Luis VillaRamblings on software, law, and the spaces in between.

Some Third-Party Thoughts

A friend summarized Bilski this way: “Shorter #Bilski: Federal Circuit, your rule was too straightforward and didn’t add enough uncertainty to an already volatile field.”

I don’t think that was actually the court’s intent, but certainly that will be the short-term outcome. Long-term the court and the PTO will have to find new rules. Patently-o has some thoughts on how that process might play out, and the PTO has issued the following guidance to patent examiners on the topic. The PTO memo, while preliminary, is a great simple summary of the ruling, and contains the following critical passage:

If a claimed method does not meet the machine-or-transformation test, the examiner should reject the claim under section 101 unless there is a clear indication that the method is not directed to an abstract idea.

In other words, the PTO has reverted to the pre-business-methods ‘machine-or-transformation’ test as a default, with the burden of proof shifted to the patent filer to show a ‘clear indication’ that their non-machine/non-transformation is not an ‘abstract idea.’ It will be interesting to see in coming months what the PTO accepts as a ‘clear indication’; I would expect that this won’t be a high bar to clear, but it will probably cut out some of the most egregious applications.

For an optimistic take on the whole thing, check out Rob Tiller’s piece at opensource.com.

Comments on the Concurrences

Yesterday’s train ride focused on the majority opinion. However, as I noted then, the voting patterns here are complex; complex enough that there is some important law to be found in the two concurrences. The patently-o post I linked above makes a particularly astute observation in this regard. So today’s train ride I’ll try to read and share some thoughts on the concurrences, particularly the ‘swing’ concurrence from Breyer and Scalia.

The first thing to note is that the Breyer/Scalia concurrence opens with a strong support of Stevens’ opinion that business method patents are not patentable, but that this part is… only signed by Breyer. So it does not tell us much. The rest of it focuses on four (really three) points which Breyer and Scalia feel the entire court agrees on. If you read only one part of the opinion, read this part- it is short, sweet, and to the point, and because at least five (possibly nine) members of the court agree here, it will likely be the jumping off point for the next round of patentability litigation. These points are:

1. There are many things which are unpatentable. This seems uncontroversial (the court was quite explicit about it in 1989′s Bonito Boats case), but after the Federal Circuit’s expansion of patentability through the 80s and 90s, it was perhaps not as clear as it should have been. This concurrence makes it very clear (once again) that there is a line, even as it simultaneously announces that no one knows where the line is. It could also be interpreted as a subtle hint to the Federal Circuit that they should set to finding that line. (Gottschalk v. Benson, which held that algorithms are unpatentable, is cited approvingly here; as I mentioned yesterday, Gottschalk and Flook may have been given some second wind by Bilski; possibly the best thing that anti-software patent crusaders can salvage from this.)
2. Transformation of a thing to a different state is a “very good clue” (point two), but not the only clue (point three), as to whether or not non-machine things are patentable. The Federal Circuit’s Bilski ruling had essentially declared this ‘machine or transformation’ test to be the only test, which was what made business methods unpatentable under that ruling. Again, Flook is cited approvingly (when saying that it is a strong test) but unfortunately Gottschalk is cited to show that it is not the only test- which is exactly the loophole that State Street (the case that allowed business methods) drove through.
3. The ‘useful, concrete, and tangible result’ test that the Federal Circuit put forth in State Street- i.e., the case that allowed business patents- is not a good test, sometimes producing patents that range from ‘the somewhat ridiculous to the truly absurd.’ In other words, something can be ‘useful, concrete, and tangible’ but still not be patentable. This last point was highlighted by Patently-O yesterday as being fairly important.

If you’d told anti-software patent/anti-business-method patent folks on Sunday that the court’s Monday ruling would have five justices (or maybe nine) justices agreeing that the ‘useful, concrete, tangible result’ rule was bogus, they’d have been pleased. Of course, they’d have expected the court to enunciate a new, replacement rule- which has not happened. It is that gap which has caused so much consternation, not just for patent critics but also for patent supporters.

It will be up to the Federal Circuit to try and find a new rule, somewhere between ‘machine or transformation’ and ‘useful, concrete, tangible’- and this almost certainly means that we’ll be back at the Supreme Court arguing similar issues within a few years, asking the court to ratify- or reject- the next Federal Circuit attempt.

In trying to figure out what Scalia actually agreed to, I’ve now read sections II.B.2 and II.C.2 (which Scalia did not sign on to) a couple of times. They are, like much of the decision, a little rambly; long on vague assertions about the current state of things (lots of talk about the ‘Information Age’) and not very strong on details or particular policy conclusions. If I had to guess (and I should stress that this is just a guess) Scalia is really reacting to the mechanisms used to reach these vague conclusions, which tend to be very divorced from the actual statutory text that the main body of the decision relies on. So probably not worth reading much into that.

The Stevens concurrence… that will have to wait for another train ride. Suffice to say for now that it is a thorough researching of a difficult question. It is certainly not perfect, but is the kind of dedicated textual and historical reading that many members of the court pay lip service to but do not consistently practice.

Some very preliminary thoughts on Bilski, written in the course of one train-ride to work. This does not represent the viewpoint of my employer and should not be taken as legal advice; merely observations on one ruling.

• In the lower court (Federal Circuit) ruling on this case, the Federal Circuit was very aggressive in trying to limit business method patents by applying an old rule very, very broadly. The Supreme Court here reached the same conclusion about the specific patent at issue (holding it not patentable) but chastised the Federal Circuit for their aggressiveness in going from step 1 (invalidate this particular patent) to step 2 (invalidate all business method patents). At the highest level, this is not good for opponents of software patents- this is the most change-averse patent opinion the Supreme Court has issued in recent years, and it will leave the Federal Circuit very reluctant to broadly attack entire classes of patents in the near future. But the court did not completely bar such attempts, and it also strengthened some older anti-software-patent rulings, so it is not a complete loss for opponents of business method and software patents.
• This was a very splintered decision- while every judge agreed in the outcome, no part of the opinion got more than five votes, and many parts got only four. This probably explains why it took so long, and why Stevens was not (as widely anticipated) the author of the majority opinion- one or more judges probably were swinging between the two opinions until very late in the process. The addition of the probably pro-business Judge Kagan to replace the (effectively) pro-technology Judge Stevens could make future cases along these lines more conservative. And the court itself basically admits in their first section that this is hard; saying of the Federal Circuit’s ruling in the case that “Students of patent law would be well advised to study these scholarly opinions.”
• The court punts on the most difficult questions, quite explicitly: “This [Information] Age puts the possibility of innovation in the hands of more people and raises new difficulties for the patent law. With ever more people trying to innovate and thus seeking patent protections for their inventions, the patent law faces a great challenge in striking the balance between protecting inventors and not granting monopolies over procedures that others would discover by independent, creative application of general principles. Nothing in this opinion should be read to take a position on where that balance ought to be struck.” [emphasis mine.] Unfortunately, this buys into the rhetoric that all inventors are patenters, but otherwise makes it explicit that the court is staying out of the deeper policy question to the greatest extent it can.
• Core of the decision is to set up a very conflicting set of tests: business methods can in some circumstances be ‘processes’, which are patentable, but they may also be abstract ideas, which are not patentable. (The lower court had said that business methods are never processes and therefore a court did not need to ask ‘is this an idea?’ before ruling that it was unpatentable.) So future seekers of business method patents (and presumably software patents as well) will have to thread the needle, showing that they are a process (probably not difficult after this ruling) but also that they are not an abstract idea (may be hard, not clear yet.)
• Needless to say, this kind of gap is the kind of thing that sophisticated lawyers love to drive trucks through, and which will continue to create lots of uncertainty for small innovators for whom even the threat of a patent suit is enough to stop innovation.
• When deciding that the patent is an idea, and hence unpatentable, the court has kind things to say about Benson and Flook, two older case which spoke against patenting algorithms but which were then sort of ignored. This may signal to lower courts that they should take these cases more seriously when looking at software and business method patents, which would be a good thing for anyone who is seriously interested in the quality of software patents and not the worst possible outcome for those who believe that all software patents should be banned- these could become potent weapons against some of the most outrageous patents on algorithms.
• At the same time, the court also speaks well of Diehr, another older case. This case has generally been interpreted to stand for the idea that a combination of software with hardware (originally, use of software to control a rubber curing machine) is patentable, but the court here seems to read it more broadly, arguing that Diehr should be interpreted to mean that algorithms combined with any new processes (whether mechanical or otherwise) might still be patentable.
• The court specifically tells the Federal Circuit that the method of restriction it had been using is barred or weakened (not great for those who dislike software patents) but also specifically says that the Court can and should explore new methods of limitation as long as they are consistent with the text of the patent act; seemingly implicitly stating that the pre-Bilski situation (where business method patents ran rampant) was untenable. This suggests to me that we’ll see a period of several years of experimentation in the Federal Circuit, where the Federal Circuit attempts to find new ways to limit business method patents on something other than a case-by-case ‘I know it is an idea when I see it’ rule of thumb.
• The court specifically says that they did not want to create uncertainty for software patents, citing the pro-software-patent amicus briefs, but then goes ahead to create such uncertainty by allowing the Federal Circuit to find new, narrower tests. However, these two sections of the majority holding got only four votes; Scalia did not join this part of the otherwise majority opinion- presumably because it seems to give the Federal Circuit very wide interpretive powers.
• The Stevens opinion, at a glance (remember, brief train ride) would have been much more amenable to the anti-software-patent crowd, but I imagine that it is exactly this quality that made it the minority opinion.

I’m afraid that at the end of this brief train ride, my only firm conclusion can be that the real winners here are patent lawyers- this decision creates no new certainties, only uncertainties, which will encourage patenters to spend more money patenting things, and the rest of us to waste time and energy worrying about the problem- time and energy that should have been spent on innovating. But this is a long, multi-layered ruling, and will require a lot of time for the full implications to be truly understood, so take this one-train-ride blog post with a large grain of salt :) Hopefully more writing tonight/tomorrow.

I completely understand why many startups have terms of service with terrible content- providing terms of service whose content is fair to the user is incredibly risky and/or expensive (though it isn’t unheard of).

But there is just no excuse for terms of service with terrible organization, especially when you’re trying to sell services to real companies who might (gasp) actually have someone read the damn things. Having a well written document doesn’t cost you anything. If it should be two separate documents, make it two separate documents, and not one (which is what set me off on this rant). If it should be five documents… wait, it should never be five documents.

So please, think of the lawyers. Write your terms of service in a comprehensible, sane structure today.

This has been a public service announcement; we now return you to your regularly scheduled kvetching.