Thursday, September 11, 2014

Updated: A landmark decision on patents: Alice vs CLS Bank

The Electronic Frontier Foundation has done a great job of covering Alice vs CLS Bank, a case that made it to the Supreme Court through years of litigation to finally give us a landmark ruling. EFF sums it up nicely here:

Alice Corp.'s patent claimed a form of escrowing that was well known. Called an “intermediated settlement,” it allowed a third party to act as an intermediary by creating “shadow accounts” for parties, and only allowing transactions to go through if the “shadow account” showed the party had enough money. Oh—and it was done with a computer.

The plaintiff was seeking patent protection for putting a practice that has been well known for many years on a computer. Intermediate settlements are performed with math, you know, addition, subtraction, division and multiplication and a little algebra. This is the kind of stuff you can do in your head and on paper. But Alice Corp. would have loved to have patent protection for putting that process on a computer.

The Supreme Court has ruled, finally, that you cannot take an abstract idea, implement it on a computer and then expect to get a patent for your...invention. The EFF has honored this ruling by starting a Stupid Patent of the Month series to show how our tax dollars are being put to use. Their first example is that of a patent for programming the functions of a secretary into a computer.

The pro-patent apologists are exasperated as they try to explain to us and the courts that patents should be easier to get. Why? To protect small businesses so that when they invent something novel and new, anything at all, they should be able to get protection for it. The problem is that doing so creates a tragedy of the anti-commons. There are so many patents now, that it's truly a guessing game to know if you're infringing on someone's patent when you run your business.

The purpose of a patent is to protect something truly novel. But the patent office, starved of funding by a conservative Congress, allows the patent office to get its funding from patent application fees. This is exactly the wrong incentive to give to the patent office. The patent office now issues hundreds of thousands of patents each year, each with 17-20 years of protection. The approval rate is about 50%, a rate that is still far too high. Patents should be very, very hard to get, but until Congress figures out the incentive problem it created, we're going to see a patent office "open for business".

Thankfully, Alice vs CLS Bank will help to clear out hundreds of thousands of computer implemented inventions, also known as software patents, that hinder the true innovators, the true job creators. Unfortunately, for the small businesses approached by a patent troll, those patents that are disqualified by the Alice vs CLS Bank ruling will not be found until litigation ensues. Maybe the patent office will follow this new guidance from the Supreme Court to stem the flow of patents from their desks. From the looks of this, the patent office seems to think that the new ruling has very limited effect on their work.

It may take a few more rulings to finally cure the patent office of its tendency to approve patents for math.

Well, there is a sea change in the courts and the lower courts are starting to rule on subject matter relating to patents. Just this year alone, there have been 11 rulings on patent subject matter, which, apparently is a record up to this point. Last year there were 13 such rulings. If the patent office isn't going to listen to the Supreme Court, then the lower courts will have to do the heavy lifting until the patent office wakes up.

What I find so interesting too, is that companies like Microsoft, Intellectual Ventures and Acacia are all making tons of money from stiffing small businesses with patent licenses for patents that are no more than doing something we can do in our head or with pen and paper, with software on a computer.

Microsoft is making $2 billion a year on Android device licensing alone - all of it on software or idea patents. Parasitic business models might not have been what the framers had in mind when they wrote the Constitution, but that is what we're seeing. Properly applied, CLS vs Alice could be used to completely destroy those patents and force Microsoft to do something else. You know, like make a better product than Android. I can see Microsoft in the future as a patent holding company, but with this ruling, that plan will be nixed.

This is not just good for consumers, it is also great for free software in general. Defendants in patent cases are becoming bolder, and more effective at dealing with patent trolls like Microsoft and Intellectual Ventures. If you use Linux, or any other free software, or if you're a developer, your load just got a lot lighter.

There is one other point that I think is worth mentioning. As far as I know, none of the cases so far, have ever pointed out that running software on a computer does not make a new machine. The computer has a central processing unit, we know it as the CPU. The CPU has a well-defined instruction set used to interpret code. The instruction set tells the CPU how to interpret code that is running on the computer.

Running code on a computer does not create a new machine because it does not change the processor. The code does not tell the machine (CPU) how to do something it does not already know how to do: interpreting code and executing that code. This is the ultimate argument against software patents and it should be deployed as soon as possible to test it. I think that this argument goes beyond doing something on a computer, it says that the computer is not a new machine with new software.

Remember, patents are for inventions, you know, stuff you make and sell. They are not for "ideas", like putting money in escrow and keeping track of it using a computer. This is what the fight against software patents is all about.
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