Presentation for the Workshop on Intellectual Property and Software, Mauritius, 25/04/2013

1. +
Dr Andrés Guadamuz
Patentability of
Computer
Software and
Business
Methods

3. +
Software

4. +
Software
 Software is "a set of
statements or instructions to
be used directly or
indirectly in a computer to
bring about a certain
result".
 These instructions are set
out in source code, a set of
in logical human-readable
instructions coded into
computer language.
 Object code is the result of
a compilation of the source
code into machine
readable instructions.

5. +
Source code
#!/usr/bin/perl
# Public domain. Questions to Jamie McCarthy, jamie@mccarthy.vg
use LWP::Simple;
use Math::BigInt;
my $html = get(`http://www.utm.edu/research/primes/curios/48565...29443.html');
my($prime) = $html =~ m{<blockquote>([^<]+)</blockquote>};
$prime =~ tr{0-9}{}cd;
$prime = Math::BigInt->new($prime);
my $binary = '';
while ($prime > 0)
{ $binary = pack(`N', ($prime % 2**32)) . $binary;
$prime /= 2**32; }
$binary =~ s{^0+}{};
local *FH;
open(FH, `| gunzip -acq') or die `cannot gunzip, $!';
binmode FH;
print FH $binary;
close FH.

6. +
Object code

7. +
Algorithms

8. +
Know-how and documentation

9. +
Software and the law

10. +
International software protection
 Art 4WIPO Copyright Treaty (WCT): Computer
programs are protected as literary works within
the meaning of Article 2 of the Berne Convention.
Such protection applies to computer programs,
whatever may be the mode or form of their
expression.
 Art 10 TRIPS: 1. Computer programs, whether in
source or object code, shall be protected as
literary works under the Berne Convention (1971).

11. +
Software protection in Europe
 Software Copyright Directive 91/250/EEC requires copyright
law to recognise software as a literary work.
 UK LAW: 3.-(1) "literary work" means any work, other than a
dramatic or musical work, which is written, spoken or sung,
and accordingly includes- (a) a table or compilation other
than a database, (b) a computer program; and (c)
preparatory design material for a computer program; and
(d) a database.
 Art 52(2)(c) of the European Patent Convention (EPC) states
that “programs for computers”“as such” are not inventions,
and therefore are not patentable.

15. +
Copyright vs Patents
EXPRESSION IDEA
LITERAL NON-LITERAL
SYMBOLIC FUNCTIONAL

16. +
UK: Navitaire Inc v easyJet Airline
Co [2004] EWHC 1725 (Ch).
“Copyright protection for computer software
is a given,but I do not feel that the courts
should be astute to extend that protection
into a region where only the functional
effects of a program are in issue.There is a
respectable case for saying that copyright is
not,in general,concerned with functional
effects, and there is some advantage in a
bright line rule protecting only the claimant's
embodiment of the function in software and
not some superset of that software.”

17. +
Why patents?

18. +
Trouble with copyright: USA
 The idea-expression dichotomy is very well used in the
United States, this has had interesting effects for
software protection.
 “look and feel” cases, Apple v. Microsoft 821 F.Supp 616
(1993).
 Whelan Associates Inc v Jaslow Dental Laboratory Inc
[1987] FSR 1 gave a test for the idea-expression
dichotomy in software.
 Computer Associates v Altai 982 F 2d 693 (1992) –
Abstraction, Filtration, Comparison.
 Aharonian v Gonzales, N.D. Cal., No. C04-5190, Jan. 3,
2006) tried to get software declared as “not subject to
copyright protection”, but failed.

19. +
Abstraction, Filtration,
Comparison test
 Stage 1 - Abstraction - You dissect the code and
isolate each level of abstraction.
 Stage 2 - Filtration - Examine the structured
components at each level of abstraction to
determine whether their inclusion at that level was
‘idea’ or was dictated by efficiency, required by
external factors or was taken from the public
domain (and is therefore unprotectable).
 Stage 3 - Comparison - What remains following
filtration is a core of protected expression.This
must be compared for substantial similarity.

20. The road towards patentability:
USA
 The Abstraction-Filtration-
Comparison test has been a
failure.
 Owners begin to pursue other
types of protection.
 Diamond v Diehr, 450 U.S. 175,
185 (1981) "everything under
the sun that is made by man."
 In re Alappat, 33 F. 3d 1526
(1994), “useful, concrete,and
tangible result.“
 State Street Bank v Signature
Financial Group (1998) 47
USPQ2d 1596.

21. +
First came the business methods
 When talking about business methods in
patentable terms, we are talking about flowcharts.
 A business method is then akin to software
algorithms
 USPTO Class 705: Data processing: financial,
business practice, management, or cost/price
determination

22. +
State Street, business methods and
software patents
 State Street decision (1998).
 Any invention is patentable if it “it produces a useful,
concrete and tangible result.”
 “…the transformation of data, representing discrete
dollar amounts, by a machine through a series of
mathematical calculations into a final share price,
constitutes a practical application of a mathematical
algorithm, formula, or calculation, because it produces
'a useful, concrete and tangible result’”.
 The invention in State Street Bank was only possible
because of computerisation – it wouldn’t work without a
program.

23. +
Business method patents (USA)

24. +
Amazon’s One Click
 USPTO issued US patent 5960411 for “Method and
system for placing a purchase order via a
communications network” to Amazon.com in
September 1999.
 In 2006, the USPTO ordered a reexamination of the
"One-Click" patent based on prior art.
 Several claims in the patent were rejected.
 In Europe, a patent application on the 1-Click
ordering was filed with the European Patent Office,
but was never granted.

25. +
Typical software patent claim
 “A method to be performed by a computer for operating a
matching service, comprising:
generating, from empirical data, a number of factors
corresponding to a like number of functions of one or more
variables relevant to relationship satisfaction; approximating
the satisfaction that a user of the matching service has in the
relationships that the user forms with others; identifying, with
the computer, candidates for a relationship with the user by
determining an association between the approximated
satisfaction and one or more of the factors; and
approximating the satisfaction that the user will have in a
relationship with a particular candidate.” U.S. Patent
6735568

26. +
Charts

27. +
But… software copyright is
useful

28. +
Software patentability around
the world
 Art. 27.1 TRIPS Agreement: “patents shall be
available for any inventions,whether products or
processes,in all fields of technology”.
 All major (in terms of volume) patent offices accept
software patentability in one shape or another (US,
Europe, Australia, Japan).
 Reluctance to apply indiscriminate patentability in
various regions.

29. +
Patentability in Europe
Strict reading of the law leads one to
believe that software “as such” is not
patentable.
European Patent Office (EPO) Board of
Appeals interpreted “as such” very broadly
in several cases.
20,000 software patents approved by the
EPO, 6,000 applications per year in UK.
There is software patentability in Europe.

30. +
Technical effect
Case law has decreed that only software that
has a “technical effect” can be patented.
The term is not in the legislation, and
therefore there is no clear definition of
technical effect.
Lack of consistency in its application.
Merrill Lynch [1989] RPC 561: "There must...
be some technical advance on the prior art in
the form of a new result.“

32. +
Some caselaw

33. Halliburton v Smith International
 Two patents involved, one
drill bit and software to
design drill bits.
 In this ruling, there seems to
be a clear technical effect,
the software can only be
used for specific purpose.
 The patent was struck down
because it had inadequate
disclosure (upheld after
appeal).
 Could this be the strategy to
attack software patents in
the future?

34. The little man test (CFPH LLC
Application)
“The question to ask should
be: is it (the artefact or
process) new and non-
obvious merely because
there is a computer
program? Or would it still
be new and non-obvious
in principle even if the
same decisions and
commands could
somehow be taken and
issued by a little man at a
control panel, operating
under the same rules? For
if the answer to the latter
question is 'Yes' it
becomes apparent that
the computer program is
merely a tool, and the
invention is not about
computer programming
at all.”

35. +
Aerotel v Telco
 “[...] despite the fact that such patents have been granted for some
time in the US, it is far from certain that they have been what Sellars
andYeatman would have called a "Good Thing." The patent system is
there to provide a research and investment incentive but it has a price.
That price (what economists call "transaction costs") is paid in a host
of ways: the costs of patenting, the impediment to competition, the
compliance cost of ensuring non-infringement, the cost of uncertainty,
litigation costs and so on.There is, so far as we know, no really hard
empirical data showing that the liberalisation of what is patentable in
the USA has resulted in a greater rate of innovation or investment in
the excluded categories. Innovation in computer programs, for
instance, proceeded at an immense speed for years before anyone
thought of granting patents for them as such.There is evidence, in the
shape of the mass of US litigation about the excluded categories, that
they have produced much uncertainty. If the encouragement of
patenting and of patent litigation as industries in themselves were a
purpose of the patent system, then the case for construing the
categories narrowly (and indeed for removing them) is made out. But
not otherwise.”

36. +
Astron Clinica & Others v The
Comptroller General of Patents
 "... I do not detect anything in the reasoning of the
Court of Appeal which suggests that all computer
programs are necessarily excluded. I have
identified the key aspects of the decision which
relate to computer related inventions and they
undoubtedly criticise the reasoning of the EPO
Board of Appeal in each of the "trio" of cases. But
the criticism is directed at the "any hardware will
do" approach and the return to form over
substance with the drawing of a distinction
between a program as a set of instructions and a
program on a carrier."

37. +
Symbian Ltd v Comptroller
General Of Patents
 "So is this invention no more than the running of the
program? Having regard to the earlier authorities the answer
has to be that it depends on what the program does and not
merely how it does it.The mere fact that it involves the use of
a computer program does not exclude it. [...] It is simply
inaccurate to label all programs within the computer as
software and on that basis to regard them as of equal
importance in relation to its functionality. [...] I think that the
Hearing Officer took too narrow a view of the technical effect
of the invention and was wrong to exclude it from
patentability on the basis that it amounted to no more than a
computer program.The appeal will therefore be allowed."

38. +
Enlarged EPO Board of appeals
 Programs for computers, G 0003/08, 12 May 2010.
 “… it seems to this Board, although it may be said
that all computer programming involves technical
considerations since it is concerned with defining
a method which can be carried out by a machine,
that in itself is not enough to demonstrate that the
program which results from the programming has
technical character; the programmer must have
had technical considerations beyond "merely"
finding a computer algorithm to carry out some
procedure.” para 13.5.

39. +
Bilski patent application
08/833,892
 Patent for a method of hedging risks in commodities
trading.
 Claims:
 (1) initiating a series of sales or options transactions between a broker
and purchaser-users by which the purchaser-users buy the commodity
at a first fixed rate based on historical price levels;
 (2) identifying producer-sellers of the commodity; and
 (3) initiating a series of sales or options transactions between the broker
and producer-sellers, at a second fixed rate, such that the purchasers’
and sellers’ respective risk positions balance out.

40. +
Bilski v Kappos 561 U.S. _ (2010)
 Patent application for a method of hedging risks in
commodities trading in energy markets (U.S. Pat
Application 08/833,892).
 Rejected by examiner, appealed, lost.
 Appealed to Court of Appeals of the Federal
Circuit (CAFC), rejected again.Taken to US
Supreme Court.
 Supreme Court produced a bit of a mixed bag.

41. +
Result of Bilski
 Business method patents are still accepted, but
court struck down the State Street “useful,concrete
and tangible result” test.
 The Federal Circuit decision in Bilski changes the
law by requiring a process either to be tied to a
machine or to transform articles in order to be
eligible for patenting.
 SCOTUS rejected this machine-or-transformation
test as a sole test of patentability.
 Regarding Bilski’s application, the court decided
that was an unpatentable abstract idea. Bar has
been set higher for patentability.

42. +
Mayo v. Prometheus Laboratories
 In this unanimous 2012 decision, the SCOTUS
determined that a medical testing patent was
unpatentable as nonstatutory subject matter under
Section 101 of the Patent Act
 “In determining the eligibility of respondents'
claimed process for patent protection under § 101,
their claims must be considered as a whole. It is
inappropriate to dissect the claims into old and
new elements and then to ignore the presence of
the old elements in the analysis”
 The decision opens up more challenges to patents.

43. +
Mind the trolls

44. +
The cost of trolls
 A 2011 study from Boston University calculated that
patent trolls had cost the US economy $500 billion
USD since 1990.
 A database of 1,630 patent troll lawsuits found a
total of 4,114 defendants pairs, with a mean loss of
$122 million USD per case!

45. +
Patent trolls
 Defined as a company that produces no code, only
has patent portfolio.
 Large companies can use patents defensively
against a smaller company who produces software,
since it is likely that the defensive portfolio may
contain some patent covering a part of the smaller
company’s software.
 Patent Trolls are immune to this, since most
produce no software, and therefore a defensive
patent portfolio is less effective against them.

46. +
Rising share of litigation

47. +
Concluding…

48. +
Questions?
a.guadamuz@ed.ac.uk