Co-authored by Brad Feld
The U.S. Supreme Court just blinked. In the landmark Bilski v. Kappos decision announced yesterday, the Court had a chance to right a patent wrong. It didn't. Instead, in a cautious and internally contradictory decision, it further fuzzified the mess that is the U.S. patent system -- and it will have sad consequences for innovation in this country. It was terrible timing for a loss of legal nerve.
For all the attention given this case's decision -- and some patent law blogs had turned its release into something like the final episode of LOST, complete with countdown -- the underlying case was easily decided. It had to do with whether the plaintiff could patent a method for assessing and trading energy risk. This sort of vague nonsense is an easy lob to the high court, with Justices applauding one another for agreeing that trading energy risk shouldn't be patented.
If it was so easy, why was there so much interest? Because Bilski really stood for a much broader and more important issue. The real questions had to do with what limitations, if any, should be placed on a dangerously mutating U.S. patent system as it moves from its roots in materials, machines and the like into software, and into the very ways of doing business itself, like in Bilski. Patents have increasingly been granted in implausible areas never imagined by the framers of the U.S. Constitution or the legislators who drafted the Patent Act of 1952, like sending information over the Internet, or online courses, or even basic computer science concepts that have been around for 30 years or more.
These expanded patents in the area of software and business methods are 99.9% nonsense. They fail the classic patenting criteria of being novel, useful, and non-obvious. They are also mostly contrary to the later interpretive overlay of passing the "machine or transformation" test, in which you might have been able to patent a new machine but you couldn't patent an idea or algorithm, such as how you shopped for the machine.
Far from encouraging innovation and advancement in the "useful arts," as the Constitution originally envisioned and Congress wanted, software and business method patents have become a quasi-legal poison pill. Sometime it's from patents obtained years after application via circuitous paths and bankrupt companies, and sometimes it's straight-up planned extortion. Either way, these "patent trolls" lurk in the shadows, waiting for someone to unknowingly infringe. Then they sue in patent-plaintiff-friendly jurisdictions (of which there are ranked lists - we kid you not), forcing defendants, often small, unsophisticated companies, to settle rather than face the cost and uncertainty that defines litigating a patent case against a well-capitalized troll.
The costs associated with this are immense, as is the innovation penalty. Software companies now must file defensive patents just to make sure that they are not later submarined by useless patents originating with patent attorneys themselves or at failed software companies. We have officially exited economics and entered Kafka's courts.
Startups are always on the financial edge with it taking very little to scare an investor or acquirer away. Patent protection is not an option when the time from engineering, to launch, to success or failure, is often a matter of months. Predatory patent trolls can stop all this innovation cold, preventing startups from obtaining capital, or forcing funded companies into protracted legal licensing battles over "inventions" that should never have been allowed patent protection in the first place. Why are we putting these roadblocks in the way of software startups, one of the most important job-creating engines in our economy? The mind boggles.
In its Bilski decision, the Court nervously flitted about, footnoting away like a post-modern novelist. It upheld the lower court ruling, agreeing that risk trading isn't patentable, but balked at saying anything more about patenting principles and ideas, while agreeing that maybe it should ... you know, someday. It worried nervously about the "unanticipated consequences" of saying more, an embarrassing abdication of responsibility in the face of an economic and legal system desperate for clarity and guidance. It even partially undercut its own "machine and transformation" rule, before reaffirming it, sort of, in an another attached opinion. It throws the mess back into the hands of a dysfunctional U.S. Patent Office, the patent trolls, and the lawyers.
Post-Bilski we are back to business as usual, with software patents a tax on innovation. Yes, yes, patents still may have some utility in areas like materials, biotechnology, and clean technology. When the timeline is long, the up-front capital costs are high, and the payoff is large, one can argue that patents encourage innovation. But the same is not true in fast-moving areas like software and business methods, where businesses are about rapid iteration with low capital intensity and prodigious speciation.
It didn't have to be this way. The Court missed an opportunity to provide invention clarity when this innovation-hungry economy needs it most. Instead, it muddied things, cited the same precedents that caused the problem, and essentially told those of us in the real business of creating software innovation and jobs, "Good luck with that" The Supreme Court could and should have done much, much better.
Open source software companies like Red Hat have been innovating for years and doing it without software patents. Companies like Microsoft, Adobe and Amazon would love the vendor lock-in that patents provide so that they *won't* have to work so hard innovating.
To really get a sense of the problem, I highly recommend the following:
www.againstmonopoly.org
http://www.dklevine.com/general/intellectual/againstfinal.htm
http://www.conservativenannystate.org/cns.html#5
http://spectrum.ieee.org/computing/software/software-patents-dont-compute
Software patents muddy the water, to put it simply. Patents on ideas are something to be feared as Jefferson wrote: http://spectrum.ieee.org/computing/software/software-patents-dont-compute
On patents in general I have but two questions to ask: Who is smart enough to determine what is patentable? Are they working for the patent office or are they gaming the system?
And, let's not forget that in the last 20 years the USA has been an innovation powerhouse. All under the very patent system that people are now complaining about.....
Lets hope the next case that goes to the supreme court solves this problem. Mike from Kingston
In sum though, I believe Paul is completely wrong to assume that software is in a realm which somehow avoids constitutional governance - which is what I suggest Paul is asking for here. I suspect the Supremes don't give a rip about the meaning of law or even the constitution any more, so if I had to posit a reason for them going the way they did, I would guess it was because they are like so many others in this country, faux conservatives, fake strict constructionists, and neer do wells who think that on balance keeping software patents on the books protects the financial interests of their friends.
Method patents are even more insidious. If a surgeon patents a new technique for cutting you open and patents it, other surgeons would have to pay to use it. Or if you discover a new method for managing inventory in your store, come patent troll could come along and force you to pay money to use it. Someone once tried to patent double entry bookkeeping.
The problem of software patents is compounded by unknowledgeable patent examiners who dont know the industry and the prior art.
BTW: I have a software patent. It too is a piece of junk.