The Current State of Software Applications and Patents

The Current State of Software Applications and
This article originally appeared in The Legal Intelligencer on September 4, 2013
Twenty-four years ago, I wrote my first software patent application, "Debugging
Parallel Programs by Serialization." A little more than two years after filing the
application, the patent issued with claims that lacked mention of any structural
component of a computer. In fact, the closest the first claim came to a tangible result
was the step of "displaying information." The software patent attracted little
attention during its lifespan and expired unnoticed.
My, how things have changed. Today, everything about software patents is different
than when I filed that application in 1989. In fact, the issues surrounding software
patents have significantly fueled allegations that the U.S. patent system is "broken."
Why has the world of software patents become such a huge mess? The problem is
First, consider how much time it currently takes for a software patent application to
mature into a granted patent. While the Official Gazette of the U.S. Patent and
Trademark Office reports (as of June 30) that examination of software patent
applications are currently at a 17-month backlog, that is only part of the story. After
receiving two rejections in a patent application, an attorney is normally required to
file a request for continued examination (RCE) in order for the patent office to
further examine the application. Many examiners examining software patent
applications, however, adhere to internal patent office guidelines that permit those
examiners to process no more than one RCE per month.
Thus, for example, if an attorney files an RCE and that RCE becomes the 24th RCE in
an examiner's backlog, then the attorney may need to wait 24 months for that RCE to
be processed. Furthermore, the office's Patent Trial and Appeal Board (PTAB) reports
that they are currently processing appeals that were filed in 2010 for software patent
applications. Thus, the time period from when an attorney files an RCE in a software
patent application until the PTAB issues a decision can exceed five years. Add to that
number the one-and-a-half-year delay until examination begins and one year in
prosecution for filing two responses, and the time period from filing the patent
application to when the patent grants can easily be at least eight years. Given the
short life span of commercial software products, eight years is an incredibly long time
to wait for a patent to issue.
Another issue is the patent office's allowance rates for software patents. Patent office
examiners are divided into art units, and each art unit examines applications relating
to respectively different areas of technology. In January of last year,
issued a study in which it calculated the allowance rate in art units that examine
certain types of software patent applications, namely patent applications relating to
the subject matter of "data processing: financial, business practice, management, or
cost/price determination." Allowance rate was obtained by dividing the number of
cases allowed by the total of number of cases allowed plus the number of cases
Some of the results of the study were startling. While the average allowance rate for
all applications (i.e., across all areas of technology) filed in the patent office typically
hovers around 50 percent, the allowance rate for two art units examining the above
software patent applications was 6.8 percent and 4.3 percent, respectively. Thus, the
allowance rates of patent applications in those art units are significantly lower than
the patent office average. Because these numbers have been so drastic, some authors
have actually suggested that patent applications should be written with specifically
chosen keywords so that patent office software that scans and assigns patent
applications to appropriate art units will not assign applications to art units with low
allowance rates.
Part of the reason for the backlog relating to software patents and the lower
allowance rates may be attributed to the second level of review that business
method/software patent applications receive. In particular, applications in those
technology areas must be reviewed by two examiners before applications can be
allowed. Several studies have suggested the additional time that results from two
levels of review contributes to the delays associated with patent grants.
To its credit, the patent office is engaged in significant efforts to try to address the
problems outlined above. For example, total patent application backlog across the
entire patent office has dropped approximately 20 percent over the past four years.
Also, the patent office is currently engaged in a significant study (in which it has
solicited input from the public) regarding problems with the RCE system. The office is
also involved in many efforts to achieve further funding in order to increase the total
number of employees in the examining corps.
The delays in the patent office in the procurement of software patents is only part of
the problem. The other side of the coin relates to all of the frivolous litigation that
has occurred at the hands of some patent software owners. Currently, many
companies are threatened with lawsuits over software patents that they are accused
of having infringed. Such threats are often accompanied by "settlement offers," which
include an offer to license a patent at a cost of, for example, $30,000. Given that the
cost of defense in a patent lawsuit could conceivably exceed $1 million, many
companies simply pay the demanded fees.
The companies making these demands have often been referred to in the literature as
"trolls," although today the term "nonpracticing entity" is used more frequently. A few
of these companies are legitimate companies that have developed software and seek
to protect their investment. Unfortunately, many of these companies are asserting
overly broad patents with the hopes of collecting licensing fees from accused
companies that would rather pay the licensing fee than litigate.
Part of the reason why some of these patents are overly broad is because of confusing
case law that does not clearly articulate patentability requirements of software-based
technology. The most recent high-profile case dealing with this issue, CLS Bank v.
Alice, 2011-1301 (Fed. Cir. May 10, 2013), received huge amounts of criticism from
the intellectual property bar when a 10-member en banc panel of the U.S. Court of
Appeals for the Federal Circuit issued seven different decisions. While the majority
stated, "It is difficult to conclude that the computer limitations here do not play a
significant part in the performance of the invention," what is odd to me is the lack of
claim limitations that were quoted in the majority opinion. In other words, the
majority opinion held that the claims had patentable subject matter. Yet, there was
almost no discussion of the actual language in the claims that led to the majority's
Today, when most intellectual property attorneys write software patent applications,
those attorneys know to simply include the word "microprocessor" in the claims.
Typically, software claims that do not include the word "microprocessor" are currently
rejected as being nonstatutory, while claims that do include the word
"microprocessor" rarely are rejected as being nonstatutory. Most intellectual property
attorneys will agree that the case law relating to the patentability of software is
exceptionally "muddy" and the courts have not yet articulated a bright-line test.
With all the problems that currently exist in the world of software patents, public
opinion has reached such a fever pitch that the White House has recently become
involved. On June 4, the White House issued five executive actions with the goal of
preventing "frivolous litigation" and ensuring "the highest quality patents." Legislative
recommendations include creating court discretion for awarding attorney fees when
court filings are deemed to be frivolous and expanding the patent office's ability to
conduct post-grant review.
White House executive actions include the patent office initiating a review-making
process to require patent applicants and owners to be more transparent in their
ownership information. Patent office examiners will also now be trained to require
greater claim clarity in patent applications. (See my article from the July 3 issue
of The Legal, "The Need to Provide Understandable Patent Claims.")
On August 23, the U.S. Government Accountability Office issued a report regarding
frivolous litigation based on software patents. The report's sole recommendation was
for the patent office to avoid issuing patents with overly broad claims by monitoring
litigation trends. The report issued to mixed reviews. While it is important for patents
to not have overly broad claims, other deterrents are also needed to discourage the
filing of frivolous lawsuits.
Part of the problem is that much of the public does not have a good and detailed
understanding of the significant problems that plague the patent system. For
example, my experience has been that patent applicants that are new to the patent
system (for example, startups), typically have no understanding of the patent office's
backlog and low allowance rates for many software patents. Furthermore, and again
referring to startups, many are shocked and overwhelmed when threatened with
litigation over a frivolous and overly broad software patent. Part of the solution is to
make the public more aware of the issues that are causing the current problems. It is
hoped that by creating public awareness, lawmakers will be pressured further to
properly address these complex issues.
— by Lawrence Ashery