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Patentability of Software after Bilski and KSR: Looking Back and Looking Forward

-- By ThomasHou - 19 Oct 2011

Section I: Bilski's Unfinished Effect on Computer Software as Eligible Subject Matter

For patent law and software aficionados who were expecting the Supreme Court to make a definite pronouncement on the patentability of process patents such as computer software, the Court's decision in Bilski v. Kappos was a letdown. The Court declined to "comment[] on the patentability of any particular invention" and left to the Federal Circuit ("FedCir") to develop doctrine according to the Supreme Court's precedents (including categories of unpatentable subject matter, such as abstract ideas). For software, neither the Supreme Court nor the FedCir? addressed in the Bilski decisions whether mere recitation of a computer could satisfy the "special purpose machine" of the FedCir? 's machine or transformation test, or a computer specifically adapted to the claimed process was necessary.

Nonetheless, decisions from the PTO, BPAI, and district courts are suggesting a more exacting review of software patent applications. Since Bilski, the PTO and BPAI have begun to deny a large number of software-only patent applications, albeit without establishing clear doctrine. A July 2011 study of post-Bilski BPAI and district court cases on patentability found that a majority of software patent applications were invalidated, mostly because they were deemed abstract ideas. On that level, the lower courts and administrative bodies are heeding the Supreme Court's earlier precedents, especially Gottschalk v. Benson, which held that inventions cannot substantially preempt the use of an abstract idea. The PTO and BPAI have not definitely commented on the contours of the "special purpose machine" definition from In re Bilski. Most notably, the FedCir? has not had an opportunity to rule on the eligible subject matter for pure software, which explains why the doctrine remains unsettled.

In the upcoming years, I anticipate that the PTO, BPAI, and district courts will continue to examine and adjudicate on various software patents, whose filings have not dropped. Although Jonathan Masur points to institutional incentives for the PTO to expand the boundaries eligible subject matter, I find recent developments from the Supreme Court through its many patent cases and Congress through the America Invents Act tempering the PTO's ability. Ultimately, the FedCir? must rule on the patentability of software and define what constitutes "special purpose machine", either from patent applications denied by the PTO or from invalidity arguments raised during one of these patent wars cases. Bilski only started the debate, and without a definite solution, needless litigation and reexaminations will continue.

Section II: KSR's Heightened Nonobviousness Test to Bar Trivial Software Patents

Even though Bilski and eligible subject matter are dominating headlines in patent law, they are not the sole area in flux. After all, patentability also requires utility, novelty, and nonobviousness, the latter of which has long been the gatekeeper for patentability and the hardest for patentees to satisfy. The Supreme Court's fairly recent decision in KSR Int'l Co. v. Teleflex Inc. seems to and should be having a similar effect on nonobviousness as Bilski had on eligible subject matter.

Several aspects of KSR are similar to Bilski and indicate a similar trickle effect on lower courts and the PTO and BPAI. First, the Court emphasized that its precedents called for a flexible and functional approach and rejected the FedCir? 's rigid, narrow test for obviousness. Second, the Court advised courts to look broadly at various factors, such as "interrelated teachings of multiple patents; the effects of demands . . . in the marketplace; and the background knowledge possessed by a person having ordinary skill in the art." Third, the Court recognized that market demand will often drive design trends, especially in the informational economy: "When there is a design need or market pressure to solve a problem . . . a person of ordinary skill has good reason to pursue known options within his or her technical grasp." This insight may be particularly pertinent to software. Finally, the Court left many questions unanswered and implicitly instructed the lower courts, including the FedCir? , to develop nonobviousness doctrine.

An empirical study has found that the FedCir? and district courts have started to invalidate more patents for obviousness because of KSR. For software, the obvious-nonobvious percentage is somewhat close to 50-50, which a 2010 WilmerHale study of FedCir? decisions since KSR found. Going forward, I see the FedCir? and district courts continuing to grapple with nonobviousness doctrine, including for software patents. KSR has elevated the threshold and more software, even if they are deemed statutory subject matter, may be subject to a finding of obviousness. However, I don't see the Supreme Court or FedCir? deciding this area en banc anytime soon. Most of the action will be at the district court or PTO/BPAI level, which may lead to divergences in what is already a fact-intensive area.

Section III: What This Means for Software, Software Users

Many people, including free software advocates, have long decried software patents as hindrances to innovation and sharing. The recent populist efforts to petition the Obama administration to end software patents show they are not alone. However, given Congress's inability to grapple with this issue (or any other matter), change must come from elsewhere. The flux in the doctrine in eligible subject matter and nonobviousness is a step in the right direction. Those sued by patent holders have greater likelihood of success to invalidate software patents under Sections 101 and 103. Perhaps one day proprietary software holders of patents will find the patent system and courts not worth their effort and costs. Or change may come from the market. The patent wars have already shown the inefficiencies with the software patent system, and with free software offering an alternative for users and other stakeholders, perhaps that would sound the death knell.

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