 2,000 applications for approximately 1,400 unique new gTLD extensions. ICANN’s new gTLD program is expected to substantially increase the number of domain names on the Internet.  So the question is, "Are you the Master of your Domain?"

Brand owners looking to protect their trademarks from being adopted as a domain name registered through one of these new (gTLDs) now have their chance. A new “Trademark Clearinghouse” is now open that allows brand owners to register their marks in a central repository before hundreds of these new gTLDs (e.g “dot brands”) are launched.  In this ever-expanding online space, the Trademark Clearinghouse serves as an additional tool for brand owners to proactively protect their trademarks from those attempting to improperly register a domain name that includes your federally registered trademark.  

The Trademark Clearinghouse will accept and verify federally registered trademarks and trademarks protected by statute or treaty, and every new gTLD registry will be required to use the Trademark Clearinghouse database to provide trademark protection services to brand owners

Most notably, the “Trademark Claims” service will act as a watch service for brand owners. During the first 60 day period after a new gTLD launches, the Trademark Claims service will monitor domain name applications and send a warning to any applicants who attempt to register a domain name matching a trademark registered with the Clearinghouse. If the applicant still proceeds with registering the potentially infringing domain name, ICANN will notify the trademark owner, so the owner has an opportunity to challenge.

The Trademark Clearinghouse also includes "Sunrise Services," which allow participating trademark owners an advance opportunity to register domain names for new gTLD registries (for instance .bank, or .car or .app or .shoes, .retail) in a top level domain before registration is generally available to the public.

Filing fees for registering a trademark with the Trademark Clearinghouse must be paid annually, with discounts available where you prepay for up to five years in advance.  For example, the filing fee for one year is $150, for three years is $435, and for 5 years is $725. Registration of a trademark with the Trademark Clearinghouse includes linking up to ten domain names per registration. Trademark Registrations can be designated for one, three, or five years and are re-validated once each year.

Trademarks can be registered with the Clearinghouse at any point, but those trademark owners who register their marks with the Clearinghouse during what ICANN deems the "Early Bird Registration Period" will be granted extended protection. Trademarks registered during the Early Bird period will not expire on the first anniversary of the registration date, but will instead expire on the first anniversary of the date the Early Bird Registration Period closes.

 

So, what's the moral of this story? The early bird catches the worm.

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© Mari-Elise Taube, Stites & Harbison, PLLC, 2013

Send email feedback- mtaube@stites.com

Determining Whether Computer-Implemented Methods (software) and Computer Systems are Patent Eligible Remains an "Abstract" Exercise

The test for determining whether particular computer-implemented methods (software) and computer systems (executing software) are merely eligible for patenting remains "abstract" in view of the en banc Federal Circuit in CLS Bank v. Alice Corp.  (CLS).  The CLS decision assessed U.S. patent eligibility of computer-implemented methods and systems based on whether the claims are directed to "abstract" ideas, and thus, not patent eligible, without actually defining "abstract" and/or "abstract ideas."  Perhaps, like Justice Potter Stewart in his infamous comment regarding pornography, the Court knows an abstract idea when it sees it.  However, for the rest of us, a test for "abstract ideas" needs to be more concrete, tangible and definitive and less obtuse, or dare I say, less "abstract."  Questions still remain as to what constitutes patent eligible computer-implemented methods (software) and computer systems and how one determines their patent eligibility.

The most "abstract" aspect of U.S. computer-implemented (software) patents is the 135 page judicial opinion(s) of a very divided en banc Federal Circuit bench.  Five of the 10 judges join a "majority" opinion, and five other judges concurred in part and dissented in part, in the en banc review of a lower district court's decision.  The CLS decision involves a determination of whether four subject patents, directed to computer-implemented methods (software) and computer systems were eligible for U.S. patent protection at all.  The "majority" opinion appears to give little useful and reliable guidance for allowing one to accurately and consistently determine whether a computer method, software, or even a computer system running software is eligible for consider of patentability.  Without reading a single word of the 135 pages, the shear number of differing opinions (majority, concurring, and dissenting) gives you a hint that there is no consensus of how one should analyze and determine eligibility of computer-implemented methods and computer systems.

The "majority" reiterates the widely accepted judicially created exemptions of patent ineligibility for claims directed to 1) laws of nature, 2) natural phenomena and 3) abstract ideas.  However, the majority appears to equate 3) abstract ideas with 1) laws of nature and 2) natural phenomena.  Moreover, the majority never defines the term, "abstract ideas."  Instead, the majority merely refers to prior cases of claims directed to 1) laws of nature and 2) natural phenomena as being directed to "abstract ideas". 

Finally, although Judge Moore, in her dissenting opinion, alleges that "this case is the death of hundreds of thousands of patents, including all business method, financial system, and software patents as well as many computer implemented and telecommunications patents," the majority opinion, itself does not appear to be a real "game changer".  One slight footnote to this is with regard patent eligibility of computer systems.  Due to a tie in judges' votes, there was no majority decision with regard to patent eligibility of the computer system claims.  As a result, the lower district court's decision on patent ineligibility of the subject patents' system claims stood.

In summary, the CLS opinion does not appear to change the law of U.S. patent eligibility.  However, the decision does make it more difficult to access patent eligibility of computer-implemented methods (e.g. software) and systems and it introduces more uncertainty as to whether a patent/patent claim will be found to be patent eligible.

In view of an ever uncertain and indefinite test for patent subject matter eligibility based on an undefined criterion of "abstract ideas," patent practitioners and business people need to consider all functional aspects of computer-implemented methods (software) and draft patent claims of varying, ever more detailed scope and directed specific implementations (embodiments) so as to cover all bases and thereby ensure patent eligible subject matter.

© Stephen J. Weyer, 2013

Send email feedback- sweyer@stites.com