Here’s Why Software Patents Are in Peril After the Intellectual Ventures Ruling

The end may be in sight for software patents—which have long been highly controversial in the tech industry—in the wake of a remarkable appeals court ruling that described such patents as a “deadweight loss on the nation’s economy” and a threat to the First Amendment’s free speech protections.

The ruling, issued on Friday by the U.S. Court of Appeals for the Federal Circuit, found that three patents asserted against anti-virus companies Symantec (SYMC) and Trend Micro were invalid because they did not describe a patentable invention. The patents were owned by Intellectual Ventures, which has a notorious reputation in the tech world as a so-called “patent troll,” a phrase that describes firms that buy up old patents and wage lawsuits in order to demand payments from productive companies.

The most important part of the decision, which has created a stir among the patent bar, is a concurrence by Circuit Judge Haldane Mayer. In striking down a key claim from U.S. Patent 5987610, which claims a monopoly on using anti-virus tools within a phone network, Mayer says it is time to acknowledge that a famous Supreme Court 2014 decision known as “Alice” basically ended software patents altogether.

The Alice case involved a company that claimed a monopoly on the age-old idea of escrow because it had recreated the process on the Internet. The Supreme Court, however, said such claims were merely abstract ideas that are ineligible for protection and that the only way to get a patent is if there is some sort technological improvement for the computer itself.

In his ruling, Judge Mayer says the Alice decision should be taken to mean that software itself is not patentable.

“Software lies in the antechamber of patentable invention. Because generically-implemented software is an “idea” insufficiently linked to any defining physical structure other than a standard computer, it is a precursor to technology rather than technology itself,” he writes.

Software Patents as a Threat to Free Speech

Friday’s ruling is also significant because Judge Mayer eschews the insider baseball language that typically dominates patent law, and addresses patents in the broader context of technology and government monopolies.

Pointing out that intellectual property monopolies can limit free speech, Mayer notes that copyright law has built-in First Amendment protections such as “fair use” and that patent law must include similar safeguards. He suggests that the safeguard comes in the form of a part of the Patent Act, known as “Section 101,” which says some things—including abstract ideas—simply can’t be patented in the first place.

Citing briefs from the American Civil Liberties Union and the Electronic Frontier Foundation, Meyer writes:

“As the most participatory form of mass speech yet developed, the Internet deserves the highest protection from governmental intrusion.” […] A robust application of section 101 at the outset of litigation will ensure that the essential channels of online communication remain “free to all men and reserved exclusively to none.” Most of the First Amendment concerns associated with patent protection could be avoided if this court were willing to acknowledge that Alice sounded the death knell for software patents.

He adds that, because software is basically a form of language, its intellectual property protection should be limited to copyright—which covers things like musics and books—rather than patents.

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In addition to the discussion on Alice and free speech, the decision also offers a frank discussion of the impact of patents on the tech industry, and the success of patent trolls in exploiting them.

Quoting a recent Federal Circuit ruling in a long-running case between Google (GOOG) and Oracle (ORCL), Mayer writes that the “complex and expensive patent system is a terrible fit for the fast moving software industry,” adding that “under our current regime, those who scamper to the PTO early, often equipped with little more than vague notions about using computers to automate well-known business and social practices, can reap hefty financial dividends” at the expense of companies who actually make products.

All of this is likely to make those who invest in patent trolling ventures—more politely known as “non-practicing entities”—uneasy. While companies like Intellectual Ventures have raised billion dollar funds devoted to exploiting patents, recent Supreme Court rulings and changes to Patent Office producers have made patents harder to enforce, and patent trolling less lucrative. The end of software patents would only add to this.

Friday’s ruling does not, however, mean the immediate end of software patents because Mayer’s ruling came as a concurrence in a split 2-1 ruling. But it is consistent with a larger skepticism on the part of courts towards software patents, and could lead more judges to reject them outright.

The Supreme Court, meanwhile, has so far taken up fewer patent cases this term after handing down a series of major rulings in the field in recent years. The top court, however, may take up a closely-watched case involving venue-shopping and the controversial role of East Texas in offering a friendly forum for patent plaintiffs.

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