I am continually amazed that for over a decade the legal, technical, and academic communities have debated the issue of software patent eligibility. Many trees have been cut down in the form of articles, blogs and law journal articles devoted to both sides of the debate, not to mention the lobbying dollars spent. In addition, the most recent Supreme Court decision on the matter, Alice Corp. vs. CLS Bank has left the intellectual property bar without a clear and reliable test to determine when exactly a software (or computer-implemented) claim is patentable versus a mere abstract idea “free to all and exclusive to none”.
This has left us with a myriad of USPTO Section 101 guidelines, flowcharts, presentation slides, reference sheets, and tables of jurisprudence interpreting Alice and its progeny from District Court and Federal Circuit cases, all of which confuse and distract the USPTO, courts and practitioners from properly focusing on Articles 102 (novelty) and 103 (obvious). The net effects are increased costs, lower quality of patents, and in some cases even denial of patent protection for software inventions.
I have always maintained that eligibility for software patents is a must in a country where patent rights are constitutionally guaranteed. That is, all areas of innovation should be treated equally under the law so that one area of ââactivity (for example, pharmaceutical or electronic) is not considered more “worthy of patenting” than other fields (that is to say, computing and information technology). This is especially true when you consider the importance of software to the U.S. economy, as evidenced by the following facts and figures:
- The US software market was valued at approx. $ 200 billion in 2016. [CompTIA, IT Industry Outlook 2017]
- A report by PriceWaterhouseCoopers puts the cumulative value of technology-related M&A activity for 2016 at US $ 323.5 billion, with software accounting for the bulk of that total volume with US $ 88.5 billion in transactions, representing more than 40% of the volume of transactions. [PwC, US Technology Deals Insights Year-end 2016 (2017)]
- In 2016, more than 5.2 million American workers were employed in major IT occupations (g., software developers, database administrators, web developers, systems analysts, user support specialists, information security analysts, etc.). Identifier.
- PayScale – the online salary, benefits and compensation company – reports that a computer and engineering college major ranks in the top five for salary potential, with a median of mid-career (e., 10+ years of experience) salary of $ 116,000. [PayScale, 2016-107 College Salary Report]
- In 2015, 59,281 bachelor’s degrees, 31,474 master’s degrees and 1,998 doctorates were awarded in the United States in computer and information science. [Institute of Education Sciences at U.S. Department of Education, National Center of Educational Statistics, Table 325.35]
- âThe employment of software developers is expected to increase by 17% from 2014 to 2024, much faster than the average for all occupations. â¦ The main reason for the rapid growth of application developers and system developers is a surge in the demand for software. [U.S. Bureau of Labor Statistics, Occupational Outlook Handbook, Software Developers]
Add to the above the fact that we are at the start of the fourth industrial revolution – the era of the Internet of Things (IoT) – where many businesses are undergoing ‘digital transformations’. It’s not just about implementing digital processes (that is to say, replacing labor with software) but also using software to analyze large sets of data collected from hardware (and people) equipped with sensors wirelessly connected to the Internet.
In summary, a substantial portion of US commerce depends on software and associated innovation in the field – when new and not obvious – deserves stable and predictable patent protection! As further proof that the software must be Patent-eligible – both for political and legal reasons – patent activity at the USPTO tells a fascinating story. Using data from the USPTO, I sought to determine what percentage of utility patents issued by the USPTO are âsoftware relatedâ. To define which patents are âsoftware-related,â I used the same methodology used by the United States Government Accountability Office in a report on intellectual property litigation presented to Congress in 2013. This report s ‘supported certain classes and subclasses of applications most likely to include patents with claims related to software selected by expert advisers at the USPTO. Regarding the selection of classes and subclasses that make up âsoftware patentsâ, these experts recognized:
“[I]identifying patents with software elements can be a tricky business. â¦ While this definition is certainly both over-inclusive and sub-inclusive, the method is calibrated to help us identify the classes in which patents with software claims are most likely to be found. In short, we refer to the applications or patents which fall under these classes and subclasses as “software” applications or patents, and to those which do not fall as “non-software”, it being understood that this nomenclature is a nomenclature for convenience, and will not be accurate in all cases.
After opting for this methodology, I called on the patent analysis company GreyB Services to tabulate the emission rates for these classes and subclasses. [Id. at n.7] for the last quarter of a century to produce the following two figures:
While I leave the bulk of the interpretation of the data to the reader – including observations of year-over-year trends – some conclusions stand out:
- Since 2012 – the same year Mayo Collaborative Svcs. v. Prometheus Laboratories was decided by the Supreme Court of the United States, and on which the Alice the two-step framework is based – more than half of the total annual utility patents granted in the United States were related to software.
- The percentage of issued US utility patents related to software has averaged an annual growth rate of 2.98% over the past quarter century.
- The largest single-year percentage increase in issued U.S. utility software patents occurred from 1997 to 1998 – the same year State Street Bank & Trust Co. v. Signature End. Group was decided by the Federal Circuit.
- For a year after the dot-com bubble burst (e., 2001) to 2016, the percentage of US software utility patents issued increased by 18%.
So, I think Congress, the courts, and the USPTO need to end their assault on Section 101 and software patents. The latter two should focus again on Sections 102 and 103. In addition, the USPTO should continue to prioritize improving patent quality and waiting times. Anything less is simply counterproductive for the digital age we live in.
This article reflects my current personal views and should not necessarily be attributed to my current or former employers, or their respective clients or clients.
Raymond Millien has been named one of the â300 Best IP Strategists in the Worldâ by Intellectual Asset Management (IAM) magazine and a âCorporate IP STARâ by Managing IP (MIP) magazine. He is Managing Director of Harness, Dickey & Pierce, PLC. He oversees the operations of the company including human resources, finance, marketing / business development, IT and records management. Previously, Ray was Chief IP Officer at Volvo Car Corporation and CEO of Volvo Cars Ventures. He led the IP function at GE Oil & Gas and American Express Company, and the software IP function at GE Healthcare. Ray also served as legal counsel to investment bank Ocean Tomo, LLC, and practiced law in the Washington, DC offices of DLA Piper US LLP and Sterne, Kessler, Goldstein & Fox PLLC. He holds a BS in Computer Science from Columbia University and a JD from George Washington University Law School. In addition to his career as a legal and innovation executive, Ray is a speaker and published author with experience serving on multiple boards of directors and in venture capital, licensing, software development and corporate law. and technology.
You can find out more about Ray or contact him through his Firm Bio page.