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John Morris

Everything you need to know about software patents

What are software patents and why are they controversial?

Software patents allow individual and companies to claim exclusive rights over software inventions. Some famous software patents have included Google's patent on its method of ranking search results, Amazon's patent on the concept of one-click shopping, and a patent on the concept of scanning documents to an email address that has been heavily used by patent troll MPHJ Technologies.

Software patents are controversial because they are unusually prone to litigation. In recent years, patent litigation has cost defendants tens of billions of dollars per year; these lawsuits have disproportionately involved software patents. Also, many computer programmers regard patents as an infringement on their freedom to do their jobs. Critics view copyright law as a better system for protecting programmers' creativity.

The legal status of software patents is uncertain. The courts have struggled to draw a clear line establishing which software inventions, if any, can be patented. Supreme Court rulings in the 1970s suggested software was not eligible for patent protection. A series of court decisions in the 1980s and 1990s made it easier to get software patents. Since then, hundreds of thousands of software patents have been granted.

But the pendulum is now swinging in the other direction. A landmark 2014 Supreme Court case signaled a newfound skepticism toward patents on software, and may cause many software patents to be declared invalid.

Software patents have also been a focus of recent debates in Congress. A flashpoint in the 2013-14 patent reform debate on Capitol Hill was a proposal to expand a patent office program that makes it easier to invalidate software patents after they have been granted.

Are software patents legal?

This is a surprisingly difficult question to answer. Indeed, many scholars of patent law object to the use of the term "software patent." They prefer the term "computer-implemented invention," and they argue that there's no way to draw a clear line between patents on computer hardware devices and patents on software.

Yet the Supreme Court has made it clear that some software-related inventions cannot be patented. Two Supreme Court cases, one in 1972 and the other in 1978, rejected software patent applications. The law has never allowed patents on mathematical calculations that human beings can perform using a pencil and paper, and the Supreme Court held that the same logic applied to patents claiming the use of a computer to perform mathematical calculations.

In 1981, the Supreme Court cracked open the door to software patents by allowing a patent on a rubber-curing machine that used software to calculate how long to heat the rubber for an optimal result. While the court reiterated that mathematical algorithms in themselves were not patentable, the court held that you could patent a device for curing rubber that happened to use a computer to decide when to open the mold.

In the 1990s, the Federal Circuit Appeals Court, which has jurisdiction over all patent cases, opened the software patent floodgates. The Federal Circuit has always had a pro-patent bias, and in a series of decisions in the 1990s, it removed all meaningful limits on patenting software.

As a result, the number of software patents soared. In 1981, only about 1,200 software patents were granted. A quarter century later, the patent office was issuing 40,000 software patents per year.

Since the turn of the century, we've seen an unprecedented surge of patent litigation. That seems to have attracted renewed scrutiny — and growing skepticism about software patents — from the Supreme Court. In the landmark 2014 decision of CLS Bank v. Alice, the high court rejected a patent that took an ancient concept — holding funds in escrow to prevent one side of a contract from reneging on a deal — and implemented it on a computer.

Since the Alice decision was announced in June, lower courts have cited it to invalidate more than a dozen software patents. Some legal scholars expect the ruling will have a dramatic impact on the software patent landscape. For example, the prominent patent scholar Mark Lemley has speculated that "a majority of the software patents being litigated right now are invalid under Alice."

Why do so many patent lawsuits involve software?

Research shows that patents on software are particularly prone to litigation. There are several reasons for that:

  • Software patents can be extremely broad. For example, a famous patent covers the concept of purchasing products online with one click. Another patent owned by a troll called MPHJ covers the concept of scanning documents to an email address. This kind of broad patent makes it easy for businesses to infringe by accident, triggering lawsuits by the patent holders.
  • Most companies aren’t just users of software, but also have IT departments and web developers that produce it. So many firms that wouldn’t otherwise have to worry about patent law are at risk of infringing software patents.
  • Software is extremely complex. Computer programs contain thousands, and sometimes millions, of lines of code. Since patents can be infringed in just a few lines of code, there’s no practical way for companies to figure out which patents their software products might be infringing.

Are software patents needed to promote innovation?

The argument for software patents is that software companies won't invest enough in research and development if they are not able to protect their inventions from copycats. But there are some reasons to be skeptical of this theory.

First, most software companies don't rely on patents at all. This chart shows the number of software companies, of various categories, that have any patents:

A large majority of software companies do not have even one patent, indicating that the patent system is not an important part of their business model. And it's important to remember that not every company that has patents necessarily benefits from the patent system. Some firms acquiring patents purely for "defensive" purposes — that is, to allow them to counter-sue anyone who accuses them of patent infringement.

At the same time, a large percentage of software startups (one survey found around 28 percent of venture-backed IT startups) have faced legal threats from patent trolls, creating a disincentive to invest in software innovation. So the number of firms that are being harmed by the patent system is roughly equal to the number who may be benefitting from it. Patents may actually be creating a net disincentive for innovation in the software industry.

Fortunately, software is already eligible for copyright protection, which offers legal protections against software copying — without the problems patents have created for the software industry.

Copyright law has two big advantages over patent law. First, it's much easier to get copyrights, making the system accessible for small firms that can't afford to obtain patents. Second, while companies can — and often do — infringe patents by accident, only deliberate copying triggers copyright liability. As a result, frivolous patent lawsuits are a much bigger problem than frivolous copyright lawsuits.

Hence, critics argue that the software industry would be better off if software couldn't be patented at all.

Could the patent office do more to scrutinize patents after they've been granted?

Traditionally, firms got rid of low quality patents by challenging them in court. But in 2011, Congress passed the America Invents Act , which created a new, streamlined process for third parties to challenge patents at the patent office.

It was known as the "Covered Business Method" (CBM) program, and it was originally limited to patents that affect the financial service industry. The program was the brainchild of Sen. Chuck Schumer (D-N.Y.), whose Wall Street constituents had grown frustrated with patent trolls.

Some patent reform advocates have lobbied to expand the CBM program to include all software patents. Proponents argue that the program is needed because it's too slow and expensive to challenge a patent in the courts. The CBM program gives defendants a quick and easy way to demonstrate that a patent is invalid without fighting a long legal battle.

In 2013, the idea was supported by the Obama administration, Google, and many brick-and-mortar businesses. But the proposal was fiercely opposed by larger technology companies, such as Microsoft and IBM, that have large patent portfolios. It now appears unlikely that the current Congress will pass this or any other patent reform proposals.

Do other countries allow patents on software?

Software patents have been even more controversial in some foreign jurisdictions than they are in the United States. The European Parliament rejected legislation to allow software patents in 2005 after a grassroots lobbying effort. New Zealand passed legislation banning software patents in 2013.

Yet the prohibitions on software patents in these countries may be less significant than they appear. While software per se isn’t patentable in either jurisdiction, clever patent lawyers have found ways to effectively claim software inventions without running afoul of formal software patent bans.

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So if you have additional questions or comments or quibbles or complaints, send a note to Timothy B. Lee:

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