10.31.16

The World Comes Tumbling Down for Software Patents and Patent Trolls

Posted in America, Patents at 4:15 am by Dr. Roy Schestowitz

Weeping-angel

Summary: News analysis regarding the state of software patents as well as patent trolls that heavily depend on such patents and on highly biased courts which are based in Texas

EARLY in the month we wrote a variety of articles about Intellectual Ventures v Symantec, which was an important CAFC-level case that may have spelled the doom/end of software patents in the US. Today we bring together and present a potpourri of coverage related to this.

Free Software Foundation on the Effect/Impact for Free/Open Source Software

Now too long ago the Free Software Foundation (FSF) wrote about this case, saying that the judge “provides a strong case against software patent”. To quote:

Mayer lays out the First Amendment argument against patentability of certain subjects, noting that limits on the subject matter of patents are meant to protect free expression. Under U.S. law, 35 U.S.C § 101 (section 101) lays out the scope of patentable subject matter. In analysing this section, courts have carved out certain subjects as being outside the scope of patentability so as to protect freedom of expression. In particular, abstract ideas and mental process have been found too threatening to the free exchange of ideas to permit them to be locked up in patents. After outlining the basics, Mayer goes on to state that “Most of the First Amendment concerns associated with patent protection could be avoided if this court were willing to acknowledge that Alice sounded the death knell for software patents.”

Discussion Everywhere This Month

Recently, TechDirt dedicated a whole audiocast to the subject and titled it “Death Knell For Software Patents”. Obviously, as expected, patent law firms are still bemoaning the (almost) end of software patents and here we have Manatt Phelps & Phillips LLP remarking on the second anniversary of Alice, which is actually almost 2.5 years old by now. The Court of Appeals for the Federal Circuit’s (CAFC) mea culpa, as one might put it, is admitting that making software patents possible was a horrible mistake. Here is Christine Hall’s article about it, titled “Federal Judge Says Alice ‘Death Knell for Software Patents.’”

It’s not time to break out the champagne just yet, but opponents of software patents might have cause to be hopeful. There’s now a federal judge that openly agrees with them.

This isn’t just any judge, but a judge sitting on the Court of Appeals for the Federal Circuit (CAFC), which hears all patent appeals. He’s also not some bright-eyed newcomer to patent law. He was appointed to the Federal Circuit in 1987, where he was Chief Judge from 1997-2004.

On Friday, CAFC ruled that three patents Intellectual Ventures was attempting to use against Trend Micro and Symantec were invalid as they didn’t describe anything patentable. Although the ruling was pretty much business-as-usual and wasn’t unexpected, a concurring opinion by Judge Haldane Mayer went into uncharted waters. Alice Corporation versus CLS Bank International, he said, ended software patents.

“Alice” was the 2014 case in which the Supreme Court ruled that an abstract idea that “does no more than require a generic computer to perform generic computer functions” is not patentable. At the time of the ruling, many thought it would seem to invalidate almost all software patents, except that the Supreme Court bent over backwards to say otherwise within the ruling.

Judge Mayer spent 13 pages addressing software patent issues on several different fronts. For starters, he said they pose a First Amendment problem. “Patents, which function as government-sanctioned monopolies, invade core First Amendment rights when they are allowed to obstruct the essential channels of scientific, economic, and political discourse.”

It’s the free speech issues that led him to the conclusion that “Alice,” in effect, outlawed most if not all such patents. “Most of the First Amendment concerns associated with patent protection could be avoided if this court were willing to acknowledge that Alice sounded the death knell for software patents,” he wrote.

An article by Scott Graham of The Recorder has been titled “Software Patents on Shaky Ground With Federal Circuit in Case After Case” and it is no longer behind a paywall (a two-page short article).

Also see “Federal Circuit Finds Three Intellectual Venture’s Patents Invalid under the Mayo/Alice Framework” — an article that uses more legalese:

The Federal Circuit recently decided a case concerning three patents owned by Intellectual Ventures I LLC (“IV”). Intellectual Ventures I LLC v. Symantec Corp., Case Nos. 2015-1769, 2015-1770, 2015-1771 (Fed. Cir. Sept. 30, 2016). The district court had invalidated U.S. Patent Nos. 6,460,050 (‘050) and 6,073,142 (‘142) and found that Claim 7 of U.S. Patent No. 5,987,610 (‘610) was patent eligible. The district court had also found that Symantec Corp. (“Symantec”) infringed Claim 7 of the ‘610 patent, leading to an $8 million judgment. On appeal, the Federal Circuit held that all three patents were patent-ineligible under 35 U.S.C. § 101.

Patent Law Firms Partly in Denial

Software patents are still being squashed (we covered new examples last night), but their proponents try to find hope. “Alice/101 Patent Invalidity Rate at the Federal Circuit Is 91.4% of Patents Rendered Ineligible,” one patent attorney notes in relation to the statistics presented in Bilski Blog and “I think its the Fed. Dist. Cts. w/>50% 101 Valid Patents; The CAFC is still killing >90% of patents in 101 appealed cases,” he added. This was said in relation to Dan Barsky’s claim that “[f]or the first time since Alice the Fed Circuit has held more #patents valid than invalid @CAFCPatentDaily #intellectualproperty” (incorrect!)

They are both citing Bilski Blog (as above), which has tracked all these cases pretty exhaustively. Their problem is that CAFC and SCOTUS are a lot more potent or influential than other courts, especially those that are in Texas. Here we have Finnegan, Henderson, Farabow, Garrett & Dunner LLP expressing concern about the decision and another new article about CAFC, this time dealing with the tightening of patent scope in another area:

The US Court of Appeals for the Federal Circuit has affirmed the Patent Trial and Appeal Board’s (PTAB) decision to reject a patent application centring on an influenza drug.

Relenza (zanamivir) is a treatment for infection by an influenza virus, and was invented by Constantin Efthymiopoulos, who had applied for a patent relating to methods of administering the drug through inhalation.

One of the rejected claims states that zanamivir should be administered by inhalation through the mouth alone.

Has CAFC finally realised that patent maximalism is not desirable? Lawyers from Finnegan, Henderson, Farabow, Garrett & Dunner LLP certainly understand that they cannot patent everything under the Sun and here is what they say in a new article about Mayo/Alice:

In Affinity Labs of Texas, LLC v. DirecTV, LLC, Nos. 2015-1845-48 (Fed. Cir. Sept. 23, 2016), the Federal Circuit affirmed a district court order granting a motion to dismiss, holding that the asserted patent, directed to wireless streaming of regional broadcast signals to cell phones located outside the service region, was invalid based on lack of patentable subject matter.

In applying the first step of Mayo/Alice—determining whether the claim is directed to a patent ineligible concept (i.e., abstract idea)—the Court held the claimed invention was an abstract idea and “entirely functional in nature.” The Court found that missing from the claims was how to implement out-of-region broadcasting on a cell phone, and the specification was similarly deficient and in fact underscored the abstract nature of the invention.

Other law firms’ pessimistic notes on the likely end of software patents are worth taking stock of. On the 19th of the month Hodgson Russ LLP published a “A Silver Lining for Software Patents” and Wolf Greenfield & Sacks PC said that “It is Still Possible to Patent Software”, even though it is a lot harder and probably too risky to be worthwhile.

Reprinted with limitations by Amanda Ciccatelli under the same headline (in the form of “news”), we now have “Is Software Patentable?” To quote:

This case could have a significant impact for tech companies and startups if courts continue to take the Alice ruling to mean that software patents are null. So, what might this mean for the future of the tech industry? Brett Schuman, a partner in Goodwin’s IP Litigation Group, and an expert in patent law for startup and emerging growth companies, spoke to Inside Counsel about these questions and other Intellectual Property issues.

Well, startups don’t need software patents; it’s what lots patent trolls sue them out of existence with. Patent lawyers’ media lies about it.

Denelle Dixon Thayer, writing about the latest major CAFC ruling, says that “Software patents preventing free expression online” (as per the decision from the judge). To quote:

Should someone be able to get a monopoly on concepts for software? What if those concepts cover the basic pieces of something as important as the Internet? These are the type of questions constantly debated in the software industry, the patent office and the courts. What is generally overlooked, however, is the very real impact that software patents can have on freedom of expression. The Internet as a software platform is the largest channel of free expression in existence today. So the question we all need to consider now is how much do software patents restrain the rights protected under the First Amendment.

The Internet isn’t a single, uniform system. Rather, it’s a massive, collaboratively created platform, a large part of which is based on open software. It relies on multiple people and companies developing numerous pieces of software that must communicate with each other to work. Because patents allow a single person or company to exclude everyone else, a patent monopolizing basic Internet functionality causes enormous damage to the core of how the Internet is built and functions – the very thing that enables the Internet as a medium for expression on such a huge scale. Both Congress and the courts have recognized this kind of tension and accounted for it in the context of copyright and trademark law. Unfortunately, U.S. patent law has few built-in protections to ensure that patent monopolies do not overreach and restrict free expression.

Last week, achieving this critical balance between patents and free expression hit a crucial milestone. Judge Mayer in the Federal Circuit (the US court that hears patent appeals cases) wrote in a concurring opinion that patents directed at software running on generic computers can violate the First Amendment by creating barriers to communication, discourse, and the exchange of ideas online. In his opinion, he recognized that software and the Internet are widely-used, basic tools for expression. Mayer went further to declare that they are “essential channels of scientific, economic, and political discourse.”

An article by James M. Singer (Fox Rothschild LLP) said that “Federal Circuit Invalidates Three Software Patents; Judge Mayer Calls For Ban On All Software Patents”. From the opening parts:

In the past few months, the Federal Circuit reversed a two-year trend of overturning software patents by publishing three decisions that outlined various parameters in which software can be eligible for patenting. In those decisions (described in previous IP Spotlight posts published here and here) the court cautioned that not all improvements in computer-related technology are inherently abstract. It also said that when assessing patent-eligibility, one must be careful to not use patent-eligibility to invalidate a claim when the real issue with the claim is obviousness.

An article by Russ White has a misleading headline, “The Future of Software Patents” — as if there’s much of a future to them now…

At this point, software patents still stand in the United States. The reasoning of the primary and concurring opinion, however, is likely to be picked up by other courts, potentially reducing (or eliminating, over time) the enforceability of software patents. Since I’m not a legal scholar, I’m not going to comment on the overall likelihood of software patents becoming less than useful. Instead, what I’d like to think through is what the reaction of the network engineering world might be.

A survey taken by patent lawyers in site that targets them says software patents are not dead. But that’s like asking about Donald Trump in Fox News. The audience is already a subsection of the population which has biases/convictions. “Responding to WIPR’s recent survey,” WIPR wrote, “100% of readers disagreed with Mayer’s opinion.”

Well, obviously this means that people who profit from patents don’t like a decision against them. “100% of readers disagreed with Mayer’s opinion,” says the article, but it does not specify the number or respondents. Could be 8. Could be 80. Anything…

Intellectual Ventures and Other Patent Trolls in the News

Dealing with the troll (not company) that caused the latest panic among law firms, Bastian Best tries to defend it by saying: “Another example of the ” #patenttroll = patent owner I don’t like” argument” (or maybe he alludes to universities that feed Intellectual Ventures).

Actually, the core argument is that a patent troll — in this case the world’s biggest (which is also Microsoft-connected) — picks up all the patents and universities facilitate it. “Well,” Benjamin Henrion responded, Intellectual Venture “has many fans among some communities.”

Found via IPRsLaw was the context of it all — an article by the EFF that cites an analysis of Intellectual Ventures. Remember that it was Microsoft that created this monster, Intellectual Ventures, and the EFF urges people to “Tell your university: don’t sell patents to trolls.” Here is their source (which contains a lot of information):

To answer this, I have scraped the names of the original assignees for each of the U.S. patents in the portfolio from patent records (see annotated patents list). The analysis shows that nearly 500 of IV’s patents originally belonged to universities, including state schools (see Figure 1 and university-derived patents list).

The EFF mentioned this chart later on as well and the EFF’s Vera Ranieri said that “Patent Forum Shopping Must End” in relation to the VENUE Act:

As we’ve detailed on many occasions, forum shopping is rampant in patent litigation. Last year, almost 45% of all patent cases were heard in the Eastern District of Texas, a sparsely populated region of Texas probably more well-known as the birthplace of George Foreman than for any technological industry. EFF, along with Public Knowledge, has filed an amicus brief in TC Heartland v. Kraft, urging the Supreme Court to hear a case that could end forum shopping in patent cases.

The case is one of statutory interpretation. Prior to 1990, the Supreme Court had long held that in patent cases, the statute found at 28 U.S.C. § 1400 controlled where a patent case could be filed. However, in 1990 in a case called VE Holding, the Federal Circuit held that a small technical amendment to another venue statute—28 U.S.C. § 1391—effectively overruled this long line of cases. VE Holding, together with another case called Beverly Hills Fan, means that companies that sold products nationwide can be sued in any federal court in the country on charges of patent infringement, regardless of how tenuous the connection to that court. TC Heartland first asked the Court of Appeals for the Federal Circuit to revisit its law. EFF also supported TC Heartland at that court. The Federal Circuit declined the invitation.

More recently, the EFF’s Elliot Harmon said that “Patent Trolls Undermine Open Access”. To quote this newer analysis:

Patent Trolls Undermine Open Access

This Open Access Week, the global open access community has a lot to celebrate. Hundreds of universities around the world have adopted open access policies asking faculty to publish their research in open access journals or archive them in open repositories. A few years ago, open access publishing was barely recognized on the fringes of science; now, it’s mainstream. Three years after the White House’s groundbreaking open access memo, we may be on the verge of passing an open access law.

Again and again, we’ve seen how making the results of scientific research available to everyone is good for innovation. Innovators should be able to use and build upon the most up-to-date scientific research, regardless of whether they have the budgets and institutional connections necessary to access expensive journal subscriptions and academic databases—particularly when that research was paid for with public funds.

Shooting the messenger is the tactic used by Bastian Best again. “Another one-sided viewpoint by EFF,” he calls it, which is actually more polite than Watchtroll put it. In this particular case, the EFF agrees with Red Hat, whose “EVP speaks out on patent litigation abuse in EDTX”. To quote Red Hat based on this new article:

Help slow the drag with patent venue reform

As our country and North Carolina look to accelerate the growth of our economy and expand its reach to all citizens, one issue has been a continuing drag: abusive patent litigation.

One prevalent tactic of abusers is to haul companies into virtually any district court in the United States, including those far away and those in locations that have nothing to do with where you do business.

Under current patent law, infringement suits can be brought in courts with no or little connection to the parties in the litigation. “Patent trolls” use this weakness in the system to select the courts well-known for their friendliness to patent suits.

For most of these patent trolls, their court of choice is the Eastern District Court of Texas (EDTX), which has been the No. 1 venue for bringing patent suits for nearly a decade. The EDTX saw 44 percent of all patent infringement cases filed in the entire U.S. in 2015, with one judge overseeing more than a quarter of all cases – twice as many as the next most active patent judge.

As a home-grown, global company headquartered in North Carolina that has been recognized as one of the world’s most innovative companies, Red Hat has repeatedly been forced into court in the EDTX. We have no office there; we do no business from there. The patent litigation abusers have minimal contact there, sometimes just a small office. But they go for a leg up in that district, given its reputation.

Red Hat and other companies have tried to move cases to where we can get a fair hearing, but the rules to change venue don’t easily allow that. We believe patent infringement suits, just as other types of suits, should be heard in judicial districts that have a reasonable connection to the dispute.

They basically strive to limit the ability of trolls to choose Texas. Here is a TC Heartland Law Professor Amicus Brief, submitted by “Mark Lemley, Colleen Chien, Brian Love, and Arti Rai” against such patent trolling (mostly in Texas). To quote Patently-O:

From a policy perspective, the case is seen as a vehicle for defendants who do not like being sued in the Eastern District of Texas and into more venues perceived as more defendant friendly.

A group of 50+ law and economics professors led by Mark Lemley, Colleen Chien, Brian Love, and Arti Rai have filed an important brief in support of the TC Heartland petition that I have copied below. Their position is (1) the Federal Circuit has erred on interpreting the law; and (2) the permissive venue result has fueled many of the problems of our patent system.

Patent trolls don’t make as many headlines as they used to, but when they do, it’s about celebrities like Justin Timberlake and Britney Spears. This too is about Texas and Joe Mullin explains:

It’s getting easier than ever for defendants to win fees in patent cases, especially against “non-practicing entities” with no products. But don’t tell that to pop stars Justin Timberlake and Britney Spears.

The two celebrities and their respective production companies were sued by an entity called Large Audience Displays Systems, LLC (or LADS for short) back in 2009.

The patent-holder who came after them is Darrell Metcalf, the inventor of US Patent No. 6,669,346, which describes a way of displaying video images on massive, arced screens. Metcalf, who lives in California, set up an East Texas LLC called Large Audience Display Systems (or LADS for short) back in 2009, then sued the pop stars in that venue, along with the LA Lakers and the band Pussycat Dolls.

The case was transferred to California in 2011. The judge promptly put the case on hold at the defendants’ request, while the patents were under reexamination at the US Patent Office. Ultimately, the office rejected all the patent claims.

The USPTO is asleep at the wheel and it was granting software patents almost all the time. No wonder all this chaos has been happening. Trolls depend a great deal on software patents and they prey on software patents; it’s tempting to think that headlines like “Did trolls cost Twitter $3.5bn and its sale?” speak about/allude to patent trolls, but these actually speak of Internet trolls and Twitter happens to be a frequent target of patent trolls, too (patent trolls are a huge problem for them). Professor James Bessen, an academic who writes a lot about the subject, wrote about this new report. “Major breakthrough “Invention” cues new video after you finish another,” he said, in relation to the following news:

These days, it seems like software patents are falling down right and left. Hundreds of them have been invalidated by US federal judges since the Supreme Court’s 2014 Alice Corp v. CLS Bank. decision, and more patent-holders are getting sanctioned for their behavior in court. The economics of the patent-trolling business are changing in fundamental ways, and lawsuits are down.

It’s tempting to think the whole mess is going to dry up and blow away—but the lawsuits coming from companies like Bartonfalls LLC show that some patent lawyers are going to keep on partying like it’s 2009. Bartonfalls is a shell company formed in the patent hotspot of East Texas, and it sued 14 big media companies on October 11 over US Patent No. 7,917,922.

This is a software patent that really ought to be invalidated. Maybe it will.

Speaking of patent trolls that rely on software patents, see this relatively new article from Mother Jones:

Meet America’s Most Prolific Patent Troll

[...]

So if you send notifications telling customers that their orders have been filled, S&T will sue you for $25,000. Why? Because they claim to have patented this idea if it’s done via some kind of computer network. In all this time, however, the patent has never been tested in court. It’s never been worth anyone’s time.

This. Is. Ridiculous. If you call your customer on the phone, it’s fine. If you send them an email, you’ll get sued. It’s hard to conceive of anything stupider.

This was also covered by the Wall Street media, under the heading which puts it in perspective (based on one criterion among others):

America’s Biggest Filer of Patent Suits Wants You to Know It Invented Shipping Notification

Like almost every online retailer, Spice Jungle LLC emails tracking numbers to customers when they place orders. That’s why the small firm was dumbfounded when it received a demand to pay $25,000 for the right to do so.

There are several aspects to some of these latest developments; one major aspect is software patenting and another is patent trolling, both of which are tied together by causality and other correlations which we covered here before.

We are gratified to see that the USPTO and the US patent system (in general) is improving these days, unlike the EPO.

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