Patent Law

Kill Off Software Patents

The Supreme Court has a chance to strike a blow for innovation and justice.


The Supreme Court has a chance to give innovation a boost this year by rolling back one of the country's most economically stupid policies. With the case of Alice Corporation v. CLS Bank International, the justices will dive into the issue of whether companies should be able to patent computer software.

Here's the background. The Alice Corporation claims that CLS Banking International is violating its general patent that claims to implement an escrow function between traders in financial derivatives. To be clear: CLS Banking was not using software developed by Alice Corporation. Escrow entails a third party holding a financial instrument—say, securities or funds—on behalf of the other two parties in a transaction. The funds are transferred once the parties have fulfilled their obligations. The practice of escrow goes back at least as far as the Middle Ages.

Now, the purpose of patents, in Abraham Lincoln's words, is to offer an incentive for "the discovery and production of new and useful things." They also constitute a disclosure mechanism in which inventors are awarded exclusive use of their inventions for 20 years in exchange for clearly revealing to the rest of us how they are made, thus avoiding a world pervaded with trade secrets. According to Section 101 of the U.S. Patent Act, patents may not be awarded if the claimed invention "would have been obvious" to anyone "having ordinary skill" in the relevant art.

The upshot is that Alice Corporation says it deserves a patent because it was novel and non-obvious for them to suggest using computers to facilitate the ancient legal process of escrow.

This isn't even the most egregious recent case in this field. In Ultramercial v. Hulu, Ultramercial claimed to have exclusive rights to the idea of trading advertisement viewing for access to content. The patent does not specify any actual software code, just the concept the code is executing. In other words, Ultramercial says no one had ever before thought to oblige people to see or hear commercials in exchange for access to copyrighted material. No one except purveyors of, say, television, newspapers, and radio. Astonishingly, in June 2013, the Federal Circuit Court of Appeals ruled the Ultramercial patent valid, essentially because the company specified that the advertising would be viewed over the Internet. Some critics of software like the Electronic Frontier Foundation would have preferred that the Supreme Court take this case instead of Alice v. CLS.

Cases like these would be a ridiculous legal sideshow were it not for the proliferation of software patent infringement lawsuits, and lawsuit threats, by patent trolls. Patent trolls—the technical term for them is "non-practicing entities," or NPEs—basically buy up lots of dodgy patents and wait for someone to allegedly infringe. At that point, the troll's lawyers send out a letter demanding royalties.

Some patent trolls are no longer just going after tech manufacturers and vendors; they are now threatening litigation against innocent users of some products. For example, in 2011 Innovatio IP Ventures claimed that hotels, coffee shops, and restaurants that offer WiFi to their customers are violating its patents. They demanded a licensing payment of between $2,300 and $5,000 from each business location. Patent defense costs a lot of money, so many small companies simply cave and hand over the cash to the extortionists.

A 2010 Georgetown Law Journal study looked into recent patent litigation history and found that "NPEs and software patentees overwhelmingly lose their cases, even with patents that they litigate again and again." In fact, NPEs won only about 9 percent of the time. This strongly suggests that their patents are pretty low quality. In 2012, NPEs brought 61 percent of all patent litigations, up from just 5 percent 10 years earlier.

This isn't just a recipe for individual injustices. The rising flood of dubious software patent infringement litigation is significantly retarding innovation and wealth creation. In a 2010 article for Regulation, the Boston University legal scholars James Bessen, Jennifer Ford, and Michael Meurer found that NPE lawsuits and infringement threats "are associated with half a trillion dollars of lost wealth to defendants from 1990 through 2010." The wealth lost in each of the prior four years had amounted to $80 billion annually. In a 2012 working paper, Bessen and Meurer calculated that the direct costs of litigating or paying off NPE patent claims amounted to $29 billion in 2011. This figure excludes other costs to innovation, such as the diversion of resources, delays in new products, and loss of market share.

Speaking of the diversion of resources: Microsoft, Google, Apple, Samsung, and other tech giants have amassed software patents not because the companies expect them to fuel their innovations, but because they need them to defend against one another. For example, a consortium including Microsoft and Apple banded together to buy the patent portfolio of the bankrupt Canadian telecomm equipment manufacturer Nortel for $4.5 billion in 2011. Analogizing the legal situation to the Cold War's mutually assured destruction, a venture capital cliché runs: "Patents are like nuclear bombs, you just got to have some."

The Supreme Court has long held that the laws of nature, natural phenomena, and abstract ideas are not patentable. Merely adding "on a computer" or "over the Internet" to otherwise conventional processes like selling merchandise or sliding to unlock a cell phone should not be patentable. The Supreme Court would go a long way toward fixing the current software patent chaos if it limits patents to inventions that actually involve some mechanical process or the creation of novel physical products.

In the meantime, Congress may offer some relief: The Virginia Republican Bob Goodlatte has introduced the Innovation Act. This would not end software patents altogether, but it would narrow the grounds for software infringement lawsuits, prevent suits against innocent users of technology, and force the losing party in such suits to pay litigation costs. The bill passed on a vote of 325 to 91 in the House last week and is expected to pass in the Senate.

But the Supreme Court has the power to go farther. At an earlier stage of Alice v. CLS' litigation, Judge Kimberly Moore of the Federal Circuit Court of Appeals wrote that "if all of these claims, including the system claims, are not patent-eligible, this case is the death of hundreds of thousands of patents, including all business method, financial system, and software patents." If so, good riddance.

Related video: "How Patent Trolls Kill Innovation," produced by Zach Weissmueller. For more info go here.

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  1. robc argues that we should kill off patents.

    But the supremes cant do it as its in the constitution.

    1. some guy argues we should kill off all forms of intellectual property.

      But that won’t happen in his lifetime.

      1. Yeah, that too.

      2. And Acosmist is libertarian, so thinks property should be protected, but it takes all kinds of fascists to make a world!

      3. Why should intellectual property be treated differently than physical property ?

        1. what is real?

          intellectual property does not exist. its just information. information is a fantasy that does not exist in the physical universe. an apple sitting on a table exists, but the idea of the apple does not. IP is not the apple, its ideas.

          current IP law is aimed at preventing harmless methods of copying information. methods that do not alter the original in any measureable way.

          its a victimless crime that leaves the original possessor in exactly the same state as he was beforehand. and any measureable inconvenience dramatically falls as you move to 3rd paty, 4th party, 5th party, which is who pirates are.

          information literally does not exist. its a category of things like intentions, beliefs, and hurricanes. does ‘making a fire’ exist? no. no, fires dont even exist.

          processes are not things and therefore cannot be uniquely owned.

          1. can you own the moment you were born? this is just nonsense. noone has claim on information other than privacy and reputation. information is an emergent property of reality. properties are not things. purple, triangular, and smooth are not things, and you certainly cant own them without a cop with a gun regulating ppls information use.

            hey! dont you draw a picture using triangles!!!

            the twisted thing about it all is that ppl are bound to create triangles even if they are trying not to.

            if big business compels its existence then IP should be sunsetted far sooner after creation and permanently when dropped.

            if im not mistaken we are entering 3rd generation music estates getting royalties. that means grandkids of dead musicians are getting rent.

            i wonder if i could trace back ‘happy birthday’ to one of my ancestors…

          2. By your definition this article and your response to it don’t exist so why bother?

      4. AIM agrees.

    2. The supremes can’t kill patents, but they could put a stop to the bullshit of issuing patents on ideas.

  2. Mostly agree. While we’re at it, let’s gut the concept of business process patents.

    It’s really easy to see how these bullshit patents are different from truly novel inventions–they just immediately block things that are already happening rather than creating some neat new thing that you want to keep people from ripping off for a while.

    1. The problem is business process patents.

      The courts fucked up when they said business methods could be patented.

      Software used to control a smelter to make iron (an industrial method) isn’t the problem.

      Software used to control an order processing system to sell iron (a business method) should never have been allowed to be patented.

  3. Whatever the initial intended purpose for patents was (I know what it fucking was, it was to inspire innovation by guaranteeing monopolistic profits for a specific and limited amount of time), that point has been blown through like a stop sign on a back road. Patents now effectively stifle innovation, and are in fact used specifically to do so.

    Even if you believe in IP, which I don’t, you have to agree that the patenting system is no longer a general force for innovation, and has instead been captured by charlatans and extortionists and huge companies to stifle innovation and competition. Oh look, just one more aspect of supposedly limited government that has grown and become a force for oppression rather than what it was intended for. Amazing how that happens. Every fucking time.

    1. I’m sorry, I patented the use of the word “fuck” and all permutations thereof last year for commenting on the Internet. Please send me $550,000 and a shrubbery genetically tailored to be a nice shade of plaid or I will release the lawyers.

      1. Only if you cut down the largest tree in the forest with…a herring!

        1. Ah, I see you are familiar with patent law. Very well, you win this round! [Begins hitting tree with herring.]

          1. I’m sure someone out there has a patent for logging with forage fish, so the jokes on both of ya!

            1. That’s on halibut and completely distinguishable.

              1. We’ll see if the judge thinks it’s “completely distinguishable”.

                1. That’s my tree, you can’t be splattering it with fish guts without a piscene disposal permit and a tree usage agreement that covers your intended use.

                  1. Wrong, sir! Wrong! By the ancient law of ferrae naturae, I can chop down your tree and any other tree forthwith and forthrightly so long as I employ a wild herring for the task!

                    1. Better make sure that’s a frozen herring….I own a patent on the thawing process.

    2. Epi,

      YOur post reminds me of something really funny that happened in grad school in a product development class.

      The assignment was to design some product for consumer use, and we were supposed to ID a marketing opportunity, come up with a solutione and figure otu the market etc etc until we had a design spec for some engineers to use to design the damn thing.

      One of the assignments was to look for patents that might cover our idea.

      Now, I really pushed an idea for a computer controlled conventional oven that cooked things perfectly, even if the cook sucked. I was so full of zeal, I overwhelmed the rest of the team and they decided to work on my idea.

      Imagine my suprise when one of the guys reported that there was a patent our preliminary design infringed on, and the patent had my dad’s name on it!

      Since my dad and I are pretty distant, I had had no idea! Of course, my denials really didn’t convince anyone that I hadn’t gotten the idea from him. 🙂

      We didn’t get a good grade. When we were done, we had a design that was 10 times more expensive than the ovens on the market. So our final presentation started off with an admission that we had produced something tha twasn’t commercially viable.

      But boy was it sweet!

      1. Obviously this drive to automate ovens is genetic. Paging ‘Murican.

  4. Hi ALL!!! The solution to making our current patent system work, is “massive defensive publication” powered by the web, and Excel spreadsheets that can combine, in randomly selected words, phrases, and concepts, everything known to humans. If it is ***ALL*** been defensively published already, nobody can get a patent, and we can all have economic freedom and reduced prices! See a sample of the solution at…..blication/ ?

    1. Did you try ‘cid too?

      1. Yeah Man I ‘fess up…

    2. Only flaw I see is it’s lack of being gluten free.

  5. I remember several years back one of my coworkers who was going for his Masters in Computer Science talked about how in one class they were visited by some people who made their money off of patents. What they would do is patent and idea, then sue whoever implemented it. I was like, what the fuck? That’s like patenting the idea of putting a motor on something with four wheels, and demanding royalties from anyone who makes a car. Unreal.

    1. *an idea*

    2. Patent trolling is a very real and horrible thing.

      1. Reason had an article a few years ago (maybe even a decade ago at this point) about the King of All Patent Trolls:
        Lawrence B Lockwood.

        One of his patents is for an “Automated Sales System”, whatever the fuck that means.

    3. They really need to shore up the applied definition of what is patentable. Even if you can’t build a car on your own, you should be forced to describe in great detail the components, interactions, and processes that are novel, and only those parts should be patentable. IOW, putting a motor on a car shouldn’t be patentable, but a specific design of a torque converter should be.

      Same with software. “Using a computer to access your bank account info” shouldn’t be patentable. The novel parts of the interface that allow you to securely access your bank info could be.

      1. The best definition of what is patentable is “nothing”. It’s also the simplest.

        Intellectual property is censorship. It’s a violation of freedom of association. It’s a violation of real property rights. It’s a bad thing and it needs to go away.

        1. And stealing my idea isn’t a violation of my property rights? Bad plan. There are a lot of crap patents out there, and the trolls are very real. I had to deal with one personally as an expert witness. But at the same time I should be able to have a reasonable period to harvest and exploit my idea (20 years is fine) without some copycat asshat coming along and duplicating it without putting in the R&D effort that I did.

          Got a problem with the moral hazard of rewarding low income people for making bad choices, e.g. subprime borrowers getting a gov’t bailout? Then you got a problem with abolishing patents entirely.

          1. ideas are not real.

            using someone’s idea causes no physical harm, its harm comes in opportunity cost or something compareably unreal and of similar flavor.

            when we start measuring and monetizing opportunity cost for information exchange i am gonna charge ppl $5 for a pleasant hello and $1 for a gruff sneeze.

            if person A hears my hello, and reproduces it to another i should feel like i have been cheated out of that new $5 from person B.

            believing ideas and information are ownable is like believing you own 1+1=2. its utter insanity.

    4. At least this is better than the old case of filing patent applications, continuing them endlessly, and only trying to get them issued when you saw an infringing commercial product beginning to be developed.

      The patent office could get rid of some of the shenanigans by hiring some better examiners, that are actually familiar with the English language, and mandating an embodiment requirement. As well as tossing software and BM patents.

  6. The problem endemic in software patents is an issue with patents in general. They have thrown the gates wide open, and let everything thrown at the wall stick. It sure doesn’t help that the PTO is populated by a bunch of people who don’t know a transistor from a terabyte, and that make it so that many of the patents out there are a complete joke.

  7. The only proprietary software I run is Flash. And that’s only because the porn sites won’t switch to HTML5.

    1. I find their lack of movement on this confusing since the mobile market should be fairly lucrative.

      1. Actually, I wouldn’t surprised if conversion rates to the “Just message and ask to fuck” / “Ugly bitches need sex!” etc sites are lower on mobile, since it’s a pain to fill in forms.

        Also, *ewwww*, gay porn!

        1. Then the porn industry is falling behind as a leader in technological breakthroughs. Create a porn OpenID network for one-click access and drag all of the porn advertisers around. Also give that network an innocuous name so that wives/husbands/terriers going through the phone wouldn’t be suspicious.

          “Click here for one on one time with Jeanine the homely but kinky secretary”
          *Allow this site to access you ManAccess details?*


          Also, *ewwww*, gay porn!

          I’ll be sure to watch enough to make up for your lack of taste in this area.

      2. “I find their lack of movement on this confusing since the mobile market should be fairly lucrative.”

        Perhaps it’s because of all the people still running IE6.


    2. A damn good reason.

      Though, as you are probably aware, much (most) of the Free Software you are running is likely covered by somebody’s patents.

  8. If I understand the general consensus on the board. “The current patent registration and litigation system is badly broken. Therefore we should completely invalidate a valid form of property ownership because we like free shit.” You people sound like a bunch of fucking progs.

    1. Intellectual property is censorship. It’s a violation of freedom of association. It’s a violation of real property rights. It’s a bad thing and it needs to go away.

    2. Please show me the “property” an IP holder owns. Put it in my hands. Come on, genius, I’m waiting.

      1. Please show me the “property” an IP holder owns. Put it in my hands. Come on, genius, I’m waiting.

        Come on Epi… your general point is good, but don’t be mendacious about it.

        Go ahead and put an insurance policy in my hands. Oh, all you have is a paper memorial defining the specifics of the policy? That’s all I have of my patent. Airplane tickets? Upgrades to first class? You can’t put the seat in my hands, because you don’t own it.

        1. You do not own the insurance policy as property, it exists as a contract(of course, you may own a specific physical copy of the contract). This goes for everything else you mentioned. IP is not property, it is contract between an entity and the state which constrains others from transforming their property into a similar configuration.

          1. Strictly speaking, in Anglo-American law, all property is title. Title also includes rights. Rights in a contract are property. So, you DO own the insurance policy as property, since it exists as a contract, and contracts assign rights.

            1. IP is a bar on others actions. others who arent even party to the contract.

              its shocking that libertarians would find this appropriate.

              the only proper censorship on non-dangerous information is privacy and reputation. reputation goes away if its true (digital copying is 100% accurate) and privacy goes out the window when you sell the data to your first customer.

              if you are a libertarian this law should feel wrong.

      2. Invalidate all IP and see what happens to the economy. You won’t like it. My product ideas, designs, writings, computer code, etc. are mine. I made them and I should be able to protect them. I agree the current system is broken, but throwing away all IP rights will not work. A lot of the wealth that has been deservedly earned in the US is a result of IP protections. You can call is censorship if you like, but you don’t have a right to steal my work.

        1. you cant own information.

          what rent did you pay to the ancestors of albert einstein for E=MC^2?

          how much did you pay that random guy on the street who told you the purpose of life is to serve others?

          monetizing information is not just problematic, its immoral. you CAN’T perfect it and ppl will not get their due.

          you think your hard work and sweat deserves financial compensation. i think learning to add 3digit numbers in the 3rd grade deserves a reward. i had to work for that info, even if i had to stand on the shoulders of previous giants (like you did in your work).

          pretending IP bloodsweattears entitles to rent is sheer asshattery.

          what you (and all of us) have learned from bloodsweattears is a drop in the bucket compared to info we have been freely given. talk about greed and ingratitude…

          rentseeking via censorship and restriction on persons outside your contract MUST take the cake.

    3. Go ahead. Defend this guy:

      Good luck.

      1. Nice straw-man. I didn’t say the system worked well as is, in fact I acknowledged the opposite. My only point is that IP IS property and important to the functioning of our economy.

    4. This isn’t a “we want free stuff” argument. This is a “The Constitution has a very specific guideline for the purpose of patents and these specific patents, software and business methods, do not adhere to that purpose and need to go.” argument.

      1. So tell me what the difference is between a copyright and a software patent in your interpretation of the Constitution?

        Should one be able to copyright software if one cannot patent it? What would be the practical difference between the two?

        This is an interesting thread because I believe in IP but agree with a lot of the previous posts that there is massive abuse in process patents.

        1. Should one be able to copyright software if one cannot patent it? What would be the practical difference between the two?

          You already can copyright software whether or not you patent it, and there is a vast difference. Copyright applies to a specific work — i.e., to your code. Patents apply to processes, i.e., things your code does; hence, they can apply to code other than your own (assuming you have any in the first place).

    5. You have an idea.

      I make a thing, with my own time and materials.

      You say my thing is an implementation of your idea.

      I stole nothing from you, yet you claim ownership of my property.

      IP is an oxymoron.

      1. Using my time and materials that I required to come up with the idea. Your argument is no better than the prog argument that we all own natural resources and therefore you can’t claim ownership of anything you make.

        1. you dont create information, you ‘discover’ what is already. and it has no scarcity.

          and for the purposes of IP law, has no copying costs.

          information is not uniquely bound to any real thing. it can be imprinted on ANY matter and stored in ‘any’ brain.

          1. So you want to “level” the intellectual playing field, and creative a collectivist brain output exchange? Smells kinda fishy Ann, rather pedestrian equivalency rhetoric, and a slippery slope down to the 99% Occupy Lamers and the “everyone is special” parades.

            I’m admittedly a little saddened that you’re putting everything behind the clich? modesty feign: that the artist didn’t create the work, it was already there inside the marble. By your reasoning, there’s no need to pay the artist, he just discovered what is already. Ann, have you seen the Hunt for the Red October?
            Hopefully you’re recognizing the sound of my torpedo obliterating your premise.

            However, this article is just silly. Slide to lock isn’t an intangible, it’s a mechanism designed for unlocking a touch screen phone. Exactly like the zipper mechanism that’s designed to unlock my pants.

    6. I have no problem with software patents. Not in the abstract, anyway. The problem is that patents are being awarded for things that are obvious and trivial. Unfortunately, the PTO’s standard seems to be is that anything not previously patented is patentable. I would estimate that less than 20 software patents per year should be granted.

      The larger problem I have with patents is that they are completely unreadable. I have read many, and usually I have no idea what it is that they’re describing.

      The other larger problem that I have with patents is I can’t avoid infringing something I don’t know exists. Even if I could understand them, there’s no way for me to realistically know what to look for. The piece of electronics that I manufacture probably infringes dozens of patents (that probably should never have been granted).

      This has nothing to do with liking free shit. It’s just not a workable system. Step 1 to fixing it is to stop issuing bullshit patents.

      1. The larger problem I have with patents is that they are completely unreadable. I have read many, and usually I have no idea what it is that they’re describing.

        Whereas heretofore Dumbass, Esq. herein doth inscribe the following work hereafter known as, “the work” in such manner as to induce violent headaches in genuine human beings as opposed to the subspecies that is lawyers.

  9. I can see a case for copyright when it comes to software, but even then it’s not like most people make their source code available.

    1. And if you do make it available to certain parties you can make them sign a non-disclosure agreement first.

    2. I sympathize with pharmaceutical patents too, but only because of the artificially astronomical development costs imposed by the FDA. Nobody is going to spend $200 mil developing new and innovative medications without some sort of monopoly protection to recoup those costs.

      SLD: The FDA is bullshit etc etc.

      1. I can see your point. But I think getting rid of pharma patents would catalyze the end of the FDA, so I’m still for it, even given the FDA’s existence.

  10. My field of research is currently kneecapped by a mercenary group that takes out a patent after virtually every paper they write. The situation sounds similar. “Method for this” and “method for that” when they are just throwing each week of a grad school scientific computing syllabus at the same one problem. And this is lifesaving stuff, that just sits on the back burner because of this crap.

  11. The patent does not specify any actual software code, just the concept the code is executing.

    No patent covers software.

    Patents cover systems, devices, methods, and other such things.

    Methods are frequently embodied as software running on a computer.


    The patents that Bailey is bitching about claim methods that were never “novel and not obvious”. This problem was caused by a major fuck-up at the PTO which let through a whole bunch of shit that should not have been patented.

  12. if you need a job try this site JOBS61 (dot)??m. Dan does it at home and makes $29.95 hourly just sitting and typing stuff all day…No experience needed too

  13. This has been allowed for over 20 years. Don’t expect a reversal. There is a ton of law, cases and settlements.

    It was a bad idea from the beginning. There are many examples of bad law. This is one of them.

  14. My Uncle Jason got Hyundai Accent Hatchback by working part-time from a computer… read the full info here

  15. upto I saw the check for $9707, I be certain that…my… mom in-law woz like actualy taking home money part time at their computer.. there sisters roommate has been doing this 4 only six months and just repayed the morgage on there home and got a new Alfa Romeo. Find Out More http://WWW.CASH46.COM

  16. I’m gonna patent a sex move and name it after myself
    Of course, the USPTO will grant me the patent

  17. Your article was very well written, and the points are all good and obvious. The challenge for a libertarian comes from an example I know well. I was involved in the early days of bringing video to the internet and the computer.

    Little companies cannot protect themselves against bigger companies even if they have created novel solutions and even if they are successful solutions. It can take thousands of tries to find the secret sauce that seems absolutely obvious in retrospect but was the last thing you could think of, and was something that no one else had ever thought of.

    One of my friends split off into a subfield and started a company and had 40 patents. They were in the business and trying to do deals 20 years ago with Apple and Microsoft. But each had produced similar products that were not knock-offs, but were clearly building on key ideas. Patents are imperfect, and in this case my friend was winning some patent arguments. Microsoft decided they had deeper pockets and was able to get the government to do something that had never been done, which is to have an entire portfolio of patents to be reconsidered. They got the patent office to reset the clock after millions of dollars and years of investment. Obviously there was no recovery.

    So be careful about considering who is protected and who is harmed in this process.

    Removing patent protection may help the wealthy more than the innovators. consolidation of innovation may not yield more innovation.

  18. The tech industry tends to be very big and supportive of open source. All of this crap is created by deluded systems. The nuclear bomb analogy fits perfectly. There’s no need for them in the absence of patent laws. (They are self confirming.)

  19. Look what I found at the bottom of this web page:

    ?2012 Reason Foundation

    One assumes the attorneys at Reason would defend that copyright. I would also imagine that if I were to copy the entire contents of this website verbatim and sell advertising on it I would be sued by Reason. These articles contending intellectual property (patents and copyrights) should not be protected are absurd.

    Most of the people arguing for this never came up with an idea of value that took thousands of hours of hard work to develop. If they did they might have a different view.

  20. Therefore we should completely invalidate a valid form of property ownership because we like free shit.” You people sound like a bunch of fucking progs.

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