Software Patents at the US Supreme Court: Patenting of escrow accounts

17 06 2014

The Supreme Court recently heard arguments over whether a company named Alice Corporation can own an “invention” for escrow accounts. While the idea of escrow has been around for centuries, Alice Corp has a patent that describes the concept of using a computer to implement it.

For Alice’s opponent, CLS Bank, a lot is at stake since the bank uses the patented process to clear millions of dollars in financial transactions each day. Even more is at stake for an American patent system swamped by millions of low-quality patents, many of them — like the one belonging to Alice Corp — related to software.

What can and can’t be patented

While the Supreme Court has issued many decisions about patent rules in recent years, the Alice case looks at the more fundamental question of what sort of things should receive patent protection in the first place. For now, the law is clear that “abstract ideas” like math formulas or gravity can’t be patented, and that specific applications that describe a process for implementing an idea are eligible for a patent. The question in Alice is where software fits into all this.

“Software or business method patents are typically broad patents that often cover basic methods of doing business,” said Brian LaCorte, a lawyer at Ballard Spahr, who is skeptical about patents that describe using a computer to implement age-old ideas such as escrow accounts.

From an economic perspective, to the degree that such software patents fail to offer genuinely new ideas, they appear to upset the notion of treating the patent system as a bargain between society and inventors.

As Robin Feldman, an influential patent scholar, wrote in the New York Times, patents like the one belonging to Alice Corp can result in the government handing out a powerful monopoly without receiving anything of value in return — the “inventor” gets a patent, but doesn’t disclose any undiscovered science or ideas. Another scholar, Mark Lemley, said of such patents in 2011, “they claim everything but contribute nothing.”

The Alice case also comes at a time that the Supreme Court is paring back patents in other areas. Last year, for instance, the court ruled that human genes are not eligible for patents.

Are software patents a “tax” on the tech sector?

The Alice case induced a long list of companies to file briefs, including a joint submission from a group of tech companies  – including Google, Amazon, Facebook and Netflix — that are rivals in the marketplace, but that have come together to ask the Supreme Court to squash abstract software patents.

“Abstract software patents have become a plague on computer-related industries,” noted the companies in their brief. The filing also claimed that the proliferation of such patents is “effectively tax innovation,” and includes a 1991 quote from former Microsoft CEO Bill Gates that warns that patents could have brought the early software industry to “a standstill.”

For many, the issue right now isn’t just theoretical. David Selinger, CEO of web-shopping firm RichRelevance, says his company spent about four percent of its annual revenue last year managing patent trolls.

“I think there’s a strong case for abolishing all software patents…or at a minimum, software patents should reasonably advance art and describe how you’re doing it,” Selinger, whose company also filed a brief arguing the Alice Corp “invention” should be ineligible for a patent, told me.

Other tech companies, including Microsoft and IBM, have taken a different view of the case, suggesting in their briefs that Alice Corp’s patents are not appropriate but expressing approval for other types of software patents.

Supreme Court cleans up unfinished business

One reason the Alice case is before the Supreme Court in the first place is that the court made a hash of the same issue four years ago. In a 2010 decision known as Bilski, the court explored many of the same issues that are now before it in Alice — but provided little useful guidance on how to screen for such patents in the future.

In the Bilski case, the Court rejected a patent describing a computer-related method for hedging commodity risks. In doing so, however, the Justices also threw out a “machine-or-transformation” test that had been used to evaluate when a patent should be granted, while also failing to provide alternate criteria for lower courts and the Patent Office to use instead. The situation soon became even more complicated after an appeals court panel, hearing the Alice case, attempted to apply Bilski — and produced a messy judgment in the form of seven different opinions from ten judges.

For the Supreme Court, then, Alice is an opportunity to correct its earlier mistake by finding a better way to draw a circle around what can and can’t be patented. The court is unlikely to outlaw software patents altogether, but will likely instead issue rules that make them easier to challenge — and to reduce the likelihood the Patent Office will issue them in the first place. In the short term, however, the Supreme Court’s decision is unlikely to do much to flush away many of the millions of low-quality patents already in the system.

Update: The transcript of the court’s recent finding is now available; legal observers have suggested that the Justices’ line questioning mean they are inclined to invalidate Alice’s patent, but not eliminate software patents altogether.

Outside attention

The Alice case is unusual because of the attention it is drawing from outside the legal community. Along with the attention from the tech industry, Alice also gave rise to weekend editorials by the New York Times and the Economist.

All the interest reflects how patents — and the monopoly they grant over ideas — have proliferated in recent years, and led to the rise of patent trolls like Intellectual Ventures, which don’t use the patents they acquire, but simply demand money from others. (By most accounts, Alice Corp is such a troll.)

The US Supreme Court, which has heard several other patent cases this term, is also not the only branch of government looking to fix the patent system: The US White House issued a series of executive orders to curb patent trolls, while Congress is expected to pass a patent reform bill this spring.

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Apple v Samsung : the battle explained

1 12 2011

The intellectual property battle between between Apple and Samsung has been raging on since April in courts all over the world. But how did this (what can only be described as epic) battle begin in the first place?

The below infographic sets out the roots and progression of the Apple/Samsung lawsuit. Do you think the mobile designs are too similar?





Apple and Samsung involved in high-tech Mexican stand-off

22 09 2011

It should by now be common general knowledge that Apple and Samsung are engaged in a heated “IP battle” with over 20 IP disputes currently pending internationally in Germany, the UK, the Netherlands, France, Italy, South Korea, Japan, Australia and the United States between this California-based company and the South Korean tech giant….

What may be less well-known is that Samsung and Apple in fact have a highly symbiotic relationship. For example, Apple is Samsung’s largest flash memory customer. Not only will Samsung feel it in the pocketbook if Apple stops buying, but many key components of Apple’s consumer electronics line such as the iPad, iPod and iPhone can’t be made without Samsung’s flash memory. What the world has with the ongoing Apple and Samsung war is a real-life high-tech Mexican standoff. Both companies hold the key to the other’s destruction — though their own is nested inside, somewhere just below the surface.

This situation may soon be changing and DigiTimes reports that TSMC (as opposed to Samsung) may be manufacturing Apple’s A5 processor from next year onwards. TSMC is reportedly testing A6 chipsets, which may include the dual or even quad-core ARM-based structures used in the iPhone, iPad and iPod.

This could seriously sour relations between these two rivals even further…. and with so much on the line for both parties, with nothing to lose (other than some  (extensive) litigation fees) it may well be a long time before the curtain closes on this high-tech mini-drama……..





China changes tactics on technology patents

29 08 2011

It seems that the Chinese technology industry can no longer be regarded as a breeding ground for blatant IP infringement and patent proliferation with China recorded as the third highest filer of patents in 2010 – 337 497 patent applications have been recorded for the last year. 

The influx of patents not only underscores China’s growing strength in the technology sector, it also reveals a change in the country’s attitude toward intellectual property in general. It seems China is now starting to move toward recognising ideas and their origins….

The increase in patent filings has also sparked an increase in litigation….. Huawei Technologies and ZTE Corporation (China’s top two telecoms equipment makers) are engaged in litigation proceedings. ZTE filed a lawsuit in China in April saying Huawei had infringed its fourth generation technology. It seems both made progress in selling their mobile communication products in China and they are possibly now using patents as a competition tool…..

In general, intellectual property civil litigation increased in China by 37 percent to 41718 last year, according to the country’s Supreme People’s Court.

It seems the Chinese counterparts to Apple, Google and Samsung are developing their own armoury of patents. The obvious question being: is this to further stifle competition in the global smartphone industry……or have they  acted pre-emptively to the whole global  fist-fight by ensuring that their competitive edge remains as untouchable as possible……..

With reference to The Business Report of 26 August 2011.





Google acquires Motorola patents and suits up for battle……

16 08 2011

After Google’s clear disillusionment with the patent world, as discussed here and evidenced by this recent Google blog post: “We recently explained how companies including Microsoft and Apple are banding together in anti-competitive patent attacks on Android…..” Google have decided to acquire Motorola Mobility, the spun-off phone manufacturing wing of the original Motorola.

In terms of the reasons proferred by Google for the acquisition, the following was said on their blogspot: “Our acquisition of Motorola will increase competition by strengthening Google’s patent portfolio, which will enable us to better protect Android from anti-competitive threats from Microsoft, Apple and other companies.”

By grabbing Motorola, Google has certainly gained access to more patents to beef up its Android patent portfolio and this will enable it to counter (and respond with counter suits of their own) to any future IP threats……

Therefore, it seems as though, as much as this transaction it is about getting some really, really cool Android hardware out on sale, it is also about protecting the Android phone from further IP battles….clearly their previous patent vulnerability has promted them to prepare more on the patent front and suit-up properly for any potential battles on the horizon…. but in the mean time they are becoming armed and dangerous themselves…..





Google disenchanted with patenting world

8 08 2011

After my previous post regarding the proposed acquisition of Nortel patents by Google, it seems that their bid was largely unsuccessful. This has clearly left Google feeling bitter and disenchanted with the patenting world  and they are now alleging that Microsoft and Apple are only acquiring technology patents in a bid to stem the advent of the Android phone (full article here). In my view, that seems a bit rich coming from the company who had it not been unsuccessful in its attempt would have right now been using the Nortel technology patents for the exact same purpose: to stem the technology developments of its rivals…… could this be a case of the pot calling the kettle black? I certainly think so…….. 

This brings me to an interesting point: is this where the world of technology patents is moving to? Of course, the scale of magnitude of this patent war can never be rivalled in a country such as South Africa…….However it would still seem wise for technology companies to acquire as many patents of their own as they possibly can…….if consistent development and innovation is a key to the success of a technology company then Google’s position is not  a good one to be in: stunted by its competitors… (and clearly very embittered as a result of it……)