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Category: Law


CLS v. Alice Oral Argument

Reading the transcript of the oral argument at the Supreme Court in this case is like listening to bunch of stoned college freshman debating Jonathan Livingston Seagull.  Not one person involved in the discussion would pass a first semester law school class in patent law.  None of the people involved are patent attorneys, none of them have a solid technical background, none of them understand how a computer works, none of them of legally or factually competent to be patent attorneys.  Everyone of the people involved in this oral argument should have recused themselves as incompetent

Alice’s attorney failed for three reasons: 1) he is not a patent attorney, 2) he tried to make sense of the Supreme Court’s earlier decisions, which a full of logical contradictions, 3) he failed to define what an invention is and what an abstract idea is.  CLS’s attorney was unscrupulous and played fast and loose with the law and the facts as I will explain below.

Because the oral argument was so incoherent, I will just highlight the parts that I found outrageous, interesting, or nonsensical.

Abstract Idea:  Justice Breyer is using the technique of all charlatans and refusing to define what an abstract idea is.  He should be thrown off the court for this stunt.  The abstract idea exception to 35 USC 101 is illogical.  Any truly abstract idea would not meet the requirements of 35 USC 112 and that is where this issue should be dealt with.  But Justice Breyer is not interested in logic, he likes using an undefined phrase that he can manipulate to attack any patent.

Justice Breyer’s use of analogies is against the law.  An invention is defined by its claims and the claims must be taken as a whole (35 USC 101 and Conservation of matter and energy).  The reason Breyer uses analogies is because he is too stupid to be able to understand the actual invention and is incapable of reading a claim.

Here is an example of this

I mean, imagine King Tut sitting in front of the pyramid

10 where all his gold is stored, and he has the habit of

11 giving chits away.  Good for the gold, which is given at

12 the end of the day.  And he hires a man with an abacus,

13 and when the abacus keeping track sees that he’s given

14 away more gold than he is in storage, he says, stop.

15 You see?

16  Or my mother, who used to look at my

17 checkbook, when she saw that, in fact, I had written

18 more checks than I had in the account, she would grab

19 it.  Stop.  You see?

20  So what is it here that’s less abstract that

21 the computer says, stop?

 

Using analogies to inventions is completely useless.  The law requires the invention be evaluated on the patent, not on some absurd analogy.  I warned Alice about this.  Alice’s council should have refused to deal in hypotheticals and pointed to the law.  They also should have defined what an invention is and what an abstract idea is.  An invention is a human creation that has an objective result.  Here Alice’s invention is a specially programmed computer.  Those do not exist separate from man.  Therefore Alice’s invention is a human creation.  Alice’s invention has an objective result of affecting a transaction if all the conditions are satisfied and not affecting a transaction if any of the conditions are not satisfied.

 

Here is an excellent analogy to the absurdity of Justice Breyer’s statements that using a computer to implement the invention is irrelevant, by my good friend and patent attorney Peter Meza, “A new idea for a current mirror does not become patent eligible merely by tacking on a transistor to carry it out.”

 

Another idiotic statement by Breyer when Alice’s counsel suggests Breyer’s analogy is caricature.

 

JUSTICE BREYER:  Of course it’s a

20 caricature.  It’s a caricature designed to suggest that

21 there is an abstract idea here.  It’s called solvency.

There is an abstract idea in every invention.  That is like saying the LASER is abstract because it uses the ‘abstract idea’ of stimulated emission.  Breyer is an idiot.  He uses analogies because he is totally incompetent in the technology, so he has to bring up something he does understand.

 

Justice Sotomeyer seems to be creating a new exceptions to 35 USC 101

 

JUSTICE SOTOMAYOR:  I’m sorry.  But ­­ but

20 what it appears to be, it sounds like you’re trying to

21 revive the patenting of a function.  You used the word

22 “function” earlier, and that’s all I’m seeing in this

23 patent is the function of reconciling accounts, the

24 function of making sure they’re paid on time.  But in

25 what particular way, other than saying do it through a

1 computer, is this something new and not function?

 

Was there ever a rule against patenting a function.  Patent law allows, actually requires that well known complex functions not be described in detail.  Thus we do not claim the transistors, resistors, capacitors in a low pass circuit or a transceiver.  Claiming a low pass filter is claiming a function: claiming a transceiver is claiming a function.  These Justices are idiots.  The function of error correction code is to correct errors.  A patent on an error correction code is a patent on the function of correcting error in the transmission of data.  The claims do not recite I claim intermediated settlement (whatever that is – note this is not a standard term used in banking)

 

Justice Scalia seems to be slowly learning some patent law.  Here he recognizes that this case in not about novelty.

 

JUSTICE SCALIA:  Well, I’m not saying use a

5 computer is ­­ is much of a novelty.  I mean, that’s ­­

6 that goes to whether it’s novel or not.  If you just say

7 use a computer, you haven’t invented anything.  But if

8 you come up with a serious program that ­­ that does it,

9 then, you know, that may be novel.  But that’s a novelty

10 issue, isn’t it.

 

Note the claims never say “use a computer” but these people are too ignorant to read claims.

 

Justice Kennedy shows he knows nothing about patent law.  Alice’s attorney should have force him to analyze the claims.  He should have said to Kennedy and Breyer the invention is defined by the claims, if you wish to discuss this invention then you must look at the claims and tell me what it is you are referring to.

 

 JUSTICE KENNEDY:  Suppose I thought ­­ and,

9 again, it’s just a thought because I don’t have the

10 expertise ­­ that any computer group of people sitting

11 around a coffee shop in Silicon Valley could do this

12 over a weekend.  Suppose I thought that.

 

Here both Alice’s attorney and Justice Sotomeyer, who is suppose to be a copyright attorney, prove their ignorance of a concept any law student taking copyrights should know the answer to – my only caveat to this is perhaps this was a backhanded way of saying Alice never wrote any code.  While CLS makes this claim, I seriously doubt it is true.

 

 JUSTICE SOTOMAYOR:  Is your software

15 copyrighted?

16  MR. PHILLIPS:  No, I don’t believe so.

 

Of course the software is copyrighted.  This is the incompetent leading the incompetent.

 

Alice’s counsel attempts to force Justice Kagan to look at the claims, but she proves her ignorance of patent law by ignoring the claim limitations.

 

 MR. PHILLIPS:  I’m saying both actually.  I

15 mean, I’m making both of those arguments.  I ­­ I

16 believe that if you analyze the claims and you don’t

17 caricature them and you don’t strip them out of the

18 limitations that are embedded in there, this is not some

19 kind of an abstract concept.  This is not some kind ­­

20 it’s not an abstract idea.  It’s a vary ­­

21  JUSTICE KAGAN:  So putting the computer

22 stuff aside completely ­­

 

Here Alice’s attorney attempts to get back on track.

So my suggestion to you would be follow that

15 same advice, a liberal interpretation of 101 and not a

16 caricature of the claims, analyze the claims as written,

17 and therefore say that the solution is 102 and 103 and

18 use the administrative process.  If you ­­

 

This might be a hopeful sign.  Justice Scalia is pointing out that not all the Justices agree on this interpretation of an abstract idea.

 

JUSTICE SCALIA:  And four is not five

10 anyway, right?

11  MR. PHILLIPS:  That’s true.

12  JUSTICE SCALIA:  Four is not five.

 

Another hopeful sign by Justice Scalia.

 

JUSTICE SCALIA:  By the way, we ­­ we have

16 said that you can’t take an abstract idea and then say

17 use a computer to implement it.  But we haven’t said

18 that you can’t take an abstract idea and then say here

19 is how you use a computer to implement it ­­

 

Justice Kagan proves she can’t read a claim or a specification and has no intention of doing so.

 

JUSTICE KAGAN:  Well, how are you saying the

5 how?  Because I thought that your computers ­­ that your

6 patents really did just say do this on a computer, as

7 opposed to saying anything substantive about how to do

8 it on a computer.

 

Justice Kagan proves she is incapable of reading claims or the patent statute

 

 JUSTICE KAGAN:  No, but exactly.  I mean,

22 the claim would have said something along the lines of,

23 you know, there’s this process by which people order

24 products and we want to do it over the Internet, we want

25 to do it electronically, and we will use a computer to

1 do that, to essentially take the process of mail order

2 catalogues and make it electronic.

 

 

Mr. Phillips lies to himself and the court about his ability to write claims.  Mr. Phillips is not a patent attorney and I am sure has never written a claim in his life.  He does not have the technical background to write claims and does not have the legal knowledge to do so.

 

 MR. PHILLIPS:  I could certainly ­­ I think

4 I could write a claim ­­ a set of claims that I believe

5 would satisfy 101.  And ­­ and to the extent that

6 you’d ­­ that you’d think those are no different than

7 the ones I have here, then my argument is simply I think

8 I satisfy 101 with the claims we have before us,

 

Here is blatant lie by Mr. Perry.

On the abstract idea, Justice Ginsburg, you

8 asked Mr. Phillips what’s the difference between hedging

9 and this claim. There is no difference.  This is

10 hedging.  It is hedging against credit default rather

11 than price fluctuation, but it is simply hedging.

 

The definition of hedge is “Making an investment to reduce the risk of adverse price movements in an asset.”  Nowhere in Alice’s claims is there any investment to reduce the risk of adverse price movements.  Mr. Perry should be disbarred.

 

 

Another blatant lie by Mr. Perry

This claim has simply two steps.  It’s very

18 simple.  “First, debiting and crediting on a realtime

19 basis the relevant shadow records; and second, by

20 periodically affecting corresponding payment

21 instructions.”

 

The patents involved are USPNs 5970479, 6912510, 7149720, and 7725375.  All of the claims require more than Mr. Perry’s lie.  He also shows he does not understand the difference between the claims and the specification. He should be disbarred.

 

 

Justice Roberts is on the right track but proves he is incompetent to rule on patent cases.

 

CHIEF JUSTICE ROBERTS:  Well, that’s a

25 little more complicated.  He referred us to Joint , which is not a change in how

2 computers work.  But it is ­­ constitutes the

3 instructions about how to use the computer and where it

4 needs to be affected.  And just looking at it, it looks

5 pretty complicated.  There are a lot of arrows and

6 they ­­ you know, different things that go ­­

 

 

Mr. Perry in the quote below has attempted to redact the whole specification.  Since Mr. Perry is not a patent attorney perhaps he doesn’t understand the claims have to be supported by the specification.

 

It’s 4 columns.

6 It’s less than five pages in the printed appendix that

7 actually pertains to this invention.  And it contains no

8 disclosure whatever.

 

 

Mr. Perry attempts to define what would be patentable.

 

MR. PERRY:  Your Honor, there are many

1 examples.  One would be a technological solution to a

2 business problem.

Mr. Perry isn’t this what Alice’s invention is?  Of course you are too ignorant to read the claims, so you wouldn’t know.

 

Justice Kennedy proves his ignorance of patents.  All inventions can be described as a method or an apparatus.

JUSTICE KENNEDY:  Well, I ­­ I ­­ in my

16 language, I’ve called that mechanical rather than

17 process.  Can you give me an example of process?

 

This admission by CLS should win the argument for Alice in a rational world – but this is not a rational world.

  MR. PERRY:  At a point in time in the past,

12 I think both of those (word processor/spreadsheet) would have been technological

13 advances that were patentable.

14  JUSTICE SOTOMAYOR:  How?

MR. PERRY:  Today ­­ because they would have

16 provided a technological solution to a then unmet

17 problem.

 

 

Mr. Perry is putting words in other people’s mouth that are clearly not true and demonstrating his lack of understanding of physics and inventions.  Every invention in the history of the world is a combination of known things/elements/steps because you can’t create something from nothing.  This is because of conservation of matter and energy.  In addition, section 112 requires that you explain your invention in language people understand, which means it has to describe the invention in terms of things that are known.

 And here we know that these patents don’t

1 claim anything that was not conventional, well

2 understood, and routine.  We went through that in great

3 detail, and Alice has never disputed a word of it.

“It is

10 possible to do the business methods of maintaining

11 accounts, adjusting accounts, and providing an

12 instruction without a computer or other hardware.”

 

It is possible to separate the seeds in cotton without a cotton gin, SO WHAT.

 

More stupidity from Mr. Perry.

We know from Benson, the Court’s seminal

20 computer implementation case, that if you can do it by

21 head and hand, then the computer doesn’t add anything

22 inventive within the meaning of the 101 exception.  That

23 is the holding of Benson.  And the Court reiterated that

24 in Mayo.

 

You can type by hand, you can do spreadsheets by hand.  Mr. Perry has just contradicted himself, but appears to be too technically incompetent to understand this.  Most likely so are most of the Justices.

 

Mr. Perry proves he does understand how claims of a patent work.  This is the sort of thing a first year associate in patent law should know.  Once again we have the incompetent leading the incompetent.  Alice’s invention cannot be implemented without a computer because of the need nearly real time communications.

 CHIEF JUSTICE ROBERTS:  What if ­­ what if

9 you can do it without a computer, but it’s going to

10 take, you know, 20 people a hundred years?  In other

11 words, theoretically, you can replicate what the

12 computer does ­­

13  MR. PERRY:  Two answers.

14  CHIEF JUSTICE ROBERTS:  ­­ but it’s

15 impractical without looking to do it on the computer?

16  MR. PERRY:  Mr. Chief Justice, first, these

17 claims literally read, as Alice reads them, on a single

18 transaction between two parties, so it’s not 20 people

19 for a hundred years.  It’s one person sitting in a room,

20 so that’s not a problem.

21  Second, if what is being claimed is the

22 necessary speed or efficiency or data crunching

23 capabilities, if you will, of a computer, then it would

24 have to be claimed, and there’s nothing claimed here.

25 All that is claimed ­­ and my friend is going to stand

 

No Mr. Perry the claims would never say any such thing.  But you are too incompetent to know that.

 

Mr. Perry proves he does not understand the purpose of 35 USC 112.  He is not a patent attorney.  Factually and Legally is not competent to be one.

MR. PERRY:  If I can answer in two steps,

20 Justice Kagan.  First in the negative:  What the

21 applicant or patentee must do ­­ must not do is simply

22 describe the desired result.  That would take us back to

23 State Street.  That would simply say:  I claim a magic

24 box that buys high and sells low or vice versa, I

25 suppose, I claim a magic box for investing.  That’s what

these patents do.

 

Listening to Mr. Perry is like listening to a teenage bull session.  Note that he makes a completely contradictory statement without even blushing.

MR. PERRY:  No, Your Honor.  I think the ­­

20 actual description of the programming is a 112 problem.

21 I agree with that, A 112 issue.  That is the realm of

22 the written description requirement.  What is a 101

23 problem is it is on the applicant to do more than simply

24 describe the results, simply say:  A magic box that does

25 intermediate settlement.

 

Justice Ginsburg clearly thinks she is a queen who can manipulate reality.  She is clearly too incompetent to even understand the contradictions and absurdities of her (the courts) own writings on patents.

 Justice Ginsburg, this Court’s precedents

3 are clear.  They are unanimous.  They just need to be

4 applied.  To suggest that there is confusion that needs

5 to be addressed by retreating, beating a retreat from

6 recent unanimous decisions, would simply reward

7 intransigence, difficulty, refusal to adhere to what are

8 clear precedents

 

 

Mr Verrilli proves he does not have the slightest idea how a computer works.  Any software is part of computing technology.  Patents are not about improvements, they are about whether the invention is novel (non-obvious).  Many designs around inventions are not improvements.  Mr. Verrilli should be fired for this clear ignorance of the law, but as a political appointee competence is irrelevant.

 GENERAL VERRILLI:  Mr. Chief Justice, and

17 may it please the Court:

18  An abstract idea does not become

19 patent­eligible merely by tacking on an instruction to

20 use a computer to carry it out.  A computer makes a

21 difference under Section 101 when it imposes a

22 meaningful limit on the patent claim.  That occurs when

23 the claim is directed at improvement in computing

24 technology or an innovation that uses computing

25 technology to improve other technological functions.

1 That’s the test that we believe is most faithful to this

2 Court’s precedents in Bilski and Mayo.

 

Mr. Verrilli is incompetent to read the claims of a patent, so he ignores them.

 

At least Justice Ginsburg is beginning to understand that ‘abstract idea’ has never been defined.  Clearly Alice’s invention is a concrete invention, it solves a real problem using technology.  Clearly, the Obama Administration is doing the bidding of Wall Street and trying to ensure that there are no patents having anything to do with finance.  But neither the Obama Administration nor Wall Street can provide a rational explanation for this, so they resort to argument of “tradition.”

 JUSTICE GINSBURG:  I have a question about

3 how do you identify an abstract concept.  The ­­ a

4 natural phenomenon, a mathematical formula, those are

5 easy to identify, but there has been some confusion on

6 what qualifies as an abstract concept.

7  GENERAL VERRILLI:  We would define

8 abstract ­­ an abstract concept as a claim that is not

9 directed to a concrete innovation in technology,

10 science, or the industrial arts.  So it’s the ­­ it’s

11 abstract in the sense that it is not a concrete

12 innovation in the traditional realm of patent law.

 

Justice Sotomayor proves that she cannot understand basic logic.  If there are no business patents, then there are no patents.  All patents are directed to a business, people are not getting patents so they can hang a plaque on their wall.

 JUSTICE SOTOMAYOR:  If we were to say that

19 there are no business patents ­­

 

Patent law has now devolved to the state of politics.  As this oral argument proves, there is no logic, the statute is ignored, the claims are not analyzed, the only real question is who has the most political pull.  Patent law has become a cesspool in the same vein as anti-trust law, environmental law, and the Obama Administrations belief that they can change statutory law by Executive Orders.

 

 
Adam Carolla and the Podcast Patents: The Real Story

Adam Carolla is being sued by Personal Audio LLC and has created a FundAnything (crowdfunding site) campaign to raise money for his legal defense.  He is billing this dispute as a patent that will kill off podcasting.  This is the sort hyperbole people who don’t want to pay inventors engage in.  Note Mr. Carolla wants to be paid for his intellectual property.  Since Mr. Carolla is making the standard arguments against inventors who attempt to enforce their property rights, I will examine some of the arguments below.

1.  The inventor will not receive any of the profit from this lawsuit, only a shell company, whose only purpose is to sue people.

One of the inventors on the patent is a serial entrepreneur and is an owner of Personal Audio LLC who is suing Adam Carolla.  James Logan founded MicroTouch Systems in the 80s and served on the on the Board of Directors of Andover.net, the company that acquired Slashdot back in 1999.  He founded, Personal Audio, in 1996.  The original company was Personal Audio Inc. and the patents are now owned by Personal Audio, LLC.  Personal Audio invested $1.6 million developing this technology.  As Mr. Logan points out, when inventors are paid for their inventions it reduces the risk of investing in new technologies.  This increases the willingness of investors to put money into inventions, which results in more advances in technology.  In addition, Mr. Logan explained that he and the company want to see podcasting thrive, because that will maximize their profit.  Killing off podcasting is not the goal of or in the interest of Personal Audio.  Mr. Carolla statements to the contrary are just nonsense.

 

Conclusion: Adam Carolla is spewing BS.

 

 

2.  The inventor never made anything.

As the inventor, James Logan, points out Tesla never made anything either.  Most of Edison’s inventions were sold to companies and he produced nothing, the same can be said of Bell and many of the great inventors of the US.  Mr. Logan points out that many inventors have no interest in manufacturing, marketing, distribution etc.  But today’s system forces inventors to work for a company.  You would think someone in the media would have read Adam Smith and understand division of labor.

In the late 1800s it was quite common for people to specialize in inventing and over 85% of those inventors who obtained a patent eventually sold or licensed it to a manufacturer.  Today the attack on inventors mean that even when inventors have a valid, issued patent that has been upheld in court (Personal Audio v. Apple), people like Mr. Carolla, argue they have the right to steal other people’s inventions.

Note that Mr. Carolla never makes anything.  He sells his comedy, which is just a bunch of words, until a recording device and a transmission device turns that into a product.  Perhaps actors and comedians should not be paid either.

Imagine if actors and authors could not sell their creations without first having a company turn them into a book, movie, or recording?  That is exactly what Mr. Carolla is advocating.

 

Conclusion: Adam Carolla is spewing BS.

 

 

3.  The invention was created by other people independently.

This is a common argument by people who don’t want to pay inventors.  The patent in question was applied for in 1996 and the Patent Office divided the original patent application into three or more patents.  The first patent issued in 2001, so the world has known about this technology for a long time.  This makes the claim of independent invention absurd.  But on top of that according to Mr. Logan these patents have been cited in over 1300 other patents.  Clearly the world was aware of his technology.  The idea of independent invention without knowledge of Personal Audio’s invention is absurd.   The US had a system for disputes between nearly simultaneous inventions until the passage of the American Invents not Act in 2011 and this process was rarely invoked.  The infrequency of this process was a major argument for changing our laws from a first to invent to a first to file.  Independent invention is a diversionary argument, to distract from the fact that people like Carolla want to steal other people’s work.

 

Conclusion: Adam Carolla is spewing BS.

 

 

4.  The patent is not valid and is overly broad.

This is a favorite of the leaches who do not want to pay inventors.  This patent was applied for in 1996.  No one had thought about podcasts at that time.  Few were thinking about sending large files or streaming files.  A high speed modem at the time was 64Kbaud and compression techniques were much more limited.  This invention was ahead of its time so it is very unlikely that there is prior art to invalidate this patent.  As a result of the invention being ahead of its time, it can validly ask for and receive fairly broad claims.  However, the claims do not cover all podcasts, as the hyperbole of Mr. Carolla and other suggest, they are directed to playlists.

Personal Audio LLC sued Apple over these same patents and won.  Apple already raised these issues in court and lost.  It is complete nonsense to suggest that these patents are overly broad and should never have been issued, without providing specific evidence that was not raised by Apple.  Clearly, Mr. Carolla has no respect for the law and more importantly no respect for inventors.

 

Conclusion: Adam Carolla is spewing BS.

 

 

5.  The Patent was applied for on March 4, 2009 and granted on February 7, 2012

This comes from TechDirt which has no compunction about lying about patents.  The patent was filed for in 1996.  TechDirt then argues that the Patent Office is allowing patents too fast.  Imagine if you built a house, bought a stock, or a car and it took three years to obtain title to it.  You would think you were living in a third world country, which is exactly what is happening to inventors.

 

 

 

Mr. Carolla is a hypocrite who thinks artists should be paid for their work, but not INVENTORS.  I bet if I start selling copies of Mr. Carolla’s performances he would sue me in a nanosecond.  He would talk about how I was stealing his work, but inventors are supposed to work for nothing.  Note all the above arguments apply to actors/comedians as well as inventors.

 
CLS Reply Brief:  Alice v. CLS Bank Supreme Court

CLS’s Reply Brief is not only illogical it is filled with intellectually dishonest statements.  The lack of logic is not surprising given the Supreme Court’s confused and disorganized thinking on the subject, but the intellectual dishonesty is inexcusable.  Despite this a careful reading of CLS’s brief shows that their argument fails on its face.  If you don’t have a winning argument, confuse and overwhelm them.

CLS’s arguments boil down to Alice’s patent claims preempt the idea of an escrow account and they are a non-practicing entity to boot.

The claims asserted by Alice recite the fundamental economic practice of intermediated settlement or escrow, in which a “middleman” stands between the counterparties to a transaction and effectuates the transfer of entitlement once all conditions are satisfied.

There are so many problems in this statement it is hard to know where to begin.  First of all ESCROW has a definition: it is money, property, a deed, or a bond put into the custody of a third party for delivery to a grantee only after the fulfillment of the conditions specified.  The claims do not cover this situation.  The term ‘intermediated settlement’ does not have a well defined meaning.  You cannot find a definition for this term in the online finance dictionary.  So it clearly is not a fundamental economic concept.  CLS is using the charlatan technique of purposely blurring the definition of words.

Then CLS makes this statement:

Allowing patent claims like these would effectively foreclose the productive use of economic concepts and other fundamental principles in our increasingly computerized Information Age, in contravention of the Constitution and the Patent Act.

The claims are clear and if CLS wants to computerize an escrow arrangement it can do so.  This is just a lie that Alice’s patent preempts a fundamental principle and the lawyers who wrote this should be sanctioned for lying to the court.  Second the purpose of the Constitution is to protect the rights of Inventors.  No patent forecloses the productive use of any invention.  This is an attempt to confuse patent law property rights with anti-trust law.  Property rights provide for the owner the right to exclude others from using their property.  Ownership of a building or an invention does not foreclose economically productive uses of the property.

Here is another dishonest statement in CLS’s brief.

The economic concept of intermediated settlement is an abstract idea under the approach taken in Bilski and subsequently endorsed by the PTO.

Note the intellectual slight of hand here.  Alice did not claim the concept of an intermediated settlement.  Instead of dealing with the claims, CLS attempts to provide a broad generalization of the claims and then analyze the abstraction.  This is against the law and fundamentally dishonest.  The court must deal with the claims, not CLS’s self serving broad categorization of the claims.

 

Property Rights, Patents, and Monopolies

CLS and some judges are suggesting the blatantly false statement that patents are monopolies.  Patents are property rights.  Property rights are the result of creation, see John Locke.  This was recognized in common law and can be found in Sir William Blackstone’s Commentaries on the Laws of England.  For more information see Patents are Natural Rights http://hallingblog.com/patents-are-natural-rights/.

Antitrust law is never applied to a property right.  It only can be invoked based on how property rights are used.  Enforcement of one’s property rights in court cannot be consider a violation of antitrust law.  This whole line of reasoning is straight out of a Marxist text and should not be tolerated.  But on top of it Alice’s patents do not give it property rights in electronic escrow accounts.

 

Definitions

I have often stated that using loose definition is the handmaiden of charlatans and tyrants and CLS seems to be quite good at it.

Laws of nature, natural phenomena, and abstract ideas are not patent-eligible under this Court’s established construction of 35 U.S.C. § 101. The asserted claims of Alice’s patents are ineligible under that standard because they attempt to monopolize the abstract idea of intermediated settlement.

First of all property rights do not monopolize anything.  This line of reasoning by CLS is straight from Marxist dogma.  CLS and the courts have thrown around the phrase abstract idea but failed to define it.  Perhaps Thomas or Scalia will demand a definition.

Let’s examine what a reasonable definition of an abstract idea would be.  Some of the potential definitions of “Abstract” from Dictionary.com are provided below:

1. Considered apart from concrete existence: an abstract concept.

2. Not applied or practical; theoretical. See Synonyms at theoretical.

3. Difficult to understand; abstruse: abstract philosophical problems.

4. Thought of or stated without reference to a specific instance: abstract words like truth and justice.

5. Impersonal, as in attitude or views.

6. Having an intellectual and affective artistic content that depends solely on intrinsic form rather than on narrative content or pictorial representation: abstract painting and sculpture.

Clearly the first or second definitions appear to be the closest to what the Supreme Court means when speaking of patents.

Now here are some of the definitions of “idea” from the same source.

1. Something, such as a thought or conception, that potentially or actually exists in the mind as a product of mental activity.

2. An opinion, conviction, or principle: has some strange political ideas.

3. A plan, scheme, or method.

4. The gist of a specific situation; significance: The idea is to finish the project under budget.

5. A notion; a fancy.

The first definition appears to be the most appropriate.  So what we end up with is a thought or conception that is separate from concrete existence or not applied to the practical.  In the broadest sense of the word, every patent defines an invention that has been abstracted.  An invention by definition is an abstraction or a category of things.  If this is what the judges mean, then the standard is complete nonsense, since it negates every patent.

If we use the definition of an Abstract Idea given above “a thought or conception that is separate from concrete existence or not applied to the practical”, then every invention that meets the requirements of 35 USC 112 first paragraph is not an Abstract Idea, since this section requires that the invention be described in a manner so one skilled in the art can practice the invention.  Something that can be built and used (practiced) is concrete and applied, therefore it is not an abstract idea.  The ABSTRACT IDEA exclusion to 35 USC 101 should be dropped, because any logical definition of an abstract idea is excluded by 35 USC 112, first paragraph.  It should also be dropped, because, Judges should not read into statutes things that are not there.

A computer is not an abstract idea, it uses electrical power, generates heat, causes electrons to move.  Those are all real world effects.

 

Another poorly defined term is used by CLS in this statement.

The claims asserted by Alice do not include “significantly more” than the abstract idea of intermediated settlement, such that they could be patent eligible under Mayo Collaborative Services v. Prometheus Laboratories, Inc., 132 S. Ct. 1289 (2012). Alice fails to come to grips with the analytical approach this Court articulated in Mayo, which requires an “inventive concept.”

First of all the patent statutes do not discuss an inventive concept.  Second of all, the phrase ‘inventive concept’ is not defined in the brief, statute, regulations, or by the Supreme Court or any other US court.  Courts do not have the right to reinvent statutes.  The requirements for a patent are clear and substituting another term for what the statute says is illegal and should cause any judge to be impeached for subverting the Constitution.

 

Another poorly defined term used to smear patents by CLS.

Petitioner Alice Corporation Pty., Ltd. Contends that the CLS system infringes “business method” patents that broadly claim a computerized form of intermediated settlement.

Every patent is part of a business and any method patent is therefore broadly speaking a business method patent.  The first patent issued in the US was a method of making potash.  Since making potash is/was a business the very first patent issued in the US was a business method patent.  The people who argue against business method patents have failed to provide a consistent, clear definition of what they mean.

 

Bilski

CLS tries to paint Alice’s claims as being the same as Bilski.  This is nonsense.  Bilski admitted that their claims did not require a computer.  Alice’s claims specifically require computers and a communication network.

Note that a series of steps performed by hand can definitely be an invention.  The first patent issued in the US was for a method of making potash and all the steps were performed by hand.

 

Other Points Nonsensical Points in CLS Reply Brief

Alice suggests that its claims do not meet its chosen dictionary’s definition of escrow because they “do not prescribe that the electronic intermediary (or any other third party) receives any money or property.” Pet. Br. 47 (emphasis added). Of course, Alice’s claims do not preclude the receipt of money or property and thus would cover such activity. In any event, nothing in the concept of intermediated settlement requires the physical exchange of money or tangible property.

This shows a lack of understanding of patent law.  Either these lawyers should be fired as incompetent or they should sanctioned for lying to the court.  No patent claim precludes the use of something outside of the claim.  Alice’s claims do not cover the use of an electronic escrow.  Claims don’t preclude things, they define what is covered by the claim.  If my patent claim on a bicycle includes a shock absorber in the fork, it does not preclude having a solid fork.  It also means you can build a bicycle with a solid fork.  Here CLS is admitting that Alice’s claims do not preempt an escrow arrangement.  But like all charlatans they state it in such a convoluted way that it is hard to untangle the mess to see what it really means.

 

CLS quotes two Mark Lemley papers.  Mr. Lemley is not a patent attorney, has never written a patent claim in his life, is not legally or factually competent to practice patent law.  Mr. Lemley is a charlatan who spouts off recycled Marxist ideology applied to patents.

 
Business Method Patents: A Solution?

I have been particularly critical of the whole notion of business method patents.  Every patent is part of a business and any method patent is therefore broadly speaking a business method patent.  The first patent issued in the US was a method of making potash.  Since making potash is/was a business the very first patent issued in the US was a business method patent.  The people who argue against business method patents have failed to provide a consistent, clear definition of what they mean.

I have also defined an invention as a human creation with an objective result, while art is a human creation with a subjective result.  By objective result I mean that the invention has a repeatable result.  For instance, a patent for an incandescent light bulb always produces light when the correct electrical signal is applied to the light bulb.  Just because a person performs one of the steps in a claim does not make it invalid.  For instance, in the patent for the method of making potash a person performed many if not all the steps.  However, if the person is making a non-objective evaluation or decision as part of the method, then the process does not have a repeatable or objective result.  This is why most management theories are not patentable.  For instance, the popular SWOT (Strengths, Weakness, Opportunities, Threats) analysis relies on experts to define each of these points.  If you put different experts into the process then you get a different result.  On the other hand double entry accounting yields the same results no matter who is performing the process (as long as they apply it correctly), so it has an objective or repeatable result.

Using this standard I have found that a number of ‘business method’ patents that are invalid.  These patents rely on the use of subject matter experts to evaluate something and then provide input in the middle of a process.  This does not result in an objective, repeatable result.  Now if these experts’ subjective opinions are at the beginning of a process, then this may still provide an objective result.  For instance, if the SMEs provide a subjective 1-10 evaluation of certain Strengths in a SWOT analysis and the invention then processes these to determine the mean or rank them is some way, then this is an invention, because if the process receives the same inputs it will provide the same output, i.e, it is repeatable and objective.  Alternatively, if the SMEs are provided with processed information at the end of the process, then this is an invention.

 
Innovation Act Will Greatly Harm Independent Inventors: Guest Post Randy Landreneau

Patent legislation is in the works right now that is a greater threat to independent inventors than any legislation we have seen in the past.

The bill is the Innovation Act, HR 3309, which passed in the House on Thursday, December 5th. I don’t know everything that is wrong with it, but there are two particular things that really stand out. One is Loser Pays. According to this bill, if a patent owner sues someone for infringement and doesn’t win, he automatically has to pay the other party’s legal expenses. This will end the ability of the typical independent inventor to defend his property. Historically, an inventor could hire an attorney on contingency. Loser Pays creates a huge financial risk that totally changes the playing field. Under Loser Pays, An independent inventor would have to risk financial ruin to defend a patent.

The Innovation Act also undoes provisions that were intended to prevent serial challenges to patents. Under the present law, someone challenging a patent must put their best case forward rather than withholding information and bringing multiple cases in an effort to bankrupt the patent owner. This bill enables vested interests to use serial challenges to bankrupt patent holders and eliminate competition.

The stated reason for this legislation is patent trolls – companies that don’t produce products (NPEs – non-practicing entities), and that buy patents and allegedly sue companies frivolously for infringement. This situation has been hyped up way beyond any actual harm simply to enact legislation that will 1) make it harder for large corporations to be sued successfully for infringement, and 2) eliminate the independent inventor as a threat to the vested interest.

Is there a better example of America and the American Dream than an independent inventor, burning the midnight oil, working toward success with a new invention? This is what the American Patent System was designed to spur, and it did so. It is no accident that America became the most innovative and most prosperous country in the world. But multinational corporations have been using politics to weaken our patent system. The America Invents Act hurt us, but the Innovation Act is the nail in the coffin.

This bill will be voted on in the Senate. It could happen at any time. It got pushed through in the House very fast. Please forward this information to anyone who can help defeat it. Senators need to hear how the Innovation Act will harm independent invention. 99% of the political effort is from large corporations whose interests are directly opposed to independent invention. Please contact your Senators and forward this information to anyone who can help. Time is of the essence.

 
Patents are Natural Rights

I have often pointed out that patents are a natural right under Locke’s theory of property rights.  Locke stated, in modern language, that you own yourself so you have the right to those things you create.  Many detractors have suggested that this absurd.  According to Locke the three chief natural rights are life, liberty, and property.  Locke states that protecting property rights is the main reason for forming governments.

Sec. 124. The great and chief end, therefore, of men’s uniting into commonwealths, and putting themselves under government, is the preservation of their property.[1]

Inventions are the result the inventor’s labor and therefore property under Locke.  Property is a natural right, so patents are natural rights.  Despite this logical connection, many people have continued to deny that patents (property rights in inventions) are a natural right.

Locke’s ideas were incorporated in the law of the United States by William Blackstone’s Commentaries on the Laws of England.  This treatise became the basis of common law in the US.  Here is what Blackstone said about patents and copyrights (intellectual property).  Note that he cites Locke’s ideas on property rights for his explanation for why intellectual property is Property.

There is still another species of property, which (if it subsists by the common law) being grounded on labour and invention is more properly reducible to the head of occupancy than any other; since the right of occupancy itself is supposed by Mr. Locke, and many others, to be founded on the personal labour of the occupant. And this is the right, which an author may be supposed to have in his own original literary compositions; so that no other person without his leave may publish or make profit of the copies. When a man by the exertion of his rational powers has produced an original work, he seems to have clearly a right to dispose of that identical work as he pleases, and any attempt to vary the disposition he has made of it, appears to be an invasion of that right.

Now the identity of a literary composition consists entirely in the sentiment and the language: the same conceptions, clothed in the same words, must necessarily be the same composition: and whatever method be taken of exhibiting that composition to the ear or the eye of another, by recital, by writing, or by printing, in any number of copies, or at any period of time, it is always the identical work of the author which is so exhibited; and no other man (it hath been thought) can have a right to exhibit it, especially for profit, without the author’s consent.

This consent may perhaps be tacitly given to all mankind, when, an author suffers his work to be published by another hand, without any claim or reserve of right, and without stamping on it any marks of ownership; it being then a present to the public, like building a church or bridge, or laying out a new highway: but, in case the author sells a single book, or totally grants the copyright, it hath been supposed, in the one case, that the buyer hath no more right to multiply copies of that book for sale, than he hath to imitate for the like purpose the ticket which is bought for admission to an opera or a concert, and that, in the other, the whole property, with all it’s exclusive rights, is perpetually transferred to the grantee.

On the other hand it is urged, that though the exclusive property of the manuscript, and all which it contains, undoubtedly belongs to the author, before it is printed or published; yet from the instant of publication, the exclusive right of an author or his assigns to the sole communication of his ideas immediately vanishes and evaporates; as being a right of too subtile and unsubstantial a nature to become the subject of property at the common law, and only capable of being guarded by positive statutes and special provisions of the magistrate.

The Roman law adjudged, that if one man wrote any thing on the paper or parchment of another, the writing should belong to the owner of the blank materials meaning thereby the mechanical operation of writing, for which it directed the scribe to receive a satisfaction; for in works of genius and invention, as in painting on another man’s canvas, the same law gave the canvas to the painter. As to any other property in the works of the understanding, the law is silent; though the sale of literary copies, for the purposes of recital or multiplication, is certainly as antient as the times of Terence, Martial, and Statius. Neither with us in England hath there been (till very lately) any final determination upon the right of authors at the common law.

But whatever inherent copyright might have been supposed to subsist by the common law, the statute 8 Ann. c. 19 hath now declared that the author and his assigns shall have the sole liberty of printing and reprinting his works for the term of fourteen years, and no longer; and hath also protected that property by additional penalties and forfeitures: directing farther, that if, at the end of that term, the author himself be living, the right shall then return to him for another term of the same duration: and a similar privilege is extended to the inventors of prints and engravings, for the term of eight and twenty years, by the statute 8 Geo. II. c. 13, and 7 Geo. III. c. 38, besides an action for damages, with double costs, by statute 17 Geo. III. c. 57. All which parliamentary protections appear to have been suggested by the exception in the statute of monopolies, 21 Jac., I. c. 3, which allows a royal patent of privilege to be granted for fourteen years to any inventor of a new manufacture, for the sole working or making of the same; by virtue whereof it is held, that a temporary property therein becomes vested in the king’s patentee. (emphasis added)

 

The idea that patents are a natural right is incorporated in early American law as the quote below shows.

“we protect intellectual property, the labors of the mind, productions and interests as much a man’s own, and as much the fruit of his honest industry, as the wheat he cultivates, or the flocks he rears.” (Davoll v. Brown, 7 F. Cas. 197, 199 [C.C.D. Mass. 1845].)

It is just obstinance or disingenuousness to suggest that patents are not part of natural rights.

 


[1] The Second Treatise of Civil Government; 1690; John Locke; CHAP. IX., Of the Ends of Political Society and Government.

 
Disuniformity: Paper on CAFC’s Failure to Provide Clarity

Disuniformity[1], is an academic paper that concludes the CAFC has had a marked increase in doctrinal disagreement over the last few years.  The paper explains that the whole purpose of the CAFC was to provide doctrinal consistency in patent law.  Perhaps the most interest parts of the paper are on what lead to the creation of the CAFC.  Below are some parts I found interesting.

In the time leading up to the creation of the Federal Circuit, the United States faced economic recession, high unemployment, mass layoffs of scientists and engineers, and extreme inflation. P.2

Gee that sounds like today.  Think there is any correlation between weakening the property rights of inventors and a weak economy?

Other information demonstrated that the patent office was “freelancing” with respect to the standards of patentability

Can anyone say Jon Dudas?  Actually the authors are talking about the PTO in the 1970s, but obviously history repeats itself.  But David Kappos was no saint either, he got rid of the absurd “rejection equal quality” but he helped push the unconstitutional AIA.

Congress, moreover, was informed that the Supreme Court rarely stepped in to resolve inconsistencies in patent law, and might not be well equipped to even if it were so inclined. P. 3

Actually, the evidence is now overwhelming that the Supreme Court justices are not competent to review patent law cases.

The central empirical observation is a remarkable increase in decisional disagreement among Federal Circuit judges – an observation we interpret as likely to reflect a decrease in doctrinal uniformity – over the past several years. P. 9

The main cause for this lack of uniformity is the Supreme Court’s decision to get involved in patent law cases and their complete incompetence in this area.  If you read their recent cases on point, SCOTUS has stated that only inventions that are black magic and not marketable should obtain patents.  Another problem is appoint none patent attorneys and people without a scientific or technical background to the CAFC.

In other words, the rate at which judges were writing dissents had reached a point where it was higher than the rate at which panels were unanimous in precedential opinions. P. 13

The first is that the Supreme Court has been positively discouraging doctrinal uniformity in patent law, and encouraging legal uncertainty. P. 18

Here the authors hint at the real cause for the problem.  But more broadly we have a fight going on in this country about whether we should even have property rights and no coherent theory of property rights.  See the Supreme Court’s decision in Kelo v. City of New London.

Perhaps one of the earliest examples of this is presented by Court’s 2005 decision in eBay v. MercExchange.  By pretty much any measure eBay reduced the uniformity of application of remedies law to patent cases, and encouraged judicial discretion in making remedy decisions. P. 18

The net effect of decisions like eBay, KSR and Global-Tech is to reduce the uniformity of patent doctrine and to increase the decisional space available to judges hearing patent cases and patent appeals. P. 19

As Judge Rader observed, the Federal Circuit could not even resolve the issue en banc. Indeed, this may be a situation where the Supreme Court has announced rules in different opinions that lead to different results. P. 20.

More hints that the Supreme Court is the root of the problem

CONCLUSION

The Federal Circuit is a response to a failure in judicial administration that produced a fractured, unworkable patent law. P. 33

Thanks to the Supreme Court it did not work.

 

Rantanen, Jason and Petherbridge, Lee, Disuniformity (November 10, 2013). U Iowa Legal Studies Research Paper No. 13-42. Available at SSRN: http://ssrn.com/abstract=2351993


[1] Rantanen, Jason and Petherbridge, Lee, Disuniformity (November 10, 2013). U Iowa Legal Studies Research Paper No. 13-42. Available at SSRN: http://ssrn.com/abstract=2351993

 
Alice Corp v. CLS Bank: Brief in Opposition to Certiorari

CLS Bank filed their brief in opposition to the Writ of Certiorari on November 6, 2013.  Some people use words to understand the world and some people use words to manipulate other people.  CLS’s brief falls into the second category.  The brief can only be described as a dishonest mish mash of ideas that are often illogical, contradictory, and outright lies.  On the merits of the Writ it is clear that the courts do not have a consistent standard for 35 USC 101, particularly with respect to software enabled inventions and so called business method inventions.  Note that almost every invention is a business method invention because people want to commercialize their inventions, so they are part of a business.  The first patent ever issued in the US was a method of making pot ash, which is a business and a method of operating that business.

The fault for this confusion is not the Court of Appeals for the Federal Circuit, but the Supreme Court who refuses to define its terms, refuses to follow the statute, refuses to listen to people who know infinitely more about patent law than any of the Supreme Court Justices will ever know, and refused to create a logical framework.  As a result, I am sure that the Supreme Court will only make a further mess of this area, so I cannot root for the Supreme Court to grant cert.

Because this brief is so incoherent I will only discuss some of the lowlights of the brief.

*Not surprisingly the Attorney for CLS Bank is not a registered patent attorney and does not have a degree in engineering or science.  His co-counsels do include one registered patent attorney, Brian M. Burocker, who has only prosecuted one issued patent.

 

*Question Presented:

Absent an inventive concept, a method of performing well-understood economic activity is not patent-eligible under 35 U.S.C. § 101. P. 2

The method, media, and system claims asserted here “simply recite how an electronic intermediary can be used to effectuate an almost infinite array of exchanges in the modern financial world” and, accordingly, would “effectively preempt the use of an electronic intermediary to guarantee exchanges across an incredible swath of the economic sector.”  P. 2

First of all the patent statutes do not discuss an inventive concept.  Second of all, the phrase ‘inventive concept’ is not defined in the brief, statute, regulations, or by the Supreme Court or any other US court.  This is first substantive part of the brief and it is complete nonsense.  In any rational world these attorneys would be unemployed and unemployable, but because we have a number of Supreme Court Justices who have no interest in following the law, logic, or reason.  As a result, this sort of B.S. is not only condoned but applauded.

The preemption argument is wrong – logical, legally, and factually.  First of all the whole point of property law, which includes patents, is to preempt or give exclusive rights to the property owner.  Second of all the claims are actually very specific, but I doubt any of the attorneys who wrote this brief can properly construe the claims of a patent.  Third almost all software escrow agreements have an ‘electronic intermediary’ that guarantees an exchange.  So this statement is blatantly false.

 

*The district court held that all of the asserted claims are patent-ineligible under 35 U.S.C. § 101 because they impermissibly attempt to monopolize the core economic idea of intermediated settlement, or escrow. P. 9

This would be a good time to define escrow.  “Escrow means Money, property, a deed, or a bond put into the custody of a third party for delivery to a grantee only after the fulfillment of the conditions specified.”  Based on this definition Alice’s does not even claim an escrow system.  But logic and definitions as I stated at the beginning are irrelevant to the attorneys who wrote this brief.

There is no such thing as a patent monopolizing anything.  A patent is a property right.  The essence of a property right is to exclude others.  For more information on the nonsense that patents are monopolies see:

Patents: Monopoly or Property Right a Testable Hypothesis http://hallingblog.com/patents-monopoly-or-property-right-a-testable-hypothesis/

If patents are a monopoly, as some suggest, then it should led to certain outcomes.  A close examination shows that none of the supposed monopoly effects result from granting patents.

 

Monopoly/Rent Seeking vs. Property Rights/Intellectual Property http://hallingblog.com/monopolyrent-seeking-vs-property-rightsintellectual-property/.

This post explains the characteristics of a monopoly and a property right and poses three questions to show the difference.  Patents fit all the characteristics of a property right and none of a monopoly.  Note that professional licenses, such as a law license has some of the characteristics of a monopoly.

 

More on the Myth that Patents are Monopolies http://hallingblog.com/more-on-the-myth-that-patents-are-monopolies/.

This post contains a number of quotes from philosophers explaining that patents are not monopolies.

 

Property Rights, Possession and Objects http://hallingblog.com/property-rights-possession-and-objects/

This post explains the difference in the concepts of property rights, possession, and objects.  Most economists and patent detractors confuse these concepts.  The origin, definition, and legal basis of property right are explained.

 

The Myth That Patents are a Monopoly http://hallingblog.com/the-myth-that-patents-are-a-monopoly/

This post compares the definition of a monopoly to the rights obtained with a patent.  It shows that the rights obtained with a patent do not confer a monopoly.

 

*Each additional element is examined to see if it is “sufficient to transform the nature of the claim” and then all elements must be considered together “as an ordered combination.” P. 12

A court following the methodology articulated in Mayo thus considers the claims “as a whole” (ibid.) and does not inappropriately “dissect the claims into old and new elements and then … ignore the presence of the old elements in the analysis.” Diehr, 450 U.S. at 188.  P. 12

35 USC 103 requires examining the invention (claim) as a whole.  This statement clearly violates the Statute.  But they state that is not what they are doing, so it must be so. (Using words as tools of manipulation, not logic.)

 

*Accordingly, the “bright-line prohibition against patenting” abstract ideas cannot be drafted around by adding routine elements, by limiting the claim to a particular technological environment, or by rephrasing it to cover the same scope by tricks such as breaking the claim into steps. P. 12

This Court’s “cases warn us against interpreting patent statutes in ways that make patent eligibility depend simply on the draftsman’s art.” P. 26

Now this points out one of the inherent contradictions of the court cases in this area.  If the above statement is true, then why are the courts examining the claims for determining if the invention meets 35 USC 101.  In fact, this is exactly what I have argued in the post Is 35 USC 101 Judged by the Claims?   But you cannot logically state that we examine the claims to determine if the invention meets 35 USC 101 and then state that how the claims are drafted is irrelevant.  This is just an excuse for the judges to make a decision without any logical justification.  The statement of breaking the claims into steps should get the Supreme Court Justices impeached for gross ignorance of the law.

 

*Where the patent claims an abstract idea and the additional elements “consist of well-understood, routine, conventional activity already engaged in by the scientific community” such that those elements, “when viewed as a whole, add nothing significant beyond the sum of their parts taken separately,” then the claim is ineligible. P.12

Here they try to cover up that they are suggesting dissecting the claims to determine whether it meets 35 USC 101, but if you read it carefully you see that the statement is contradictory on its face.

Now would be a good time to define what an ‘abstract idea’ is, which the courts have failed to do.  Some of the potential definitions of “Abstract” from Dictionary.com are provided below:

1. Considered apart from concrete existence: an abstract concept.

2. Not applied or practical; theoretical. See Synonyms at theoretical.

3. Difficult to understand; abstruse: abstract philosophical problems.

4. Thought of or stated without reference to a specific instance: abstract words like truth and justice.

5. Impersonal, as in attitude or views.

6. Having an intellectual and affective artistic content that depends solely on intrinsic form rather than on narrative content or pictorial representation: abstract painting and sculpture.

Clearly the first or second definitions appear to be the closest to what the Supreme Court means when speaking of patents.

Now here are some of the definitions of “idea” from the same source.

1. Something, such as a thought or conception, that potentially or actually exists in the mind as a product of mental activity.

2. An opinion, conviction, or principle: has some strange political ideas.

3. A plan, scheme, or method.

4. The gist of a specific situation; significance: The idea is to finish the project under budget.

5. A notion; a fancy.

The first definition appears to be the most appropriate.  So what we end up with is a thought or conception that is separate from concrete existence or not applied to the practical.  None of the judges using the “Abstract Idea” standard have bothered to define what they mean by these words.  In the broadest sense of the word, every patent defines an invention that has been abstracted.  An invention by definition is an abstraction or a category of things.  If this is what the judges mean, then the standard is complete nonsense, since it negates every patent.  Not defining your terms leads to an Alice in Wonderland world, where words mean whatever the person using them wants them to mean and the reader/listener has no idea what they are talking about.  Failure to define one’s term is the province of charlatans.

If we use the definition of an Abstract Idea given above “a thought or conception that is separate from concrete existence or not applied to the practical”, then every invention that meets the requirements of 35 USC 112 first paragraph is not an Abstract Idea, since this section requires that the invention be described in a manner so one skilled in the art can practice the invention.  Something that can be built and used (practiced) is concrete and applied, therefore it is not an abstract idea.  The ABSTRACT IDEA exclusion to 35 USC 101 should be dropped, because any logical definition of an abstract idea is excluded by 35 USC 112, first paragraph.  It should also be dropped, because, Judges should not read into statutes things that are not there.

A truly Abstract Idea is not a “process, machine, manufacture, or composition of matter” under 35 USC 101.  The Court need proceed no farther.  But the real thrust behind the Abstract Idea exclusion is to provide a broad (arbitrary) basis for Judges who do not like patents or do not like software patents or patents directed to financial transactions or directed to medical technology to rule patents invalid.  This turns patent law into nothing more than glorified politics.  It is a shameful act by a bunch of charlatans and they are getting away with it, because litigants have not demanded terms be defined.

A computer is not an abstract idea, it uses electrical power, generates heat, causes electrons to move.  Those are all real world effects.

This would also be the time to show that money is not abstract.  Money represents units of computers, or ICs, or gasoline and these items are consumed, moved, and assembled based on these transactions.  An analogy to patents on error correction codes or encryption schemes, where the final product is just electronic data might also help.  For more information see Is Money an Abstract Idea? 

 

*In addition to this judgment order, members of the en banc court also issued six separate opinions, none of which commanded a majority.  P.17

This pretty much defines the situation where cert should be granted.

 

*Even if the patentee has recited an “important and useful” advancement, the patent will not clear the Section 101 threshold without “an act of invention.” Ass’n for Molecular Pathology v. Myriad Genetics, Inc., 133 S. Ct. 2107, 2117 (2013).  P. 23

Here we again see language that is nowhere in the statute, “an act of invention”, that is also completely undefined.  Both the attorneys and the judges who used this language should be barred from ever being involved in another patent case.

 

*But while generic computers are useful tools in the modern workplace and laboratory, they are ubiquitous; reciting them in a patent claim (without more) adds no more to patent-eligibility than reciting the use of a slide rule or protractor or sextant or any other conventional implement of the relevant art.  P. 24

This shows a complete lack of understanding of computers.

 

*[Alice] argued that its “computer system claims are patent eligible because they claim tangible machines, irrespective of what the computer is configured to do” (id. at 35 (emphasis added)). At that level of generality, Alice has to be wrong: Otherwise every abstract idea could be patented by the trivial expedient of coupling the idea with generic computing devices in the claims. p. 27

This shows that these attorneys have no idea how a computer works or what an abstract idea is.  A computer is a machine (electronic circuit) PERIOD – therefore it meets 35 USC 101 PERIOD.

 

*The judgments here advance the constitutionally grounded policy concerns underlying Section 101: ensuring that a patentee cannot preclude an entire realm of future innovation while contributing very little to the development of those inventions. P. 28

There is no such Constitutional policy.  The Constitution talks about protecting the Rights of Inventors to their Inventions and does not say anything about precluding innovation.  This B.S. argument is based on the phrase in the Constitution ‘promoting science and the useful arts’.  First, this is a preamble and not a limitation.  It states what the outcome will be of protecting inventors’ rights.  All macroeconomic evidence shows this is exactly what a patent system does.  The B.S. of this argument can be seen in the fact that no one suggests that copyrights should only be awarded if they promoting science and the useful arts.  If that were the case on an individual basis, then most books, TV shows, and movies would not receive copyright protection.

 

*The Brief quotes Mark Lemley, who is not a patent attorney, does not have a engineering or science background, knows nothing about computers or how they work and can only be considered a charlatan.

“As this Court has summarized, Section 112 does not address the risk that underlies the eligibility exception, namely the risk that a patent on the law would significantly impede future innovation.”  Quoting Mark Lemley who has been shown to be a fraud, is not a patent attorney, is not economist and provides no empirical basis for this conclusion.

 
Alice Files Petition for Writ of Certiorari

Alice Corp. in Alice v. CLS Bank filed a petition for writ of certiorari with the Supreme Court on September 4, 2013.  Alice sued CLS Bank for infringement of USPNs 5970479, 6912510, 7149720, and 7725375.  All the claims were held patent ineligible under 35 USC 101 at the district court and the CAFC en banc decision also found all the claims ineligible under 35 USC 101.

The petition makes it abundantly clear that the standard for determining if software enabled inventions are patent eligible material is FUBAR, but what it does not state that is that the Supreme Court is responsible for this mess.

I found it interesting and unusual that the Petition cited in the table of authorities works by at least three registered patent attorneys (Dennis Crouch, Gene Quinn, John Kong, Robert Sachs) instead of just relying on the opinions of people who have never written a patent and could not write a claim for a mouse trap e.g., Mark Lemley, who is also cited and amazingly is considered a professor and an expert on IP even though he is not competent to even sit for the patent bar.  It is also interesting that two articles from IPWatchdog were cited in the Petition, another article from another patent blog and several online magazines.  Academic publications on patent law are not where the real scholarship is occurring in today’s world and academic publications on patents for at least a century have been dominated by people (charlatans) like ‘professor’ Mark Lemley.

Part of the Petition’s argument is:

What makes the current state of legal disarray completely intolerable is that patented inventions are the engine of much of the nation’s and the world’s economic growth, which will be needlessly stifled unless the standards for patentability are much clearer than they are today.

I believe that if Alice is going to win its case at the Supreme Court (assuming the petition is granted) it is going to be vitally important to prove this statement.  It is not a foregone conclusion that all the Supreme Court Justices agree with the above statement.  For instance, I do not believe Justice Breyer would necessarily agree with the above statement.  Many of the Supreme Court’s patent opinions have been littered with antitrust language and analytic techniques.  Anyone who uses the framework of antitrust to discuss patents is inherently opposed to any patents being issued or found valid.

 

Keys to this Case for Alice

0) Moral Story

Alice has to show that they are the good guy.  Alice must show they spent years and millions of dollars developing and deploying the technology.  Alice must show that when the market was taking off CLS Bank entered it and stole their efforts.  If true Alice should play up that CLS Bank is bigger, better connected, has huge investors, etc.?  While this mainly appeals to emotions, many Judges are just too lazy to wade through the logic of the law and facts (this particularly true in patent cases), so Alice needs to be seen as the white hat.

 

1) Definitions

Patent law is littered with undefined or poorly defined terms.  Poorly defined terms result in sloppy thinking.  Besides Scalia, whose record on patent cases is poor, does respond to definitions and does Thomas.  Here are some terms that should be defined.

INVENTION: An invention is a human creation that has an objective result.  Why is it important to define what an invention is separate from the statute?  Because we need to know if the statute and the Judicially created exceptions make sense in terms of the Constitution, which states that Congress protect the RIGHTS of inventors.

It is vital to get the Justices to understand that an invention is a combination of existing or known elements and connections or steps and connections.  This is a basic law of physics, namely conservation of matter and energy.

INVENTOR: An inventor is the first person to create and invention.  The inventor may not receive patent rights in their invention for various reasons, but it is important to understand what an inventor is.

PROPERTY RIGHTS: Property rights are derived from creations and the creator is the owner.  This is a straight forward modern language version of Locke and can be found in Blackstone’s Commentaries on the Laws of England, and early English case law on hunting and in the Homestead Act in the US.  This will appeal to the traditionalist on the court.

MONOPOLY:  A monopoly (de jure) is an exclusive legal right to a market.  A patent to a method of making salt might cover the closed pan production under vacuum method.  If you own this patent, you cannot stop me from selling salt from a salt mine or a solar evaporation manufacturer.  If you have been given a monopoly by the government to salt however and I start selling or producing salt by any method, you can legally stop me.  (Note that since a patent is a legal right, then the correct definition for a monopoly is a de jure monopoly)  You can bet that CLS will be using all sorts of antitrust language in their brief and at oral argument and failure to address it upfront will significantly increase the chance of an adverse outcome.

ABSTRACT IDEA: Judges have purposely avoided defining this term so they could play fast and loose with their logic.  It is important to put forward a good definition.  This will be important particularly for Scalia and Thomas.  Here is what I said at Alice Corp Abstract Ideas.

                Some of the potential definitions of “Abstract” from Dictionary.com are provided below:

 

1. Considered apart from concrete existence: an abstract concept.

2. Not applied or practical; theoretical. See Synonyms at theoretical.

3. Difficult to understand; abstruse: abstract philosophical problems.

4. Thought of or stated without reference to a specific instance: abstract words like truth and justice.

5. Impersonal, as in attitude or views.

6. Having an intellectual and affective artistic content that depends solely on intrinsic form rather than on narrative content or pictorial representation: abstract painting and sculpture.

Clearly the first or second definitions appear to be the closest to what the Supreme Court means when speaking of patents.  Now here are some of the definitions of “idea” from the same source.

1. Something, such as a thought or conception, that potentially or actually exists in the mind as a product of mental activity.

2. An opinion, conviction, or principle: has some strange political ideas.

3. A plan, scheme, or method.

4. The gist of a specific situation; significance: The idea is to finish the project under budget.

5. A notion; a fancy.

The first definition appears to be the most appropriate.  So what we end up with is a thought or conception that is separate from concrete existence or not applied to the practical.  None of the judges using the “Abstract Idea” standard have bothered to define what they mean by these words.  In the broadest sense of the word abstract, every patent defines an invention that has been abstracted.  An invention by definition is an abstraction or a category of things.  If this is what the judges mean, then the standard is complete nonsense, since it negates every patent.

2) Prove patents do increase the growth of the economy and increase our level of technology.

Failure to provide a strong argument for this point will result in a certain loss for Alice.  Judges who believe patents retard economic growth are very unlikely to find a patent valid.

Here are some papers/books on point:

Erstling, Jay, “Korea’s Patent Policy and Its Impact on Economic Development: A Model for Emerging Countries?” (2010). Faculty Scholarship. Paper 138. http://open.wmitchell.edu/facsch/138.

Hu , Albert G.Z. and Png , I.P.L., Patent Rights and Economic Growth: Evidence from Cross-Country Panels of Manufacturing Industries, August, 2010.

The causal relationship between patent growth and growth of GDP with quarterly data in the G7 countries: cointegration, ARDL and error correction models http://mpra.ub.uni-muenchen.de/33153/

R&D, Invention and Economic Growth: An Empirical Analysis, by Professor Hulya Ulku http://www.gbv.de/dms/zbw/558276474.pdf

Are Patents Relevant? http://hallingblog.com/are-patents-relevant/

Source of Economic Growth http://hallingblog.com/source-of-economic-growth/

The Invisible Edge http://www.amazon.com/The-Invisible-Edge-Strategy-Intellectual/dp/1591842379/ref=sr_1_1?ie=UTF8&qid=1378854719&sr=8-1&keywords=the+invisible+edge The book The Invisible Edge, in chapter 8, makes a compelling case that the recession of the 1970s was largely due to the Federal Trade Commission’s (FTC) antitrust policies that limited the value of patents owned by U.S. companies.

The Most Powerful Idea in the World: A Story of Steam, Industry, and Invention http://www.amazon.com/The-Most-Powerful-Idea-World/dp/0226726347/ref=sr_1_1?ie=UTF8&qid=1378854945&sr=8-1&keywords=The+Most+Powerful+Idea+in+the+World%3A+A+Story+of+Steam%2C+Industry%2C+and+Invention  Explains that property rights in inventions was the key to the Industrial Revolution.

Also creating a simple chart showing that the wealthiest countries, most technologically advanced countries, and the countries that create the bulk of the world’s inventions have the strongest patent laws.

 

2a) Patents are not monopolies

Patents are property rights because they are the result of creation which is the source of all property rights.  Inventions were not part of the Statute of Monopolies, because they were property rights not monopolies.

2b) Patents Increase information

The whole purpose of publishing patents is to increase information.  Without patents, people keep their inventions trade secrets which retards technological and economic growth.  See The Democratization of Invention: Patents and Copyrights in American Economic Development, 1790-1920 (NBER Series on Long-Term Factors in Economic Development)

This is important because a number of recent Supreme Court cases have suggested the opposite.  This book also counters the nonsense that inventors are not motivated by profit.  Patents are important to inventors obtaining a profit from their invention.  Another great book on point is Invention and Economic Growth, Jacob Schmookler 1966.

 

3) Understanding (Patent) Law

The petition does a pretty good job of this, however the Supreme Court Justices are incompetent in this area and this always bears repeating.

35 USC 101

Whoever invents or discovers any new and useful process, machine, manufacture, or composition of matter, or any new and useful improvement thereof, may obtain a patent therefor, subject to the conditions and requirements of this title.

This is a good time to introduce the definition of an invention.  The big problem is to keep the Justices for introducing a novelty analysis here because of the word new in the statute.  Or worse a nonobviousness analysis here.  Confusion favors CLS.  While I am in the minority, I do not think that the 101 analysis should be applied to the claims.  The claims define the invention, but they are not the invention.  The specification describes the invention.  The applicant is allowed to change the claims during prosecution, but the not the specification.  This is because the definition of what is my invention is different than the explanation of what I invented.  If I invented and described a new electronic circuit, but claim an artistic combination of electronic elements I should receive a 112 rejection not a 101 rejection.

35 USC 102 Novelty

This does not mean you have created something out of nothing.  An invention is a combination of existing or known elements and connections, or steps and connections.  This is a basic law of physics, namely conservation of matter and energy.

Novelty means that every element and connection (step and connection) can be found in a single prior art reference.  This is very important or the Justices will make idiotic statements about how Alice’s invention is a combination of old elements.  An example might help here.  Show that the LASER was just a combination of existing elements, connections, and known physical laws.

35 USC 103

Quickly explain that 35 USC 103 is meant to deny patents to trivial inventions (note this violates the Constitution).  In order for a claim to be rejected under 103 there must be a group of references that show every element and connection.  However, there has to be strict motivation for combining these references, because every invention is a combination of known elements (Conservation of matter and energy).  Without this limitation all patents are invalid.

35 USC 112

This section requires the inventor explain to the world how to build his invention.  This is important because of the stupid statements by the Justice that patents suppress information.  Might be a good time to quote The Democratization of Invention: Patents and Copyrights in American Economic Development, 1790-1920 (NBER Series on Long-Term Factors in Economic Development)

Designing Around a Patent

Patent encourage new technologies be incentivizing people to create alternative (design around) inventions that accomplish the same result.  Quote Chisum on Patents.  This would be a good time to define escrow.  “Escrow means Money, property, a deed, or a bond put into the custody of a third party for delivery to a grantee only after the fulfillment of the conditions specified.”  Based on this definition Alice is not even using a true escrow system.

It is also important to show that CLS Bank could have easily designed around the patent.  For instance, they could have not had two shadow accounts.  Show that CLS Bank was just lazy.  Make an analogy of failing to do a title search (survey) for land before you undertake construction of a building.  This makes them look like the bad guy.  This is a great place to play up the morality of CLS theft and their laziness.  This also avoids the argument of preemption of a whole technology.

 

4) Understanding the Technology

Alice must explain what a computer is and what software is.  Software is a way of wiring an electronic circuit, specifically a computer.  Originally computers were wired by technicians.  Then people realized it would be more efficient to build a machine, generally called a compiler, which converts symbols or words into wiring instructions.  Either way a software enabled invention is just a claim to an electronic circuit.  (A short history of how software was developed might make sense)

Now would be a good time to introduce the definition of an Abstract Idea.  A computer is not an abstract idea, it uses electrical power, generates heat, causes electrons to move.  Those are all real world effects.

This would also be the time to show that money is not abstract.  Money represents units of computers, or ICs, or gasoline and these items are consumed, moved, assembled based on these transactions.  Also an analogy to patents on error correction codes or encryption schemes, where the final product is just electronic data might also help.  For more information see Is Money an Abstract Idea?

 

The Supreme Court is not qualified to hear patent cases, so Alice will have an uphill battle if they are going to win this case.  Unfortunately, I believe the Supreme Court is likely to further degrade patent law if they grant cert for this case.

 
How Should the US Respond if China Creates a Successful Patent System?

Here is another confused and confusing academic paper, The US, China and the G-77 in the era of responsive patentability  Queen Mary Journal of Intellectual Property, Vol. 2 No. 4, pp. 315–328.  The paper seems to suggest that it will be bad news for the US and the West if China and other BRIC nations create successful patent systems that result in their technological leadership.  The solution according to the paper appears to be aggressive use of anti-trust law.  However, the paper is far too incoherent to be sure exactly what the author’s point is.

The paper starts with some telling lines.

It appear that “‘anything made under the sun by man’” is patentable, but it is also clear that the sun never sets on the patent system.

Responsive patentability means that anything is patentable anywhere. Restrictions on patentable subject matter are read down or circumvented through clever claims drafting.

Most citizens in poor states cannot afford to pay patent prices for access to needed medical and food technologies.

Responsive patentability is unresponsive to the preferences of poor people.

The author, Mr. Drahos, is a professor of law and heads the Chair in Intellectual Property at Queen Mary University of London.  Interestingly, Mr. Drahos is not a patent attorney and in fact does not have the technical background necessary to be a patent attorney or to sit for the patent bar.  How universities think that it makes sense to have a professor who is incompetent to be a patent attorney teach patent law is beyond me.

The paper is full of broad unsupported statements such as those above.  Why should the sun set on the patent system?  Should the sun set on the criminal system, on the property rights system?  Mr. Drahos offers no explanation.  Why should there be a restriction on patentable subject matter?  If so what should those restrictions be?  Again Mr. Drahos offers no explanation.

What is the point of stating that poor people cannot afford patented foods or medicines?  Poor people cannot afford many things.  That is the definition of being poor.  So what is Mr. Drahos point?

Finally, the statement that responsive patentability is unresponsive to the preference of the poor is totally unsupported.  Should the criminal law system be responsive to the preferences of the poor?  Why should the poor’s input be more important than anyone else?  Is physics, algebra, chemistry, calculus responsive to the preferences of the poor?  Should they be?

Patent law should be based on logic and reason.  It should be firmly grounded in property rights and it should not deviate from this logic for the poor, the rich, or socialists like Mr. Drahos.

Ignoring the obvious bias of the paper it appears to be making a point about China becoming a technological leader and how the US and West should respond to this challenge.  The paper explains:

China’s market socialism may yet evolve into a close variant of US knowledge monopoly capitalism. This ending to China’s development story would not surprise readers of Animal Farm.

For a patent wealth maximization strategy to succeed a country’s innovation system must generate core technologies.

Under this criterion the system can be said to work if one country is able to use it to extract monopoly rents from other countries, thereby making it an overwhelming net winner from the system.

From these statements it appears that Mr. Drahos is concerned that China might become a creator of technologies, particularly core technologies, instead of just a consumer.  The paper appears to imply this would be bad.  I cannot see how the world will be worse off if more people are inventing important technologies that make everyone’s life better.  Again the paper fails to explain this assumption, but there are clues to why Mr. Drahos is so concerned with this outcome, for instance, the ominous reference to Animal Farm.

After setting out this dire situation, Mr. Drahos proposes at least a partial solution.

Let us assume for the sake of argument that a succession of five-year plans turn China into a patent superpower with control over many core technologies. How might the US respond to such a situation? One possibility is that it would simply issue compulsory licences over those foreign technologies it believed were vital to its national interests. Over the course of the twentieth century, antitrust law has been intellectual property’s constant regulatory shadow. For significant periods of the twentieth century it was a shadow that loomed over intellectual property owners to check the exclusionary uses of their monopoly powers. There is a resilience to antitrust principles in the US that should never be underestimated.

Mr. Drahos solution to an inventive China is to ignore property rights either with compulsory licensces or antitrust law.  Modern antitrust law is anti-property rights and turned the law against monopolies on it head.  The Statute of Monopolies of 1623 limited the power of the Crown (government) to interfere with private property rights.  The Statute of Monopolies excluded patents for inventions because they result from the creative effort of the inventor and therefore are property rights.  On the other hand modern antitrust law increases the power of government to interfere with private property rights.  The underlying theory of antitrust law is the efficient market hypothesis.  This hypothesis postulates that wealth is created by falling prices for existing goods and services and this is the result of competition to sell existing goods and services.  However, this is incorrect and inconsistent with modern economic research.  Increases in per capita income are the result of increases in technology – inventions.  Antitrust law undermines the incentive to create and invest in new technologies and therefore hurts our economic health.

When the US was facing an economic and technological challenge from Japan in the 1970s, the answer was to strengthen US patent law.  It worked spectacularly.  The US regained both its economic and technological leadership in the 1980s and 1990s.  Then the US started weakening its patent laws around 2000 and has continued to do so.  Once again the US is stagnant technologically and economically.  The clear answer to a technological challenge by China is for the US to strengthen its patent rights and all property rights not to resort to antitrust law, which is what the US did in the 1970s.

 

 

Let’s deconstruct Mr. Drahos paper.  He hates patents and does not think they should exist.  His citation of Michele Boldrin and David K Levine, who have written a book suggesting the elimination of patents, demonstrates this point.  Mr. Drahos has argued elsewhere that patents are not “property”, which is consistent with his ‘monopoly’ analysis.  But Mr. Drahos isn’t just against patents, he is against property rights generally.  For example he quotes Fidel Castro with approval.

Fidel Castro in a speech at a G-77 Summit in Havana in 2000 claimed that developed countries ‘control 97% of the patents the world over and receive over 90% of the international licenses’ rights’. He went on to observe that the ‘new medications, the best seeds and, in general, the best technologies have become commodities whose prices only the rich countries can afford’.  Castro finished with a strong appeal for unity and cooperation amongst the G-77.

Castro as a communist is against all property rights.  Mr. Drahos concern in this paper is not that the US might fall behind technologically, it is that other countries might adopt a strong property rights legal system that including patents.  The patent discussion in this paper is just a crutch from Mr. Drahos to push a radical Marxist ideology.  It is an embarrassment that this paper is considered academic or scholarly research and that Mr. Drahos has a job as a professor of law and chair in intellectual property.

 

The US, China and the G-77 in the era of responsive patentability  Queen Mary Journal of Intellectual Property, Vol. 2 No. 4, pp. 315–328.

 

 

 

 
Is the Supreme Court Competent to Rule on Patent Cases?

It is generally recognized that jobs or tasks require certain skills in order for a person to competently perform them.  For instance, a general practice medical doctor is not competent to perform brain surgery.  This does not mean that if the general practice doctor underwent a couple of years training, they could not become competent.  Competence is defined as:

   a. The state or quality of being adequately or well qualified; ability.

b. A specific range of skill, knowledge, or ability.

(According to Free Dictionary Online)

 

In patent law it is generally recognized that a patent attorney needs both a strong technical background and an understanding of patent law.  Patent attorneys have to take a separate bar exam on just patent law and have to prove they have taken a certain number of college level science and engineering courses.  Do any of the Supreme Court justices meet this definition?

 

John Roberts, A.B. History Harvard College, J.D. from Harvard

Antonin Scalia, A.B. History Georgetown University and University of Fribourg, Switzerland LL.B. Harvard

Anthony Kennedy, B.A. Political Science Stanford University and London School of Economics, LL.B. Harvard

Clarence Thomas, A.B. English Literature Holy Cross College, J.D. from Yale

Ruth Ginsberg, B.A. Government Cornell University, LL.B. Columbia Law School

Stephen Breyer, B.A. Philosophy Magdalen College, Oxford, LL.B. Harvard

Samuel Alito, B.A. Princeton, J.D. Yale

Sonia Sotomayor, B.A. History Princeton University, J.D. Yale

Elena Kagan, A.B. History Princeton, M. Phil. Oxford, J.D. Harvard

 

Not a single Supreme Court justice has passed the patent bar and not a single Supreme Court justice has an engineering or science background.  Clearly, by this standard the Supreme Court justices are in-competent to rule on patent matters.

You might argue that while the Justices do not have the required background, they are still smart enough to rule competently on patent matters.  This argument also fails.  No competent client or attorney would ask any of the Justices to write a claim for a patent.  No patent law firm would hire any of the justices to write claims for their clients or ask them to do an infringement or clearance opinion.  I think this is overwhelming evidence that the Justices do not have the practical background to rule on patent cases.  This incompetence has been demonstrated in a number of recent cases.  Below are just a few examples of their inability to understand patent law and technology.

 

*Oral Argument: Association for Molecular Pathology v. Myriad Genetics (Technical Incompetence):

The Justices made analogies to baseball bats and chocolate cookies in trying to understand this case involving genetic testing for breast cancer.  No person competent in genetics would find any of these analogies helpful.  Can you imagine a lecture on genetics where they attempted to use these analogies to explain what is happening in a genetic test?  Clearly, the Justices do not understand the technology and are attempting to make invalid – absurd analogies in an attempt to do so.

 

*Mayo Collaborative Services v. Prometheus Labs., Inc. Supreme Court 2012 (Legal Incompetence):

The Supreme Court held “The three steps (of the claim) as an ordered combination adds nothing to the laws of nature that is not already present when the steps are considered separately.”  P. 10  35 USC 103 states

A patent for a claimed invention may not be obtained, notwithstanding that the claimed invention is not identically disclosed as set forth in section 102, if the differences between the claimed invention and the prior art are such that the claimed invention as a whole would have been obvious before the effective filing date of the claimed invention to a person having ordinary skill in the art to which the claimed invention pertains. Patentability shall not be negated by the manner in which the invention was made.

The Supreme Court specifically ignored the statute.  The law specifically prohibits looking at each step /element of a claim separately.

This also demonstrates the Supreme Court’s ignorance of Physics.  Every invention ever made involves steps (elements) that were known individually before the invention; and is subject to the laws of nature.  You cannot create something out of nothing – it’s called Conservation of Matter and Energy.  You cannot violate the laws of nature.

The opinion also states patents are monopolies in three spots and mentions rent seeking in one spot, but it does not mention that the Constitution clearly states that inventors have a RIGHT to their invention.  The patent statutes specifically state that patents are (have attributes of) personal property.  35 USC § 261.  The Justices ignored both the Constitution and the statute.

 

*Bilski v. Kappos (Legal Incompetence): The Court confuses statutory subject matter 101 with Novelty 102 and Non-Obviousness 103.  For instance, Justice Kennedy writes:

“In light of these precedents, it is clear that petitioners’ application is not a patentable “process.  Claims 1 and 4 in petitioners’ application explain the basic concept of hedging, or protecting against risk: Hedging is a fundamental economic practice long prevalent in our system of commerce and taught in any introductory finance class.” p. 15.  Whether Bilski claims a well known economic practice is irrelevant to a 101 analysis that is the province of 35 USC 102 & 103.  This also shows that the Justices do not know how to read a claim.  The claims of Bilski are related to hedging, but do not claim hedging in general.  Bilski defined a system that used hedging to provide flat rate billing to small customers that could not hedge their own risks.  The Justices read the claims as if they were prose, when any competent patent attorney knows that claims have to be read like an equation.  Each word has to be given meaning.

 

*KSR Int’l Co. v. Teleflex Inc. (Legal and Technical Incompetence): The Court stated, “A court must ask whether the improvement is more than the predictable use of prior art elements according to their established functions.” P. 417.  Every invention is a combination of prior art elements.  The Court is ignoring 35 USC 103 see above.  Every element functions as it should according to physics, it cannot violate the laws of physics.

The Supreme Court goes on to states, “In many fields there may be little discussion of obvious techniques or combinations, and market demand, rather than scientific literature, may often drive design trends.  Granting patent protection to advances that would occur in the ordinary course without real innovation retards progress and may, for patents combining previously known elements, deprive prior inventions of their value or utility.” Id. At 419.  (This sort of writing should get you an F in English composition 101)  Almost all inventions are driven by market demand.  Inventors are in the business of making money.  According to the Supreme Court inventors should only get patents on inventions for which there is no demand.  Do they even read their own opinions?

 

*eBay Inc v. MercExchange, L.L.C., 2006 (Legal Incompetence): The Court held a permanent injunction should not automatically issue as part of a judgment of infringement.  A patent is a legal right to exclude, 35 USC 154, others from making, using, selling (offering for sale), or importing the invention.  The Supreme Court’s eBay decision is in violation of the law 35 USC 154.

 

Having the Supreme Court rule on patent matters makes about as much sense as having an English literature professor (who never took any college level physics) teach quantum mechanics.

 
Does the Myriad Decision Constitute a 5th Amendment Taking?

The Supreme Court in ASSOCIATION FOR MOLECULAR PATHOLOGY ET AL. v. MYRIAD GENETICS, INC., ET AL retroactively withdrew the property rights of hundreds if not thousands of inventors, by stating patents to isolated forms of DNA are not patent eligible.  The relevant part of the 5th amendment states:

nor shall private property be taken for public use, without just compensation

Patents are private property, they are owned by private individuals and the statute says they have attributes of personal property.  The Myriad decision is not just relevant to Myriad but thousands of patents.  It was a long established policy of the Patent Office to issue patents to isolated strands of DNA.  This decision changes that policy and invalidates these patents, which eliminates the patent holders’ property rights.  There was not compensation, so the question is whether this is a public use?  People often state that patent right revert to the public, but of course what really happens is there are no rights in the invention.  The situation is roughly analogous to the EPA regulating that no building can occur on wetlands.  Governmental land-use regulations that deny the property owner any economically viable use are deemed a taking of the affected property. See, e.g., Lucas v. South Carolina Coastal Council, 505 U.S. 1003 (1982), First English Evangelical Lutheran Church v. County of Los Angeles (1987).  Here the Supreme Court has denied a group of patent holders and economically viable use of their property.

These sort of broad policy changes by the courts are clearly unfair to patent owners.  The patent owner who applied for a patent when it was the clear policy of the Patent Office to allow patents on isolated strands of DNA has not done anything wrong.  If the policy had been different then they might of structured their claims to their patent differently or invested their efforts in other areas of invention.  At the least the aggrieved patent holders should have a right to a reexamination that allows them to introduce new claims based on the Myriad decision.

 
Supreme Court’s Myriad Decision a Mixed Bag

The Supreme Court issued its opinion in the ASSOCIATION FOR MOLECULAR PATHOLOGY ET AL. v. MYRIAD GENETICS, INC., ET AL today.  While I disagree with the court’s opinion, it is perhaps the most clearly written patent decision by the Supreme Court in over a decade.  Basically, the court stated those claims directed to cDNA are patent eligible under 35 USC 101.  While those patents directed to isolated DNA segments are not patent eligible.

A naturally occurring DNA segment is a product of nature and not patent eligible merely because it has been isolated, but cDNA is patent eligible because it is not naturally occurring.  P. 2

This is a better written and reasoned opinion than we have any hope to expect from the Supreme Court and its likely impact to the biotech community will be minimal.  The decision is clear and easy for inventors and patent attorneys to follow.

Below I want to point out some issues in the opinion that I found significant.  For instance, the court suggests patents are balancing acts.

The rule against patents on naturally occurring things has limits, however.  Patent protection strikes a delicate balance between creating “incentives that lead to creation, invention, and discovery” and “imped[ing] the flow of information that might permit, indeed spur, invention.”  P. 2 & 11

As I stated in my post, Nation of Laws?  Balancing tests are just a way to enhance the power of the judicial branch and create a nation of men – specifically judges.  The word invention has a definition.  Either something is an invention or it is not.  If you are the inventor and file within certain timeframes and your claims properly delineate your invention,  you are entitled to a patent.  No balancing tests are needed.

The court goes on to state.

Before Myriad’s discovery of the BRCA1 and BRCA2 genes, scientists knew that heredity played a role in establishing a woman’s risk of developing breast and ovarian cancer, but they did not know which genes were associated  with those cancers.  P. 4

Knowledge of the location of the BRCA1 and BRCA2 genes allowed Myriad to determine their typical nucleotide sequence.  That information, in turn, enabled Myriad to develop medical tests that are useful for detecting mutations in a patient’s BRCA1 and BRCA2 genes and thereby assessing whether the patient has an increased risk of cancer.  P. 4-5

Those tests included isolating a specific set of genes, which no one had ever done.  Just because people could isolate genes, did not tell them which genes were important to isolate.  Isolated genes do not exist in nature and are not an attempt to patent a person’s genes.

Finally, the court had this caveat.

First, there are no method claims before this Court. Had Myriad created an innovative method of manipulating genes while searching for the BRCA1 and BRCA2 genes, it could possibly have sought a method patent. But the processes used by Myriad to isolate DNA were well understood by geneticists at the time of Myriad’s patents “were well understood, widely used, and fairly uniform insofar as any scientist engaged in the search for a gene would likely have utilized a similar approach,” 702 F. Supp. 2d, at 202–203, and are not at issue in this case.  P. 17

The court is wrong.  There were no known genetic tests for breast cancer.  Every invention is a combination of known/existing elements – you can’t create something from nothing, it’s called conservation of matter and energy.  It is axiomatic that just stating the individual parts of an invention are known ,tells you nothing about the novelty of the invention.

 
Patent Trolls vs. Legal Trolls

There has been a lot of media attention about so called patent trolls.  I am intimately familiar with these issues, but the characterization is incorrect.  There are legal trolls, some of whom specialize in patents, but they prey upon the same problems that infects all of our legal system and so there is nothing unique regarding patents.  As happens so often, the government creates one problem and then people see the symptom and propose more improper government policies, which will just cause more problems.

I had a small software startup that was contacted by a legal troll.  The troll had selected the company because its website stated it was in a somewhat similar space to the patents they were attempting to enforce.  I analyzed the claims and it was clear the company was not practicing the patented invention.  When I contacted the troll they were unwilling to review the case or the claims.  They did not appear to be interested in the truth.  The company decided it would rather die litigating than take a license they did not require.  They also worried that taking the license would make it harder to be acquired.

Another case that illustrates the point, happened before the term “troll“was invented.  A patent counsel for a large Fortune 500 company received a complaint for patent infringement of over 30 patents.  Under the CAFC rules at the time, the company would have to spend at least three hundred thousand dollars on opinions just to respond to the complaint.  A couple of days later the troll offered to settle for about one hundred thousand dollars, knowing full well that both the costs and time constraints made this a great hold up game.  The patent counsel was so pissed off about this clear extortion, that he refused to give in and found there was a cross licensing agreement that gave his company the right to use the patents.  Nevertheless, this was an attempt to extort the company for a quick Christmas bonus and all that happened to the troll was they had to eat crow and some minor legal fees.

These situation arose not because of patent laws that protect the rights of inventors, but because of our overly burdensome federal litigation system and because Rule 11 sanctions are almost never enforced against legal trolls.  The reality is that legal trolls have been using the complexity of the law and the absurdly lenient standard for pleading to extort money from companies since at least the 1970s.  These Legal Trolls use medical malpractice, product liability, securities laws, and many others areas of law for this purpose.  However government is one of the biggest legal troll of them all.  They use the environmental laws to extort money from companies, OHSA rules, the IRS and many others.

In the case of medical malpractice lawsuits, 90% of those that go to trial fail.   In a rational system you would expect about a 50% rate of success.  Otherwise it should be in the interest of the parties to settle.

Here is an article, Annual Meeting Holdup: Securities Class Action Lawyers’ Latest Scheme, on the latest holdup innovation by securities plaintiff attorneys.

But, as I pointed out, the government is the biggest legal troll of them all.  The EPA regularly demands people comply with their arbitrary ruling or face bankrupting daily fines.  One example of this, Sackett v. EPA, made it to the Supreme Court.  The EPA has not only given itself the ability to assess this fines separate from a court or a trail, but they have argued successfully that they do not need to get a warrant to investigate a person.  This case is hardly unique.  In fact EPA administrator Al Armendariz admitted the EPA purposely terrorizes companies to force compliance among subsequent targets.  He compared it to the Romans, when they conquered a village they would crucify five people arbitrarily to ensure compliance.

The SEC refuses to define “insider trading.”  Accusing people of insider trading has been the favorite political stepping stone for attorney generals out of New York.  See Rudolf Giuliani and Elliot Spitzer.  How can you be charged with a crime the government won’t define?  How do you know if you violated the law?  How can you have mens rea?  The securities laws are just politics disguised as law – also see anti-trust laws.

Clearly, we have a problem with legal trolls not with patents.  So how do we fix the problem?  I will ignore how to fix the abuses of our government.  First,we need to clearly define what we mean by legal troll.  I would define a legal troll as any group that uses the complexity of the legal system to make a profit when they know their case is dubious.  Based on this definition there are two main components: the complexity of the legal system and baseless lawsuits.

In an attempt to promote justice our legal system reduced the requirements for pleadings and provided a wide open discovery process.  These are the two main reasons why lawsuits are so expensive.  The requirement for a good faith investigation of the facts before filing a complaint should be made stricter.  However, it is utopian thinking that judges are going to enforce this.  I will propose a solution in the next section for this.  The discovery process should be time limited and page limited.  Discovery should not be used as a fishing expedition.  Another problem is that we have an over worked Federal Judiciary.  This is in part because we do not have enough federal judges and partly because we have federalized too many crimes/regulations.  On the patent level we should have judges who have technical backgrounds and have passed the patent bar.

Rule 11 sanctions are supposed to prevent frivolous lawsuits, but judges almost never apply them and when they do it is so arbitrary as to appear politically motivated.  I suggest that the Rule 11 type sanctions should be a private right and award.  This would balance the risks of filing frivolous lawsuits.  In addition we might want to consider a loser pays type rule.

We do not have Patent Trolls we have Legal Trolls.  The biggest Legal Trolls of all are governments.

 
Is 35 USC 101 Judged by the Claims?: CLS Bank v. Alice Corp CAFC en banc decision: Nation of Men

CLS Bank v. Alice Corp was an en banc decision that attempted to set the record straight on 35 USC 101.  IT FAILED.  The patents in suit deal with settlement risk in financial transactions.  The holding can be boiled down to we don’t like patents on software or on financial transactions and we really don’t like patents that cover both.

 

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