Software Patents in Europe and China

Software inventions are patentable in the United States, and in many other key jurisdictions. However, not all other countries allow broad protection for software innovation. Two of the more important patent offices, the European Patent Office (EPO) and the Chinese State Intellectual Property Office (SIPO) restrict how software inventions may be protected. However, many types of software can still be protected in China and Europe.

Europe The EPO precludes patenting "(a) discoveries, scientific theories and mathematical methods; (b) aesthetic cre¬ations; (c) schemes, rules and methods for performing mental acts, playing games or doing business; and (d) programs for com¬puters, and presentations of information." However, there is an exception. Article 52(2) excludes "the patentability of the subject-matter or activities referred to therein only to the extent to which a European patent application or European patent relates to such subject-matter or activities as such." This clause creates an exception for certain kinds of software innovations to be patentable subject matter at the EPO.

The EPO's patentable subject matter includes the technical or hardware related elements of an invention, as opposed to features that are merely algorithms. This is not an obvious distinction. In the United States, algorithmic elements can be protected, if claimed correctly. In Europe, algorithms, such as an accounting program, that are executed on a general purpose computer are not patentable. However, software that does something to hardware is likely to be patentable. For example, software that controls communications between machines is more likely to be patentable subject matter. Similarly, software that accelerates graphic display functions is probably patentable.

EPO patent applications are also structured differently from United States patent applications. The application should follow a problem/solution format. A technical problem is described and a solution, the invention, is then presented. This is in sharp contrast to US applications where the problem description is often minimized so that it is not used against the applicant as prior art.

The claimed embodiments of the EPO application are directed to the problem. EPO software claims are organized as two part claims, with a preamble that lists elements that are known in the art followed by a second part with the novel inventive elements.

China In China, software, algorithms or computer games are not per se patentable subject matter. Software inventions must solve a technical problem and have physical features. So like in Europe, your clever accounting or stock analysis algorithms are not patentable subject matter. However, software with physical features such as accelerating data interchange or storing data more efficiently solve a technical problem, and so are likely to be patentable subject matter.

Even though Europe and China do not support the protection of software inventions to the same extent as the United States, you can protect many types of software innovations in those jurisdictions.

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Why Software Patents Make Sense

Software is patentable subject matter in the United States. There are some restrictions, such as that the software must be embodied in a machine, but software inventions are regularly given patent protection. However, there is strong opposition to protecting software inventions, and many countries, particularly European Union nations, do not allow the patenting of software inventions.

The opposition to software patents is based on a number of good arguments including that patents stifle innovation and competition, that many over broad and obvious patents were granted, and that the United States Patent and Trademark Office (USPTO) doesn't have the necessary expertise to evaluate software inventions. There is some truth to these arguments, but protecting software innovation is more important than ever because so much economic growth and innovation is centered in software products.

It is true that software patents stifle innovation and competition. That is the objective of any patent, to give the inventor the right to exclude others from practicing her invention. All modern societies give these innovation-discouraging non-competitive rights to inventors for one reason - it encourages more innovation than it discourages.

Invention is a difficult, time-consuming, and expensive process. It is simply hard to get something new to work in a useful way. In contrast, copying an invention is easy, quick, and cheap. Without patents, there would be little incentive to innovate because copying is so much easier. We see this today in countries with weak patent protection - copying is far more popular than innovating.

However, bad patents can stifle innovation. A bad patent is generally over broad, protecting far more than the inventor invented. An over broad patent can stop all innovation in a large technology segment by giving one inventor all rights to a very general solution, even though the inventor never developed or even considered all of the solutions that are covered in her patent claims.

Unfortunately, there are a disproportionate number of overboard patents for software inventions. One reason for this is that so much of our software technology is of recent invention. We are close to the Big Bang of software innovation, so many core software concepts are still covered by patents. For example, the explosive growth of the internet is still within the twenty year term of a patent, so many basic software innovations like one-click ordering are protected by patents. This is similar to the early days of the automotive industry when patents covered most basic automotive technologies like steering wheels and drive trains.

As a result, programmers can infringe patents using relatively basic design principles. In contrast, the core innovations of older technologies such as electronic logic or engine design are not longer protected by patents, so basic design principles can be employed without violating patents.

Bad patents are often granted for very obvious inventions. Patents should be awarded for doing something new and non-obvious, and not for being the first to file an application for a predictable, obvious solution. Unfortunately, the USPTO had to meet a very high standard to show obviousness when many applications for software inventions were examined. As a result, patents were issued for some relatively obvious inventions. Since then the standards for showing obviousness have been relaxed, making it much harder to patent an obvious solution. Older patents can also be reexamined using the new obviousness standard, reducing the chances that patent holders will try to assert questionable patents.

Some bad patents were also issued because the USPTO simply wasn't staffed with examiners with the right expertise to evaluate the explosion of software applications. However, the USPTO has done a good job of adding and training examiners with software expertise. As a result, the examination of software applications has steadily improved, with fewer bad software patents being issued.

While much of the criticism of software patents is valid, protection for software inventions is increasingly important for innovation and economic growth. The factors that created the large number of innovation stifling bad software patents are diminishing as more basic software technology enters the public domain, changes in patent law reduce obvious patents, and the USPTO becomes adept at examining software inventions. The problems and abuses are being corrected.

At the same time the importance of software inventions to innovation and competitiveness is growing. Programmers are solving real problems with inventive, non-obvious software solutions. They should be encouraged by being allowed to patent their inventions. It would be wrong to deny protection for software inventions because they are inventions. And it would be foolish, because the creation of software is a vital economic activity where innovation should be encouraged and protected. Software patents are more important than ever because software innovation is more important than ever.

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Key Software Patent Details

Software inventions are no harder to patent then other types of innovations. However, many software patents are often only allowed after significantly narrowing the scope of the claims, resulting in patents that offer much less protection and that may be easily engineered around. This is not because software inventions are less patentable. Instead narrow software patent claims often result from a lack of structural detail in the software patent application.

Just as patent applications for mechanical inventions that arrange well-known elements such as supports or tubes in a unique structure are regularly allowed, software inventions that organize basic software elements in unique structures are also patentable. However, the key inventive structural details of innovation must be carefully described and claimed in order to secure broad patent coverage. These key inventive structural details include algorithm descriptions, data structure descriptions, and interface descriptions.

Algorithms and rule descriptions are often critical in distinguishing the structure of a software invention. The description of an algorithm or rule should include multiple levels of detail with multiple embodiments of implementation. For example, an algorithm that determines when to perform a key function should include a high level written description of the conditions for performance, two or more written refinements that further modify the conditions of performance, and several embodiments of equations or logical statements that should how the algorithm can be explicitly implemented.

Data structure descriptions must include much more information than simply that key data is stored. The details of the data structure should include structural details such as specific data fields and a description of the data stored in those fields, relationship details between data values that are stored in the data structure, and functional details of how the data is employed. For example, a description may include the details of each data field, algorithms for deriving one data value from other values, and the algorithms that employ the data values.

Interface descriptions may be the most important inventive elements to protect. Unlike algorithms and data structures, interfaces with software and/or hardware elements are much more easily observed for evidence of infringement. One should carefully describe and claim the unique data elements and functions employed by an interface. For example, a software interface to a database engine should describe the key variables that are passed through the interface, the functional results of the variables, and the order and conditions of key handshaking exchanges.

By describing the details of algorithms, data structures, and interfaces, a software patent application will typically include enough information to broadly claim the invention while distinguishing it from dissimilar innovations. As a result, your software innovation and competitive advantage can be protected from copying.

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How CyberSource May Affect the Patentability of Software

Software inventions have been able to receive broad protection in the United States. However, in CyberSource v. Retail Decisions, the Court of Appeals for the Federal Circuit upheld a lower court ruling that a Beauregard claim was not patentable subject matter. Is the CyberSource ruling the beginning of a change in patent law, or an outlier that will eventually be corrected?

In the United States, "any new and useful process, machine, manufacture, or composition of matter..." is patentable. Software executing on a general purpose computer has been considered to create a machine that is patentable. See In re Alappat, 33 F.3d 1526, 1545 (Fed. Cir. 1994). The Federal Circuit established a machine or transformation test to determine if an invention was patentable, and the Supreme Court slightly broadened the scope of software patentability by holding that the machine or transformation test was a useful clue in determining patentability, and not the only test.

The CyberSource decision suggests that reciting the use of a computer to execute an algorithm may not be enough to create a machine. In particular, the court cited a recent Federal Circuit decision that a machine "must play a significant part in permitting the claimed method to be performed." SiRF Tech., Inc. v. Int'l Trade Comm'n, 601 F.3d 1319, 1333 (Fed. Cir. 2010). The ruling also suggests that manipulating data may not be enough to be considered a transformation.

The overall effect of the ruling would seem to move US law regarding software patents much closer to European law, where a software invention must solve a technical (physical) problem to be patentable, and where algorithms that can run on a general purpose computer are not patentable. One wonders if this change is because of the sharp increase in software patent infringement suits. The US patent system has come under much public criticism because of this increase in litigation. A change in the requirements for patenting software could invalidate the patents in many of these suits, while still leaving a way to protect software inventions. However it is difficult to determine if this ruling is merely an outlier or a new direction in US patent law.

Major judicial changes in patent law are often made en banc, where a majority of the federal circuit judges hear the case instead of the usual three judge panel. An en banc hearing would clarify whether the CyberSource ruling was really the new standard for software inventions.

Of course, until there is an en banc decision, inventors will still be filing patent applications to protect their software inventions. The ruling suggests a number of ways that claims for software inventions can be strengthened. Until the law regarding protecting software is clarified, these techniques should be employed to assure that inventions can still be protected if the law changes.

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