Intellectual Property Directions

Dennis Crouch, a associate professor of law at University of Missouri has compiled a table of the time to first office action for a variety of technology centers. That is, how long does it take the patent office to get back to you with their (no doubt obviousness-based) rejection of most or all of your claims.

For the technology centers he lists the time ranges from a low of 1.7 years for Manufacturing Devices to a high of 3.7 yearsfor a couple of un-important technologies - fuel cells, batteries, and solar. Now remember, this is the time between filing and your first office action. It can easily take another year before your patent issues and during all that time you have been unable to enforce your patent rights. Heck, you didn’t even know if you were going to have any patent rights.

Mind you, if you filed a provisional application first, then your patent application has been public after 0.5 years from the filing date of the regular application, so you fuel cell companies out there have had your proprietary information hanging around the street, so to speak, for a little over 3 years and counting.

I always tell my clients that the patent system is supposed to be a deal between the inventor and society. You get limited time control over your invention in exchange for teaching the rest of us all those juicy details. This bargain breaks down, I think, when your teaching is published 3 or 4 years before you know that you have control over your invention, if you ever do get that control. During that time your competitors have had the chance to build on your proprietary information to your disadvantage.

It makes one wonder if it’s still worthwhile applying for a patent in a fast moving technology area.

I don’t usually comment on licenses (I care more about technology issues than business deals) and I’m even less interested in the software licenses in shrink-wrapped retail software. But last week I came across a software license that is so egregious in its terms, that so exceeds any logical relationship with its customers, that it almost begs you to violate its terms. Mind you, I’m not advocating ripping anyone off - in fact I’m suggesting that the software company is doing the ripping off and should mend its ways.

I understand and agree with the rational for licensing, rather than selling, software. Licenses are easier to enforce than copyrights, and software is just so easy to copy. And the analogy of “only one person can read a book at any time” certainly applies to software- only one person should be able to use the software at any time, where “at any time” fairly means a work session, not a computer clock cycle! Yet, the one of the first paragraphs of Acronis’s True Image Home 2009’s license says:

You may reassign a Software License if you retire the licensed PC due to permanent PC failure. If you reassign a Software License, the PC to which you reassign the license becomes the new licensed PC for that particular Software License.

 What !!! My computer has to die before I can move this software to another machine!! If I pass the computer to my daughter I can’t move the software to my new machine!! No way.

Another section of the license says:

The Software is a trade secret of LICENSOR and is proprietary to LICENSOR. LICENSEE shall maintain Software in confidence and prevent disclosure of Software using at least the same degree of care it uses for its own similar proprietary information, but in no event less than a reasonable degree of care. [...] The obligations under this paragraph shall survive any termination of the Agreement.

Gee, I’m sure a lot of home PC owners maintain their own “similar proprietary information”. And this software is a trade secret? If it was, it ain’t no longer. You can’t spread your trade secrets around to anyone with $40 in their pocket and still call them trade secrets.

And when it comes to kicking you when you’re down…

This Agreement and the license may be terminated without fee reduction [...] on notice by either party hereto if the other party ceases to do business in the normal course, becomes insolvent, or becomes subject to any bankruptcy, insolvency, or equivalent proceedings. Upon termination for any reason, LICENSEE shall immediately return Software and all copies to LICENSOR and delete all Software and all copies from the Hardware.

which says that if you go bankrupt they can terminate your license and demand the software back!

Needless to say the license also includes the more or less standard clause that says you’re out of luck if the software is so buggy as to be unusable, etc etc.

Finally, to show how valuable they think their $40 software is, the serial code that you have to enter to load the software is made up of 8 blocks of 8 alphanumerics each - more than enough to give everyone in the universe their unique number. Those hackers aren’t going to bust our code is the thinking, I guess.

Thought I’d pass along a link to eWeek contributor Jim Rapoza’s commentary on the “in re Bilski” ruling. While Jim conflates trolls, obviousness, and the real topic of Bilski (business methods/software), it’s still worth a quick read.

With last week’s announcement of the CAFC’s decision in in re Belski you might asked an Emily Litella question, “Who is Ray Bilski and why is the court deciding what’s in him?”. Emily, upon learning that it’s a court case “in re” Bilski would have said “Never mind”, but for us it’s worth thinking about.

Bilski was at the wrong place at the wrong time with the wrong “invention”. On April 10, 1997 (yes, 11.5 years ago) Bernard Bilski and Rand Warsaw filed a patent application for method of hedging risk in commodities trading - that is, a business method. Claim 1 read:

 A method for managing the consumption risk costs of a commodity sold by a commodity provider at a fixed price comprising the steps of:

(a) initiating a series of transactions between said commodity provider and consumers of said commodity wherein said consumers purchase said commodity at a fixed rate based upon historical averages, said fixed rate corresponding to a risk position of said consumer;

(b) identifying market participants for said commodity having a counter-risk position to said consumers; and

(c) initiating a series of transactions between said commodity provider and said market participants at a second fixed rate such that said series of market participant transactions balances the risk position of said series of consumer transactions

The PTO rejected this application as not being directed to patentable subject matter.  The CAFC concurred with this decision. So, after previously opening the door to a flood of business method patents with the so called State Street decision, the CAFC has tried to jam the door at least partially closed.

I’ve never been a fan of “methods” claims in general and of business methods claims in particular. Bilski, it seems, is the poster child for everything wrong with these patent applications.

First, the very basis of the US patent system is the Constitutional phrase: “Congress shall have power … to promote the progress of science and useful arts…” Frankly, I doubt the founders would consider hedging risk in commodity trading part of science and the useful arts.

Second, the patent law drafted on the basis of this power lists the patentable invention subject matter to be a ”useful process, machine, manufacture, or composition of matter.” Now I may be old fashioned, but I think a patentable process has to be more than just an activity that can be described by a series of steps; everything we do can be broken down into a series of steps - A method of blogging comprising the steps of a) logging on to a blog site, b) placing fingers on a computer keyboard, c) initiating a series of keystrokes wherein the keystrokes form known words, wherein further the words are sequenced and punctuated in accordance to the know rules of a pre-selected language. You get the idea!

So what is the test of process patentability? According to the Bilski decision, there is a two-part “machine-or-transformation test” for eligibility of process claims. First, eligibility may be demonstrated if a claim “is tied to a particular machine or apparatus.” Second, and alternatively, eligibility may be shown if a claim “transforms a particular article into a different state or thing.” Also note that the “tie” to a machine or apparatus must be a meaningful limitation in the claim.

I would have preferred to see methods of performing business/financial operations per se be declared unpatentable as not being part of science or the “useful arts”, as was urged by some.

The bottom line for most of my clients is “very little impact”, since I focus on hardware/device IP, but if you are in the financial or software industries, a consultation with your IP attorney may be in order.