Court Slaps Down Software And Business Model Patents

Legal Issues

from the a-sense-of-sanity-returning-to-patents? dept

It seems like barely a week goes by without another good story of the courts reigning in the worst abuses of the patent system. While patent reform issues languish in Congress, the courts are doing an excellent job correcting a lot of patent abuses. Just as the Supreme Court is looking at yet another patent case, the Court of Appeals for the Federal Circuit (CAFC) seems to be putting some limits on business model and software patents. This is somewhat amusing, as it was a CAFC decision about a decade ago in the State Street case that opened the floodgates to business model patents. Prior to that, it was widely believed that you couldn’t patent “business methods,” but the ruling at CAFC said that wasn’t true at all. The real travesty of the situation was that the guy who wrote the decision had been a former patent attorney who had written the last major update to patent law — with almost no Congressional oversight. In other words, one patent attorney almost singlehandedly changed a large part of patent law without Congress even realizing it. However, with the Supreme Court smacking down CAFC patent decisions left and right, it appears that the folks at CAFC are now recognizing that perhaps it needs to bring a little sanity back to the patent system. A little over a month ago, that meant raising the bar for “willful infringement,” and now it means raising the bar for business model and software patents.

This case involved a guy who was trying to patent the concept of “mandatory arbitration involving legal documents.” The USPTO denied the patent. After a failed appeal, the guy went to court, and CAFC is also saying that his concept does not deserve patent protection, with this being the key quote: “The routine addition of modern electronics to an otherwise unpatentable invention typically creates a prima facie case of obviousness.” In other words, simply taking a common process and automating it on a computer should be considered obvious — and thus, not patentable. This doesn’t rule out business model or software patents by any means — but it at least suggests that the courts are beginning to recognize that the patent system has gone out of control. The court also specifically addresses its own earlier State Street decision, suggesting that people had been misinterpreting it to mean any business model was patentable — when the USPTO and the courts should still be applying the same tests to see if the business models are patentable. It then notes that a business model on its own shouldn’t be patentable unless it’s tied to some sort of product, and then states: “It is thus clear that the present statute does not allow patents to be issued on particular business systems — such as a particular type of arbitration — that depend entirely on the use of mental processes.”

All in all, this is a very good decision that could take us even closer to stomping out innovation-destroying software or business model patents completely.

Filed Under: business models, cafc, patents