Software Patents Under United States Patent Law - History

History

In the late 1960s and early 1970s, the USPTO and the United States Court of Customs and Patent Appeals (CCPA) were at odds over the patent-eligibility of technical advances whose departure from the prior art was only in the use of a software algorithm. The USPTO rejected such claims and declined to patent them, but the CCPA repeatedly reversed the USPTO's rulings and ordered the issuance of patents. The USPTO's position was hampered during the 1960s by the uncertainty over whether the Supreme Court could review decisions of the CCPA, because it was unclear whether it was an Article III court. That question was resolved, however, in Brenner v. Manson, in which the Court held that it had certiorari jurisdiction to review CCPA decisions. That decision also began a string of decisions in which the Supreme Court reversed decisions of the CCPA, and then its successor court the United States Court of Appeals for the Federal Circuit (CAFC), which had reversed decisions of the USPTO denying a patent to an applicant.

In the first of the Supreme Court's computer software decisions (the "patent-eligibility trilogy"), Gottschalk v. Benson, the Court reversed the CCPA's reversal of a USPTO decision denying a patent on an algorithm for converting binary-coded decimal numbers into pure binary numbers. In so ruling, the Court looked back to 19th century decisions such as O’Reilly v. Morse, which held that abstract ideas could not be made the subject of patents. The Court's 1978 ruling in Parker v. Flook, was similar in principle. These cases also established that the "clue" to whether a patent might be granted on a process was whether the process was carried out with a particular apparatus or else effectuated a transformation of an article from one state or thing to another state or thing. In Flook, where the sole departure from the prior art was concededly the formula or algorithm, no transformation was alleged, and it was conceded that the implementing apparatus was old or conventional, the process was simply not the kind of process that could be patented.

In the 1981 case of Diamond v. Diehr, the United States Supreme Court upheld the CCPA's reversal of the USPTO, and ordered the grant of a patent on an invention, a substantial part of which involved use of a computer program which used a well-known formula (the Arrhenius Equation) for calculating the time when rubber was cured and the mold could therefore be opened. The Supreme Court stated that in this case, the invention was not merely a mathematical algorithm, but a process for molding rubber, which was therefore patentable. In the Diehr case, there was no concession that the implementation was conventional, and the process did effectuate a transformation of substances (from uncured rubber to cured rubber).

After this point, more patents on software began to be granted, albeit with conflicting and confusing results. After its creation in 1982, the CAFC charted a course that tried to follow the Diehr precedent. Patents were allowed only if the claim included some sort of apparatus, even rather nominal apparatus at times, such as an analog-to-digital converter front end, or in one case a scratch-pad memory for storing intermediate data. A representative decision from this period is In re Schrader, in which the CAFC set forth probably its best and most detailed formulation of the rule it was attempting to follow.

Dissatisfaction with the perceived artificiality of this rule erupted, however, in rulings beginning with the en banc 1994 decision in In re Alappat, in which the CAFC majority held that a novel algorithm combined with a trivial physical step constitutes a novel physical device. Therefore, a computing device on which is loaded a mathematical algorithm is a "new machine", which is patentable. This ruling was followed up in In re Lowry, which held that a data structure representing information on a computer's hard drive or memory is similarly to be treated as a patent-eligible physical device. Finally, in State Street Bank v. Signature Financial Group, the CAFC ruled that a numerical calculation that produces a "useful, concrete and tangible result", such as a price, is patent-eligible.

The USPTO's reaction to this change was, for the time being at least, to "throw in the towel." The Clinton administration appointed Bruce Lehman as Commissioner of the USPTO in 1994. Unlike his predecessors, Lehman was not a patent lawyer but the chief lobbyist for the Software Publishing Industry. In 1995, the USPTO established some broad guidelines for examining and issuing software patents. The USPTO interpreted the courts as requiring the USPTO to grant software patents in a broad variety of circumstances. Although the U.S. Congress has never legislated specifically that software is patentable, the broad description of patentable subject in the Patent Act of 1952 and the failure of Congress to change the law after the CAFC decisions allowing software patents, was interpreted as an indication of Congressional intent. The reaction of the defeated-feeling USPTO was characterized in the cartoon shown at right, which appeared in IEEE Micro at this time.

The United States Supreme Court remained silent on these decisions and developments for years. The first response appeared in a dissenting opinion in LabCorp v. Metabolite, Inc (2006). Although certiorari had been granted, the Court dismissed it as improvidently granted; the minority argued that the question of statutory subject matter in patent law should be addressed. Justice Breyer's dissent stated:

" does say that a process is patentable if it produces a 'useful, concrete, and tangible result.' But this Court has never made such a statement and, if taken literally, the statement would cover instances where this Court has held the contrary."

He continues to directly address the claim that software loaded onto a computer is a physical device:

"...And the Court has invalidated a patent setting forth a process that transforms, for computer-programming purposes, decimal figures into binary figures-even though the result would seem useful, concrete, and at least arguably (within the computer's wiring system) tangible."

At about the same time, in a concurring opinion in eBay Inc. v. MercExchange, L.L.C., Justice Kennedy (joined by Justices Stevens, Souter, and Breyer)questioned the wisdom of permitting injunctions in support of "the burgeoning number of patents over business methods," because of their "potential vagueness and suspect validity" in some cases.

This was followed by the decision of the CAFC in In re Bilski, which has opened a new chapter in this history. In Bilski, as the article on that case explains, the CAFC superseded State Street and related decisions with a return to the tests of the patent-eligibility trilogy, although while those decisions had merely treated the machine-or-transformation test as the clue to past decisions the CAFC now made that test dispositive.