Ironick

Bilski Severely Restricts Patentability of Software and Business Methods

My friend and fellow NYU Law alumnus Keith Takeda emailed me yesterday with news of In re Bilski. Given I was flying home from Microsoft PDC, I didn't see it until today.

As soon as I saw it though, I alerted my Gartner colleagues that a major shift in patent law had just taken place. Now that I've had more time to read the decision closely, I'm even more convinced of it.

[Of course, now that I am no longer a bar-certified IP litigator these opinions are only the opinions of a lay person. For a legal opinion, speak with your attorney. Now with that legal boilerplate out of the way, on to the discussion.]

In its densely reasoned opinion, the CAFC did one thing quite clearly. It (re)established a single test of patentability to apply to applications for software or business method patents -- the so-called machine-or-transformation test:

A claimed process is surely patent-eligible ... if: (1) it is tied to a particular machine or apparatus, or (2) it transforms a particular article into a different state or thing.

In doing so the court invalidated several other tests, especially the test used in the (in)famous State Street decision: a "useful, concrete, and tangible result".

Many commentators have already opined that Bilski did not significantly impact software patents because the court explicitly chose not to address the machine aspect of the machine-or-transformation test:

As a result, issues specific to the machine implementation part of the test are not before us today. We leave to future cases the elaboration of the precise contours of machine implementation, as well as the answers to particular questions, such as whether or when recitation of a computer suffices to tie a process claim to a particular machine. [emphasis added]

Accordingly, such commentators appear to reason that so long as a patent application ties the software to a computer, it may pass the test. This would leave most software patents intact.

I find this reasoning completely unpersuasive in the face of the ample dicta the court provided to signal its likely approach to the machine test. The requirement that software be "tied to a particular machine or apparatus" is not satisfied by merely reciting that the software is tied to a "general-purpose digital computer". Here is just one example: "However, in Benson, the limitations tying the process to a computer were not actually limiting because the fundamental principle at issue, a particular algorithm, had no utility other than operating on a digital computer." [emphasis added]

Clearly the CAFC will require that the machine being tied to is either some type of special-purpose computer, or a general-purpose computer embedded in some type of special-purpose device. So unless the transformation test (which we turn to next) leaves a loophole, the particular machine test will greatly restrict the scope of software patents.

My reading of the court's discussion of the transformation test convinces me that it offers no loophole either. While the court does not go so far as to require that the article being transformed be a physical object, it does require that the article being transformed be at least a representation of a physical object: "Purported transformations or manipulations simply of public or private legal obligations or relationships, business risks, or other such abstractions cannot meet the test because they are not physical objects or substances, and they are not representative of physical objects or substances." [emphasis added]

So some software and business method patents survive, but only a select few. Restating the machine-or-transformation test with the restrictions impose in Bilski will make this clear:

A claimed process is surely patent-eligible ... if: (1) it is tied to a special-purpose computer, or a general-purpose computer embedded in a special purpose device, or (2) it transforms a physical object or substance, or a representation of such, into a different state or thing.

IMLayO, this new test will invalidate thousands of patents. A list of some potentially invalidated patents has been produced by Gene Quinn: Say Goodby to These Patents. Let the litigation begin!

Sun has no clue, er, strategy, regarding Linux.

Robert Scoble's post re Don Box's post led me to this gem of ignorance and arrogance.

IBM's New Linux Ad: It Moved Me.

The Scobleizer says the new IBM freaks him out a bit. Or at least the kid does. But I'm almost embarrassed to admit that I found the ad moving. To see all these experts freely contribute their knowledge, insight and wisdom to "the kid" was moving. What I think Robert may have missed is the line in the ad that says something like: "What he learns, we all learn."

Yes, the ad would be more accurate if it showed the kid interacting more with his "teachers"--asking questions, correcting them, answering their questions. But it still worked for me. It got across the essential nature of open source, which is of course open, shared development.

Red Hat and Microsoft: Both Enforce Copyrights.

A very interesting article (and active discussion thread) on the impact of copyright enforcement on buying behavior. Ernie Ball decided to switch to Linux after being busted by the BSA for copyright infringement of (apparently) Microsoft software.

However, anyone who thinks that by switching to Linux she can make this problem go away is naively WRONG. Here is the REALITY from Red Hat's latest License Agreement (which is the distro Ernie Ball is using):

4. REPORTING AND AUDIT. If Customer wishes to increase the number of Installed System, then Customer will purchase from Red Hat additional Services for each additional Installed System. During the term of this Agreement and for one (1) year thereafter, Customer expressly grants to Red Hat the right to audit Customer's facilities and records from time to time in order to verify Customer's compliance with the terms and conditions of this Agreement. Any such audit shall only take place during Customer's normal business hours and upon no less than ten (10) days prior written notice from Red Hat. Red Hat shall conduct no more than one such audit in any twelve-month period except for the express purpose of assuring compliance by Customer where non-compliance has been established in a prior audit. Red Hat shall give Customer written notice of any non-compliance, and if a payment deficiency exists, then Customer shall have fifteen (15) days from the date of such notice to make payment to Red Hat for any payment deficiency. The amount of the payment deficiency will be determined by multiplying the number of underreported Installed Systems or Services by the annual fee for such item. If Customer is found to have underreported the number of Installed Systems or amount of Services by more than five percent (5%), Customer shall, in addition to the annual fee for such item, pay a penalty equal to twenty percent (20%) of the underreported fees. [Emphasis Added.]

Here is a recent debate on the issue. As you can see, the relationship between this clause and the GPL is a bit murky. I agree with the viewpoint that the RH distro contains both GPL and non-GPL code, so it is the non-GPL code that is restricted from further copying. If someone wanted to go through the effort of subsetting out just the GPL code, it would work and be legal to copy widely, so RH is not in violation of the letter of the GPL, but it would be a lot of effort to do so on an ongoing basis. I wonder how the GNU folks feel about it though. I think I will ask them.

It will be interesting to see what happens when the all but one of the older versions of Red Hat (which apparently don't have this clause) go off support at the end of the year, and a bunch of users have to upgrade to RH Enterprise Linux (which does).

Here's the punch line: Red Hat is a member and on the board of the Software & Information Industry Association, which like the BSA, has a piracy watchdog division. So guess what, if Ernie Ball makes unauthorized copies of Red Hat products, someone can drop a dime on it all over again--here's the toll free number.