Second chance saloon: opposing software patents

The software industry has seen its fair share of innovation, patenting and litigation, yet national regimes remain divided as to what constitutes patentable subject matter in this area. The 2010 US Bilski decision—a case involving a method of hedging risks in commodities trading—held that business methods were patentable, as long as they are not directed at abstract ideas. In Europe, computer-implemented inventions are not patentable unless they make technical contributions or solve technical problems.

Case law governing the patentability of software inventions is fairly new, but one problem afflicting the patents themselves is an age-old issue—overly broad claims. National case law in this area has caused uncertainty, but rapid innovation in the software industry is causing software patents to become old before their time.

Companies want to make their patents as broad as possible so that they can extract their maximum value. It is not uncommon for a competitor to come up with a similar product within a few years of a patent being granted. If these products read on a patent’s claims, the company has a means of challenging for the product’s share of the market.

Post-grant opposition procedures can help to remove or restrict patents that should not have been granted in the form that they were applied for. Patent portfolios are often leveraged to achieve market position through litigation or negotiation, with settlement being more often than not the endgame. But litigating patent portfolio against patent portfolio costs time and money, and is by no means certain. Attacking a patent based on previously unknown prior art, through an opposition, is a focused assault on a company’s livelihood, and it gives a patent office a second chance at examination.

The US

Post-grant oppositions (known as Post Grant Review Proceedings in the pending Leahy- Smith America Invents Act of the US Congress) are expected to be enacted into law later this year. Until then, challengers may pursue existing patent office mechanisms to challenge a US patent. The mechanisms that are currently available in the US are known as ex parte or inter partes re-examination.

"IN DISTRICT COURT, NOT ONLY ARE PATENTS PRESUMED VALID, BUT PROVING OTHERWISE REQUIRES CHALLENGERS TO MEET THE CLEAR AND CONVINCING EVIDENCE STANDARD."

Requests can be filed at any time post-grant, and by anyone. Both systems require the challenger to raise a substantial new question of patentability using at least one prior art patent or printed publication. Scott McKeown, partner in Oblon Spivak McClelland Maier & Neustadt LLP’s patent re-examination and reissue practice, says: “The post-grant system can focus the claims of a weak patent on what they were originally meant to cover.”

It is up to a team of three examiners from the US Patent and Trademark Office’s (USPTO) Central Reexamination Unit to decide whether the prior art submitted raises a substantial question of patentability and allow a patent’s claims to be challenged.

There are a limited range of issues that can withstand the substantial new question requirement for initiating a patent re-examination, according to Steve Baughman, partner in Ropes & Gray LLP’s Washington, DC office. He says: “Subject matter patentability, in other words the Bilski issue, is not a basic issue that can be addressed for original claims in the re-exam. It is not one of the foundations for requesting re-examination.”

A key difference between the ex parte and inter partes systems, other than inter partes only being of any use against patents that were granted after 1999, is the challenger’s participation. Using the ex parte system means that a challenger can only request a re-examination—its active involvement stops there. From then on, ex parte proceedings involve the USPTO and the patent owner. “Challengers are much better off in inter partes proceedings where they can continue to submit rebuttal evidence and arguments,” says McKeown.

But inter partes proceedings are subject to a statutory estoppel that could put some off from using the system. “If you lose in litigation, you cannot use that same prior art to file a later inter partes request, and vice versa,” says McKeown.

It seems that this statutory estoppel exists to prevent re-examination requesters from harassing patent owners. “The legislature is trying to strike a balance between interests in a way that allows a challenge outside of court, but does not overly burden or threaten legitimate patent rights,” says Baughman.

The estoppel is not an issue for challengers that run inter partes re-examinations in parallel with litigation because the re-examination takes a significant amount of time. “Parallel proceedings are a good opportunity to put the patent owner behind the 8-ball and have them making arguments that they otherwise wouldn’t make,” says McKeown.

Re-examination proceedings are subject to a lower evidence standard than an invalidity claim in district court. At the USPTO, patents are not presumed to be valid, and proving invalidity requires challengers to meet a ‘preponderance of the evidence’ standard—the most convincing evidence wins the argument. “These liberal standards apply to the patent owner and it’s got to tackle them head on. To force all of this on the patent owner at a fraction of the cost of litigation is a nice bargain,” says McKeown.

In district court, not only are patents presumed valid, but proving otherwise requires challengers to meet the ‘clear and convincing’ evidence standard. Microsoft recently challenged this difference in its case against software company i4i. In April, Brad Smith, Microsoft’s senior vice president and general counsel, co-authored a blog discussing the issues surrounding the i4i case.

The blog post said: “[B]y requiring patent cases to be adjudicated under a special ‘clear and convincing’ standard even when the Patent Office was unaware of key prior-art evidence, a thumb is placed on the scales of justice. This increases the risk that companies will skate by with a dubious patent, and hold up and tax innovation by others.”

The US Supreme Court disagreed with Microsoft in June. It said that patent validity presumption had “long been a fixture of the common law” and this “presumption encompass[es] not only an allocation of the burden of proof but also an imposition of a heightened standard of proof.” A Microsoft spokesperson declined to comment on the decision.

Baughman says: “Some courts take the view that the agency that granted the patent in the first place—the patent office—should have an opportunity to consider new prior art arguments that it did not address the first time, and whether those new arguments affect the patentability of the invention, so that when the courts are rendering their decisions they have the informed view of the patent office beforehand.”

Europe

Computer-implemented inventions are difficult to patent in Europe, and the European Patent Office’s inter partes administrative opposition procedure is an effective tool for taking them on.

Dr Hans Wegner, partner and European patent attorney at Bardehle Pagenberg, says that about a third of European patents, which provide patent protection for inventions in selected European countries that are signed up to the European Patent Convention, survive the opposition procedure unchanged, a third are restricted in scope and a third are fully revoked. ‘That’s pretty impressive,’ he adds.

Pure business methods are not patentable, says Wegner, and this is a fundamental difference that causes US businesses the most difficulty when filing in Europe. US software patent owners seeking European protection for their business methods often make similar mistakes with their European applications—they do not account for Europe’s ‘technical’ requirement.

"THE PERSON DRAFTING THE FIRST APPLICATION HAS TO BE AWARE THAT THEY HAVE TO CLEARLY CARVE OUT THE TECHNICAL ASPECT OF THE INVENTION IN ORDER TO MAKE IT PATENTABLE IN EUROPE."

Wegner says: “The person drafting the first application has to be aware that they have to clearly carve out the technical aspect of the invention in order to make it patentable in Europe. If they don’t do this and use technical buzzwords like ‘computer’, ‘display’ and ‘processor’, so they make it sound technical without really carving out the technical substance to get it over the patentability hurdle, the application isn’t really going to work at the EPO.”

European patents must be opposed within nine months of a patent being granted. This puts the onus on companies to watch their competitors and be reactive to any patents that they are granted. “Some of our clients receive weekly or monthly reports that let them know what patents their clients are filing for, and if they see something that might be dangerous, they can file an opposition,” says Wegner.

Anyone can file an opposition to a European patent at the EPO. The admissibility standard for accepting oppositions is low—challengers need only explain why a patent should be revoked and submit prior art backing this up. Three examiners handle any one opposition—one of whom may have been involved in the patent’s original examination.

“An EPO opposition is a very valuable procedure for getting dangerous patents revoked and to bring additional prior art to the attention of the examiner which the examiner cannot find,” says Wegner. “It’s impossible for an examiner to find all prior art, and the opposition procedure allows others to bring this to an examiner’s attention. It’s a very cost-efficient, streamlined procedure. The only disadvantage is it takes too long.”

Outside of the nine-month period, European patents have to be opposed in national courts. Depending on the national jurisdiction in which it is being attacked, litigating a European patent can be costly and unpredictable. With a harmonised European patent court still some way off, Wegner would like to see the EPO’s opposition division given the resources it needs to reduce opposition pendency times.

Wegner says: “What is needed is more manpower. It would be perfect if oppositions could be sorted out within a year. Particularly in heavily contested fields like telecommunications where you have many oppositions pending for a number of years. With so much money being involved in those cases it would be nice to get legal certainty at an earlier point in time.”

The opposition procedures in Europe and the US are cost-effective, streamlined alternatives to costly and unpredictable litigation. Software patent owners need to be aware of what the competition is doing at all times—especially in times of rapid technological change and aggressive patent strategies—so that they can file an opposition should the need arise.