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IAM on In re Bilski: Tightening The Standards For Software Patents

IAMJoff Wild of IAM Magazine predicts that the Federal Circuit’s en banc rehearing of the In re Bilsk case signals a move to restrict the patentability of software and business methods. He predicts that the Federal Circuits decision will bring the United States closer in line with how Europe treats this subject matter.

He provides the following reasons:

  • Its rare for cases to be heard en banc
  • The Federal Circuit is aware that recently the U.S. Supreme Court has been placing limits on patent holders rights
  • Congress is considering the Patent Reform Act and the Federal Circuit’s Chief Judge is opposed to the changes in the Patent Reform Act

Rule 35 [link, PDF] of the Federal Circuit Rules of Practice provides that an en banc rehearing is ordered by a majority vote of the active circuit judges. It states that en banc rehearing is not favored and ordinarily will not be ordered unless:

  1. en banc consideration is necessary to secure or maintain uniformity of the court’s decisions; or
  2. the proceeding involves a question of exceptional importance.

Here, the court may be answering the Board of Patent Appeals and Interference’s (Board) request for guidance in determining what is patentable subject matter under section 101. The Board stated in its decision [PDF] that “Several major analyses of statutory subject matter [under section 101] have been published recently.” The Board continued, “The USPTO is struggling to identify some way to objectively analyze the statutory subject matter issue instead of just saying ‘We know it when we see it.’ ”

It is possible that the Federal Circuit could provide a framework for determining patentable subject matter under section 101 without restricting the patentability of software and business methods. However, it may also be that the Federal Circuit will provide a section 101 framework that restricts software and business method patents.

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Method of Rewarding Waiting Customers

ibmwaitingreward1.jpgA statement in a IBM patent application caught my eye and made me wonder whether the yet-to-be-released-results of the Federal Circuit’s en Banc rehearing of In re Bilski [Patently-O’s coverage] could effect the patentability of the claims in this application. In Bilski the court will consider, among other things, whether a method or process must result in a physical transformation of an article or be tied to a machine to be patent-eligible subject matter under section 101.

The IBM patent application involves a method of reducing waiting-customer dissatisfaction by monitoring a waiting queue, calculating rewards based on the wait, and communicating the reward to the customer. A customer may be waiting on the phone, or at recreational, restaurant or lodging facilities. The IBM application provides, “although the concepts of the present invention are exemplarily discussed above as having been implemented as an automated system on a computer . . . [the] concepts of the present invention could be implemented completely devoid of computerization or automation of any kind.”

However, it is important to focus on what the application claims. Here, claim 1 provides:

A system for reducing customer dissatisfaction for waiting, said system comprising:a queue monitoring subsystem that detects an entry of a customer into a waiting queue;a reward computing subsystem that calculates a reward for the customer for being in the waiting queue; and a communication subsystem to communicate the reward to the customer, wherein at least one of said queue monitoring subsystem, said reward computing subsystem, and said communication subsystem is automated.

The IBM claim requires at least one of the steps to be automated–as for example–embodied in a computer, whereas claim 1 of Bilski does not:

A method for managing the consumption risk costs of a commodity sold by a commodity provider at a fixed price comprising the steps of: (a) initiating a series of transactions between said commodity provider and consumers of said commodity wherein said consumers purchase said commodity at a fixed rate based upon historical averages, said fixed rate corresponding to a risk position of said consumer; (b) identifying market participants for said commodity having a counter-risk position to said consumers; and (c) initiating a series of transactions between said commodity provider and said market participants at a second fixed rate such that said series of market participant transactions balances the risk position of said series of consumer transactions.

Its not clear why Bilski did not add the requirement that a step be automated.

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Google Seeks Patent on Chinese Spell Check Program

GoogleCNSpellPatAppA patent application, published on January 31, shows Google is continuing to develop for the Chinese market. The application discloses a program for spell checking non-Roman character based languages, such as Chinese, Japanese, and Korean. Although the summary of the invention section provides that the program may cover any non-Roman based language, the dependent claims show the application is focused on the Chinese language.

The program identifies potentially incorrect inputs, identifies alternatives, determines the proximity between the potentially incorrect input and the alternative, and computes probabilities of possible correct “word” based on the proximity measurement and optionally on a context of the possible conversion. Then it determines the most likely conversion from all the possible conversions.

——

“Fault-Tolerant Romanized Input Method for Non-Roman Characters,” Wu et. al. (U.S. Patent Application No. 20080028303).

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Suburban Networking: Silicon Prairie Social

img1Tonight, the first Silicon Prairie Social was held at Mullen’s Bar and Grill in Lisle, Illinois. Similar to the Tech Cocktail events in Chicago, the Silicon Prairie Social was designed to connect “tech professionals, entrepreneurs, service providers, Internet professionals, Web 2.0 and startup companies, the mobile industry, and mobile marketing professionals.” The goals of the event were to:

  • Connect local people with others in their industry and build community
  • Raise the profile of the Silicon Prairie through the publicity generated around the events.
  • Foster investment and economic development in the region by showcasing local businesses, entrepreneurs, and startups.

Here’s a partial list of those I saw, met, or talked with:

This only scratches the surface of the 350 people in attendance of this sold-out event. Events like this help promote collaboration and innovation in the suburban technology community. I look forward to future silicon socials on the prairie.

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Reason in the Prior Art: Applicability Beyond Chemical

Takeda_Alphapharm_P1

Takeda Chemical Indus. v. Alphapharm Pty., Ltd., No. 06-1329, slip op. (Fed. Cir. 2007).

Alphapharm sought FDA approval to a market generic version of Takeda’s drug ACTOS (U.S. Patent 4,687,777), which is used to treat diabetes. Takeda sued Alphapharm and the district court rejected Alphapharm’s obviousness attack on the patent. The Federal Circuit affirmed. It found that KSR v. Teleflex did not eliminate the prima facie obviousness requirement that a challenger, in cases involving new chemical compounds, "identify some reason that would have led a chemist to modify a known compound in a particular manner."

Takeda and KSR

Citing its Pre-KSR precedents the appellate court stated when an obviousness challenge is based on a structural similarity between the prior art and the claimed compound, the challenger must show the “prior art would have suggested making the specific molecular modifications necessary to achieve the claimed invention.” The court noted the Supreme Court’s indication in KSR that while the TSM test cannot be rigidly applied, the test is not necessarily inconsistent with the Graham analysis.

Is the Federal Circuit’s requirement that a challenger identify a reason to modify a known compound consistent with KSR’s direction that the TSM elements not be applied in a rigid and mandatory way? The Court in KSR acknowledged that "it can be important to identify a reason that would have prompted a person of ordinary skill in the relevant field to combine the elements in the way the claimed new invention does." However the Court immediately thereafter cautioned that insights drawn by considering what reason(s) prompted the combination "need not become [a] rigid and mandatory formula."

Considering a reason that would prompt a person of ordinary skill in the art to combine the elements, is necessarily an art specific inquiry. The KSR Court recognized this by stating, "In many fields it may be that there is little discussion of obvious techniques or combinations, and it often may be the case that market demand, rather than scientific literature, will drive design trends." Will the Federal Circuit extend the Takeda requirement to other arts outside the chemical field?

Takeda’s Applicability to Software Patents

Many, including the Patent and Trademark Office Commissioner, note the particular difficulty that examiners have in finding prior art in the software field. This difficulty is part of the motivation underlying the Peer-to-Patent Pilot, which allows the public to contribute prior art relevant to software patent applicants. If Takeda is extended to software patents, it might be difficult for challengers to identify particular pieces of prior art which evidence a suggestion to combine elements. Challengers would likely argue more flexibility is necessary in showing the prima facie case of obviousness given the nature of the software art.

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Noncompeting Plaintiffs: Irreparable Harm Analysis

Previously I reported on the CSIRO v. Buffalo Technology case. There, the district court found CSIRO’s patent (No. 5,487,069) covered all 802.11a/g wireless technology and granted a permanent injunction against a wireless LAN vendor. CSIRO does not practice its patents, but instead seeks licenses from third parties. The court’s irreparable harm analysis is particularly interesting in light of CSIRO’s non-practicing status.

In eBay v. MercExchange, the Supreme Court provided that to obtain an injunction a patent holder must show (1) irreparable harm in the absence of an injunction; (2) inadequacy of money damages; (3) balance of hardship favors an injunction; and (4) the public interest would not be harmed by the injunction.

The irreparable harm portion of the analysis is generally where courts consider whether the plaintiff and the defendant are competitors or whether the plaintiff only licenses their patent rights to third parties.

Factor: Plaintiff’s Use of Additional Licensing Revenue to Solve Important Societal Problems

When a court issues an injunction, the plaintiff is able to obtain greater licensing fees due to the increased bargaining power that the injunction provides. The court emphasized the importance of the projects CSIRO would undertake with additional licensing revenue. The court found CSIRO used its licensing revenue to fund frontier projects. Those projects covered “areas of important research” including “addressing the increasing rate of obesity and the consequential increase of Type 2 diabetes, developing biomaterials that can be used to aid recovery from traumatic damage to the body, and examining the impact of climate change and mitigating its causes.” The court found this, among other things, supported a finding of irreparable harm.

What are the implications of this analysis? CSIRO is a Australian scientific research organization similar to the United States’ National Science Foundation. Can for-profit entities succeed in similarly arguing that they too would use increased licensing revenue to solve important societal problems? Will drug companies benefit from arguing their licensing revenues are to fund further research on particular life saving drugs? What about engineering firms and environmentally friendly products or defense contractors and counter-terrorism inventions? This particular aspect will not be determinative in the injunction analysis, but its interesting that the particular use of additional licensing revenue is a factor.

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Injunction Granted for License-Only Plaintiff: IEEE 802.11a and 802.11g Technology

Information Week reported that the Federal District Court for the Eastern District of Texas issued a permanent injunction against Buffalo Technology, a wireless LAN equipment vendor, in favor of the Australian science agency CSIRO. The court found Buffalo was violating CSIRO’s patent (U.S. Pat. No. 5,487,069) that is a core component of the IEEE 802.11a/g wireless LAN technology standard widely used in business and home networks.

The Information Week article reported:

Judge Davis’ decision is noteworthy because it seemingly contradicts the Supreme Court’s May 2006 ruling in another patent case, eBay v. MercExchange, in which the Court found that an injunction could be issued in an infringement case only if the plaintiff is actually in competition with the defendant — in other words, companies or individuals who seek to make money from patent holdings, rather than actual products and services, were unlikely to get injunctive relief.
[emphasis added]

Ebay’s Majority
However, the Supreme Court did not say that an injunction would never issue when the plaintiff is a non-competitor. In Ebay [PDF], the court specifically rejected categorical rules like the one suggested by Information Week. The Court said the district court in Ebay, went too far when the district court concluded “that a ‘plaintiff’s willingness to license its patents’ and ‘its lack of commercial activity in practicing the patents’ would be sufficient to establish that the patent holder would not suffer irreparable harm if an injunction did not issue.” 126 S.Ct. at 1840.

The Supreme Court recognized that “some patent holders, such as university researchers or self-made inventors, might reasonably prefer to license their patents, rather than undertake efforts to secure the financing necessary to bring their works to market themselves.” The Court concluded that such patent holders are not categorically excluded from the opportunity to obtain an injunction under the traditional four factored test.

In the Texas case, the court noted CSIRO is a scientific research organization of the Australian Federal Government. Like a university, CSIRO conducts scientific research and applies the efforts of that research to benefit the public at large.

Justice Kennedy’s Concurrence
Justice Kennedy noted that some firms use patents to obtain license agreements rather than to produce products. He warned that an injunction used by such firms could be “employed as a bargaining tool to charge exorbitant fees to companies that seek to buy licenses to practice the patent.” But in the next sentence he stated: “When the patented invention is but a small component of the product the companies seek to produce and the threat of an injunction is employed simply for undue leverage in negotiations, legal damages may well be sufficient to compensate for the infringement and an injunction may not serve the public interest.”

So Justice Kennedy’s comments about license-only plaintiffs might be limited to those whose patents cover only a small component of the defendant’s product. In any event, Justice Kennedy’s comments cannot be read to always prohibit injunctions in favor of license-only plaintiffs because that categorical rule was rejected by Justice Kennedy and the majority.

The Texas court referenced Justice Kennedy’s statement, and noted that CSIRO’s patent does not cover a small part of Buffalo’s product, but instead is the “core technology embodied in the IEEE’s 802.11a and 802.11g standards.”

Conclusion
The Texas court’s ruling does not contradict Ebay in the way suggested by Information Week.

[Commonwealth Scientific and Industrial Research Organisation v. Buffalo Technology Inc. — F.Supp.2d —-, 2007 WL 1739999 (E.D.Tex. 2007).]

[eBay Inc. v. MercExchange, L.L.C., 126 S.Ct. 1837 (2006).]

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Commissioner Doll on Peer-to-Patent Pilot

Listen to the Patent and Trademark Office Commissioner John Doll discuss the Peer-to-Patent pilot, which is now live. He notes the particular difficulty that examiners have in finding prior art in the software field. Consequently the pilot is limited to technology center 2100, which handles computer hardware and software applications. The goal the pilot is allow public participation to improve the quality of issued patents.Also, Comissioner Doll predicted the PTO will have a backlog of 800,000 patent applications by the end of the year despite their effort to hire 1,200 examiners.

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Test Marketing Your Invention

The Invent Blog linked to an article from the Wall Street Journal entitled Testing the Marketability Of Your Product Idea. The article suggests that you should test market your product or invention by soliciting feedback from (1) friends and family, (2) those who might understand your product’s industry or customers, (3) employees and customers in stores that sell similar items, and (4) online surveys.

What’s missing here? Google AdWords.

You can test market any idea in a short time using Google AdWords. Here’s how it works:

You create your ads
You create ads and choose keywords, which are words or phrases related to your business [or invention].

Your ads appear on Google
When people search on Google using one of your keywords, your ad may appear next to the search results. Now you’re advertising to an audience that’s already interested in you.

You attract customers
People can simply click your ad to make a purchase or learn more about you [or your invention]. You don’t even need a webpage to get started – Google will help you create one for free.

You can experiment with different keywords to determine which works to generate the most traffic. The traffic will help you gauge the market for your invention. For step by step details on how to test market your invention using AdWords, check out chapter 10 of The Four-Hour Workweek by author Tim Ferriss or read this blog entry.