The idea of patenting software has been around for a long time. Some countries simply don’t allow it. They view software as something non-tangible and therefore not eligible for patent protection. For many years, the U.S. was considered the easiest place to obtain a software patent. But the complexities of recent court decisions and the limitations on software patents have expanded so that it’s reasonable at this point to ask if software patents are still possible in the U.S.
The discussion below analyzes the current state of software patents in the U.S.
The Alice Decision
In 2014, the United States Supreme Court issued a seminal decision setting forth guidelines on how to ascertain patent eligibility. In Alice Corp. v. CLS Bank Int’l, 134 S.Ct. 2347 (2014), the court instructed that one should first determine if the patent claims are directed to one of the three unpatentable categories: laws of nature, natural phenomena, and abstract ideas. If so, then the second step of the analysis is to determine it the elements of each patent claim, both individually and as an ordered combination, transform the nature of the patent claim into a patent-eligible application. This second step is a search for what the court calls an “inventive concept” sufficient to ensure that the patent in practice amounts to significantly more than a patent upon the ineligible concept itself.
The Alice decision is the guiding standard for assessing the patentability of software or business methods, both of which are viewed by the courts as abstract ideas. Since abstract ideas alone are not patentable, the key test in assessing the patentability of software is determining whether the technology meets the second step of the Alice analysis: “inventive concept.” The Supreme Court declared that the inventive concept requires something more than simply stating the abstract idea while adding the words “apply it” or “apply it with a computer.” Not surprisingly, in the three years since the Alice decision the courts have rejected or invalidated nearly 70% of all software and business methods patents brought up for review. The challenge for most patent owners is now convincing the courts or the United States Patent Office that there is something more or something especially inventive about the software. The Alice decision is widely seen as a repudiation of many of the business method and vague software patents that had previously been allowed by the United States Patent Office.
Complying with DDR Holdings
At the end of that same year, the United States Court of Appeals for The Federal Circuit issued one of the few decisions post-Alice that upheld a software patent. In DDR Holdings, LLC v. Hotels.com, L.P., 773 F.3d 1245 (Fed. Cir. 2014), the Federal Circuit ruled a patent valid that was directed to generating a composite web page that combined visual elements of the host website with content from a third party vendor website. The Federal Circuit’s analysis in DDR Holdings is instructive in how the courts may determine a software patent to be valid. In the DDR Holdings decision, the court acknowledged that mathematical algorithms, including those executed on a generic computer, are abstract ideas. The court pointed out that a common thread in cases where the software patent was invalidated was that the software patent claims were recited too broadly and generically to be considered sufficiently specific and meaningful applications of the underlying abstract ideas. In deciding to uphold the patent at issue, the court noted that the software proposed a specific solution rooted in a particular technology rather than reciting the performance of some business practice known from the pre-Internet age along with the requirement to perform it on the Internet. Finally, the court noted that the patent claims included additional features to ensure that the claims were not designed to monopolize an abstract idea.
In short, although the United States Supreme Court’s Alice decision significantly narrowed the range of potential software patents, it did not entirely foreclose the possibility of obtaining a software patent in all circumstances. The Federal Circuit’s DDR Holdings decision set forth acceptable parameters for a properly drafted software patent application:
- The patent claims must be narrow and specifically directed to a meaningful application.
- The patent must address a specific problem in a particular technology.
- There must be additional features in the claims to avoid presenting a general claim to an abstract concept.
Example of a Successful Software Patent
Following the 2014 ground-breaking Alice decision, the DDR Holdings decision, and other subsequent decisions based on this new precedent, patents relating to software and software applications have still been issued by the United States Patent Office. It is instructive to examine an example of such an issued patent.
On September 16, 2016, the Patent Office issued a patent titled “Gaming System Having Wagering Features Funded by Extra-Casino Activities” to Bally Gaming, Inc. (U.S. Pat. No. 9,443,389 (the “ ‘389 Patent.”)) This patent was carefully designed to adhere to the precedent of the Alice and DDR Holdings decisions. Figure 2 of the ‘389 Patent shows a computer I/O system with a computer CPU, system memory, and general input/output mechanisms typical for software applications. Figure 3 shows general parameters for a software solution involving online activities and internal and external computer networks. The essence of the ‘389 Patent is that the casino uses a separate gambling fund sourced from activities outside of the casino to apply to the gambler’s in-casino account, mostly sourced from online gaming activities. Under this patent disclosure, the gambler can participate in online gaming and have the credits from this activity transfer to his in-casino activity. In this way, the gambler can maintain enthusiasm toward bonus games and jackpots and still enjoy mobility of applications.
The presentation of the claims in the ‘389 Patent exemplify the standards of the Alice and DDR Holdings decisions. Claim 1 does not recite software per se. Instead, the claim is directed to a “gaming system” comprising “a regulated gaming machine [ ] dedicated to playing a casino wagering game, … including a cabinet … and one or more electronic input devices coupled to the cabinet.” The claim then recites “game-logic circuitry” that sets forth the parameters that are all accomplished through software application. By careful drafting, the patent practitioner accomplished a software-type claim by emphasizing a physical device (the gaming machine), with narrow claims addressing a specific need (application of extra-casino activity to in-casino game enthusiasm) and additional features that preclude the general abstract concept (displaying gambling outcomes, applying gambling credits, activating game features, etc.). The patent was allowed while still claiming the broad concept of applying extra-casino rewards obtained through online activity to an in-casino gaming feature.
Although the United States Supreme Court’s Alice decision made it significantly more difficult to obtain and to enforce broadly written software patent claims, there is guidance from subsequent case law that sets forth understandable parameters for drafting software-type claims of an appropriate scope. It is reasonable to believe that software patents are attainable if the invention is directed to inventive concepts that are narrowly tailored and specific to solving a problem within a certain field of technology.