USPTO REPORT ON PATENT ELIGIBLE SUBJECT MATTER

Software and Life Sciences are most affected

Fortunately, the current problems associated with examining a patent application in relation to patent eligibility are limited primarily to life science technologies or computer-related technologies.  Other technological arts including mechanical arts have not been affected by this. The Report discusses the competing interests for and against the current law regarding eligibility for patent protection.  The problems are significant or felt at the patent prosecution stage and the patent enforcement efforts.  Patent prosecution refers to the process of applying for a patent on an invention and facilitating the examination process of securing an issued patent by the USPTO.  Patent enforcement refers to the process of suing an alleged infringer for damages and/or an injunction.  Software inventions are infrequently allowed during patent prosecution.  Many software inventions are being invalidated during litigation. Many software-related patent applications are rejected under 35 USC 101 (Section 101) as being ineligible for patent protection.  In my experience, the basis for the rejection is that the claimed software invention is directed to the judicially created abstract idea exception.

Two-step Mayo/Alice patent eligibility standard

The USPTO and the courts use a two-step analysis to determine eligibility for patent protection explained in Mayo and Alice.  Under the current two-step Mayo/Alice analysis, the USPTO and the courts are to determine under step 1, if the claimed invention is directed to one of the judicial exceptions, specifically, abstract idea, the law of nature, or natural phenomenon.  If so, then under step 2, the USPTO and the courts are to look to see if there is “something more” that would transform the claimed invention eligible for patent protection. Business method patents are among the inventions most commonly challenged under this two-step test — see our detailed breakdown of which business methods remain patentable after Alice.

Patent prosecutor’s perspective on the problems

Smaller software companies are at a disadvantage to larger companies

As a patent prosecutor or as a patent attorney that advises entrepreneurs and small businesses, the problem with the current Section 101 analysis is that it does not allow for any or allows for only a very few instances in which software inventions can be eligible for patent protection.  Hence, there is a low rate of allowance for software-related inventions.  The problem with the low rate of allowance is that startups and smaller software companies are in my opinion having a harder time finding investments because investors of smaller companies are not as ready to invest compared to larger software companies with a proven track record.  The Report identifies that there is a disparity in funding at different levels of funding.  Venture capitals that fund multi-millions of dollars are not affected by the current altered patent eligibility landscape as much as angel investors.  This makes sense because they are making decisions to invest based on the quality of the management team, the success that the business has already achieved in executing its business plan, its profitability, etc.  The patent portfolio may be less important to these larger businesses seeking venture capital.  However, for the smaller software companies that might seek angel investors, the investment decision is based on the same considerations but the value of the small software business would be greatly enhanced by the patent portfolio that the software business owns and can use against competitors to remain competitive. In my point of view, the patent system should be useful for the startup and the entrepreneur.  If the startup/entrepreneur pitches the idea to a larger company or decides to enter the marketplace, large well-funded companies can out-compete the startup/ entrepreneur by taking the software ideas and inventions of the startup/entrepreneur and incorporating them into their own software products.

Great software inventions are having difficulty in securing patent protection

Another point of contention of the current patent eligibility landscape is that the methods may be truly beneficial to society but the USPTO will not grant a patent and the courts may likely invalidate the software patent.  Let me provide an example.  In Ultramercial v. Hulu (Fed. Cir. 2014), the invention was related to allowing internet users of streaming content to choose their own advertisements in return for being able to pay less for the streaming content or watch content for free.  Personally, I thought that this was a great idea.  The internet user can choose their own commercials to watch instead of having content providers decide which advertisements the internet users should watch.  This would allow the internet user to enjoy watching the advertisements as well as the primary streaming content.  It would also put pressure on advertisers to think differently and more creatively to produce entertaining advertisements.  Nevertheless, the courts held that this invention was an abstract idea related to watching advertisements in exchange for video content and included nothing more than routine conventional steps.

Patent eligibility standards conflated with novelty and nonobviousness

This comes to my third point.  The primary reason that the advertising method was deemed to be an abstract idea was that the general system of forcing users to watch advertisements in exchange for content was an old idea.  However, in my point of view, the idea of choosing your own advertisement in exchange for watching content is a new idea.  It is not abstract.  There are specific steps that one can code into software to implement the method.  Nevertheless, the report identified that a common complaint of the current eligibility standard is that the standard conflates eligibility requirements with novelty and non-obviousness requirements.  Ultramercial uses concepts of novelty and nonobviousness when discussing patent eligibility requirements.  It appears to me that the case’s implied holding is that old methods are abstract ideas. I invite you to contact me with your patent questions at (949) 433-0900. Please feel free to forward this article to your friends. As an Orange County Patent Attorney, I serve Orange County, Irvine, Los Angeles, San Diego, and surrounding cities.