Patentability of Computer Software

and Business Methods

Andrés Guadamuz 1
Computer Implemented
Software Patents
Inventions
2
Why software?

3
Software
 Software is "a set of
statements or instructions
to be used directly or
indirectly in a computer to
bring about a certain
result".
 These instructions are set
out in source code, a set of
in logical human-readable
instructions coded into
computer language.
 Object code is the result of
a compilation of the source
code into machine readable
instructions.
4
 Source code
#!/usr/bin/perl
# Public domain. Questions to Jamie McCarthy, jamie@mccarthy.vg
 use LWP::Simple;
use Math::BigInt;
my $html = get(`http://www.utm.edu/research/primes/curios/48565...29443.html');
my($prime) = $html =~ m{<blockquote>([^<]+)</blockquote>};
$prime =~ tr{0-9}{}cd;
$prime = Math::BigInt->new($prime);
my $binary = '';
while ($prime > 0)
{ $binary = pack(`N', ($prime % 2**32)) . $binary;
$prime /= 2**32; }
$binary =~ s{^\0+}{};
local *FH;
open(FH, `| gunzip -acq') or die `cannot gunzip, $!';
binmode FH;
print FH $binary;
close FH. 5
Object code

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7
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 Copyright vs Patents
EXPRESSION IDEA

SYMBOLIC FUNCTIONAL

LITERAL NON-LITERAL

10
Software Protection in Europe
 Software Copyright Directive
91/250/EEC requires copyright law to
recognise software as a literary work.
 Art 52(2)(c) of the European Patent
Convention states that “programs for
computers” “as such” are not
inventions, and therefore are not
patentable.
11
 Trouble with copyright: USA
 The idea-expression dichotomy is very well
used in the United States, this has had
interesting effects for software protection.
 “look and feel” cases, Apple v. Microsoft 821
F.Supp 616 (1993).
 Whelan Associates Inc v Jaslow Dental
Laboratory Inc [1987] FSR 1 gave a test for
the idea-expression dichotomy in software.
 Computer Associates v Altai 982 F 2d 693
(1992) – Abstraction, Filtration, Comparison.
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 Abstraction, Filtration,
Comparison test
 Stage 1 - Abstraction - You dissect the code and
isolate each level of abstraction.
 Stage 2 - Filtration - Examine the structured
components at each level of abstraction to
determine whether their inclusion at that level was
‘idea’ or was dictated by efficiency, required by
external factors or was taken from the public domain
(and is therefore unprotectable).
 Stage 3 - Comparison - What remains following
filtration is a core of protected expression. This must
be compared for substantial similarity.

13
 Trouble with copyright: UK
 John Richardson Computers v Flanders
[1993] FSR 497.
 Saphena v. Allied Collection [1995] FSR 616.
 Ibcos Computers Ltd v Barclays Mercantile
Highland Finance Ltd [1994] FSR 275.
 Cantor Fitzgerald International v Tradition
(UK) Ltd [1999] Masons CLR 157.
 Navitaire Inc v easyJet Airline Co [2004]
EWHC 1725 (Ch).
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 Test in Ibcos
 According to Jacob J, the Altai test
should not be applied in the UK.
 What are the work or works in which the
plaintiff claims copyright?
 Is each work 'original'?
 Was there copying from that work?
 If there was copying, has a substantial
part of that work been reproduced?

15
 Protection of functionality in
Navitaire
 “Copyright protection for computer software
is a given, but I do not feel that the courts
should be astute to extend that protection
into a region where only the functional
effects of a program are in issue. There is a
respectable case for saying that copyright is
not, in general, concerned with functional
effects, and there is some advantage in a
bright line rule protecting only the claimant's
embodiment of the function in software and
not some superset of that software.”
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The road towards patentability:
USA
 The Abstraction-Filtration-
Comparison test has been a
failure.
 Owners begin to pursue other
types of protection.
 Diamond v Diehr, 450 U.S.
175, 185 (1981) "everything
under the sun that is made by
man."
 In re Alappat, 33 F. 3d 1526
(1994), “useful, concrete, and
tangible result.“
 State Street Bank v Signature
Financial Group (1998) 47
USPQ2d 1596. 17
Software patents (USA, 1985-
2005)

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But… software copyright is useful

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Software patentability around the
world
 Art. 27.1 TRIPS Agreement: “patents
shall be available for any inventions,
whether products or processes, in all
fields of technology”.
 Reluctance to apply indiscriminate
patentability in most regions.

20
 Patentability in Europe
 Strict reading of the law leads one to believe
that software “as such” is not patentable.
 European Patent Office (EPO) Board of
Appeals interpreted “as such” very broadly in
several cases.
 20,000 software patents approved by the
EPO, 6,000 applications per year in UK.
 There is software patentability in Europe.

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 Technical effect
 Case law has decreed that only software
that has a “technical effect” can be
patented.
 The term is not in the legislation, and
therefore there is no clear definition of
technical effect.
 Lack of consistency in its application.
 Merrill Lynch [1989] RPC 561: "There
must... be some technical advance on
the prior art in the form of a new result .“
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 The CII Directive
 Technical contribution: “means a
contribution to the state of the art in a
field of technology which is new and
not obvious to a person skilled in the
art.”
 A relatively small directive proposal
designed to overhaul a few
technicalities in patent law and practice
by harmonising the patentability of
computer implemented inventions…
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The geek revolution

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CII Directive

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 The aftermath
 Back to where we began…
 Case law will help to determine the
definition of technical effect.
 New ideas have emerged in recent
cases.
 The Commission and some sectors of
the software industry will not give up.
 Talk of a new directive coming our way.
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 Halliburton v Smith
International
 Two patents involved, one
drill bit and software to
design drill bits.
 In this ruling, there seems
to be a clear technical
effect, the software can only
be used for specific purpose.
 The patent was struck down
because it had inadequate
disclosure (upheld after
appeal).
 Could this be the strategy to
attack software patents in
the future?

27
 The little man test (CFPH LLC
Application)
“The question to ask should be:
is it (the artefact or process)
new and non-obvious merely
because there is a computer
program? Or would it still be
new and non-obvious in
principle even if the same
decisions and commands
could somehow be taken
and issued by a little man at
a control panel, operating
under the same rules? For if
the answer to the latter
question is 'Yes' it becomes
apparent that the computer
program is merely a tool,
and the invention is not
about computer
programming at all.” 28
 Aerotel v Telco
 “[...] despite the fact that such patents have been granted for some
time in the US, it is far from certain that they have been what Sellars
and Yeatman would have called a "Good Thing." The patent system is
there to provide a research and investment incentive but it has a
price. That price (what economists call "transaction costs") is paid in a
host of ways: the costs of patenting, the impediment to competition,
the compliance cost of ensuring non-infringement, the cost of
uncertainty, litigation costs and so on. There is, so far as we know, no
really hard empirical data showing that the liberalisation of what is
patentable in the USA has resulted in a greater rate of innovation or
investment in the excluded categories. Innovation in computer
programs, for instance, proceeded at an immense speed for years
before anyone thought of granting patents for them as such. There is
evidence, in the shape of the mass of US litigation about the excluded
categories, that they have produced much uncertainty. If the
encouragement of patenting and of patent litigation as industries in
themselves were a purpose of the patent system, then the case for
construing the categories narrowly (and indeed for removing them) is
made out. But not otherwise.”

29
Microsoft v AT&T (U.S. Supreme
Court)
 The case is whether there is
patent infringement for a
software product that may be
sent in a master disk from the
United States, and then
assembled and sold abroad.
 AT&T owns a patent over
speech-encoder software, and it
sued Microsoft arguing that
Microsoft Windows contains
code which infringes their
patent claim.
 AT&T included in their
infringement suit international
claim for all copies of Windows
manufactured and sold abroad,
a claim that Microsoft
contended.
 The U.S. Supreme court was
asked two questions, is
Windows a software component
in the sense of American patent
law? Here the answer was yes.
 If so, was the component
supplied from the United
States? The answer here was
no,
 The physical master disks were
shipped from places outside of
the United States to overseas
assembly factories, even if
there was a presumption that
some of the software could
have been coded in the U.S.
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 Sui generis?
 Why not go the “sui
generis” way?
 Software seems to
have problems with
both copyright and
patents.
 New right that has
shorter lifetime, and
recognises both the
literal and functional
aspects of software. 31
Business method patents
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Business methods and the law
 Ways of doing business not traditionally
covered by patent – e.g. book-keeping, sales
methods, etc.
 State Street decision (1998), “The business
method exception has never been invoked by
this court, or the CCPA, to deem an invention
unpatentable”
 Ex parte Lundgren (2004) USPTO Board of
Patent Appeals and Interferences (BPAI).
Process inventions do not have to be in the
technological arts in order to be patentable in
the U.S. They do, however, have to produce
a "concrete, useful and tangible result". 33
 State Street Bank again…

 State Street Bank was an example of a

‘business method’ patent.
 The invention in State Street Bank was only
possible because of computerisation – it
wouldn’t work without a program.
 Many ‘software patents’ are actually ‘business
method patents’ where the business method
is stated in program terms.
 Amazon.com’s “one click” patent application
is an example. 34
 European situation
 EPC precludes support for business methods:
 52(2)(c) “schemes, rules and methods for
performing mental acts, playing games or
doing business, and programs for
computers”
 Patents were designed for industrial
protection, hence this exemption.

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 Same problem for Business
Methods as Software
 EPC precludes support for business methods:
 52(2)(c) “schemes, rules and methods for
performing mental acts, playing games or
doing business, and programs for
computers”
 Patents were designed for industrial
protection, hence this exemption.
 However, many many patents being granted
currently which look very much like business
method patents.
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The trouble with business
method patents is…

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Thank you
a.guadamuz@ed.ac.uk 38