Summary Of ArgumentThe Federal Circuit’s expansion of patentable subject matter in the 1990s led to a threefold increase in software patents, many of which contain abstract ideas merely tethered to a general-purpose computer. There is little evidence, however, to suggest this expansion has produced an increase in software innovation. The software industry was highly innovative in the decade immediately prior to this expansion, when the viability of software patentability was unclear and software patents were few. When surveyed, most software developers oppose software patenting, and, in practice, software innovators tend to rely on other tools to capture market share such as first-mover advantage, trade secrecy, copyright, goodwill, and economic network effects. If anything, the increase in software patenting has led to an increase in software litigation, which in turn has incentivized firms to acquire patents for strategic purposes unrelated to innovation, serving as either defensive stockpiles to deter legal threats or offensive leverage for rent-seeking patent assertion entities (PAEs). Moreover, abstract software patents fail to function well within a property rights framework because they fail to define cognizable metes and bounds and fail to provide effective notice to third parties of when a particular practice or product might infringe. Due to their abstractness, these claims can often be construed to cover any of the particularized processes that result in the same outcome, including those never envisioned by the inventor. Accordingly, these metes and bounds are not concrete enough to be useful to those who wish to tread carefully around them. The mere application of the idea using general-purpose technological components, such as a general-purpose computer, does nothing to abate this problem. Similarly, abstract patents defy the attempts of software innovators, or general counsel at technology companies, to stay on notice of what is already protected. This leaves firms vulnerable to investing in software development with little to no assurance that they will be able to avoid infringing upon an abstract patent, even if they conduct diligent searches within patent databases. Again, this will be true even if there are general-purpose technological components tethered to the claims, as those components do nothing to help distinguish one abstract claim from another. Proliferation of such patents also contributes to the problem of patent thickets. A well-defined § 101 ensures that abstract software patent claims and their attendant notice and patent thicket problems do not undermine the patent system and stymie innovation. It serves as a decisive gatekeeper that the Patent Office and trial courts can use early in administrative proceedings and litigation. Further, it avoids many of the systemic challenges prevalent with the use of §§ 102, 103, and 112 in such cases—the speed of software innovation, the difficulty locating software prior art, and lax, broad claiming standards. Accordingly, this Court should affirm the invalidity of patent claims at issue here and hold that abstract ideas in the form of software are unpatentable and that mere computer implementation of those ideas does not create patentability. http://1.usa.gov/1gatCRr (noting that after Alappat and State Street, there was a substantial increase in the number of patents granted with software claims). The chart below demonstrates this increase: Id. at 12. Take for example the estimated 11,000 patents covering the sale of goods online. James Bessen & Michael J. Meurer, Patent Failure: How Judges, Bureaucrats, and Lawyers Put Innovators at Risk 213 (2008). These patents emerged, at least in part, because otherwise unpatentable abstract ideas—e.g., holding desired products in a shopping cart, checking out upon shopping completion, pressing a button to “buy it now”—became the patentable inventions of the first patent applicant to suggest implementing the idea on a computer. Cf. Alappat, 33 F.3d at 1545.
A. Abstract Software Patents Should Be Limited, as There is Little Evidence That Software Innovators Rely on Patenting for Incentives to Innovate and Compete.Despite the expanded availability of patent protection, studies of the software industry have failed to show any corresponding increase in innovation as a result. While the number of software patents has increased, there is evidence that software entrepreneurs rely much less on patent incentives when building and maintaining competitive businesses than other factors, such as first mover advantage and trade secret, copyright, or trademark protection. See Stuart J.H. Graham et al., High Technology Entrepreneurs and the Patent System: Results of the 2008 Berkeley Patent Survey, 24 Berkeley Tech. L.J. 1255, 1288-1290 (2009). In fact, studies suggest that spending on stronger and broader software patents is negatively correlated with spending on R&D. See Robert Hunt & James Bessen, The Software Patent Experiment, 77(3) Fed. Res. Bank Phila. Bus. Rev. 22, 27-29 (2004) (“[T]he negative correlation between increases in firms’ focus on software patents and their R&D intensity in the 1990s suggests that firms may be substituting for R&D with software patents.”); see also James Bessen & Robert M. Hunt, An Empirical Look at Software Patents 30-33 (Fed. Reserve Bank of Phila. Working Paper No. 03-17, 2004) (reporting the results of a historical study showing that in the 1990s firms increased their patent propensity after subject matter restrictions on software patents were relaxed, and that this increase in spending on patents displaced spending on R&D to such an extent that, assuming perfect substitution, R&D would have been about 10%, or $16 billion, higher if there had been no increase in software patenting). History also suggests that patent incentives have had a negligible impact on software development overall. Despite the denial of software patentability in Benson and Flook, which rejected broad-based abstract claims, or after Diehr, which only allowed patentability involving software in a very narrow concrete context, there was a great flourishing in software innovation in the period between Benson and Alappat. See Martin Campbell-Kelly, From Airline Reservations to Sonic the Hedgehog: A History of the Software Industry 18-19 tbl.1.2 (2003) (noting that the software industry grew eightfold between 1980 and 1990, with revenues increasing from $6.1 billion to $51.3 billion). In addition, surveys of software developers during this period show most were, in fact, opposed to patents. See, e.g., Effy Oz, Acceptable Protection of Software Intellectual Property: A Survey of Software Developers and Lawyers, 34 Info. & Mgmt. 161, 167-170 (1998); Pamela Samuelson et al., Developments on the Intellectual Property Front, 35(6) Comms. of the ACM 33, 35 (1992); Bessen & Meurer, Patent Failure, supra, at 189 (“[S]uch broad opposition from within the affected industry and among the affected inventors seems to be unprecedented in U.S. patent history.”). And, despite the fact that software patents have been growing both in absolute terms and as a percentage of all patents granted in recent decades, most software firms still do not patent their software products. James Bessen, A Generation of Software Patents, 18 B.U. J. Sci. & Tech. L. 241, 255 (2012). This appears to be even more true for startup firms. Id. at 255-56. Indeed, practically speaking, it is unlikely that patent rights can spur innovation in software because:
[I]nnovation in the high-tech industry is exceedingly fast, while government bureaucracy is exceedingly slow. Computing power doubles roughly every two years, but it generally takes three to four years to receive a patent, and even longer to enforce it in court. As a result, patented inventions in the high-tech sector are invariably yesterday’s news.Brian J. Love, No: Software Patents Don’t Spur Innovation, but Impede It, Wall Street Journal, May 12, 2013, at R2.