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jerbl

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Does the Patent System Need an Overhaul?

I have an argument paper that is coming up, if you are wondering why I am stockpiling some information, if anybody likes reading about some of the things that are going to stifle our tech industry, this is it. 

jerbl

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Re: Does the Patent System Need an Overhaul?

Innovation and Its Discontents:
How Our Broken Patent System is Endangering Innovation and Progress, and What to Do About It
Adam B. Jaffe and Josh Lerner

Cloth | November 2004 | $29.95 / ?18.95 | ISBN: 0-691-11725-X
256 pp. | 6 x 9 | 14 line illus.

Shopping Cart | Endorsements
Introduction [HTML] or [PDF format]

The United States patent system has become sand rather than lubricant in the wheels of American progress. Such is the premise behind this provocative and timely book by two of the nation's leading experts on patents and economic innovation.

Innovation and Its Discontents tells the story of how recent changes in patenting--an institutional process that was created to nurture innovation--have wreaked havoc on innovators, businesses, and economic productivity. Jaffe and Lerner, who have spent the past two decades studying the patent system, show how legal changes initiated in the 1980s converted the system from a stimulator of innovation to a creator of litigation and uncertainty that threatens the innovation process itself.

In one telling vignette, Jaffe and Lerner cite a patent litigation campaign brought by a a semi-conductor chip designer that claims control of an entire category of computer memory chips. The firm's claims are based on a modest 15-year old invention, whose scope and influenced were broadened by secretly manipulating an industry-wide cooperative standard-setting body.

Such cases are largely the result of two changes in the patent climate, Jaffe and Lerner contend. First, new laws have made it easier for businesses and inventors to secure patents on products of all kinds, and second, the laws have tilted the table to favor patent holders, no matter how tenuous their claims.

After analyzing the economic incentives created by the current policies, Jaffe and Lerner suggest a three-pronged solution for restoring the patent system: create incentives to motivate parties who have information about the novelty of a patent; provide multiple levels of patent review; and replace juries with judges and special masters to preside over certain aspects of infringement cases.

Well-argued and engagingly written, Innovation and Its Discontents offers a fresh approach for enhancing both the nation's creativity and its economic growth.

Adam B. Jaffe is Professor of Economics and Dean of Arts and Sciences at Brandeis University. He is the author, with Manuel Trajtenberg, of Patents, Citations, and Innovations: A Window on the Knowledge Economy. Josh Lerner is Jacob H. Schiff professor of Investment Banking at Harvard Business School, with a joint appointment in the Finance and the Entrepreneurial Management Units. His books include The Money of Invention.

Endorsements:

"Jaffe and Lerner's arguments are persuasive and their recommendations sensible. The book makes a very significant contribution to the current debates on patent policy."--Bronwyn Hall, University of California, Berkeley

"This is a valuable and timely book by two highly regarded experts in the field. It is an extremely well-written and well argued work that shows how the patent system has evolved in disturbing ways over the past two decades."--Brian Kahin, University of Michigan

"Patents are at the heart of the process of economic growth, and the process is suffering from a powerful form of cardiac disease. This fascinating book provides an illuminating diagnosis as well as compelling therapy. Its findings have towering importance, not just for lawyers and economists, but for the future standard of living of us all."--Peter L. Bernstein, author of Against the Gods: The Remarkable Story of Risk

Subject Areas:

Economics
Political Science and International Relations
Law

jerbl

Member

Re: Does the Patent System Need an Overhaul?

Kodak Wins Java Lawsuit Against Sun
Sunday, October 03 2004 @ 07:16 AM EDT

Here's a truly disgusting story. Kodak bought some patents from Wang in 1997. The patents cover a method by which a program can "ask for help" from another application to carry out certain functions, which is more or less what Java does. Kodak's business is suffering from the digital revolution, so it decided to sue Sun for infringing its purchased patents. It claims that Sun pilfered its technology. The two companies worked on some joint projects together at one time that involved the same technology at issue in the lawsuit, which Sun argued was an indication of Kodak's implied consent.

Friday, Kodak won, thanks to a patent system spinning out of control, one that is destroying creativity and innovation in the software industry.

Software has not always been covered by patent law, and it's not a statute that made it happen, but a case decision. That means it can change back. Case law is changed by someone bringing a case that makes it obvious to the court that change is needed. Somebody needs to do something about this problem, before it becomes impossible for anyone to write software unless they have a pile of billions on hand to pay out in case they get sued for patent infringement.

This case is Exhibit A. Sun, for all its faults, developed Java. Sun is a tech company that cares about excellence, and they have put their heart and soul into developing Java. A community formed around Java too, and many, many individuals also contributed to its development.

Kodak now says it will seek, in the damages part of the trial, $1.06 billion in past royalties, which they calculate represents *half* of Sun's operating profit from the sales of computer servers and storage equipment between January 1998 and June 2001. Why do they feel that is fair? Because Java provides "the engine for such computer equipment". Puh-lease. This is their workaround. You can download Java free, so I gather they wish to grab their royalties loot from Sun's hardware sales instead. I would expect them to also try to work out some kind of ongoing royalty deal as well, until the patent runs out. What kind of an upside-down, irrational Alice-in-Wonderland world do we live in, where such a result is possible?

Sun says it will put on "a vigorous defense" in the damages section of the trial, but what good will that do? I have no doubt they put on a vigorous defense in the part of the trial they just lost, too. The system is broken, and the sooner people realize that, the better. Patents and software don't mix well. The court that married them made a mistake. Software and patents need to get a divorce, so each can get on with its life in peace.

Europe. Are you watching? Is this system what you want where you live? If you think you can have a patent system and just work around US "excesses", think again. If you read this history of patents in the US by Bitlaw, you will see that it started small here too, and everyone tried to make the kinds of distinctions you currently are trying to craft in Europe. But look at the results here. The same thing will happen to you, if you allow patents at all on software. The excesses are part of the system as it is eventually applied by greedy individuals and companies, and you can't legislate against greedy gaming of a system. It happens.

Think about it carefully, because this is exactly what happens when you adopt a system that rewards the Kodaks of the world for such behavior and penalizes Sun for years and years of expense and sweat and toil and creativity by robbing them of their due reward, not to mention removing any motive to ever do such innovative things again as long as they live. What happens now to Sun's Java Desktop? It was supposed to be a cost-saving alternative to Windows. I wasn't planning on using it, for other reasons, but some would. Now what? What impact will this decision have on the costs of that system? I don't even want to start to think about the implications of this decision for the rest of us. Can Java go open source now, before the patent runs out? That may be sooner than Sun intended to open source it anyway, but the point is, now their code is burdened with patents and the associated costs and restrictions, and Sun doesn't even own or control the patents.

Seriously, folks. Software patents will destroy the industry in the US. The rest of the world will out-innovate US companies, because they won't be running with the patent ball-and-chain attached to their ankles, holding them back. Protect your software with copyright and trade secrets, but using patents for software inevitably blocks progress. If you must have it, rope it off severely so it doesn't hurt anyone like this. At a minimum, patents that aren't actively being used by the patent holder in any way in any product shouldn't be available as a weapon against a company actively bringing an idea to fruition and use. And FOSS, which is developed by individuals, not just companies, needs to be given special consideration so it can continue to be developed at all.

Here's why software and patents don't belong together. For one thing, patents protect *ideas*, not their application. There just aren't enough ways to do fundamental tasks in software to make patents a good fit. Software is math. How many ways are there to say 1+1=2? A couple of years ago, there was a discussion about software patents on Slashdot, and someone with the handle Lonath left this insightful comment, which I edited slightly for language, as indicated by brackets:

    "The main issue (IMO) is that people don't get math. Since they say you can't patent an abstract algorithm, but you can patent a mathematical algorithm if it's useful, you're saying that the same thing is both patentable and not patentable. The reason people think this way is that they think word problems aren't math problems. So, when you start giving numbers in algorithms real-word meaning, people get that confused GW Bush look and start fumbling around thinking that because the math has some real-world meaning given to it, it's somehow different than abstract math. Which is [absolutely incorrect]. What we need is to send people back to elementary school so that they can learn that when you solve an abstract math problem, then you give the numbers real-world meaning in a word problem, you don't change the problem."

It's a comment I hope Europeans think carefully about, as some try to fashion a patent system that isn't a patent system.

Another reason software and patents don't belong together is because software is more complex than a cotton gin or whatever else you might typically invent in a bricks and mortar world. Here's how The League for Programming Freedom expressed it in a submission to the Patent Office:

    "This capacity for complexity is a great strength because it permits the creation of highly sophisticated products. But it also means that most products, simply by their very complexity, are dependent on a vast range of software technologies.

    "In most other industries, a product will contain perhaps twenty parts. In the case of sophisticated consumer goods, such as video cameras, we could raise this to 1000 parts. Nevertheless, the constraints of the real world ensure that the complexity of the product cannot become too great. Software, however, is essentially free from these constraints. A major computer program can comprise anywhere from 100,000 to 10 million lines of code. In most other industries a product will involve technologies covered by just a few patents. In the software industry, a product can contain thousands of inventions, any of which might be patented.

    "For instance, even when buying something as mundane as a word processor, you might be able to choose between a word processor with built-in spelling checker, ability to format multi-column text, and an outline editor; a word processor with proportional fonts, an equation editor, and kanji capabilities; and a word processor that has style sheets, a page previewer, and document interchange facilities. And this is only the start. When you look closely you will find that each word processor actually incorporates thousands of different user visible features. Tens of thousands more features exist inside that are visible only by a programmer. The total number of features contained in something as simple as a word processor is enormous. Thus, patents make the legal risks and expenses associated with developing even well understood software frightening."

The paper also notes that patent searches are harder too, because software is more abstract, so even when you do search, it's hard to know what does and what doesn't infringe:

    "In short, because of their broad coverage and complexity, software patents introduce far more uncertainty than do their non-software cousins. And uncertainty is bad for business. Uncertainty makes it difficult to decide the best strategy to pursue. Which patents might you be in violation of? Will the patent owners take any action? What royalties will they request? Will they sue? Will you be able to get the patent overturned? What damages might be awarded?

    "These are not questions that can be incorporated into the smooth everyday running of a business. They are not questions comparable with concerns about tuning advertising or production inefficiencies. Rather these are issues that can kill products stone dead and destroy companies.

    "The penalties for patent infringement can be severe. The most famous case was Polaroid v. Kodak in which damages amounted to $900 million - with a further $500 million reportedly being spent by Kodak buying cameras back from consumers."

Maybe that experience is what gave Kodak the idea. The sheer number of software programs constantly being developed also makes patent searches an overwhelming task. And how do you research prior art in proprietary software licensed under terms that forbid reverse engineering? There are other reasons too that they list. Software is developed so rapidly a 20-year blockade is impractical; it never wears out, so the traditional argument that patents are needed to stimulate stagnant industries doesn't apply. Patents hold back rapid development, and they are designed to protect mature industries, once the rapid phase is completed, but with software, there is no end to the rapid development, no maturity plateau that can be beneficially protected. As Microsoft has learned, software doesn't wear out. You can run Windows 95 in 2004, if you so choose, and the only motivation to upgrade is if the customer wants innovation, new bells and whistles. So patents aren't needed to encourage invention. Software companies have to invent, because their product never wears out.

Then there is the patent costs to both large and small software companies:

    "The cost of patents is proportional to the development cost because it is the amount of stuff that you actually put in your product that determines how many different patents may be involved. In other industries, production costs dwarf development costs, and so the overhead of the patent system (on the development cost) is a minor component in the entire enterprise. However, in software the entire cost is development, and so the patent system represents an enormous cost to the industry. The auto industry would scream if the government affected production margins by just 1%. The software industry is being progressively slugged with what will be a far greater impediment, but so far has not reacted to the threat coherently.

    "The effect on large companies is that they will have to incorporate the patent process into their software development process, set up bulky legal divisions, get into the business of cultivating defensive patent suites, and perpetually negotiate royalty payments and settle lawsuits. For most big companies that focus on developing software, such action will for a time allow them to survive, for with enough broad and trivial patents in their suite they can threaten virtually anyone who threatens them. But they will also probably encounter companies THAT DO NOT DEVELOP SOFTWARE; that are demanding royalties with the gloves off! Because such companies have a distinct advantage when negotiating royalty licenses, it is likely that corporate evolutionary selection pressures will make them more numerous in the future. . . .

    "The effect of software patents on large companies is bad enough, but to a small company it can be crippling. Large companies may already have a legal infrastructure, but most small companies must rely on the advice of external professionals who charge what seem high rates. Large companies may for a time be able to accept patent lawsuits in their stride, but small companies can be wiped out by a single one - fair or not.

    "For many small companies, the prospect of being sued over a patent infringement EVEN IF THE CASE IS UNGROUNDED AND WOULD ULTIMATELY FAIL is so terrifying, that many companies choose to give all patents they know about a wide berth rather than risk the possibility of any kind of patent challenge. Patents and patent laws are so complex that even an ungrounded lawsuit may take a year to resolve, simply because it may be hard to prove quickly that the other side does not have a case. Meanwhile hundreds of thousands of dollars in legal fees will be spent, crippling the target software company.

    "Thus, whereas most large pharmaceutical and aerospace companies can afford to conduct ongoing patent battles to resolve the scope of various patents, the small players of the software industry cannot. As a result, they will attempt to steer well clear of patents, making the patents even more powerful than they were ever intended to be."

Depressingly, that paper was written in 1999. I am reproducing it because everything it warned about has come true, and since nobody paid any attention back then, it's worth trying again to show, from results, that software patents were a bad idea, and they still are.

So we currently have a system that duplicates the game of Monopoly. You can't figure out in advance if you infringe, so it's like a roll of the dice. If you get caught, you pay millions or billions. Then you look for a victim who can pay you millions or billions, all sides paying through the nose for the cost of suing each other, and around the board everyone goes. This benefits software development how? And the public benefits how? Let's not even talk about free and open source developers, who obviously can't get into this high-stakes game, not having billions to play with. But what about startup proprietary software companies? Can they play this game? The big guys end up stockpiling patents, suing each other, and then cross-licensing, with costs being passed on to the customer. And for what? How is anyone benefitting from this patent cold war?

Look at the results of this case. No company can safely work with any other, unless battalions of lawyers first clear the field of all conceivable IP landmines. Sun has no incentive now develop another Java, that is for sure, and Java itself will now be loaded down with patents. Will Sun be able to continue to let you download it for free? How does the US public benefit from this decision? You tell me.

The solution is obvious. Everybody needs to get rid of their stockpiles of weapons. Declare patents don't cover software, and everybody wins. Except some lawyers, who will then have to find other work. And not a moment too soon.

I hope Sun appeals the verdict, and that it uses this case to demonstrate to the courts that the patent system is fundamentally broken and at a minimum needs to be tweaked.

jerbl

Member

Re: Does the Patent System Need an Overhaul?

Kodak wins Java lawsuit

It returns to court next week to seek $1.06 billion in damages from Sun

Ben Rand
Staff writer

Eastman Kodak Co. will return to U.S. District Court next week to seek $1 billion in damages from Sun Microsystems Inc. now that a federal jury has ruled in its favor in a dispute over the Java computer language.

The jury decided in Rochester on Friday that Sun infringed on technology belonging to Kodak when it developed and introduced Java more than a decade ago. The computer language is now used heavily by software developers, on the Internet and in computer schools.

Kodak praised the verdict and said it was part of an aggressive push to convert innovations ? both homegrown and purchased ? into real money. The company over the past several years has been issuing licenses, filing lawsuits, forming spinoff companies and finding other uses for its technologies.

"Kodak has and continues to make substantial technology investments to ensure high-quality products," said Kodak. "We are pleased that the court has validated Kodak's intellectual property rights protecting these valuable innovations."

Rochester's largest employer claimed during a three-week trial that portions of Java infringed on patents Kodak purchased from Wang Laboratories Inc. in late 1997.

The patents describe a method by which a program can "ask for help" from another application to carry out certain computer-oriented functions. That's generally similar to the way Java operates, according to Kodak and other experts.

Ironically, the verdict came a day after Sun introduced a new version of Java. The company and some analysts hailed it as one of the most significant upgrades since Java's introduction a decade ago.

Sun denied Kodak's patent infringement claims. The company argued in court that Java did not infringe on the Kodak patents, and even if it did, the patents were invalid.

The Silicon Valley giant on Friday said it would "put on a vigorous defense" in the next phase of the trial, in which the jury will hear testimony to help it determine how much Kodak should be paid. That phase begins sometime next week.

Kodak in pre-trial documents indicated it would ask for $1.06 billion in lump-sum royalties ? a figure that represents half of Sun's operating profit from the sales of computer servers and storage equipment between January 1998 and June 2001. The argument: Java provides the engine for such computer equipment. Sun executives have publicly estimated that Java is a "key factor in 90 percent of Sun's sales," Kodak said.

The damages phase will likely be sharply litigated, according to a local patent lawyer. "Kodak will (probably) be urging for a broad royalty base and a reasonable royalty, and I'm sure Sun will argue that the use was small and the royalty base should be lower," said Thomas Fitzgerald, a patent lawyer for the past three decades.

He noted that the case is "a big deal" because patents covering software are a relatively recent phenomenon.

"In general, software patents are just coming into vogue," Fitzgerald said.

He said an appeal was likely.

The potential of a sizable verdict doesn't change Kodak's strategic challenges, a local investment professional said. Kodak must continue making progress on its plan to offset declining film sales with new businesses built around digital imaging.

"The money doesn't make you a better company," said Christopher Hayes, chief investment officer of Hayes-Fischer Capital Management Co. in Rochester. "You just hope that it doesn't make them think, 'OK, we can take a rest.' They still have their work cut out for them."

Still, Hayes said, the verdict helps extend an upbeat period for the company. Kodak has boosted profits in each of the last three quarters, is moving faster than expected in integrating acquired companies and has seen its stock price surge about 60 percent in the last 12 months.

"It's finally nice to see the ball rolling after everyone went through a sea of negatives," Hayes said.

brand@democratandchronicle.com

jerbl

Member

Re: Does the Patent System Need an Overhaul?

Dear Congressman / Member of Parliament

I am a programmer, and recent developments relating to software patents have caused me serious concern.

I am intending to write a new program, but due to the restrictions placed on me by software patents I am unsure as to why should I even begin. If I am unable to ensure that I would not be infringing a software patents somewhere which would cripple me due to the potential multi-million dollar lawsuits what incentive do I have? I could develop my new application and then loose everything due to legal fees and penalties if a patent holder decides to sue me in the future.

Therefore I need to know the following: What process should I perform to ensure my program doesn?t infringe on the numerus patents filed around the world?  How am I supposed to protect myself from litigation when I am unable to research which patents, if any, I might be infringing? What is the cost to find out? and how as an individual am I supposed to afford these costs when I am an indovidial/small busness?

How is this system supposed to encourage innovation and development? From everything I have seen all it does is stifles creativity by the many to the benefit of the few large corporations with the financial backing to withstand these costs (especially if they get sued) are the only winners of this system.

Yours faithfully

Concerned Programmer

jerbl

Member

Re: Does the Patent System Need an Overhaul?

September 27, 2004
PATENTS
Does the Patent System Need an Overhaul?
By SABRA CHARTRAND

SINCE 1793, the federal government has issued patents to inventors, giving them exclusive ownership of an idea as well as the right to prevent others from using it. Now some experts argue that achieving those rights stifles innovation.

Two professors conclude in a new book that a couple of unrelated and seemingly innocuous administrative reforms of the patent system have caused a shift away from encouraging innovation in favor of exploiting patents largely for lawsuits.

Josh Lerner and Adam B. Jaffe have written a book with a title: "Innovation and Its Discontents: How Our Broken Patent System is Endangering Innovation and Progress, and What To Do About It," to be published in November by Princeton University Press.

Mr. Lerner, a professor of investment banking at the Harvard Business School, and Mr. Jaffe, a professor of economics at Brandeis University, trace this breakdown to the early 1980's, when a single federal appeals court was established to hear patent lawsuits, replacing 12 regional courts of appeal.

Then in the early 1990's, Congress changed the patent office's financing, so the agency could pay for itself with user fees.

From his home outside Boston, Mr. Lerner last week described the patent system, 20 years after the reforms, as mired in "the land of unintended consequences."

"Again and again in the patent system, we see people set out to do reforms with one thing in mind, but that have quite an unintended effect," he said. "The easier it became to get patents, the more people wanted to apply for them, and that led to a situation where examiners grappled with more patents to review, which led to them being pressed to do quicker reviews and a degradation in quality of patents issued."

The patent agency has often struggled to keep up with the times. In recent years, the agency has confronted entirely new areas like biotechnology, software-related inventions, financial and business methods, Internet-based inventions and other information-technology innovations.

Some of the changes designed to deal with these occurred amid extensive public debate. Others got little attention because they seemed like innocuous administrative reforms - like the ones that made patents easier to get, Mr. Lerner said.

But many of those patents caused a secondary reaction, he added.

"The ability to litigate and expect to get substantial award from litigation increased," Mr. Lerner said. "So as a result we've got somewhat of a vicious cycle. Once you get one firm in an industry beginning a strategy of aggressive patent enforcement, it creates an almost inevitable response - an almost arms-race dynamic - where everyone else in the industry says, 'We better be doing the same thing.' "

He suggested that these changes for the worse occurred because "there's a relatively small group of people in the D.C. patent bar, and they have a very powerful influence on how patent policy gets decided. There is a powerful incentive for them to keep a patent system that is complicated, and one that involves protracted, costly litigation."

Also, Mr. Lerner said, businesses often fail to understand the importance of subtle changes in patent law.

"It is perhaps because of the complexity of patent issues, and because there is no long tradition of work by economists in this area, because a lot of corporations see it as second order relative to tax policy changes, for example, which directly affect their bottom line," he explained. "Patent policy has an indirect affect."

The book lays out a strategy. "Our idea is that three things will potentially make a big difference," Mr. Lerner said. "First of all, this idea which may well have made sense in 19th century of a patent examiner being able to sit and in few hours figure out what a relevant technology is, and then go out and make a decision as to whether a patent should be granted or not, that really doesn't make sense in an era like today.

"Second, to see the patent review process as 'one size fits all' is again a mistake. There has to be way to figure out how to devote more resources to those patent applications which are really the important ones, and less to the unimportant ones."

The two professors say one solution is to get more information into the hands of patent examiners.

"Our recommendation is that we create very real incentives to third parties to contribute information to the patent-examining process," Mr. Lerner said. "There should be one level of review before and after the patent is issued, but within the patent office."

The authors' third remedy is to reverse the trend toward jury trials for patent lawsuits.

"Over the last 30 to 40 years, there has been real replacing of judges by juries," Mr. Lerner said. "Patent disputes by and large tend to be highly technical disputes, and in many cases a lay person without much training in the area is hardly an expert."

The Federal Circuit Court has already divided patent cases into two areas: the interpretation of claims and questions of validity. Judges handle the former, while juries can settle the latter.

"Our argument is that there is no difference between the two, so no clear reason why both questions couldn't be decided by judges," Mr. Lerner said.

But even with these remedies, he said "dramatic change is unlikely until corporations start understanding how some features of the patent system today really affect them."

"And not just understanding from an assistant general counsel in charge of intellectual property, but until it really gets to be an issue at the C.E.O. level," Mr. Lerner added.

"Last year, the Federal Trade Commission came out with a report that raised many of these same issues, but as good as the F.T.C. report was, I can't imagine that a lot of C.E.O.'s are going to be plodding through all the footnotes."

Patents may be viewed on the Web at www.uspto.gov or may be ordered through the mail, by patent number, for $3 from the Patent and Trademark Office, Washington, D.C. 20231.

jerbl

Member

Re: Does the Patent System Need an Overhaul?

The History of Software Patents
The U.S. Patent and Trademark Office historically has been reluctant to grant patents on inventions relating to computer software. In the 1970s, the P.T.O. avoided granting any patent if the invention utilized a calculation made by a computer. Their rationale was that patents could only be granted to processes, machines, articles of manufacture, and compositions of matter. Patents could not be granted to scientific truths or mathematical expressions of it. The P.T.O. viewed computer programs and inventions containing or relating to computer programs as mere mathematical algorithms, and not processes or machines. As such, software related inventions were considered non-statutory (see the BitLaw discussion on patent requirements for further information on the requirement that inventions be statutory).

In the 1980s, the Supreme Court forced the P.T.O. to change its position. The 1981 case of Diamond v. Diehr provided the first instance in which the U.S. Supreme Court ordered the P.T.O. to grant a patent on an invention even though computer software was utilized. In that case, the invention related to a method for determining how rubber should be heated in order to be best "cured." The invention utilized a computer to calculate and control the heating times for the rubber. However, the invention (as defined by the claims) included not only the computer program, but also included steps relating to heating rubber, and removing the rubber from the heat. The Supreme Court stated that in this case, the invention was not merely a mathematical algorithm, but was a process for molding rubber, and hence was patentable. This was true even though the only "novel" feature of this invention was the timing process controlled by the computer.

After 1981, the P.T.O. and inventors were left trying to determine when an invention was merely a mathematical algorithm, and when it was in fact a patentable invention that simply contained a mathematical algorithm. Although lower courts attempted to set forth this distinction in a clear manner, the resulting opinions were generally quite confused. What was clear was that the patentability of a software related invention depended heavily on the claims created by the patent attorney.

In the early 1990s, the Federal Circuit (the highest court for patent matters other than the Supreme Court) tried to clarify when a software related invention was patentable. The court stated that the invention as a whole should be examined. Is the invention in actuality only a mathematical algorithm, such as a computer program designed to convert binary-coded decimal numbers into binary numbers? If so, then the invention is unpatentable. However, if the invention utilizes the computer to manipulate numbers that represent concrete, real world values (such as a program that interprets electrocardiograph signals to predict arrhythmia or a program that analyzes seismic measurements), then the invention is a process relating to those real world concepts and is patentable.

In 1995, the P.T.O. decided it was time to develop guidelines for patent examiners that reflect these recent court decisions. After releasing draft versions of the guidelines for comment, the P.T.O. adopted guidelines for P.T.O. examiners to use to determine when a software related invention is statutory and therefore patentable. These guidelines are analyzed in the next section.