Summary: A lot of new links about software patents and In Re Bilski
One thing that I find extremely frustrating about many legal scholars’ and economists’ approach to patents is that they make two false assumptions. The first assumption is that transaction costs are acceptable, or can be made so with some modest reforms. The second assumption is that patent litigation is reasonably “precise”; i.e., if you don’t infringe on something then you’ll be able to build useful technology and bring it to market relatively unhindered. As my friend’s story shows, both of these assumptions are laughably false. I mean, just black-is-white, up-is-down, slavery-is-freedom, we-have-always-been-at-war-with-Eastasia false.
The end result is that our patent system encourages “land grab” behavior which could practically serve as the dictionary definition of rent-seeking. The closest analogy is to a conquistador planting a flag on a random outcropping of rock at the tip of some peninsula, and then saying “I claim all this land for Spain”, and then the entire Western hemisphere allegedly becomes the property of the Spanish crown. This is a theory of property that’s light-years away from any Lockean notion of mixing your labor with the land or any Smithian notion of promoting economic efficiency. And yet it’s the state of the law for software patents. Your business plan can literally be to build a half-assed implementation of some straightforward idea (or, in the case of Intellectual Ventures, don’t build it at all), file a patent, and subsequently sue the pants off anybody who comes anywhere near the turf you’ve claimed. And if they do come near your turf, regardless of how much of their own sweat and blood they put into their independent invention, the legal system’s going go off under them like a land mine.
Proprietary software advocates would probably be most concerned with money whereas ironically Free Software advocates, especially those who promote GNU General Public License (GPL), would be concerned with power.
Intellectual property is a lie, thus its enforcement by means of the copyright law is nothing more than institutionalized violation of real property rights by means of granting government enforced monopolies to authors. They are given the power to dictate how individuals who never entered any agreements with them and instead got it from someone else will use their own property (hard drives, DVD players and burners etc.).
Yes, you read the headline correctly. BMW has filed a patent for a “Method for Systematically Identifying Technology-Based Solutions.” Broken down into non-lawyer speak, BMW thinks it has identified the ways in which technology can solve problems. In other words, they want to patent the methodology behind technological problem solving.
Those arguing that patent rights should be restricted say that “business method patents amount to a tax on Internet commerce.” On the other hand, small software companies, financial services companies and others argue that their inability to protect software “cripples” the ability of smaller companies to compete.
For the first time in almost 30 years, the U.S. Supreme Court on Monday considered the issue of what types of technology should be eligible for patent protection when it heard oral arguments in Bilski v. Kappos.
At Monday’s hearing (court transcript), neither party had the objective of abolishing software patents. The Bilski case is about a business method patent, so there was Mr. Jakes arguing that business methods should be patentable, and Mr. Stewart arguing that they shouldn’t. For software to be excluded, we’re relying on the judges (to whom we wrote an amicus brief, as did many others). There’re a few worrying statements, but there’s also a lot of hope.
On the issue of business methods, the judges were very sceptical but mentioned many times that they don’t see an obvious place to draw the line. Indeed, they seemed to find Jakes’ position comical at times, and also found Stewart not going far enough and said that with his proposed interpretation, a computer could be added to any idea to make a patentable “machine”, thus also failing to exclude business method patents. There are also some worrying statements in there, like Justice Sotomayor calling the 2008 CAFC in re Bilski ruling “extreme“.
With the tech industry looking on, the Supreme Court today will explore what types of inventions should be eligible for a patent in a pivotal case that could undermine such legal protections for software.
The judicial activism thesis may have a superficial appeal. State Street was a highly visible and prominent pronouncement by the federal court having nationwide jurisdiction over patent cases. It may seem reasonable to attribute tremendous implications to such a famous judicial opinion. Yet the judicial activism thesis suffers from multiple glaring problems and plainly cannot account for the timing of the rise in business method patenting, which plainly began well before State Street.
In a world of constantly accelerating technological change, economic prosperity depends on innovation. To support such innovation, it is vital that our patent system be well-calibrated, so that overly broad patent monopolies do not choke innovation. In the last several years, patent standards have been relaxed by the courts, which has created a patent system that hinders innovation in the software industry.
Such lawsuits can be ruinously expensive – including, for an average-size case, millions of dollars in attorneys’ fees. Large software companies have developed defenses against some patent threats, including obtaining their own patents that they may use to bring countersuits if attacked. This strategy is only available to well-financed companies. Even large companies face increased litigation risks from businesses with no purpose other than exploiting patents. These businesses – called non-practicing entities, or, less politely, patent trolls – buy patents not with a view of producing products, but rather so that they can demand ransom from operating companies.
Due to an important federal circuit court of appeals decision last year, this type of powerful innovation may no longer be patentable. In upholding a lower court ruling, the federal circuit wrote that a business process (like online banking) must be “tied to a machine” or transform “a substance into a different state or thing” in order to qualify for patent protection. This “machine or transformation” test, as it is called, is too rigid to incite innovation.
So now, shorn of all the technicalities, the Supreme Court gets a chance to say whether it means what it’s always said, or whether it wants to endorse the fast and flashy round-heeled patent system we were running during the boom times. Of course, it can always do nothing at all, or make a new alternative that wasn’t there before; that’s what being the Supreme Court means, as any Legal Realist will tell you. But one thing is certain, that if they wind up saying anything at all, what the Justices say in this case will determine the course of patent law for a long time to come.
The company is marketing the product even without the patent, so Warsaw was asked: Why keep fighting for it? “Our revenues are down millions of dollars because we don’t have the patent” and the royalty stream that would have resulted, he said. “We have no market power. That’s the essence of it. You can’t protect your interests.”
The appellate court ruled that in order for a business method to receive patent protection, it would need to either “transform [an] article to a different state or thing,” or be “tied to a particular machine.” The opinion sent the patent bar into an uproar, with businesses asserting that the new standard jeopardized patents on all kinds of highly valuable intellectual property, including software.
At issue is whether US patent protection must be limited to inventions involving machines and transformative processes, or whether patent law also embraces nonphysical inventions like improved business methods and software innovations.
The case, Bilski v. Kappos, is viewed as a potential landmark in patent law. It has attracted 67 friend-of-the-court briefs from lawyers, scholars, and businesses, including Microsoft, the Biotechnology Industry Organization, Bank of America, Google, Yahoo, and L.L. Bean.