Legal Politics

By LARRY S. NIXON AND J. SCOTT DAVIDSON

General purpose, stored program, electronic computers were invented in the 1940's but were only beginning to see widespread commercial usage by the mid-to-late 1950's. In those days, large mainframe manufacturers often "bundled" application programs or "software" together with hardware. Dominant hardware manufacturers were not particularly interested in letting others obtain exclusive patent rights for independently developed "software" -- presumably for fear that such patents might restrict the utility and/or sales of their hardware. Rumor has it that in these early days computer companies used skillful lobbying techniques in the US Patent Office (and elsewhere in Washington, DC) to stifle the granting of patents for "software" inventions.

Throughout the 1950's and 1960's, few people in the US Patent Office and in the Courts really understood how a computer program or "software" was physically constituted; or how it physically functioned during program execution in conjunction with general purpose computing hardware. Patent lawyers, with detailed technological knowledge and understanding of such things, were also in short supply.

All these circumstances worked toward an initial reluctance to grant patents for computer "software." That is, if the patent was drafted so as to describe and claim an invention where the sole novelty was in the "software" Some "hardware" patents appear to have been purposefully drafted in an attempt to disguise a "software" invention. In an attempt to refuse patent issuance, some US Patent Office examiners and some US Court decisions compared the piano rolls of player pianos, to purely mental processes, to mathematical "algorithms" and the like. To provide some legal protection against "free riders," some began to use the law of contracts and/or copyright to protect their intellectual property.

Initially, for large main frame software with limited distribution, each customer was required to maintain the software as the trade secret of the originating party. Later, for large scale distributions of software, the "shrink-wrap" agreement came into being -- and is now specifically recognized as legally enforceable in many jurisdictions. Although the copyright law was specifically amended to explicitly apply to computer programs, more recent judicial decisions appear possibly to limit the scope. The copyright now seems to protect only against copying a substantial party of the literal program code. Recent judicial decisions appear to severely limit protection for utilitarian "look and feel" or graphical user interface aspects of programs. (See, Lee & Davidson, Intellectual Property and the Internet, Wiley, 1997, Chapter 5).

The arguments advanced against granting "software" patents was always painfully weak and strained. The problem also partially rested in semantics.

THE STATE OF US PATENT LAW

For years, the Supreme Court showed a highly unusual deference to Congress by stating that it would not permit software patents to issue until Congress decided it was appropriate. Software and computers were new and misunderstood. They were being used primarily to perform faster mathematical calculations -- and one rule that the courts knew was that mathematics in and of itself was not patentable subject matter.

As a result, early courts mistakenly decided that computer programs could not be patentable since they were simply mathematical "algorithms." Software companies that hoped to siphon off for free the market's newest software inventions quickly jumped on this theme. The companies that originally invested substantial risk capital and developed the software inventions fought for some protection.

The patent fight within the software industry was brought to light when the Supreme Court took its first computer program case. In Gottschalk v. Benson, 175 USPQ 673 (1972), the Supreme Court struck down a party's right to obtain a patent on a method for converting binary-coded decimal numerals into pure binary numerals. The case touched such a nerve within the industry that the Court was inundated with sixteen briefs from groups not even parties to the lawsuit. Professional organizations like The American Patent Law Association; private companies such as Honeywell, IBM, and Mobil; research foundations; and trade associations such as the Business Equipment Manufacturers Association and the Information Industry Association, barraged the Court with so many different opinions on the patentability of computer programs that the Court, in apparent frustration, threw out all notion of patents for programs until Congress decided otherwise:

"If these programs are to be patentable, considerable problems are raised which only Congress can manage, for broad powers of investigation are needed, including hearings which canvass the wide variety of views which those operating in this field entertain. The technological problems tendered in the many briefs before us indicate to us that considered action by the Congress is needed."

[Note: When the Court later wanted to jump back into the patentability quagmire, it avoided this earlier statement of broad deference to the Congress by characterizing its holding in Benson as "limited." Dann v. Johnston, 425 U.S. 219, 224 (1976).]

Of course, Congress was not too thrilled to enter the foray either. But, President Johnson was. In 1966, the President's Commission on the Patent System issued a report rejecting a proposal that computer programs be deemed patentable. The early environment was thus not too favorable for patentees. Many in the technical and legal communities resigned themselves to life without software patents.

But, not everyone. A small number of inventors were fortunate enough to stumble onto judges with enough technical and legal savvy. Thus, in 1969, one court, in permitting the patentability of a computer program for plotting a three dimensional object as a two dimensional portrayal, wrote:

"Moreover, all machines function according to laws of physics which can be mathematically set forth, if known. We cannot deny patents on machines merely because their novelty may be explained in terms of such laws if we are to obey the mandate of Congress that a machine is subject matter for a patent. We should not penalize the inventor who makes his invention by discovering new and unobvious mathematical relationships which he then utilizes in a machine, as against the inventor who makes the same machine by trial and error and does not disclose the laws by which it operates." [In re Bernhart, 417 F.2d 1395, 1400 (CCPA 1969)]

Of course, these maverick lower courts were subordinate to the Supreme Court. Thus, they were obligated to dance around the prohibitive language previously generated by the Supreme Court. In in re Chatfield, 545 F.2d 152, 155-6, n.3-4 (CCPA 1976), the court found that a computer program that "dynamically evaluates and reassigns program priorities" was patentable. But first the Court had to suggest that neither the Supreme Court's decision in Benson nor the President's Report on Patentability really intended to preclude patentability of "all" computer programs, only certain ones. Such opinions made the Patent Office nervous. In 1978, the Patent Office complained to the Supreme Court that allowing computer program patent applications would have a "debilitating effect on the rapidly expanding computer software industry" and would require the Patent Office "to process thousands of additional patent applications." Parker v. Flook, 198 USPQ 193, 196 (1978).

So, into the late 1970's, the dance continued between the Patent Office rejecting software patents out-of-hand and a very small group of tenacious computer companies and their patent attorneys who refused to give up on them. At the time, the Patent Office had in its camp the more influential court precedents (bolstered by the Benson and Flook Supreme Court decisions). However, the patent attorneys kept picking away at the edges of the law using the more sympathetic Court of Customs and Patent Appeals. (The court junior only to the Supreme Court in the line of appeals from the Patent Office). As the attorneys and Patent Office Examiners would face off, the Patent Office Examiners would cite their favorite handful of cases that supported patent rejection. The attorneys carved out subtle exceptions using their own handful of cases that sided toward patentability of computer programs. But, without Supreme Court precedent (and its deference to Congress on the matter) the software companies were forced into court almost each time. This extended process had a chilling effect on companies seeking their patent rights.

The break for software companies came in March 1981. The Supreme Court, in a sharply divided opinion, decided for the first time that a computer program could be patentable. Diamond v. Diehr, 450 U.S. 175, 209 USPQ 1 (1981). Diehr had used a mathematical formula in his claim to a programmed computer which iteratively computed the result of a certain equation. (This was for determining the required rubber curing time during an ongoing rubber curing process to end it at just the right time for the particular curing variables then existing throughout the curing process). The Supreme Court said that while Diehr admittedly used an algorithm, the invention he claimed was a process of curing rubber, not the algorithm itself. According to the court, such a claim could not preclude others from using the algorithm, only from using the algorithm for curing rubber. The Court said,

"It is now commonplace that an application of a law of nature or a mathematical formula to a known structure or process may well be deserving of patent protection." Id. At 8.

Diamond v. Diehr finally placed the patentability of computer-aided inventions into the mainstream of the law. By acknowledging the patentability of an algorithm applied to a useful process, the Supreme Court collapsed the Patent Office's strict refusal to permit inventions reciting algorithms. The Diehr case also offered a first glimpse at the distinction that later courts (and the U.S. Patent Office) would ultimately impose upon inventions in the computer arts: those that claimed mathematics per se with no other recitations would be unpatentable, but those that applied a mathematical algorithm to a useful application would be permitted.

Although Diehr helped open the door for the Patent Office to begin issuing patents on software-related patents, those cases decided by the Supreme Court left an unclear path for later courts to follow. The Federal Circuit (which is now empowered to exclusively handle all patent appeals in the U.S.) boldly indicted the Supreme Court for this lack of clarity:

"The Supreme Court has not been clear, however, as to whether [a computer program is excluded from patentability] because it represents laws of nature, natural phenomena, or abstract ideas. [citations omitted]. The Supreme Court also has not been clear as to exactly what kind of mathematical subject matter may not be patented. The Supreme Court has used, among others, the terms ‘mathematical algorithm,' ‘mathematical formula,' and ‘mathematical equation' to describe types of mathematical subject matter not entitled to patent protection standing alone. The Supreme Court has not set forth, however, any consistent or clear explanation of what it intended by such terms or how these terms are related, if at all." [In re Allapatt, 31 USPQ2d 1545, n.19 (Fed. Cir. 1994)].

In any event, the cozy retreat that the Patent Office had enjoyed behind the Benson and Flook decisions was upset by the Diehr case. Now, the Patent Office was forced to issue at least some patents to computer programs, To stem the expected flood, the Patent Office wrote commentaries describing how the Diehr case and its predecessors were limited to very specific mathematical algorithms and did not condone patentability of computer programs. 110 O.G. 442 (1989). Companies were warned not to expect patents on simply computer programs loaded in general purpose computers. In October 1981, the Patent Office issued its first official guidelines to its examiners (in the Manual of Patent Examining Procedure, "MPEP") for handling computer related subject matter. In the guidelines, the Patent Office read Diehr as requiring some "post-solution activity." (This means some activity is performed after solving the invention's algorithm). For example, the rubber curing machine is opened at the time identified by the rubber curing algorithm. The Patent Office continued to hold that "if the end product of a claimed invention is a pure number, as in Benson and Flook, the invention is [unpatentable] regardless of any post-solution activity." Further, the Patent Office opined that displaying a result of the algorithm was "insignificant" post-solution activity, MPEP 2106 (1987).

Although still too limited, the 1981 Patent Office Guidelines provided some hope. Those of us who had been filing and prosecuting applications for our clients were now seeing those applications issued into patents without artificial threshold constraints about allegedly non-statutory subject matter. An example of a patent application filed by one of the authors in 1971 entitled: "Method of Automatically Evaluating Source Language Logic Condition Sets and of Compiling Machine Executable Instructions Directly Therefrom," is shown in Figure 1. It was finally issued in 1982, eleven years after it was filed, and shortly after the Diehr decision. Another application filed in 1974 entitled "Method and Apparatus for Information Storage and Retrieval" was issued in 1981 (see Figure 2).

But, even the new Patent Office Guidelines proved to be too strict. The courts continued to whittle away at such distinctions. In 1989, the Patent Office's outrage over the courts' retreat from its earliest stern decisions peaked when an appeals court held a simple general purpose computer running a new algorithm (for pattern recognition) to be patentable subject matter. In re Iwahashi, 12 USPQ 1908 (Fed. Cir. 1989). 1122 O.G. 445 (1990) (for PTO's formal "interpretation" of Iwahashi)

As new cases came down against the Patent Office, its general reluctance to grant patents on computer programs gradually began to fade. In 1992 and 1994, the Patent Office lost two additional computer-related invention cases. By 1995, the Patent Office hinted that a new policy was in progress. In a then-pending appeal of a computer-related algorithm case, the Patent Office took the unprecedented step of surrendering its case before the Court even had a chance to hear it. The Patent Office said, "the computer programs embodied in a tangible medium, such as floppy diskettes, are patentable subject matter," in re Beauregard, 35 USPQ2d 1383 (Fed. Cir. 1995). Thus, in 20 plus years, the patent Office had come full-circle.

After Beauregard, the Patent Office went quickly to work on its new computer-friendly policy. In 1996, the USPTO re-wrote its guidelines to examiners for handling computer program related subject matter. They now permit issuance of patents for physical data storage media (e.g., a floppy disk) containing a new and non-obvious computer program. Claims to suitably program-filled ROMs and the like are also now permitted. Today, the Patent Office recognizes the patentability of transforming computer signals and of program codes associated with practical applications, MPEP 2100 (1996). The appeals courts have also affirmed the patentability of claims to purely "data objects" loaded onto a "memory," in re Lowry, 32 USPQ2d 1031, 1033 (Fed. Cir. 1994). How these new types of patent coverage can be used in a practical and modern application (the Internet) is described by one of the authors in Intellectual Property for the Internet, Wiley 1997

As one would expect, the Patent Office's more accepting policies have caused companies to file many more unabashedly "software" patent applications. More and more "software" patents are being issued each year. Some enforcement litigation has given rise to significant verdicts in favor of the "software" patentee. As might be expected, this appears to be yet another stimulus for filing and issuing "software" patents.


Larry S. Nixon and J. Scott Davidson are partners at Nixon & Vanderhye PC.
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