Computerized business methods -- Patentable? Part 2

In part 1 of this week's topic, I examined the highly discussed Alice Corp vs CLS Bank case in which a computerized business method involving managing transaction risks is being debated for patent eligibility. So should computer-implemented inventions such as software be eligible for patent protection? Many companies and organizations have responded to the case with their takes on the topic.

• Microsoft, Adobe Systems and Hewlett-Packard are arguing that performing "an otherwise unpatentable idea on a general-purpose computer' does not make the idea patentable" because it does not actually involve a true computer-implemented invention but rather it is a business method posing as one.

• Linkedin and Netflix are saying that "software patents do not serve the Constitutional purpose of the patent system: to promote the progress of science and the useful arts ... innovation happens despite software patents, not because of them". 

• Software Freedom Law Center is even stating that "innovation in software, like innovation in mathematics, is encouraged by scientific processes of free sharing and open publication, not by granting state-issued monopolies on ideas."

These are all very interesting stances posed by different groups in the tech realm. I definitely agree with Microsoft in that an old idea does not automatically become patentable simply for being done through a computer -- though it is a novel way of doing things, it is an act that becomes quite obvious with the advancement of technology in my opinion. I can't say I agree with Linkedin and the Software Freedom Law Center completely. I think software definitely brings value to the progression of innovation for it is at the heart of the development of technology and should deserve the right to be patentable to a certain extent to say the least. Though the nature of software makes it hard to maintain its exclusivity since it is easily replicable, I think other measures should be taken to ensure that software developers are still being rewarded for their work.

Source: http://features.blogs.fortune.cnn.com/2014/03/28/supreme-court-to-decide-when-ideas-become-too-abstract-to-patent/

Computerized business methods -- Patentable? Part 1

A patent infringement case that has been gaining tremendous attention recently goes to Alice Corp. vs CLS Bank International. Why? Because it involves the issue of abstract ideas such as software can be patentable.

The invention in this particular case is a computer-implemented method of mitigating risk in foreign currency transactions so that one party won't default after another party has completed his half of the bargain. The patents involved came from an Australian named Ian Shepherd, who in 1993 filed the first of a series of patent applications that in very generic terms described a process of using a general computer to effectuate transactions between a third-party intermediary and the related parties. The concept of using an escrow agent (the third-party intermediary) is an old idea and unpatentable, but the incorporation of a computer is new in this case. After these patents were granted, Shepherd assigned them to a non-practicing entity he set up named Alice Corp.

CLS Bank International facilitates $5 trillion worth of transactions involving 17 different currencies each day and is considered "systematically important financial market utility" by the U.S. Treasury. Alice Corp sued CLS Bank for patent infringement regarding the bank's risk-mitigation system in the currency exchange market. CLS is challenging the invalidity of Alice's patents on the grounds that Alice is trying to patent a nonpatentable "abstract idea". The patents fall under the non-patentable category due to its abstractness, which is discussed in Section 101. Specifically, CLS contends that Alice has tried to patent "the basic economic concept of intermediated settlement or escrow."

Many professionals and scholars in the patent field are suggesting that in the hearing on Monday, the supreme court should move away from its reliance on Section 101 and start considering other factors such as whether the patent is too "obvious" (Section 103) or "indefinite" (Section 116) to determine its validity.

It is a highly anticipated case to say the least. On one hand we have another non-practicing entity (patent-troll) going against a prominent financial institution, while on the other we are dealing with the matter of abstractness. Whatever the decision of the Supreme Court might be, it will certainly have an impact on the patent system in both the reform against non-practicing entities as well as the determination of patent eligibility. I am definitely looking forward to the outcome of the trial.

Source: http://features.blogs.fortune.cnn.com/2014/03/28/supreme-court-to-decide-when-ideas-become-too-abstract-to-patent

Simultaneous Inventions - Obviousness?

In my previous post, I briefly delved into the concept of second considerations and how they could shed light into the determination of a patent’s obviousness. Among the list of second considerations, the simultaneous invention is a factor that is rarely applied by the Federal Circuit in comparison to others. The Federal Circuit has stated that the fact that another person has simultaneously and independently created the same invention could indicate that the invention was obvious. From an accused infringer’s standpoint, this often-overlooked secondary consideration could work in one’s favor. This factor could be particularly effective in a situation “where the simultaneous inventions occurred shortly after an enabling technology was introduced.”

Take for example, the following sequence of events:

• June 1, 1912, Company A introduces the world’s first radio with an antenna for receiving reception
• August 1, 1912, Inventor B develops a radio antenna that improves the reception of Company A’s radio
• September 1, 1912, Inventor C, independently of Inventor B, develops an antenna that improves the reception of Company A’s radio. Inventor B’s patent reads on the antenna of Inventor C.

With the simultaneous invention factor, Inventor C, if sued by Inventor B for patent infringement, could argue that the fact that Inventor B and Inventor C each independently created a radio antenna shortly after the enabling of a technology, the radio in this case, shows that the invention is obvious. In other words, the antenna would have been invented sooner if the radio was created sooner. From a litigation strategy standpoint, the accused infringer under a similar circumstance would do whatever he or she could to find technology that preceded the invention and argue that the invention only occurred once the technology existed, and therefore the invention is obvious.

Source: http://www.ipo.org/wp-content/uploads/2013/03/SecondaryConsiderations.pdf

Meaning of Obviousness and Secondary Considerations

In 2007, Teleflex Inc, a diversified global company providing manufacturing for devices in medical, aerospace and commercial spaces sued KSR Intl., a manufacturing company specializing in pedal systems, for infringing upon its patent of connecting a sensor to a pedal to control the throttle in a car. Little did they know that this case would change the landscape of patent eligibility forever.

In response to Teleflex’s litigation, KSR argued that Teleflex’s patent was not patentable because it was obvious. KSR initially won in district courts, but Telefelx was able to win in appeal courts by relying on the TSM test. The TSM test was one of the most widely used tests to determine obviousness prior to KSR. It states that in order for a patent to be obvious, there must be a Teaching, Suggestion or Motivation in the prior art to combine elements in the prior art.

In the end, the supreme court ruled in favor of KSR and stated that the federal courts made the mistake for applying the TSM test in a rigid and formalistic way that lacked common sense. Obviousness should suggest that a person having ordinary skills in the art would have easily thought of the invention given the plurality of prior art. The outcome of the KSR case essentially removed the TSM from the standard for determining obviousness and as a result, the scope of what is obvious is broadened and it becomes much easier to invalidate a patent based on obviousness.

Now that providing obviousness no longer requires establishing TSM, secondary considerations have taken on greater significance in obvious determinations. Secondary considerations, or objective evidence, can often be used to overcome an obviousness objection. Some examples include the invention’s commercial success, long felt but unresolved needs, the failures of others and etc. Essentially, by establishing that the patent fulfills one of the secondary considerations, the inventor could argue that the patent is not obvious. For example, if there is a need for an invention, one can infer that many others have tried to develop the product but failed, and therefore the invention is not obvious.

I think now that secondary considerations also fall into the determination of obviousness, it will be interesting to see the new arguments and challenges that will emerge. But we know one thing for sure, and that is the KSR case revolutionized the meaning of obviousness and the TSM is not a good indicator of obviousness if applied rigidly.

Apple: 1 vs. European Paten Troll: 0

This is a follow-up for a previous post on a patent infringement litigation involving a non-practicing entity and Apple - the case has been dismissed as the patents-in-suit are declared invalid.

A German non-practicing entity named IPCom filed a lawsuit last month against Apple accusing Apple of infringing upon its patent involving the emergency-dialing feature on mobile devices and demanded $2.2 billion in monetary compensation. However, after undergoing two panels of judges in the Mannheim Regional Court, the case has been dismissed with a total of three rulings announcing that Apple did not infringe a certain IPCom patent family by implementing the 3G/UMTS standard. A related lawsuit filed by IPCom against HTC concerning the same patent was also dismissed by court. It is believed that IPCom will most likely appeal, but Apple and HTC have no intention to settle and will continue to challenge the validity of related patents. 

I am personally relieved to learn of the outcome of this trial, for patent-licensing firms like IPCom are infamous for being active in litigating against tech companies on deceitful and invalid grounds. The court's rejection of IPCom's claim this time around can hopefully set the precedent for future rulings on lawsuits involving bad faith assertions of patent infringements from non-practicing entities. 

Furthermore, major tech firms such as Apple, Samsung and Google have also filed another petition to the EU asking to limit the power of European patent holding companies like IPCom in future infringement cases. Coupled with the effort made by the Senate of Kentucky in combating patent trolls (discussed in previous post), there has been considerable progress being made in reforming the patent system. As a strong supporter of patent reform, I look forward to seeing more comprehensive changes to be made and how the patent industry will react and adjust in response. 

Source: http://www.fosspatents.com/2014/02/ipcoms-22-billion-lawsuit-against-apple.html

Kentucky Takes Action Against Patent Trolls

In the midst of the talk about patent reforms, the state of Kentucky has become one of the first to step up and take measure specifically against unreasonable demand letters filed by non-practicing entities (NPE).

On Feb 13th, 2014, the Judiciary Committee of the Kentucky Senate voted unanimously in favor of a bill (SB116) that attempts "to establish a bad-faith assertion of patent infringement as a violation of Kentucky's consumer protection chapter and authorize the utilization of the remedies available for those violations in addition to private remedies established in the bill".

This bill aims to establish a distinction between good-faith and bad-faith assertions. Some characteristics of bad-faith litigations include:

1. Failure to state the patent number, the name and address of the patent owner(s)/assignee(s), or specific factual allegations relating to the infringement claim 
2. The claim or assertion is "deceptive" (not defined)
3. The patent holder is a non-practicing entity

As we can conclude from the points made above, many of these demand letters at the moment do not even contain the most basic information such as the patent number, yet they are still deemed legitimate and firms are subject to their ill-natured demands. This in turn goes to show the lack of regulation in place concerning the reckless practices of patent trolls and the defenseless positions firms often find themselves in.

Overall, I think this bill demonstrates a thorough effort in laying out factors weighing for and against allegations of bad-faith patent assertions. Though many terms in the bill have not yet been defined, considerable work is still done in targeting patent trolls ( point #3 above) and curtailing abusive patent litigations. As we discussed in class, an infringement lawsuit filed by a NPE against Blackberry ultimately led to the firm's demise even though the patent involved was later on determined to be invalid. These infringement claims made by NPE's in most cases are formed on unlawful grounds and have the ability dictate the fate of companies in destructive ways that could directly hinder the overall economic performance of the country. Hence, it is about time that the government start to make gradual and considerable progress in tackling the insidious nature of patent trolls.

Source: http://www.fosspatents.com/2014/02/kentucky-senate-committee-approves.html