By Stephen Hall
Once-in-a-generation patent reform was introduced in our country about five years ago. Similar to many major initiatives, it may have reaped a few unintended consequences as well. Andrei Iancu, current nominee for USPTO Director, has written about one of these consequences that affects certain procedures at the Patent Office. Among his many other writings, he also has written substantively concerning the patentability of software. This post examines Mr. Iancu’s writings on both topics, and offers some thoughts on how his thinking could affect future patent cases.
THE SUBSTANTIVE: WHEN SHOULD SOFTWARE BE PATENTABLE?
There is not and never has been a bright line rule on the patentability of software-based systems. Rather, patentability depends on the nature of the problem the system solves and the extent of the improvements over existing technology present in the solution.
Although most cases addressing the software issue begin by citing the 2014 Alice case by the Supreme Court, Mr. Iancu was a commentator well before Alice. One such article was published in 2010 in the Northwestern Journal of Technology and Intellectual Property. His article notes there are different kinds of software inventions, and they should not be treated the same. One type involves computer processes for “the rearrangement of human, legal, or financial relationships,” which often are referred to as business method patents. Yet another, more favorable type involves computations running on software that produce a useful and practical application.
This is not to say the article calls for all software applications to be patent eligible. Rather, the article’s main premise is that the analysis of inventions that recite computational steps, such as found with software-based systems, “should not generally be lumped in with business methods.”
To understand the key distinction behind Mr. Iancu’s reasoning, it is first helpful to look at why there is an issue with software in the first place. The Patent Act has been interpreted to prohibit the patenting of general principles like laws of nature, abstract ideas and mathematical equations. As Mr. Iancu’s article states, this is why “neither gravity nor the Pythagorean Theorem” would be patent eligible. Instead, it is the useful applications of these general principles which have the potential to be patented.
The article points out, as courts also observe, that doing business on the internet tends to follow general principles that have been around for decades or centuries. Consequently, patenting a general principle, such as managing risk in the commodities trade, could allow someone to unfairly “pre-empt substantially all uses of that fundamental principle.” Conversely, the application of a principle usually is specific and does not preclude other uses of the principle. This distinction between principle and application then serves as a fulcrum for one of the main points of the article. Specifically, “if not all computational algorithms threaten to preempt fundamental principles,” it follows that software-controlled steps should be “on par with any other series of physical acts, so long as the computational process has a practical application ….” To paraphrase, one should not paint with too broad of a brush when it comes to software-based patents.
The article was written several years before Alice and did not address all the nuances of that case or the numerous cases that have followed. Even so, Mr. Iancu’s observations evidence a desire to look for important distinctions and avoid painting with too broad a brush, which itself is a quality that seeks the right balance to resolving important issues. As the final sentence of the article eloquently states, “[t]he software baby, in other words, should not be thrown out with the business method bathwater.”
THE PROCEDURAL: REVIEWS OVER EXISTING PATENTS
Patent reform has allowed a challenger to undertake a new type of proceeding before the Patent Office, called inter partes review (“IPR”). IPR proceeds in two steps: step one determines whether the challenge will be instituted all the way to a substantive adjudication on its validity, while step two is the adjudication itself.
One consequence of patent reform, perhaps unforeseen, was a topic of Mr. Iancu’s 2016 article published in the Journal of the Patent and Trademark Office. Essentially, the article explains why some patents land in a kind of limbo at step one. This is because the Patent Act does not allow any appeal of the IPR decision until after step two. However, at step one, some IPR cases are not instituted – that is, are not allowed to proceed to step two – on the grounds that some of the wording in the claim is not precise or definite enough. In these cases, the grounds have nothing to do with prior art, which is what IPR was set up to address. Rather, the grounds arise from the Patent Act, which requires patent claims to be definite and to particularly point out and distinctly claim the invention.
Suspended between no finding of invalidity, yet with a cloud over the patent nonetheless, owners of these patents find themselves in a kind of no man’s land. But the challenger finds itself there, too. This is because, in many cases, that challenger must defend itself in a lawsuit for patent infringement. Because the result of step one of the IPR is not binding on the courts, nor can it be appealed, the suggestion of possible invalidity based on indefiniteness might mean something to the trial court, or it might mean very little. Thus, in his writings, Mr. Iancu has expressed empathy for the plight of those who are stuck in limbo with this type of ruling.
In his article, Mr. Iancu offered “a new approach” for solving this problem. According to this approach, the parties would be allowed to be heard at step two with respect to definiteness and to have that issue resolved in a final written decision. While the amendments to the Patent Act do not expressly provide for this new and more flexible approach, it is possible that this capability could be added. More importantly, the careful thought to a new approach shows that President Trump’s nominee for Director is willing to think outside of the box, to consider practical implications of the Patent Office’s decisions and to look for solutions when unique situations present themselves.
The USPTO Director’s authority extends to all aspects of granting patent rights and reviewing the validity of existing patents. Also, through the prominence of the position, the Director generally exerts meaningful influence on the judges who decide disputes involving patents. From at least the samples of his writings reviewed here, it would appear that Mr. Iancu’s thoughtful approach to difficult issues will serve our system well. Time will tell, but careful attention to meaningful nuances and distinctions usually benefits everyone.
 Alice Corp. Pty. Ltd. V. CLS Bank Int’l, 134 S.Ct. 2347 (2014).
 MACHINES AND TRANSFORMATIONS: THE PAST, PRESENT, AND FUTURE PATENTABILITY OF SOFTWARE, 8 Nw. J. Tech. & Intell. Prop. 247 (Spring 2010).
 “Whoever invents or discovers any new and useful process, machine, manufacture, or composition of matter, or any new and useful improvement thereof, may obtain a patent therefor, subject to the conditions and requirements of this title.” 35 U.S.C. § 101.
 “The specification shall conclude with one or more claims particularly pointing out and distinctly claiming the subject matter which the inventor or a joint inventor regards as the invention.” 35 U.S.C. § 112(b).
 INDEFINITENESS IN INTER PARTES REVIEW PROCEEDINGS, 98 J. Pat. & Trademark Off. Soc’y 4 (2016).