In the haze of confusion surrounding the Supreme Court’s recent decision in Bilski v. Kappos, the appeals board of the United States Patent and Trademark Office issued a ruling last week that takes a definitive stand against the worst kinds of patents that threaten software developers every day.

Despite the Court’s failure to provide much guidance or adopt a bright-line test for patentable subject matter in Bilski, the appeals board ruling in Ex parte Proudler is a sign of the growing skepticism towards software patents that continually test the boundary between acceptable technological innovation and impermissible abstraction. In Proudler, the Board rejected a number of claims to a software invention, citing Bilski in its reasoning.

This rejection is particularly noteworthy as it dispenses with a number of fig leaves that patent attorneys have been using for years to make software inventions seem less like abstract ideas, and therefore patentable. While the USPTO has always held that software is unpatentable, patent attorneys were usually able to get software patents granted by adding such seemingly magical phrases as “a computer readable medium containing computer executable instructions” to a series of data processing steps, thus transforming software into a patentable physical component of a computer.

Taking a page from the same playbook, the Proudler application claims a “method of controlling processing of data in a computer apparatus” and a “computer program stored on computer readable media for instructing a programmable computer to implement a method of controlling the processing of data.” Since the Federal Circuit’s infamous 1998 State Street decision which opened the floodgates to software and business method patents, such claims have been deemed patentable without question. Although the Board could have justified the July 7th decision on other grounds, it took particular pains to reject the Proudler application for claiming unpatentable software. “A claim that recites no more than software, logic or a data structure (i.e., an abstraction) does not fall within any statutory category,” the Board said in its rejection. In its rejection, the Board cited both recent Supreme Court cases (including Bilski) as well as pre-State Street decisions from the Federal Circuit.

I believe the Board correctly deduced two notable things from Bilski, in an interpretation which hopefully will take root in the courts as well.

First, the “machine-or-transformation test”, in which a patentable process must either be closely tied to a particular machine or transform a particular article into a different state of thing, survives as a primary test for routine use. Although the Supreme Court held that “the machine-or-transformation test is not the sole test for deciding whether an invention is a patent-eligible ‘process’,” it did characterize the test as “a useful and important clue.” Without any hint of what processes, if any, may fail this test while still being eligible for a patent, the burden will lie with software patent applicants to prove that their processes are patentable after failing the machine-or-transformation test.

Second, the Bilski decision effectively kills the “useful, tangible, and concrete” test long favored by patent attorneys who sought to overcome rejections for ineligible subject matter. As the USPTO has tightened its guidelines for computer-related inventions over the years, many applicants cleverly decided to draft their software claims to appear as if their process was tied to a particular machine. However, for those patents which were granted on the basis that their inventions were “useful, tangible, and concrete”?most notably software patents granted immediately following State Street?the Court’s decision in Bilski makes these patents especially vulnerable.

Assuming this characterization of Bilski survives on appeal, I think we will start to see the USPTO take more aggressive steps to stanch the flow of the worst types of software patents. One need only look at the specific claims in the Proudler application to see how patents of this type stifle innovation in computer technology. I cannot think of any computer program that does not have “logically related data items” processed by associated rules. The rest of the claim language contain unintelligible nonsense—the perfect weapon to use against small software developers who can’t afford to defend themselves against patent aggression.

So what will the status of software patents be going forward? Given the Supreme Court’s reluctance to categorically exclude any type of invention from patent-eligibility in the face of unforeseen developments in technology, I believe that at least some forms of software will remain patentable, barring any (unlikely) legislative response to the software patent issue.

Expect to see software patent claims for “computer readable mediums” encoded with “processor executable instructions” challenged under the machine-or-transformation test as not being tied to a specific machine. These challenges may prove successful in invalidating the most abstract of computer software patents, to which patent applicants will respond by drafting process claims with ever increasing references to specific computer hardware. I also expect to see an increasing reliance on system claims with generic hardware elements, such as a processor or computer network, configured to perform steps performed in software. The patentability question for computer software running on general-purpose computers will be decided on the Court’s clear disfavor for “abstract ideas” as seen in the context of the reaffirmed Benson-Flook-Diehr trilogy of Supreme Court cases. The language in these cases which deny patents to “algorithms” and “mental processes” may prove useful in invalidating the most harmful of software patents.

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Tags: Software Patents, free software, patents, Patentability, The Supreme Court of the United States, Software Freedom Law Center, Bilski v. Kappos, Bilski, Michael Spiegel, Proudler Patent Rejection, 101 Rejection, Proudler

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