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Software Patents and Protection Still In Flux

by: Charles Bieneman This article originally appeared in MI Lawywers Weekly on March 16, 2009

The patentability of computer software affects almost every business in the United States.

In the past decade or so, more and more businesses, in such areas as finance, retail, engineering, manufacturing, design, have implemented important processes in computer software.

Those businesses have a huge stake in the patentability of computer software.

But even businesses that themselves have no interest in patenting software are affected by the patentability issue when they are facing an infringement action, for example, based on a seemingly innocent Web site.

My practice includes protecting software-related intellectual property, but at present, I don’t think any patent lawyer can predict whether a software invention would be deemed patentable subject matter.

The question of whether computer software is patentable is a significant one. Without the possibility of patent protection, software owners are forced to rely on copyright protection, which is much narrower.

A copyright protects only the actual expression of an idea, and cannot prevent another party from stealing ideas embodied in software. For that broader protection, a patent is crucial.

Because patent protection can be so sweeping, many people in recent years have been highly critical of software patents. So-called “patent trolls” – intellectual-property holding companies that own patents but do not actually sell any products or services – have made headlines by aggressively pursuing companies that depend on software to operate their businesses.

For example, a number of patent trolls have obtained ownership of patents granted before the rise of the World Wide Web. Such patents have been asserted against Web site operators for big money damages, generating much controversy.

In the 1970s and into the 1980s, computer software was widely thought to be not patentable. Then the pendulum swung, culminating in a 1998 Federal Circuit Court of Appeals decision that opened the floodgates.

For a decade, software patents were rampantly obtained and asserted. The patent office, overwhelmed by the vast river of software patent applications at the dawn of the Web, and not fully conversant with the technology, granted many patents claiming inventions that should have been rejected as previously known or obvious.

Even though the courts can invalidate a patent, the fact of having a patent issued and the threat of litigation provide the patent owner with a strong tool to obtain rich settlements. And in some cases in which a defendant did not settle with the patent owner, juries awarded large damages.

The case against Research in Motion, which brought Blackberry owners to the precipice a few years ago, comes to mind. In that case, a patent owner almost succeeded in forcing the shutdown of servers providing e-mails to millions of “CrackBerry” addicts.

The pendulum now has come back the other way.

Last fall, in declaring that a patent application for a business method (that is, it did not include software or computer machinery at all) was not patentable, the Federal Circuit Court of Appeals called into question the patentability of computer software. The Patent Office has gone even further, recently denying the patentability of software inventions in case after case.

This sea change in the definition of patentable subject matter has wrought havoc with the intellectual-property portfolios of some of our country’s largest technology companies. Not all owners of software patents are “trolls.”

Well-established companies own thousands of software patents. Moreover, many smaller technology companies depend on patent protection for a key business idea that cannot be maintained as a trade secret. Because it is embodied in publicly distributed software, it cannot be protected adequately by copyright.

Thus, the definition of patentable subject matter is up in the air.

The uncertainty can be expensive and troublesome enough for large companies. For smaller companies, however, that may have made significant capital investments in a patent portfolio, the present fog of what is patentable and what is not can be crushing.

No one wants to spend money trying to protect an invention that, by definition, cannot be patented. On the other hand, no one wants to leave a valuable invention exposed when patent protection may be available.

So, what does a lawyer tell a client wondering whether to patent a software invention?

Even in today’s climate, some software inventions are more likely to be deemed patentable than others. The (for now) standard governing what subject matter is patentable emphasizes the presence of either a machine or a “transformation of matter” in the claimed invention. Pure “algorithms” are disfavored.

Therefore, claims to software applications that control machines, or that cause a device to alter some physical structure or matter, have a greater chance of being deemed patentable. Patent claims are like so much in the law: Sometimes it’s not what you are saying, but how you say it.

Furthermore, some clients will benefit from filing a patent application as inexpensively as possible, perhaps filing what is referred to as a provisional application, to buy time to see how the law evolves.

Other clients, perhaps seeing the value of their business as tightly linked to concepts embodied in software, should consider the importance of investing in software patent protection until the contours of the law governing what is patentable shake out.

In the common law system, all law is constantly in transition. Right now, U.S. patent law is rapidly changing in ways that cannot be predicted. Therefore, software owners will be well served by continuing to protect their important intellectual property investments, and by doing so in a way that anticipates – as best can be done at the moment – the future evolution of the law.