TY - JOUR
AU1 - Richard,, Kyle
AB - The author Kyle Richard is a transactional and tax attorney. Kyle currently works at the University of Washington and has experience in transactional matters, tax, intellectual property, exempt organizations, and international compliance. Kyle is a frequent speaker at higher education industry events and has published articles regarding intellectual property, tax and constitutional law matters. This article This article analyses the effect of two recent Federal Circuit decisions (Finjan and Core Wireless) on the patentability of software and their likely impact on software transactions. Software patentability is a critical issue for both software developers and users. Although the US Supreme Court provided some guidance regarding software patentability in Alice and Bilski, there is little definitive guidance or settled law in this area. As a result, parties are left to interpret and apply the two-step Alice framework to new situations, with often unpredictable results. This article argues that the decisions in Finjan and Core Wireless, building on the Federal Circuit’s 2016 Enfish decision, provided needed guidance regarding the extent of software patentability. We also predict that, given the apparent scope of potentially patent-eligible software, the parties to software transactions will be more likely to consider patent issues, reducing uncertainty and promoting innovation. Despite the lack of clarity arising from the US Supreme Court’s decision in Alice v CLS Bank,1 the Federal Circuit has begun to more clearly define the boundaries of patent eligibility for software. In particular, in early 2018, the Federal Circuit issued two decisions which build upon its 2016 ruling in Enfish LLC v Microsoft Corp,2 to more clearly permit the patenting of software which improves computer functionality. As a result of these decisions, software developers will be more likely to identify software as potentially patent-eligible, leading to increased attention to patent terms within software transactions, despite the traditional focus on copyright and trade secret protection. Although private contracts and industry customs do not have the force of judicial determinations, they are critical to the development of predictable outcomes in the area of intellectual property protection for software, given the uncertainty surrounding the eligibility of software for patent protection. Under Alice, subject matter ineligibility is evaluated through a two-step analysis: first, the court determines whether the claim is directed at a law of nature, natural phenomenon, or abstract idea; if so, the court determines whether the claim contains a sufficient ‘inventive concept’ that transforms the claim into an application of the underlying law of nature, natural phenomenon, or abstract idea. Unless the claim is either directed at something other than a law of nature, natural phenomenon, or abstract idea or else contains a sufficient ‘inventive concept’, it will be ineligible for patentability. Enfish v Microsoft: defining a post-Alice framework In 2016, the Federal Circuit issued its decision in Enfish, in which it evaluated whether five patent claims by Enfish for elements of a self-referential database were valid or directed to unpatentable abstract ideas. The court found that software was not inherently abstract (and therefore unpatentable), stating that: We do not read Alice to broadly hold that all improvements in computer-related technology are inherently abstract and, therefore, must be considered at step two. Indeed, some improvements in computer-related technology when appropriately claimed are undoubtedly not abstract, such as a chip architecture, an LED display, and the like. Nor do we think that claims directed to software, as opposed to hardware, are inherently abstract and therefore only properly analyzed at the second step of the Alice analysis. Software can make non-abstract improvements to computer technology just as hardware improvements can, and sometimes the improvements can be accomplished through either route. We thus see no reason to conclude that all claims directed to improvements in computer-related technology, including those directed to software, are abstract and necessarily analyzed at the second step of Alice, nor do we believe that Alice so directs.3 The court went on to state that the invention was not disqualified from patentability on the basis that it was not defined ‘by reference to “physical” components’4 and that such a holding would be impermissible because it would risk resurrecting the bright-line machine-or- transformation test rejected as the sole test for patentability in Bilski. The court then remanded the case to the District Court for further proceedings following the court’s finding of patent eligibility for all five claims. Thus, the Federal Circuit not only rejected a per se bar on patentability for software, but also provided a de facto standard for evaluating software patentability. That Enfish provided a standard was critical: in its first post-Alice software patent decision, the Federal Circuit had upheld a challenged software patent.5 However, DDR Holdings did not provide a clear framework for analysis. This left the requirements for patent eligibility for software an open question with little guidance, other than the two-step Alice framework for potential patentees and litigants to consider. Under Enfish, software is patentable if it makes non-abstract improvements in computer technology, which itself is evaluated by determining ‘whether the focus of the claims is on the specific asserted improvement in computer capabilities (i.e. the self-referential table for a computer database) or, instead, on a process that qualifies as an “abstract idea” for which computers are invoked merely as a tool’.6 Only if the software fails to be directed at such an improvement in computer capabilities will the court proceed to the second step in the analysis under Alice. Although this rule is consistent with Alice, and arguably even follows from the analysis therein, it is also a much clearer and more concise expression of the rule for software patentability. Finjan and Core Wireless: identifying non-abstract improvements In two of 2018 cases, the Federal Circuit reaffirmed and extended its analysis in Enfish. These cases play a critical role in defining the boundaries of software patentability. In Finjan, Inc v Blue Coat Systems, Inc,7 the Federal Circuit distinguished its holding in Intellectual Ventures I v Symantec that antivirus software was an abstract idea to find that if such antivirus software was sufficiently innovative—if it proposed a new method of scanning for viruses and security threats, that software could be patent eligible as an improvement in computer functionality. Then, in Core Wireless Licensing SARL v LG Electronics, Inc,8 the court found that the idea of a menu structure which provided for enhanced organization of applications was a tangible improvement in computer functionality because it represented an improvement over prior graphical user interface (GUI) technology. In Finjan, Finjan sued Blue Coat, alleging infringement of several of Finjan’s patents. The patents at issue related to software for the detection and prevention of various forms of malware. The software specifically included the scanning and profiling of downloadable files for security threats, securing network gateways through security profiles, the development of a cache management system for determining the allowability of cached files, and ‘a system and method for using “mobile code runtime monitoring” to protect against malicious downloadable viruses’. The Federal Circuit found that, although its precedent established that virus scanning software is an abstract idea,9 Finjan’s software went substantially further than mere virus scanning by employing new methods, such as a behaviour-based and predictive virus identification process (rather than a more conventional ‘code-matching’ virus scan), such that the innovations constituted a patentable improvement in computer functionality. The Federal Circuit stated that this technology was such an improvement in computer functionality because it ‘employ[ed] a new kind of file that enables a computer security system to do things it could not do before’.10 The significance of this statement cannot be understated: where prior precedent appeared to endorse a more rigid bar on patentability, based on the type of software and its function, Finjan embraced a more flexible approach, in line with the Patent Act’s broad public policy to increase innovation through the provision of a limited monopoly for inventions which represent a sufficiently disruptive ‘process, machine, manufacture, or composition of matter’ or improvement thereof. In Core Wireless, Core Wireless Licensing SARL alleged that LG had infringed its patent for a user interface. The Federal Circuit upheld the patentability of the innovation, finding that the claims ‘are directed to an improved user interface for computing devices’,11 rather than a mere implementation of the abstract idea of an index. The claims are directed at organizing information, particularly on a computer with a small screen, such that users of the computer could more easily access and organize such information rapidly. The trial court found that this innovation qualified as a specific improvement on user interfaces for such computers, which the Federal Circuit determined to be an improvement on existing computer technology.12 Although the context is different, this holding follows from the same principle announced in Finjan—that an innovation in computer software can be sufficiently transformative to provide a non-abstract improvement in computer technology. The extension of patent protection to a user interface is a substantial step towards expanding patent protection for software, although it clearly fits within the framework of a non-abstract improvement in computer technology. While some might argue that Enfish, Finjan and Core Wireless extended the patentability of software beyond the boundaries suggested in Alice, such an argument reads too much into these decisions. At its core, Alice holds that the mere introduction of a computer into a non-patentable idea or process (such as the escrow arrangement in Alice) does not impart patentability. Instead, where the purportedly patentable software is directed at an abstract idea under the first step of Mayo Collaborative Services v Prometheus Laboratories, Inc,13 it must contain a sufficiently ‘inventive concept’ at the second step.14 As a result, the post-Alice analysis involves a case-by-case analysis of the specific capabilities of the technology at issue. In each of Enfish, Finjan and Core Wireless, the technology for which a patent was sought represented a concrete and innovative improvement over existing technology. Enfish involved the development of a new type of database which, rather than modelling data in the more conventional relational format (requiring keys and calls to multiple tables for all but the simplest requests), provided for a database consisting of a single table in which all data elements were represented and linked, resulting in improved functionality and lookup speed. Similarly, Finjan’s antivirus software consisted of a new dynamic model of identifying potentially harmful files using predictive analytics, in contrast to prior models which merely compared incoming files to a repository of known viruses. Finally, in Core Wireless, the ‘application’, ‘summary window’ and ‘unlaunched state’ elements of the user interface were specific to electronic devices and sufficiently detailed in the patent application to support patentability. In contrast, cases such as Intellectual Ventures I, LLC v Erie Indemnity Company (a generic GUI),15Smart Systems Innovations, LLC v Chicago Transit Authority (the collection and storage of financial transaction information)16 and Two-Way Media Ltd v Comcast Cable Communications, LLC (streaming data in an allegedly more efficient manner)17 held the technology at issue to be directed at an abstract idea. Thus, Enfish, Finjan, and Core Wireless do not represent a wholesale liberalization of software patentability by the Federal Circuit. The Alice two-step analysis retains its teeth, particularly with patents which allege a generic improvement in pre-existing technology. Ultimately, the effect of Enfish, Finjan and Core Wireless is that there is very little software that is per se directed at an abstract idea. Whether software is directed at an abstract idea needs to be evaluated on a case-by-case basis, and even where a particular type of software has not been considered patent-eligible (such as antivirus software) or traditionally would not be protectable through the utility patent regime (such as a GUI), that software may still be patentable if it offers a concrete improvement to computer technology. Effect on software transactions As a result of the Federal Circuit’s decisions in Finjan and Core Wireless, software developers are likely to identify additional software as eligible for patent protection. In particular, innovative software which may have been assumed to be non-patentable given its subject matter (such as antivirus software, or software which controls essential, but common, functions) may be patentable if it represents a significant improvement over pre-existing software and offers non-abstract improvements in computer functionality. This will cause more software transactions and licenses to include patent protections and provisions addressing patent rights. The eventual effect of this developing trend may be more substantial negotiations regarding patent provisions in software transactions. Although this may increase short-term transaction costs, it will likely decrease long-term disputes, both through the negotiation of patent protection and by requiring the parties to more closely evaluate the bounds of protection for software prior to engaging in a transaction. Thus, by expanding the margins of patent protections for software under Alice and Enfish, the Federal Circuit provides much-needed certainty to allow companies to innovate and engage in transactions to distribute the benefits of innovation to society. Footnotes 1 (2014) 134 SCt 2347, 2357. 2 (2016) 822 F 3d 1327 (Fed Cir). 3 ibid 1335 (emphasis added). 4 ibid 1339, citing Bilski v Kappos (2010) 561 US 593, 604. 5 DDR Holdings v Hotels.com (2014) 773 F 3d 1245 (Fed Cir). 6 Enfish (n 2) 1335–36. 7 (2018) 879 F 3d 1299 (Fed Cir). 8 (2018) 880 F 3d 1356 (Fed Cir). 9 Intellectual Ventures I LLC v Symantec Corp (2016) 838 F 3d 1307, 1319 (Fed Cir). 10 Finjan (n 7) 1305. 11 Core Wireless (n 8) 1362. 12 ibid 1363. 13 (2012) 566 US 66. 14 Alice (n 1) 2355. 15 (2017) 850 F 3d 1315 (Fed Cir). 16 (2017) 873 F 3d 1364 (Fed Cir). 17 (2017) 874 F 3d 1329 (Fed Cir). © The Author(s) 2018. Published by Oxford University Press. All rights reserved. This article is published and distributed under the terms of the Oxford University Press, Standard Journals Publication Model (https://academic.oup.com/journals/pages/open_access/funder_policies/chorus/standard_publication_model)
TI - After Alice: how do Finjan and Core Wireless change the patentability of software in the USA?
JF - Journal of Intellectual Property Law & Practice
DO - 10.1093/jiplp/jpy175
DA - 2019-03-01
UR - https://www.deepdyve.com/lp/oxford-university-press/after-alice-how-do-finjan-and-core-wireless-change-the-patentability-mLd0u7W9IA
SP - 210
VL - 14
IS - 3
DP - DeepDyve
ER -