Watch stocks you care about
The single, easiest way to keep track of all the stocks that matter...
Your own personalized stock watchlist!
It's a 100% FREE Motley Fool service...
The contentious and continually evolving worldwide tech-patent battle took an interesting turn over the weekend. TechCrunch dug up an amicus brief, filed by a number of important tech companies in response to the overly broad "software" patents at issue in obscure Federal Court of Appeals case CLS Bank v. Alice Corp. The amicus brief (a filing that allows outside parties offer information that can help judges make a more informed decision) asks the court to reject vague conceptual patents that simply take obvious ideas and (more or less) add "do this with a computer" to the description, which is essentially a description of the patent at issue.
The tech companies behind the brief are Google (NASDAQ: GOOGL ) , Dell (UNKNOWN: DELL.DL ) , Facebook (NASDAQ: FB ) , Homeaway (UNKNOWN: AWAY.DL ) , Intuit (NASDAQ: INTU ) , Rackspace Hosting (NYSE: RAX ) , Red Hat (NYSE: RHT ) , and Zynga (NASDAQ: ZNGA ) . We'll return to the motivations of these companies in a moment -- they all ultimately have their own self-interests at heart when it comes to patent battles -- after taking a look at some key points raised by the filing:
Bare-bones patents like the one asserted in this case are invalid ... because they claim abstract ideas when used on a computer or over the Internet, without more. Because such patents merely divide an abstract idea into its component parts, the real work comes later, when others undertake the innovative task of developing concrete applications. This is the work that may be eligible for patent protection; merely claiming computer implementation of an abstract idea without reciting a particular means of computer implementation, is not.
Many computer-related patent claims just describe an abstract idea at a high level of generality and say to perform it on a computer or over the Internet. Such barebones claims grant exclusive rights over the abstract idea itself, with no limit on how the idea is implemented. Granting patent protection for such claims would impair, not promote, innovation by conferring exclusive rights on those who have not meaningfully innovated, and thereby penalizing those that do later innovate by blocking or taxing their applications of the abstract idea. The abstractness of computer-related patents bears much of the blame for the extraordinarily high litigation and settlement costs associated with such patents.
Defend the Droid
It shouldn't be surprising that Google would take the lead in this effort. CLS v. Alice hinges on determining whether Alice Corp.'s patent claim to the idea of a computerized financial-transaction closing system, not an actual system Alice Corp. has developed. It's a very broadly realized patent that, if upheld, would create a standard of patent eligibility so vague as to require little beyond "hey, I've got an idea, and I'll add the word 'computer' to it." This is a looser standard than that applied to most of the patents Apple (NASDAQ: AAPL ) has thrown at Google's Android partners, since Apple tends to implement the technology covered by its patents in its devices.
In fact, the standard should be more stringent than that applied to CLS v. Alice, which was initially decided against Alice Corp. in district court, until the Court of Appeals overturned it on broader grounds. The Mayo test is mentioned numerous times in the amicus brief as a practical determination for patent eligibility. Mayo refers to a Supreme Court case that established four "guideposts":
- Adding obvious steps or elements to an existing concept is insufficient to create patentable subject matter.
- General and non-specific steps or elements added to an existing concept, which don't significantly limit the scope of the patent claim, are also insufficient.
- Limiting an idea to a particular technological environment ("it's like that, but on a computer") is also insufficient.
- An idea that fails the machine-or-transformation test -- which requires implementation with a particular machine in a novel way or otherwise requires transforming something from one state to another -- is also insufficient.
In essence, patents should be specifically designed innovations for a particular operating environment that's been set up to work with that patent, in ways that go beyond adapting an existing idea to a different environment. It's worth noting that, on the same day the Google-and-pals amicus brief was filed, the U.S. Patent and Trademark Office issued a preliminary invalidation of a major Apple patent on multi-touch technology. This is the second such invalidation of Apple's software patents, coming on the heels of the USPTO's rejection of the company's rubber-banding scroll patent -- the same one used against Samsung in a billion-dollar patent lawsuit that continues to drag on through appeals.
Software under attack
Google's high-profile Android legal battles are just the most visible cloud in a roiling storm of software lawsuits. Homeaway got caught in a large lawsuit against many tech-focused companies over online messaging patents in July. Many of Homeaway's fellow defendants quickly folded and offered settlements to the patent troll.
Rackspace got hit by its own vague patent-troll lawsuit in September over the technology used by GitHub, a software development site that's hosted on Rackspace servers. The implications of this suit are just as ominous as upholding the validity of Alice Corp.'s patent would be, but that's a subject for a more legally inclined writer to tackle.
Intuit, which offers financial-management software that comes closest to the case at hand, has fended off multiple patent lawsuits over the past few years and may be at risk of infringing Square's credit card-reading hardware patent -- which is, at least, a higher standard of innovation than that found in many software troll patents.
Red Hat, which distributes open-source Linux software, was hit with patent-infringement claims from another Linux developer earlier this year. Red Hat is fighting back with the terms of the general public license that ensures Linux software development remains open-source.
Zynga and Facebook have both come under attack from the same social-gaming patent troll this year, and Yahoo! (NASDAQ: YHOO ) went so far as to sue Facebook for patent infringement before its IPO, although the two parties eventually hugged it out and decided to work together instead. Zynga, in particular, has made itself vulnerable to theft claims by aping the design of any major social-gaming competitor, including Sims Social developer Electronic Arts (NASDAQ: EA ) .
Google and Facebook are hardly the best of buds, but both companies saw the benefit of cooperation to push back against overly broad software patents. The two companies bear similarities beyond just social networks and the ability to help you waste hours of your time. Neither has historically been known for deep patent troves, both are younger companies competing with more well-established software companies, and both rely on free software supported by ad revenue. They're two of the largest and most public examples of the potential "losers" in patent warfare, but many other companies are in similar positions.
On the other hand, Apple has been conspicuously quiet in calls for patent reform, which often have Google bannermen riding in the lead. Neither has Microsoft (NASDAQ: MSFT ) been particularly vocal, but there's little reason it should speak out when the vast majority of Android phones now license Microsoft patents. IBM (NYSE: IBM ) , a giant with a 70,000 -patent-strong hoard, has offered little indication that it wants to get involved in patent reform, beyond applauding the passage of the America Invents Act last year. That act changed the American patent system from "first-to-invent" to "first-to-file," which would appear to benefit patent trolls more than real innovators -- unless those innovators have extensive legal resources, as IBM, Microsoft, and Apple do. IBM currently generates more than $1 billion in annual high-margin revenue from patent licensing, so the current system appears to be working just fine for Big Blue.
Google has done a fine job marshaling other companies to its cause, but as long as the status quo remains acceptable to many companies with massive patent portfolios, it seems unlikely that real patent reform will take place. However, the preliminary invalidation of two dubious Apple patents for simplistic software designs do offer some hope that the USPTO is finally starting to take a harder line against the rampant patent-everything culture that's sprouted in the software industry.
But maybe not. Last month, Apple received a patent for an animated page-turn. Way to innovate, guys.
Facebook's at a huge disadvantage right now when it comes to patent warfare. Can Mark Zuckerberg steer his social network past patent minefields and into new, lucrative opportunities? The Fool's tech analysts have been tracking Facebook since before its IPO, and they've put together a wealth of insight in our exclusive premium Facebook research report. If you're wondering what the future holds for Facebook, you'll find answers in these reports, which are regularly updated as new information becomes available -- click here to subscribe now.