Patent News

Mar. 13, 2014 A Rebuttal to The Economist’s “Stalking Trolls,” by Michael Borella and Andrew Williams

This article originally appeared in blog on March 13, 2014.

On March 8th, The Economist published an article deriding both so-called “patent trolls” and “software patents” as being impediments to innovation in the United States. Unfortunately, as we have seen all too often when the mainstream media discusses the patent system, the article contains unsupported assertions, draws questionable conclusions, and displays a profoundly flawed understanding of patent law. Such commentary is particularly troublesome in this case because of the wide circulation of this periodical.

At the outset, the article contains a proclamation that the United States’ patent system is “dysfunctional,” suggesting this fact is a forgone conclusion to the uninformed reader. Nevertheless, in explaining how the reported developments are meant to “solve” this supposed crisis, the author reveals his unfamiliarity with the philosophical basis of the patent system in this country. For example, the article equates non-practicing entities (“NPE”) with “trolls.” The term “NPE,” however, encompasses all entities that do not manufacture products, including most universities, research institutions, and individual inventors. Even the reviled “patent assertion entities” have been acknowledged by most to serve an important role as mediator between such NPEs and operating companies often necessary to commercialize inventions. In fact, the United States’ system purposefully encourages such actions by making patent property rights freely assignable and eschewing a “working” requirement. This is thought to help make the system accessible to everyone, not just those with abundant resources.

Certainly, no one is denying that there are actors that abuse the litigation system in this country, both with regard to intellectual property rights and otherwise. However, elevating this minority of cases to be representative of the norm is simply unproductive. So is the dissemination of questionable statistics. For example, the article states as fact that patent “trolls” cost U.S. companies $29 billion in 2011. It is presumed that the author is referring to the research of James Bessen and Michael J. Meurer, which has come under recent scrutiny because of the particular methodology used. See, e.g., Schwartz & Kesan, Analyzing the Role of Non-Practicing Entities in the Patent System, Cornell Law Review, Vol. 99:2, pp. 425-56 (2014). As a result, the implications that can be drawn from the data with regard to the impact of “trolls” on the system are questionable at best.

Moreover, the article’s description of the patentability requirements in the United States also betrays the author’s lack of understanding of the topic. With regard to patentable subject matter, the article uses “boiling water to make tea” as an example of a “common idea” which certainly must be a law of nature, natural phenomenon, or abstract idea. However, not only is this example not apropos, but it actually supports the counterpoint. Heating water itself might occur in nature, but the application of that “natural” process to “make tea” does not. And, even though people were certainly brewing tea before the United States’ patent system was formed, does this mean Keurig was undeserving of a patent to its K-cups, which were essentially a new way to make tea?

Even worse, to support the allegation that the United States is issuing non-novel and obvious patents, the article mentions a single patent directed to “upgrading computer software over the internet.” Noticeably missing, however, was the patent number, title, inventor(s), and date of filing, without which it is impossible to determine just what would qualify as prior art. The article appears to be referencing U.S Patent No. 5,771,354, which was the subject of a This American Life episode in 2013 (“When Patents Attack . . . Part Two!”). If so, contrary to the suggestion in the article, the invention claimed in that patent dated back to the early 1990s, and was ultimately found to be invalid by a jury not because the invention was being practiced in the prior art, but because the correct inventors were not listed on the patent.
Nonetheless, the reference to the “computer software upgrade” patent is yet another example of how the media mistakenly characterizes a patented invention in a few short words, rather than by the patent’s allowed claims. While gospel to patent attorneys, the well-established principle that “the claims define the invention” gets little attention elsewhere. Instead, it is easy for a commentator to read the patent’s title, abstract, part of its summary, or a few of its drawings, and then provide an over-simplified synopsis of what the patent allegedly covers. Such an interpretation is not in accordance with U.S. patent law, where special court hearings are used during litigation for the sole purpose of defining the scope of asserted claims. Simply put, one cannot determine what a patent actually protects by attempting to determine the “gist” of the invention from the specification — a careful evaluation of the claims is required.

This type of fundamentally flawed analysis is often directed to software and business method patents. Never mind that neither type of patent is actually defined by the author, or that many patents purportedly directed to either of these technologies explicitly claim computer hardware or other types of physical devices carrying out, or being impacted by, the steps of a method claim. Perhaps software in particular is an easy target for such bullying, because it is less tangible than say, a cotton gin or a light bulb, and often operates invisibly.

However, the implication that software is too abstract to warrant patent protection unfairly singles out one of the greatest drivers of the U.S. economy over the last forty years. A major aspect of innovation is to make products and services faster, cheaper, and better. The patent system is intended to incentivize individuals and organizations to publicly disclose such inventions, and as a result receive a limited property right thereover. Despite contentions of the deleterious impact of a “broken” patent system on the software industry, the computer and information industry as a whole continues to grow, as evidenced by recent record-breaking stock values, billion-dollar acquisitions, and successful initial public offerings. A broad exclusion of computer-implemented inventions is illogical and disregards the fundamental tradeoff on which the system is based. A ban on software patents would make as much sense as, for example, barring any invention that uses plastic from being patented.

To the extent that criticism of the patent system might be warranted, the notion that software and business methods should be unpatentable per se is gross overreaction. In addition to having to meet the patent-eligibility bar for subject matter, a claimed invention must also be novel, non-obvious, and described in such a way that it can be practiced by one of ordinary skill in the art. The inventions of Bilski v. Kappos, Mayo v. Prometheus, and Alice v. CLS Bank have only been analyzed for validity under the subject matter rubric. In these cases, the Supreme Court has applied (or in the case of CLS Bank, is being asked to apply) the blunt knife of subject matter eligibility rather than the more incisive tools of novelty and obviousness.

As noted by the Court in 1980’s Diamond v. Diehr, “[t]he ‘novelty’ of any element or steps in a process, or even of the process itself, is of no relevance in determining whether the subject matter of a claim falls within [patentable subject matter].” This understanding was in accordance with that of Judge Giles Rich, coauthor of the 1952 Patent Statute, who wrote “[a]chieving the ultimate goal of a patent [requires] having the separate keys to open in succession the three doors of [patentable subject matter, novelty, and non-obviousness].”

The Court’s recent Mayo decision has been roundly criticized for combining considerations of novelty and obviousness into the patent-eligibility inquiry in a way that requires determining the “gist” of the invention. Consequently, Mayo runs counter to the statute, the Court’s own precedent, and well-established practices of claim interpretation. And yet, Mayo may be the standard under which CLS Bank is decided. The problem lies not in the topic of these patents, but in the inherent subjectivity of the Mayo analysis. The fractured, six-opinion Federal Circuit ruling in CLS Bank demonstrates that ten federal judges, who are experts in patent law, could not agree how Mayo should be applied.

Surely, not all patent applications that claim software or business methods should be allowed. Some will be too broad, obvious, or vague. But this analysis is best carried out on a case-by-case basis by well-educated USPTO examiners who apply workable and reasonably objective standards.

The article ends with yet another oft-asserted falsehood — that copyright would be a “perfectly adequate means of protecting and rewarding software developers for their ingenuity.” Copyright does not protect inventions — it protects expressions of ideas. In the case of software, this would be the source or object code itself. If software innovators were required to rely on the weak protection that copyright provides, the computer industry would become rife with clean-room copyists who misappropriate the ideas behind innovative software by developing cloned applications. And the so-called “trolls” are supposed to be a drain on the economy?