Guy Rub: Copyright or Contract?

Using software often means you have to sign a contract as a condition for using the software. This "end user license agreement," called a EULA, will lay out the terms under which the software can be used. For example, the EULA you sign to play a video game might say: "The player of this video game cannot cheat while playing the game."  What if you breach the EULA by playing the game using a commercially available cheating "bot"?  Is this copyright infringement? Or is this just a breach of contract?  This may seem obscure, but the question matters a lot.  For one thing, in this example, if the video game publisher has a copyright claim against the cheater, not just a contract claim, this could mean very large statutory damages versus no damages at all.

This is just one of many scenarios in which copyright owners use contracts to control the conditions of use, and whose breach may, or may not, give rise to copyright infringement. In his new article, Against Copyright Customization, Guy Rub addresses this thorny question—copyright or contract?—along with many closely related questions. For example: when is a software user a mere licensee versus an owner?  (Spoiler alert:  almost always!)  The article is forthcoming in Iowa Law Review and a draft can be downloaded on SSRN.

I interviewed Guy about the article. Here is a transcription.

How Does Patent Eligibility Affect Investment?

David Taylor (SMU) was interested in how patent eligibility decisions at the Supreme Court affected venture investment decisions, so he thought he would ask. He put together an ambitious survey of 14,000 investors at 3000 firms, and obtained some grant money to provide incentives. As a result, he got responses from 475 people at 422 firms. The response rate by individual is really low, but by firm it's 12% - not too bad. He performs some analysis of non-responders, and while there's a bit of an oversample on IT and on early funding, it appears to be somewhat representative.

The result is a draft on SSRN and forthcoming in Cardozo L. Rev. called Patent Eligibility and Investment. Here is the abstract:

Have the Supreme Court’s recent patent eligibility cases changed the behavior of venture capital and private equity investment firms, and if so how? This Article provides empirical data about investors’ answers to those important questions. Analyzing responses to a survey of 475 investors at firms investing in various industries and at various stages of funding, this Article explores how the Court’s recent cases have influenced these firms’ decisions to invest in companies developing technology. The survey results reveal investors’ overwhelming belief that patent eligibility is an important consideration in investment decisionmaking, and that reduced patent eligibility makes it less likely their firms will invest in companies developing technology. According to investors, however, the impact differs between industries. For example, investors predominantly indicated no impact or only slightly decreased investments in the software and Internet industry, but somewhat or strongly decreased investments in the biotechnology, medical device, and pharmaceutical industries. The data and these findings (as well as others described in the Article) provide critical insight, enabling evidence-based evaluation of competing arguments in the ongoing debate about the need for congressional intervention in the law of patent eligibility. And, in particular, they indicate reform is most crucial to ensure continued robust investment in the development of life science technologies.

The survey has some interesting results. Most interesting to me was that fewer than 40% of respondents were aware of any of the key eligibility decisions, though they may have been vaguely aware of reduced ability to patent. More on this in a minute.

There are several findings on the importance of patents, and these are consistent with the rest of the literature - that patents are important for investment decisions, but not first on the list (or second or third). Further, the survey finds that firms would invest less in areas where there are fewer patents - but this is much more pronounced for biotech and pharma than it is for IT. This, too, seems to comport with anecdotal evidence.

But I've always been skeptical of surveys that ask what people would do - stated preferences are different than revealed preferences. The best way to measure revealed preferences would be through some sort of empirical look at the numbers, for example a differences-in-differences approach before and after these cases (though having 60% of the people say they haven't heard of them would certainly affect whether the case constitutes a "shock" - a requirement of such a study).

Another way, which this survey attempts, is to ask not what investors would do but rather ask what they have done. This amounts to the most interesting part of the survey - investors who know about the key court opinions say they have moved out of biotech and pharma, and into IT. So much for Alice destroying IT investment, as some claim (though we might still see a shift in the type of projects and/or the type of protection - such as trade secrets). But more interesting to me was that there was also a similar shift among those folks who claimed not to know much about patent eligibility or think it had anything to do with their investment. In other words, even for that group who didn't actively blame the Supreme Court, they were shifting investments out of biotech and pharma and into IT.

You can, of course, come up with other explanations - perhaps biotech is just less valuable now for other reasons. But this survey is an important first step in teasing out those issues.

There are a lot more questions on the survey and some interesting answers. It's a relatively quick and useful read.

Measuring Alice's Effect on Patent Prosecution

It's a bit weird to write a blog post about something posted at another blog in order to bring attention to it, when that blog has many more readers than this blog. Nonetheless, I thought that the short essay Decoding Patentable Subject Matter by Colleen Chien (Santa Clara) and her student Jiun Ying Wu, in the Patently-O Law Journal was worth a mention. The article is also on SSRN, and the abstract is here:

The Supreme Court’s patentable subject matter jurisprudence from 2011 to 2014 has raised significant policy concerns within the patent community. Prominent groups within the IP community and academia, and commentators to the 2017 USPTO Patentable Subject Matter report have called for an overhaul of the Supreme Court’s “two-step test.” Based on an analysis of 4.4 million office actions mailed from 2008 through mid-July 2017 covering 2.2 million unique patent applications, this article uses a novel technology identification strategy and a differences-in-differences approach to document a spike in 101 rejections among select medical diagnostics and software/business method applications following the Alice and Mayo decisions. Within impacted classes of TC3600 (“36BM”), the 101 rejection rate grew from 25% to 81% in the month after the Alice decision, and has remained above 75% almost every month through the last month of available data (2/2017); among abandoned applications, the prevalence of 101 rejection subject matter rejections in the last office action was around 85%. Among medical diagnostic (“MedDx”) applications, the 101 rejection rate grew from 7% to 32% in the month after the Mayo decision and continued to climb to a high of 64% and to 78% among final office actions just prior to abandonment. In the month of the last available data (from early 2017), the prevalence of subject matter 101 rejections among all office actions in applications in this field was 52% and among office actions before abandonment, was 62%. However outside of impacted areas, the footprint of 101 remained small, appearing in under 15% of all office actions. A subsequent piece will consider additional data and implications for policy.

This article is the first in a series of pieces appearing in Patently-O based on insights gleaned from the release of the treasure trove of open patent data starting the USPTO from 2012.

The essay is a short, easy read, and the graphs really tell you all you need to know from a differences-in-differences point of view - there was a huge spike in medical diagnostics rejections following Mayo and software & business patent rejections following Alice. We already knew this from the Bilski Blog, but this is comprehensive. Interesting to me from a legal history/political economy standpoint is the fact that software rejections were actually trending downward after Mayo but before Alice. I've always thought that was odd. The Mayo test, much as I dislike it, easily fits with abstract ideas in the same way it fits with natural phenomena. Why courts and the PTO simply did not make that leap until Alice has always been a great mystery to me.

Another important finding is that 101 apparently hasn't destroyed any other tech areas the way it has software and diagnostics. Even so, 10% to 15% rejections in other areas is a whole lot more than there used to be. Using WIPO technical classifications shows that most areas have been touched somehow.

Another takeaway is that the data used came from Google BigQuery, which is really great to see. I blogged about this some time ago and I'm glad to see it in use.

So, this was a good essay, and the authors note it is the first in a series. In that spirit, I have some comments for future expansion:

1. The authors mention the "two-step" test many times, but provide no data about the two steps. If the data is in the office action database, I'd love to see which step is the important one. My gut says we don't see a lot of step two determinations.

2. The authors address gaming the claims to avoid certain tech classes, but discount this by showing growth in the business methods class. However, the data they use is office action rejections, which is lagged--sometimes by years. I think an interesting analysis would be office action rejections by date of patent filing, both earliest priority and by the date the particular claim was added. This would show growth or decline in those classes, as well as whether the "101 problem" is limited to older patents.

3. All of the graphs start in the post-Bilski (Fed. Cir.) world. The office actions date back to 2008. I'd like to see what happened between 2008 and 2010.

4. I have no sense of scale. The essay discusses 2000 rejections per month, and it discusses in terms of rates, but I'd like to know, for example, a) what percentage of applications are in the troubled classes? b) how many applications are in the troubled classes (and others)? c) etc.? In other words, is this devastation of a few or of many?

5. Are there any subclasses in the troubled centers that have a better survival rate? The appendix shows the high rejection classes, what about the low rejection classes (if any)?

I look forward to future work on this!

Oracle v. Google Again: The Unicorn of a Fair Use Jury Reversal

It's been about two years, so I guess it was about time to write about Oracle v. Google. The trigger this time: in a blockbuster opinion (and I never use that term), the Federal Circuit has overturned a jury verdict finding that Google's use of 37 API headers was fair use and instead said that said reuse could not be fair use as a matter of law. I won't describe the ruling in full detail - Jason Rantanen does a good job of it at Patently-O.

Instead, I'll discuss my thoughts on the opinion and some ramifications. Let's start with this one: people who know me (and who read this blog) know that my knee jerk reaction is usually that the opinion is not nearly as far-reaching and worrisome as they think. So, it may surprise a few people when I say that this opinion may well be as worrisome and far-reaching as they think.

And I say that without commenting on the merits; right or wrong, this opinion will have real repercussions. The upshot is: no more compatible compiler/interpreters/APIs. If you create an API language, then nobody else can make a competing one, because to do so would necessarily entail copying the same structure of the input commands and parameters in your specification. If you make a language, you own the language. That's what Oracle argued for, and it won. No Quattro Pro interpreting old Lotus 1-2-3 macros, no competitive C compilers, no debugger emulators for operating systems, and potentially no competitive audio/visual playback software. This is, in short, a big deal.

So, what happened here? While I'm not thrilled with the Court's reasoning, I also don't find it to be so outside the bounds of doctrine as to be without sense. Here are my thoughts.

[with Colleen Chien] Recap of the Berkley Software IP Symposium

Slides and papers from the 20th Annual Berkeley Center for Law and Technology/Berkeley Technology Law Journal Symposium - focused on IP and software are now posted. Colleen Chien and I thought we would discuss a few highlights (with some commentary sprinkled in):

David Hayes' opening keynote on the history of software and IP was terrific. The general tenor was that copyright rose and fell with a lot of uncertainty in between. Just was copyright fell, patent rose, and is now falling, with a lot of uncertainty in between. And trade secret law has remained generally steady throughout. David has long been the Chair of the Intellectual Property Group of Fenwick and West, former home to USPTO Director Michelle Lee, as well as IP professors Brenda Simon, Steve Yelderman, and Colleen Chien and is one of the wisest and most experienced IP counselors in the valley. (Relatedly, Michael Risch's former firm was founded by former Fenwick & West lawyers.)

Peter Menell's masterful presentation on copyright and software spanned decades and ended with a Star Wars message, "May the Fair Use Be With You."

Randall Picker took a different view of copyright and software, focusing instead on whether reuse was simply an add-on/clone or a new platform/core product. Thus, he thought Sega v. Accolade came out wrong because allowing fair use for an unlicensed game undermined the discount pricing for game consoles, but thought Whelan v. Jaslow (a case nearly everyone hates) came out properly because the infringing software was a me-too clone. Borland, on the other hand, created a whole new spreadsheet program to create competition. In related work, Risch published "How can Whelan v. Jaslow and Lotus v. Borland Both be Right?" some 15 years ago.

Felix Wu presented an interesting talk about how the copyright "abstraction-filtration-comparison" test might be used to determine the meaning of "means plus function" claims in patent law.

MIT's Randall Davis's "technical talk" explained how software is made and how abstractions are the essence of software. It's turtles all the way down: one level that seems concrete is merely an abstraction when viewed from the level below. The challenge, it seems, is that calling anything abstract can have wide meaning.

Rob Merges further discussed how we might define abstract. His suggestion was to look at abstract as the opposite of concrete and definite. Thus, patents would need to be far more detailed than many that are being rejected now, but such a standard might be more clear to apply.

Arti Rai discussed a similar solution, noting that lower levels of abstraction were more likely to be affirmed. Furthermore, solutions to computer specific problems seem to hold a key. Rai and Merges should be posting papers on these topics soon.

Kevin Collins presented a draft paper on Williamson v. Citrix Online. He posited that Williamson would present difficult challenges for courts trying to determine structure - including structure that's supposedly present in the claim. He presented some ideas about how to think about solutions to the problem.

Similarly, Lee Van Pelt showed some difficulties with Williamson (including Williamson itself) in practice.

Michael Risch's talk and paper leaves off where Hayes ended, with the fall of patents. It explores whether or not, in the wake of the trouble software patents are in, developers might turn to trade secret to protect visible features, and what the implications might be. It turns out that less than a week after the conference, a software company won a $940m jury verdict on exactly this theory.

Colleen Chien's talk explored, if software is eating the world (H/T MarcAndreesen), how much IP and its default allotments matter, in a world where contract is king, and monopolies are coming from data, network effects, scale (a la Thiel) and, possibly, winner take all dynamics, as discussed on Mike Masnick’s recent podcast rather than patents and copyrights. It presents early results and an early draft paper from an analysis of ~2000 technology agreements and some 30k sales involving software, finding evidence of both technology and liability transfers.

Aaron Perzanowski's presentation and forthcoming book with Jason Schultz suggests that perhaps the IoT should be known as IoThings-We-Don't-Own.

Relatedly, John Duffy addressed the first sale doctrine and presented his recent paper with Richard Hynes that shows how commercial law ties to and explains how exhaustion should work. This is relevant to the Federal Circuit's recent decision in the Lexmark case on international exhaustion.

Second day lunchtime keynote, William Raduchel, talked about the importance of culture to innovation and IP. As Mark Zuckerberg mentioned on an investor call, Facebook develops openly (some of it's IT infrastructure and non-core innovation, at least) because that's what it's developers demand and need to get the job done. He also discussed how "deep learning" may change how we consider IP, because computers will now be writing the code that produces creative and inventive output.

The empirical panel provided a helpful overview of recent studies. Pam Samuelson’s talk highlighted changes in the software industry, particularly with the growth of software as a service (SaAS), the cloud, the app market, the IoT, and embedded software as well as the software IP protection landscape since the Berkeley Patent Survey was carried out in 2007. Samuelson also discussed how recent invalidations of algorithms and data structure patents will affect copyright. If those features are too abstract for patenting, then we should consider whether they are too abstract for copyright protection, even if they might be expressed in multiple ways. (NB: A return to the old Baker v. Selden conundrum: bookkeeping systems are the province of patents, not copyrights. But can you patent a bookkeeping system? Maybe a long time ago, but surely not today).

John Allison gave an overview of what we know (empirically) about software patents. And the chief IP officers panel was a highlight, as each person had a different perspective on the system based on its own position - though they did agree on a few basics, such as the need for some way to appropriate investments and the preference for clear lines.

There is much more at the link to the symposium, including slides, drafts, and past (but relevant) papers. It's well worth a look! TAP is also running a seven-part series on the conference, starting with this overview of David Hayes' talk.

Understanding the Role of Patents for Small Smartphone Companies

When I think of smartphones and smartphone patents, I think of the big battles and players: Apple v. Samsung, Motorola v. Microsoft, NTP v. RIM, Nokia, Ericsson, Google, Sony, and other mega-companies. But what about small smartphone companies? Do they have patents? And, if so, how do those patents affect important issues like fundraising and litigation?

Joel R. Reidenberg, N. Cameron Russell, Maxim Price & Anand Mohan (Fordham Law School and Fordham CLIP) answer some of these questions in their article, Patents and Small Participants in the Smartphone Industry (18 Stan. Tech. L. Rev. 375 (2015)). Here is the abstract:

For intellectual property law and policy, the impact that patent rights may have on the ability of small companies to compete in the smartphone market is a critically important issue for continued robust innovation. Open and competitive markets provide vitality for the development of smartphone technologies. Nevertheless, the impact of patent rights on the smartphone industry is an unexplored area of empirical research. Thus, this Article seeks to show how patent rights affect the ability of small participants to enter, compete, and exit smartphone markets. The study collected and used comprehensive empirical data on patent grants, venture funding, mergers and acquisitions, initial public offerings, patent litigation, and marketing research data. This Article shows empirically that small participants succeed in the market when they have a low and specific critical mass of patents and that this success exceeds the general norms in the startup world. Surprisingly, the analysis demonstrates that the level of financing and market success do not increase with larger patent portfolios. Lastly, despite the controversies over patent trolls, this Article demonstrates that patent litigation, whether from operating companies or NPEs, does not appear to be a significant concern for small players and does not appear to pose barriers to entry. The Article concludes by arguing that patent rights are providing incentives for innovation among small industry players and that contrary to some expectations, patent rights support competitiveness in the smartphone industry for small market players.

This is an interesting article - my comments after the jump.

Do Venture Capitalists Value Patents?

This is a simple, but important question. Do venture capitalists value patents? You would think the answer is an easy yes based on survey data, as well as my own findings from the Kauffman Firm Survey that firms with patents are about ten times as likely to have venture capital funding.

But I get pushback on this. See this TechDirt post, for example, called: No, You Don't Need Patents to Raise Money:

While some of them are filing for their own patents, a key point was that their investors definitely didn't require it or push them in that direction.

None said their investors had pushed them to file for patents.

When I speak with people who espouse this view, and tell them of my 10x finding, the response is almost always: "Well, that's just people getting patents after they have money, or IP firms telling them to do it."

So, here we have an apparent conflict between stated preferences and revealed preferences. On my to do list for two or three years now has been a study of all startups, with an examination of who got patents and when. But now I don't have to, because Celia Lerman (a Fulbright Scholar at Stanford, among other things) has done the study, called Patent Strategies of Technology Startups: An Empirical Study:

How does a patent strategy affect a tech startup company’s growth? This is a fundamental question for technology entrepreneurs, investors, lawyers and the innovation system as a whole. In this study, I shed light on this issue by conducting an empirical analysis of the patenting strategies of technology startups, examining the relationship between a company’s patent applications and different events over the company’s life: rounds of investment received, company acquisition and closure. I provide the first comprehensive cross-industry analysis of this question, by analyzing the patent portfolios of United States startups listed in CrunchBase, a crowd-sourced registry of tech companies used by the startup industry. By looking into these companies’ public patent applications from the United States Patent and Trademark Office (USPTO) database between 2008 and 2012, I examine the patenting patterns of startups as they progress through funding rounds.

Through a quantitative analysis, I find that companies based in California tend to patent more than in other states, and that companies that are venture-backed patent more than those who are not. I also unveil that most start-ups that patent file their first application before even receiving any reported funding. Moreover, I find that there is a significant positive relationship between patent protection, and receiving investment and being acquired. I further find that the number of patents (and not merely the fact that a company has patents or not) contributes to higher total funding. I finally observe that patenting early is also associated to higher funding, and that early may be more important for start-ups than what some views in venture capital may predict. I also conclude that while more patents are associated with higher funding, patents account for a relevant but small portion of a company’s success.

The study provides novel insights on startup patenting strategies. It lays empirical groundwork on key circumstances under which patents can contribute to a startup’s growth, to provide important guidance to the legal and entrepreneurial communities.

The study finds that startups patent before their first funding round, from a low of 50% in software, to 64% in IT/Hardware and 67% in medical. It also finds that firms with patents are funded more often and for more money. More discussion on this after the jump.

Patentable Subject Matter and Non-Patent Innovation Incentives

I just posted my symposium essay from U.C. Irvine's Meaning of Myriad Conference: Patentable Subject Matter and Non-Patent Innovation Incentives. Here is the abstract—comments welcome!

In four patentable subject matter cases in the past five Terms, the Supreme Court has reaffirmed the judicially created prohibitions on patenting “abstract ideas” and “nature,” but the boundaries of these exceptions remain highly contested. The dominant justification for these limitations is utilitarian: courts create exemptions in areas where patents are more likely to thwart innovation than to promote it. The resulting debates thus focus on whether patents are needed to provide adequate innovation incentives in disputed fields such as software or genetic research, or whether private incentives such as reputational gains, first-mover advantages, or competitive pressures are sufficient. These debates frequently overlook a significant fact: the absence of patents does not imply that there would be only private incentives. Rather, federal and state governments facilitate financial transfers to researchers through a host of mechanisms—including tax incentives, direct grants and contracts, prizes, and regulatory exclusivity—which already provide substantial research support in the fields where patents are the most controversial.

Paying attention to non-patent incentives could prevent courts from being misled by the concern that a lack of patents for a certain type of invention would remove all incentives for nonobvious and valuable research in that field. Non-patent innovation incentives could also help ease the tension between utilitarian and moral considerations in the current patentable subject matter debates: if many people find patents on certain inventions (such as “human genes”) morally objectionable, utilitarian goals can still be served by using other transfer mechanisms to substitute for the incentive provided by patents. Indeed, non-patent incentives may be more effective than patents in contested areas, where inventors who share moral objections find little incentive in patents, and those who do not still find the patent incentive to be dulled by the persistent uncertainty that has plagued patentable subject matter doctrine in recent years. Wider appreciation of the range of innovation incentives would help bring patentable subject matter discussions in line with the realities of scientific research, and might even make this doctrinal morass more tractable.

Are R&D tax credits the software patent solution?

The Federal Circuit's fractured en banc decision in CLS Bank v. Alice probably pleased only those patent litigators who might benefit from the resulting uncertainty. The case could have provided clear guidance on the "abstract ideas" exception to patent eligibility (and thus the patentability of software), but the court instead issued 7 opinions in 135 pages, with nothing beyond the judgment having the weight of precedent. While there is much to be disappointed in here, I want to highlight a statement on page 12 of Judge Newman's opinion: "No substitute has been devised for the incentive of profit opportunity through market exclusivity."

SCU Software Patent Conference Recap

Friday was Santa Clara's Solutions to the Software Patent Problem conference, which I've previously blogged about, and I was able to follow some of the panels from New Haven via the live stream. Here's a recap, based on the parts I watched online and the detailed #HTLI tweets—thanks to all the tweeters who made this possible!

Keynote #1: What is the Problem?

Richard Stallman said software needs protection from software patents (or "computational idea" patents), and he proposed a safe harbor for software on generally-used computer hardware. The only good computational patent is a dead computational patent, he said. Kent Walker said there is a patent quality problem, a litigation problem (with internet patents litigated nine times more), and a troll problem (90% of cases settle, but when they do go to court, trolls lose 76% of the time, and they cost $29-80B). Patent litigation is a tax on innovation. Walker said we need to stop bad patents from issuing, weed out existing bad patents, and have clearer rules for damages and awarding costs. An attorney from Intellectual Ventures asked, if software patents are such a problem, why doesn't Europe dominate software since they don't patent software? Walker said US dominance came in the 90s before meaningful software patents.

Panel #1: Legal Reform, Part 1

James Bessen said we've had restrictions on patenting abstract ideas since 1972, but money trumps precedent, and lawyers have played word games to get software patents approved. In 2011, the straight legal cost of defending troll suits was $7B, and the deadweight loss from suits was $70B. He proposed adjusting maintenance fees to deter NPEs (i.e., "make pollutors pay" through a Pigovian tax). Colleen Chien explained why TRIPS Article 27 ("patents shall be available ... in all fields of technology") does not prevent industry-specific software patent reform: TRIPS allows exceptions (like our surgical methods and tax strategy exceptions) if they are narrow, well-defined, and don't prejudice legitimate interests. Brian Love proposed a patent term reduction: because most NPE suits are filed at the end of the patent term, even a 3 year reduction would impact 60% of patent troll claims. And while getting a term reduction is not politically feasible, we could effectively do it with higher maintenance fees. Christal Sheppard said Congress can affect patents by simply passing a "Sense of Congress" resolution. The audience poll for "whose solution do you like best?" was close, with Brian Love at 37% and Colleen Chien at 32%.

Panel #2: Agency Reform

Peter Menell argued that the problem is unclear claims and suggested requiring patent applicants to fill out standardized templates to improve patent clarity (and this solution won the audience poll). John Allison said we shouldn't single out software patents and suggested coming up with techniques to make it more costly to game the regulations. Arti Rai said software should learn from bioinformatics and focus on getting rid of patents that don't satisfy written description or definiteness; she thinks the enablement standard is too fuzzy to be useful to examiners. We don't need new law; we just need to enforce 112. Michael Risch said poor examination led to bad patents, but the problem will subside; we just need to tweak the current rules. He noted that coming up with the right obviousness standard is difficult because for software, the hard part is identifying the problem to be solved. He also said that enablement is not a solution: you can't simultaneously claim that everything is obvious and that everything is not enabled. Christina Mulligan noted that even if all the patents are great (satisfying obviousness, 112, etc.), there is still a problem because no one can find the patents they might be infringing. She argued that we should reduce the costs of accidental infringement by (1) having an independent invention defense; (2) making it more difficult for NPEs to recover; and (3) having lower reasonable royalties.

Keynote #2: Views from the Trenches

Caroline Dennison (USPTO) announced that Michelle Lee, formerly of Google, will be the director of the new PTO Silicon Valley office. She also said the PTO will be soliciting comments on improving claim clarity. Hon. Edith Ramirez said the FTC is concerned about use of the ITC as a way of getting around eBay, and that they are urging the ITC to use a public interest test to determine when injunctions are appropriate. They are holding a workshop with the DOJ on December 10 to discuss patent assertion entities (PAEs), which will be available as a webcast. Hon. Paul Grewal emphasized that from a trial judge's perspective, the when of all these questions is as important as the what; he asked folks to consider how different reforms fit into a trial schedule.

Panel #3: Legal Reform, Part 2

Mark Lemley discussed his solution to software patent overclaiming, which I've blogged about previously; he also won the audience poll for this panel. John Duffy (who came in second in the poll) said most of these solutions are software-specific kludges (a characterization Stallman objected to during the Q&A), and that a more elegant solution is to use obviousness to restrict patents based on Graham's inducement standard (only allowing patents on "those inventions which would not be disclosed or devised but for the inducement of a patent"), an idea he and Michael Abramowicz described in their excellent Yale Law Journal article. Ted Sichelman suggested purging patent law of "private law" remedies, arguing that "make-whole" remedies are often unnecessary to incentivize innovation. Samson Vermont said patent law is out of touch with its purpose, which is to optimize the enjoyment of operable inventions, not to promote invention for its own sake. He argued that infringement should be excused when the patentee does not practice the invention, when the infringer is an independent inventor, and when there is a notice failure in the relevant field. Commenter Suzanne Michel of Google said she likes Lemley's idea and that it was also independently invented by someone at Google—another example for his Myth of the Sole Inventor? She also loves Duffy's inducement standard for obviousness. Heidi Keefe argued that clients need to be willing to stick their necks out for legal changes, even if it means waiting for the Supreme Court to reverse the Federal Circuit. She also argued that it is important to explain the ecosystem to jurors, including that high damage awards will come back to them as higher prices.

Panel #4: Self Help

I didn't watch this panel and the tweets were more confusing than for other panels, but it appears that Keith Bergelt discussed defensive publication of prior art, Dan Ravicher discussed public interest lawsuits, Wendy Seltzer discussed royalty-free standards, and Jennifer Urban (who won the audience poll) discussed defensive patenting. Twitter's Benjamin Lee said they've fought every lawsuit over the past six years and haven't paid a cent to an NPE. Brad Burnham of Union Square Ventures said 50% of the companies in his portfolio have been threatened by patents. He said the independent invention defense would have covered every suit they are facing, and Mark Lemley's functional claiming proposal would also help.

Keynote #3

Julie Samuels (who won the poll for favorite keynote and also deserves credit for dubbing the event the #patentprom) emphasized the importance of community building around these proposals, especially post SOPA/PIPA when policymakers are listening to the tech community. Although Congress is nervous about TRIPS, they shouldn't be. Pam Samuelson said there is no silver bullet because there are so many aspects to the patent problem.

More Software Patent Commentary

Software patents are a hot topic these days! Three weeks ago, I posted about Lemley's proposal to fix software patents with functional claiming, and last week I summarized various "software patent solutions" offered by patent scholars at Santa Clara's upcoming conference. Tim Lee wrote for Ars Technica and Forbes about the Federal Circuit's responsibility for the "recent explosion of patent litigation in the software industry," prompting rebuttals from Gene Quinn at IP Watchdog. Then the New York Times ran a front-page article (and NPR had a related interview) describing how "the marketplace for new ideas has been corrupted by software patents used as destructive weapons," prompting another response from Quinn, in which he argued that this "arms race" is exactly what the patent system is meant to encourage.

Software Patent Solutions

Readers who have been following our recent posts on Lemley's software patent solution might be interested in Santa Clara's upcoming conference, Solutions to the Software Patent Problem, on November 16, 2012. Want to know what the speakers have already said about software patents?

More on Lemley and Software Patents

Tan Mau Wu's post yesterday on Mark Lemley's Software Patents and the Return of Functional Claiming questions whether restricting software claims to disclosed implementations will really make a difference. Recent posts by Simon Phipps at InfoWorld and by Mike Masnick at Techdirt have suggested that it would, calling Lemley's proposal "[t]he software patent solution" that will "[f]ix[] software patents."

Lemley: Software Patents and Functional Claiming

Here’s a software claim from a recent Federal Circuit decision (pulled from Patently-O):
1. A data processing system to enable the exchange of an obligation between parties, the system comprising:

a data storage unit having stored therein information about a shadow credit record and shadow debit record for a party, independent from a credit record and debit record maintained by an exchange institution; and

a computer, coupled to said data storage unit, that is configured to (a) receive a transaction; (b) electronically adjust said shadow credit record and/or said shadow debit record in order to effect an exchange obligation arising from said transaction, allowing only those transactions that do not result in a value of said shadow debit record being less than a value of said shadow credit record; and (c) generate an instruction to said exchange institution at the end of a period of time to adjust said credit record and/or said debit record in accordance with the adjustment of said shadow credit record and/or said shadow debit record, wherein said instruction being an irrevocable, time invariant obligation placed on said exchange institution.

Allison, Tiller, Zyontz, & Bligh: Patent Litigation and the Internet

Following State Street Bank and now Bilski, certain Internet business methods remain “patentable subject matter” under Section 101. Given the continued rise of the Internet and its increased role in nearly everyone’s everyday lives, it would be interesting to have a better understanding of how such Internet patents fare in litigation—especially in relation to ordinary patents that bear no relation to the Internet. Recently, a group of researchers, including John Allison of the University of Texas, Emerson Tiller of Northwestern, Samantha Zyontz of George Mason, and Tristan Bligh, published a piece in the Stanford Technology Law Review that continues this worthwhile empirical inquiry. The piece analyzed well over one thousand Internet patents, as well as several thousand non-Internet patents (NIPs).

Titled Patent Litigation and the Internet, their piece raises many intriguing empirical points. The piece generated evidence that Internet patents are far more likely to be litigated than NIPs, suggesting that Internet patent-holders may perceive their patents to have more value than the owners of NIPs perceive their patents. In absolute terms, over 10% of Internet patents were litigated, while only 1.36% of NIPs were litigated.

Great Minds Don’t Always Think Alike: Patent Inflation Sparks Debate Among Scholars

A couple months ago this blog highlighted an intriguing recent article by Jonathan Masur titled Patent Inflation (original post) that presented a model for what the author has observed as a trend of expanding boundaries of patentability. Since that time, Professor Masur’s model of patent inflation has become a hot topic in patent law that has stimulated a hearty debate among three notable patent scholars. Masur’s original article has spawned two thought-provoking responses and a sur-reply. This post summarizes this captivating debate as it is unfolding at the The Yale Law Journal Online.

Allison, Lemley & Walker: Repeat Patent Litigants

Do repeat patent plaintiffs have stronger patents? Are they more likely to settle to prevent these patents from being invalidated? John Allison (UT Austin Business), Mark Lemley (Stanford Law), and Joshua Walker (Lex Machina, Inc.) empirically address these questions in Patent Quality and Settlement Among Repeat Patent Litigants, which was just published in the March issue of the Georgetown Law Journal.

The study was based on the Stanford IP Litigation Clearinghouse, which links all patent suits since 2000 with their corresponding patents (and is "free to academicians, public interest researchers, judges, policymakers, and the media" and run by Lex Machina). The authors compare the 106 patents that were litigated 8 or more times with 343 patents that were litigated only once. Among their findings: