SCALE7x: Courts have new "teeth" to limit software patents

A surprising decision from the second-highest court for US patent cases will put meaningful restrictions on the patentability of software here, Red Hat patent lawyer Rob Tiller said in a well-attended talk at the Southern California Linux Expo. In a surprise October ruling in the case of In re Bilski last year, the Court of Appeals for the Federal Circuit "threw out wholesale" the existing test for software patentability, and substituted a new, stricter one. "The test has teeth," said Tiller, who, as Vice President and Assistant General Counsel, IP for Red Hat, handles incoming patent threats and authored an amicus brief in the case.

The patent at issue was a business method for hedging commodities transactions; the Federal Circuit found the method unpatentable under a new test: in order to be patentable, a process must be either tied to a particular machine or apparatus, or must transform a particular article into a different state or thing. However, the court, "left to future cases the elaboration of the contours of the test," Tiller said. The Federal Circuit threw out its previous standard, which it set in the State Street Bank & Trust Co. v. Signature Financial Group, Inc. case in 1998. That decision, which opened the door to pure business method patents, allowed a patent on a mutual fund business method under a "useful, concrete and tangible result" test. In the Bilski decision [PDF], the Federal Circuit's chief judge, Paul R. Michel, wrote, "those portions of our opinions in State Street and AT&T relying solely on a 'useful, concrete and tangible result' analysis should no longer be relied on."

Questions remain about what kind of machine is "particular" enough. Will a patent applicant need to affect a real event outside the computer, such as the timing of a rubber-curing machine, or is moving electrons within a general-purpose computer enough? "This is something that courts and patent attorneys are scratching their heads about," Tiller said later. It's possible that a software-patent-friendly interpretation of Bilski could simply include a "general-purpose computer" in a patent claim, and trivially get around the requirement for a particular machine or apparatus. But, Tiller said, "It's hard to argue that a general purpose computer alone will suffice." Judge Pauline Newman wrote in dissent, "For the thousands of inventors who obtained patents under the court's now-discarded criteria, their property rights are now vulnerable."

"Bilski suggests that the Federal Circuit believes the Supreme Court is concerned with its work," Tiller said. In an unusual move, the Federal Circuit heard the case en banc, with all twelve judges involved, instead of in a smaller panel. Nine agreed on the ruling, with two against the new test and one dissenter writing that the court didn't go far enough. "They really are concerned that if you grant too much patent protection you could inhibit innovation," Tiller said. In the Red Hat amicus brief, Tiller summarized the often-heard economic arguments against software patents, and argued that the State Street test was inconsistent with the Supreme Court's previous patent decisions.

In a 1972 case, Gottschalk v. Benson, the Supreme Court ruled that an algorithm for converting binary-coded decimal data to binary was not patentable. Later, in a 1981 decision in the case of Diamond v. Diehr, the Supreme Court decided that a process for curing rubber that includes a computer-implemented algorithm is patentable. The Red Hat amicus brief says, "Diehr reaffirms that abstract ideas by themselves are unpatentable, and that only inventions that are sufficiently tangible are patentable."

The patent holder has requested that the Supreme Court hear the Bilski case, but the Supreme Court accepts few such requests, Tiller said. Groklaw covered the Bilski case thoroughly (Part 1, Part 2, Part 3) and called it "The End for the stupidest of the stupid patents."

Tiller got an easy round of applause when an audience member thanked him for Red Hat's refusal to sign a dubious patent agreement with Microsoft, as Novell did. Although Red Hat did not give ground to Microsoft's patent threats, Microsoft blinked first and agreed to establish virtualization interoperability agreements with Red Hat without a Red Hat signature on a patent shakedown.

Tiller also asked for some policy changes to ease the patent stress on the software business. "Since 1994, US litigation costs have substantially exceeded profits from patents," he said, except in the chemical and pharmaceutical industries. "If we can't have a subject matter exclusion for software, is there anything else that can be done?" he asked. Improving patent search tools would help, and requiring source code with a patent application would make it easier for working software developers to identify problem patents, since it's easier for them to read code than the tortured language of patent claims. An independent invention defense would also help, he said. "We ought to carve out the situation where a second inventor, just as creative but a little later, comes up with the same invention," he said. Senator Patrick Leahy of Vermont plans to re-introduce a bill to reform patent damages and reexamination requirements, Tiller said. "We in fact supported that bill."

Linux users can help with the patent problem. "Talk about this problem. Educate ourselves and educate others. Instead of fostering innovation it's hindering innovation," he said. "We have a large amount of work to do to educate people about this." Red Hat is also seeking prior art to help defend a lawsuit from a patent troll firm that is suing both it and Novell.