United States Supreme Court Ruling in Alice v. CLS Bank – Software is Still Patentable

Recently, the United States Supreme Court decision in Alice v. CLS Bank ruling impacted the scope of software patents. Some opined that software was no longer patentable. The United States Patent & Trademark Office even withdrew notices of allowance for some of patent applications due to the presence of at least one claim having an “abstract idea.” Software and computer implemented inventions are impacted but the change in scope of impact will probably remain unclear for some time to come. The Supreme Court did not abolish software patents but it has increased the standard for eligibility of software patents.

Specifically, the United States Supreme Court unequivocally stated that if you have an idea so abstract that it cannot be patented, simply tying it to a “generic computer cannot transform a patent-ineligible abstract idea into a patent-eligible invention.” It also stated that tying an abstract idea to “purely functional and generic” hardware similarly would not make the idea patentable.

The United States Patent & Trademark Office (USPTO) issued preliminary guidelines in response to the decision. The guidelines provides a two step analysis which will apply to process and system claims.

For the first step, determining whether the claim is directed to an abstract idea, the memorandum provides four examples of abstract ideas referenced in Alice:

  • Fundamental economic practices;
  • Certain methods of organizing human activities;
  • An idea of itself; and
  • Mathematical relationships/formulas

If an abstract idea is present in the claim, the examiner should proceed to the next step, If an abstract idea is present in the claim, determine whether any element, or combination of elements, in the claim is sufficient to ensure that the claim amounts to significantly more than the abstract idea itself. Examples of limitations that may be sufficient to qualify as “significantly more” include:

  • Improvements to another technology or technical fields;
  • Improvements to the functioning of the computer itself;
  • Meaningful limitations beyond generally linking the use of an abstract idea to a particular technological environment.

Examples of limitations that are not enough to qualify as “significantly more” include:

  • Adding the words “apply it” (or an equivalent) with an abstract idea, or mere instructions to implement an abstract idea on a computer;
  • Requiring no more than a generic computer to perform generic computer functions that are well-understood, routine and conventional activities previously known to the industry.

The question of where the line of an abstract idea is drawn is still not clearly defined. I’ll wait for the updated USPTO guidelines, Patent Trial and Appeal Board (PTAB), and court decisions to provide additional clarity.

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3D Printing’s Impact on Patent Valuation and Enforcement

3D printing is an exciting field of technology and has made some great advances recently. It is a disruptive technology with the capability to transform the manufacturing industry.  Relatively inexpensive hardware and openly available design files allow individuals and companies to manufacture “complex” components at any location.  The nature of 3D printing technology will test the bounds of liability existing patent, trademark, and copyright regimes. The maturing technology has changed and will continue to change what can be printed. More specifically, it has made strides toward becoming a common household appliance. Companies now offer 3-D printers for just over $1,000, and prices are dropping rapidly. One recent study on the cost effectiveness of 3D printing at a household level.

What is often overlooked is that beyond just liability issues raised by the new technologies, the new technologies will impact the enforcement and valuation of the intellectual property. There will be issue in how the laws and courts evolve to address 3D printing and its legal impact. In making a decision to proceed with a patent application, the impact of possible liability changes AND the impact to valuation and enforcement of patent or other intellectual property rights of potentially 3D printable matter.

I have heard questions about 3D printing in relation to companies’ intellectual property, as these decisions must be made now in the infancy of 3d printing). I have also heard cries that 3D printing will be the fall of enforceable intellectual property rights. I believe that those cries are premature.

What is the infringement model and who is the primary infringer? Perhaps, the music industry holds some more predictive lessons. At one time, the dominant music pirate infringement model was the small scale manufacture, pressing CDs and street corner vendors selling the counterfeit CDs. The target for criminal action and lawsuit was that large scale pirate or the corner vendor. Then digital music and peer to peer sharing became a widespread model of infringement.

When one thinks of infringement in a product context, one typically thinks of the manufacturing line. One would focus on that manufacturer in order to abate infringement. However, 3D printing holds the possibility of changing that. If potential infringement shifts to small scale infringers, the ability and practicality to enforce against individuals lessens.

There is varying schools of thought as to how valuation might be impacted. One school predicts a negative impact. They reason that consumers will be able to scan and print any object thus the value of a product patent is negligible. Websites like Thingiverse will freely distribute designs and it would be impractical to enforce infringement for a single item. Other schools of thought predict overall neutral or positive impact. They reason that there are already patents for digital rights management for 3D printing technology. They also point to third party 3D printer policies restricting printing where it would infringe other’s intellectual property. Other arguments favoring neutral or positive impact may be drawn from the current music distribution model. Similar advantages that digital music facilitated for independent music may occur for some products. 3D printing may lower the threshold sales volume such that products that were not previously commercially viable can enter the market. Some potential patents with limited market prospects might meet a lowered minimum threshold market potential.

Some factors to evaluate how 3D printing might affect patent valuation and enforcement include:

  • Can the product currently be produced with a 3D printer?
  • If so, is the printing cost in the range of the purchase cost?
  • If so, is the printed product of similar quality?
  • Is the product likely to be capable of reproduction with a 3D printer?
  • Is the product a low price product?
  • What is the projected sales volume?

Of course, one doesn’t haven’t have a crystal ball to predict the impact of 3D printing on patent valuation and enforcement but the impact should not be ignored.

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Three Patent Strategy Changes Under the America Invents Act

The final provisions of the America Invents Act (AIA) recently took effect. The AIA represents the most significant overhaul of United States patent law since the mid twentieth century. It enacted provisions over time, with some provisions taking effect in September, 2011, some in September, 2012, and the final phase taking effect in March, 2013. Even though the provisions are effective, there still remain questions about the scope of impact. The United States Patent & Trademark Office (USPTO) has sought comment and issued rules based on the new provisions. The new Patent Trials and Appeal Board (PTAB) has been formed. The courts have made some rulings based on the new provisions. Without a doubt, prudent innovators have been and are continuing to update their patent strategy based on the new laws. Below are three such steps for consideration:

1. File Patent Applications Early and Supplement with Later Applications

After March 16, 2013, the United States became a first to file country. As a result, the filing date, not the actual date of invention, is the key date in determining what can be cited as prior art. Previously, a patent applicant could rely on the earlier actual invention date to removed the cited art. As a result, a company should consider filing a patent application as early as possible. Under prior patent filing strategy, a company might have waited until the technology and all of its features had been completed before filing. Under the new patent laws, the patent strategy might include filing a patent application as soon as the core technology is completed and subsequent patent applications as the improvements are developed.

2. Maintain the Invention Documentation Process

As mentioned above, it is true that the United States is now a first to file country. This has lead some to speculate that documentation such as an inventor’s journal (electronic or otherwise), presentation logs, or access lists are unnecessary. This overlooks the fact that a significant amount of patent disputes arise over ownership. These days, employees change companies often and information is spread rapidly. Patent ownership disputes can arise after an employee changes companies or a presentation attendee files a patent application for the subject matter prior to original company (See first point for consideration above). As of March 16, 2013, the USPTO instituted derivation proceedings, where a later patent application filer can demonstrate that an inventor named in an earlier application derived the claimed invention from the petitioner. In order to prevail, the petition must be made supported by substantial evidence. As a result, invention documentation such as inventor journals and access logs should still be considered within best practices.

3. Monitor Patents and Patent Applications in Your Field of Technology

The AIA introduced “inter partes review” and “post grant review” proceeding. The proceedings allow a third party to challenge a granted patent in a proceeding within the USPTO by the PTAB. Each of these proceedings is generally designed to be on shorter timeline and at a lower cost than traditional litigation. The inter partes review is currently available and the post grant proceeding is available (for patents granted under the new first to file rules) to you … and your competitors. As a result, part of the amended patent strategy could include evaluating recently granted patents and whether these proceedings might be useful.

Be aware that the United States patent landscape has changed and so must your patent strategy.

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Advantages of a UDRP Domain Name Proceeding

Trademark and Domain Names

A business can spend a lot of time, capital, energy in building rights in a trademark and the associated goodwill with the public. It can be devastating when a third party registers a domain name and operates a website incorporating a confusingly similar name to that of the valuable trademark. The detriment to the business can be significant. For example, the third party website may sell a competing product, causing loss of income to the business. In a more unsavory scenario, the third party may operate an adult oriented website under the confusingly similar name, damaging the brand equity of the right holder.

Options Against Unlawful Third Party Domain Name Holders

The primary options for consideration against the third party include:

  1. Initiating a lawsuit
  2. Initiating a UDRP domain name proceeding; and/or
  3. Online content approaches to outrank or “bury” the competing website.

The business should note that each of these options is not exclusive and more than one option might be suitable for a given situation.

Generally comparing the two proceeding-based options, a lawsuit might include claims of trademark infringement and cybersquatting. The defendant domain name holder would be located and served, discovery (exchange of evidence), and a trial, all under the rules of civil procedure. This can take significant time, capital, and energy. The notable advantage of a lawsuit is that the possible remedies include injunctions and monetary damages, which a business may need to seek in some circumstances. Contrasting a lawsuit with a domain name proceeding, a domain name proceeding is almost always faster, cheaper, and less complex. A domain name proceeding is typically resolved in less than two months. This speed must be balanced with the possible remedies. The remedies in a domain name proceeding are limiting to cancellation or transfer of the domain name. This “cost” might be palatable or welcome, especially where a defendant is difficult to locate or loss of income due to the suspect domain name is leading to red ink.

UDRP Domain Name Proceeding Elements – Proving the Case

The Uniform Domain Name Dispute Resolution Policy (UDRP) is an online procedure for resolving complaints made by trademark owners about domain names. It is a mandatory administrative proceeding arising out of the registration agreement accepted during the domain name purchase process of .com, .biz, .info, .org, and .net domain names.

The trademark owner must prove three elements in the proceeding in order to prevail over the domain name holder:

  1. the business has a trademark right and the domain name at issue is identical or confusingly similar to that mark;
  2. the third party has no right or legitimate interest in the registered domain name; and
  3. the third party registered and used the domain name in bad faith.

Take the above elements to heart. Commonly, businesses incorrectly think that their trademark rights include the right to terminate any third party’s registration of any domain name for any purpose. This fails to account for the second and third elements. A third party in an unrelated industry may register a seemingly “confusingly similar” domain name without violation of the rules. A second, common mistake involves the apparent simplicity of the proceeding. Because the rules of evidence of a courtroom aren’t followed, business often conflate the informality of evidence with the strength of evidence. Strong evidence establishing each of the above elements should be proffered in order to convince the panelists and prevail. After all, the goal is to preserve the goodwill and, in turn, the income and equity potential arising from the trademark.

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3 Key Terms of a Software License

Public Domain Licensing Logo

Who owns your software?

If your company has developed software, it should create a software license prior to distribution of that software. A software license is the key instrument that defines the rights in ownership, usage, and distribution of software between the company and user(s). Developers seek to protect rights in the product developed with their time, money, and staff. Users want to know what is being licensed and whether that license will meet their needs. A software license should be employed in enterprise software, consumer software, “cloud” software, customized software, and even in “open source” software contexts (it is a misnomer that if one desires software to be open source, that the company needs only to forego a software license). Failure to draft a carefully considered software license can lead to loss of ownership of key aspects of the software, loss of control of the business model, bad publicity, and other consequences. There are many options to think about for a software license but three key terms include:

Scope of Use – This element of the software license states the permitted and prohibited uses of the software. A license may, for example, limit the use of the software to the licensee’s own internal use or primary business activity. Such a restriction may support the licensor’s business model or effectively be required by law. For example, in credit card processing software, the software provider may also be providing related services and would seek to limit the uses of the software so that the licensee does not deprive it of revenue opportunities from those third parties. Additionally, the credit card processor may not be able to fulfill IRS reporting obligations if the user processes credit card transactions for third parties.

Intellectual Property – Since you’re reading an intellectual property blog, you probably knew this issue should be addressed. However, this issue should not be overlooked or oversimplified. Innovation in software can invoke multiple areas of intellectual property law and contract law, including patent law, trademark law, copyright law, and trade secret principles. Where software patents exist, notice of the patents should be provided. Copyright almost always exists in software, thus it should be addressed. Furthermore, the intellectual property clauses should not be oversimplified. For example, the intellectual property rights may not be as simple as “Developer owns all right, title, and interest in Software… we own it all, you can’t use it, the end…” Unreasonable restrictions on use of the software may lead to a backlash, lot revenue, or just may not fit the company business model. The intellectual property clauses may be more nuanced due to contemporary business models and social media influence, where the users may make substantial contributions. For example, use of the “Android” name and logo (ie trademarks) by third party developers is advantageous to the Android Market ecosystem. Likewise, the prolific placement of Twitter and LinkedIn logos on third parties websites promotes the use of the Twitter and LinkedIn systems, respectively.

Rights in User Data – Some user data is mission critical. For example, customer relationship management (CRM) can be  the lifeblood of a business. Judging by some of the posts on Twitter, other user created data may not be so critical. In light of the software, the business model, and customer profiles, the software license should address the licensor’s and licensee’s rights in user data. This may include user created data, data about the user, or information generated about the user from the user environment. For CRM software on an in-house workstation and servers, where the business model is that the enterprise pays for the software, the license may state that the licensee has complete ownership of the user data and the licensor has no rights in the user data. For a mapping application, the license may state that the mapping company has complete ownership, including the right to redistribute user supplied corrections.

Older language and terms may not apply to the current environment, so a company should periodically review the software licenses. Newer paradigms such as software as a service, virtualization, and multi-core processors have changed the software landscape and thus may lead to ambiguity or undesired results from an existing license.

The above terms are just three terms among many for consideration for inclusion in a software license, so do your research for your specific software and situation.

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