Evolution of Software Patents in the United States
Going back to the 1960s, the United State Patent and Trademark Office (“the USPTO”) has generally been unfriendly toward software patent applications. The most common point of contention between applicants for patent and the USPTO is whether claims directed to software include patentable subject matter. The USPTO, the Court of Appeals for the Federal Circuit (“the Federal Circuit”—having jurisdiction over all patent case appeals), and the Supreme Court often assert that the claims of software patents are directed to an abstract idea, one of the judicial exceptions to the four categories of patentable subject matter listed in 35 U.S.C. § 101. The Supreme Court recognized that a “principle, in the abstract, is a fundamental truth; an original cause; a motive; these cannot be patented, as no one can claim in either of them an exclusive right” in Le Roy v. Tatham (1852).[1]
In the 1970s, the Supreme Court took two opportunities to rule on software patents. In both cases, Gottschalk v. Benson (1972)[2] and Parker v. Flook (1978)[3], the Supreme Court did not consider the subject matter patentable. In Gottschalk, the Court held that “the patent would wholly pre-empt the mathematical formula [in the claims] and in practical effect would be a patent on the algorithm itself.”[4] However, the Court in Gottschalk did state, “It is said that the decision precludes a patent for any program servicing a computer. We do not so hold.”[5] Six years later, the Court in Flook stated, “[A] process is not unpatentable simply because it contains . . . a mathematical algorithm.”[6] Yet, the Court held that the claims were unpatentable “because once that algorithm is assumed to be within the prior art, the application, considered as a whole, contains no patentable invention.”[7] While these two Supreme Court decisions did not close the door on software patents, software patents were essentially impossible to obtain.
The trend against granting software patents continued into the 1980s with one exception: Diamond v. Diehr (1981).[8] In Diamond, the Supreme Court ordered the USPTO to grant a patent on an invention directed to a method of curing synthetic rubber employing a mathematical equation to determine how long to heat the rubber.[9] The Court in Diamond held that “when a claim containing a mathematical formula implements or applies that formula in a structure or process which, when considered as a whole, is performing a function which the patent laws were designed to protect . . ., then the claim satisfies the requirements of § 101.”[10] The Court viewed the claims in Diamond as drawn to “an industrial process for the molding of rubber products” as opposed to a mathematical formula.[11] However, because the rulings in Diamond and Flook appear to contradict each other, the issue of whether software was patentable became muddled, and the patentability of software became heavily dependent on claim drafting.
Early in the 1990s, the Federal Circuit attempted to clarify that software inventions were patentable, as long as the inventions were called something else in the claims. In other words, the software had to be “applied to or limited by physical elements or process steps.”[12] In 1994, the Federal Circuit issued a decision In re Alappat,[13] holding that novel software programming “creates a new machine, because a general purpose computer in effect becomes a special purpose computer once it is programmed to perform particular functions pursuant to instructions from program software.”[14] Less than a month later, the Federal Circuit held in In re Lowry[15] that data structures of a computer’s memory are physical entities and therefore patent-eligible.[16] In 1998, the Federal Circuit went even further in State Street Bank & Trust Co. v. Signature Financial Group (1998),[17] holding that software and business methods can be patent-eligible if they produce “a useful, concrete and tangible result.”[18]
In the 2000s, patent applicants readily applied for software patents, drafting the claims to specify that the software (or data structure) was controlled by a computer processor or stored on a non-transitory computer-readable medium. In 2008, the Federal Circuit issued a decision in In re Bilski (2008),[19] in which the Court ruled on the patentability of processes including steps that need not be performed on a computer.[20] The Court in In re Bilski held that a claimed process is patent-eligible under a “machine-or-transformation test,” the sole test governing analyses under 35 U.S.C. § 101,[21] if “(1) it is tied to a particular machine or apparatus, or (2) it transforms a particular article into a different state or thing.”[22] However, while the Supreme Court affirmed the judgment of In re Bilski in Bilski v. Kappos (2010),[23] the Supreme Court rejected the Federal Circuit’s assertion that the machine-or-transformation test is the exclusive test for determining the patentability of process claims under 35 U.S.C. § 101.[24]
Bilski was followed in 2014 by Alice Corp. Pty. Ltd. v. CLS Bank International (2014).[25] The Court in Alice used the framework adopted in Mayo Collaborative Services v. Prometheus Laboratories, Inc. (2012)[26] to distinguish claims directed to a judicial exception, such as an abstract idea, and claims directed to patent-eligible applications of those concepts.[27] Under the Mayo framework, if a claim is directed to a judicial exception, a court must decide whether the inventive concept in the claim “both individually and ‘as an ordered combination’” added “significantly more” than the judicial exception.[28] In Alice, the Court determined that the method claims at issue were directed to the abstract idea of intermediated settlement[29] and that the claims were not patent-eligible because the “introduction of a computer into the claims does not alter the analysis.”[30] “[I]f a patent’s recitation of a computer amounts to a mere instruction to ‘implemen[t]’ an abstract idea ‘on . . . a computer,’ that addition cannot impart patent eligibility.”[31]
Following Alice, the Federal Circuit invalidated many claims in 2014-2015 using that same logic—the addition of a generic computer to a claim reciting an abstract idea cannot “transform that abstract idea into a patent-eligible invention.”[32] However, the Federal Circuit issued several decisions in 2016 holding that claims to software are patent-eligible. For example, in Enfish, LLC v. Microsoft Corp. (2016),[33] the Court held that claims “directed to an innovative logical model for a computer database”[34] were “not directed to an abstract idea . . .[, but] to a specific improvement to the way computers operate.”[35] As another example, the Court in Bascom Global Internet Services v. AT&T Mobility (2016)[36] held that claims directed to filtering Internet content were patent-eligible because, even though “the limitations of the claims, taken individually, recite generic computer, network and Internet components, none of which is inventive by itself,”[37] “an inventive concept can be found in the non-conventional and non-generic arrangement of known conventional pieces.”[38] The Court in Bascom also noted that the claims did not “preempt all ways of filtering content on the Internet; rather, they recite a specific, discrete implementation of the abstract idea of filtering content.”[39]
In summary, while the Supreme Court and the Federal Circuit have a long history of changing the way they view software patents, software claims are patentable if they are properly drafted.[40] Even though Federal Circuit seems to be moving toward a friendlier environment for software patents, calling the invention software in the patent claims is not advised. Claims to software should be drafted with all relevant Supreme Court and Federal Circuit decisions in mind so that they can be used to rebut rejections under 35 U.S.C. § 101 made by examiners at the USPTO.
[1] 55 U.S. 156, 175 (1852).
[2] 409 U.S. 63 (1972).
[3] 437 U.S. 584 (1978).
[4] 409 U.S. at 72.
[5] Id. at 71.
[6] 437 U.S. at 590.
[7] Id. at 594.
[8] 450 U.S. 175 (1981).
[9] Id. at 187.
[10] Id. at 192
[11] Id. at 192-93.
[12] Arrhythmia Research Tech., Inc. v. Corazonix Corp., 958 F.2d 1053, 1058 (Fed. Circ. 1992).
[13] 33 F.3d 1526 (Fed. Circ. 1994).
[14] Id. at 1545.
[15] 32 F.3d 1579 (Fed. Circ. 1994).
[16] Id. at 1583-84.
[17]149 F.3d 1368 (Fed. Circ. 1998).
[18]Id. at 1375-77.
[19] 545 F.3d 943 (Fed. Circ. 2008).
[20] Id. at 949-50.
[21] Id. at 955-56.
[22] Id. at 954.
[23] 130 S.Ct. 3218 (2010).
[24] Id. at 3226.
[25] 134 S.Ct. 2347 (2014).
[26] 132 S.Ct. 1289 (2012).
[27] 134 S.Ct. at 2355.
[28] Id. (citing Mayo, 132 S.Ct. at 1294, 1297-98).
[29] Id.
[30] Id. at 2357.
[31] Id. at 2358 (citing Mayo, 132 S.Ct. at 1301).
[32] Id.
[33] 822 F.3d 1327 (2016).
[34] Id. at 1330
[35] Id. at 1336.
[36] 827 F.3d 1341 (2016).
[37] Id. at 1349.
[38] Id. at 1350.
[39] Id.
[40] See, e.g., Enfish, 822 F.3d at 1335.