The link between patent law and billy goats

Patents, like bridges, are main draws for trolls.

But while their bridge-dwelling cousins ​​like billy goats, patent trolls have a more expensive appetite for tech companies and their work. Patent trolls drill for cheap intellectual property, then demand loot in the form of royalty payments or legal settlements from companies that actually make things other people buy. This tactic has become so common and so annoyingly effective that some tech companies have started to mimic it with their own patent portfolios.

The prevalence of companies aggressively acquiring and litigating computer-related patents has led to calls for legislative reform. Meanwhile, the status of such patents ranges from perfectly legitimate to semi-absurd. (In one high-profile example, patent owner Jim Logan sued several podcasters, claiming that his 1996 patent on reading magazine articles aloud and distributing them via cassette tape means he has a right to the idea of ​​any syndicated audio content sent directly to the listener.)

Software patents are undoubtedly important, because new and better software innovations have yet to be invented. But “business method” patents are something else. Many business method patents amount to little more than the hypothetical or trivially challenging application of a well-established principle to some aspect of everyday commerce. Patents are supposed to protect genuine inventions, not mere ideas. (Time travel would be nice. Maybe it will patent the idea of ​​using a computer to run a time travel machine.)

For a more immediate example, consider Amazon.com’s “1-Click” ordering system. 1-Click is not just a registered trademark; Amazon also patented the process. At least, he tried to, with varying degrees of success. Europe denied the application for a patent right. The Canadian patent office eventually granted the patent, after being ordered by the courts to re-examine the initial rejection of the patent. The United States granted the patent; when that patent was challenged, Amazon narrowed it down slightly and the patent office re-examined and eventually approved the modified version.

Why the differences between patent offices? It has to do with the nature of what Amazon was seeking to patent. If you think of Amazon as a big department store, 1-Click is the equivalent of letting the customer say, “Charge it to my account and ship it to my house.” Wealthy midwives have been saying it in brick-and-mortar stores for the last 100 years. All 1-Click did was compress and consolidate many existing steps: enter your address, enter your credit card information, review everything, and click confirm. Amazon did not invent cookies (the way such information is stored) and the patent had nothing to do with how the payment was processed. It was simply a matter of eliminating redundant steps.

The idea of ​​optimizing multi-step processes has been around forever. There was a particular movement toward efficiency in business a century ago, spearheaded by Frederick Winslow Taylor, whose disciples included Henry Ford. Taylor’s ideas are credited with leading to the principles of mass production that fueled the industrialization of the early 20th century. Today, efficiency consultants are common in business. In general, they do not create completely new processes. Instead, they look at existing business practices and suggest ways those practices can be carried out more quickly or accurately.

Amazon’s 1-click method simply said, “What if we saved customers’ information when they first entered it, so customers didn’t have to enter the same information all over again?” If that idea is a patentable business process, we have a problem.

The government has decided that it is patentable, at least in the United States. The recently discussed Supreme Court case Alice Corp. v. CLS Bank International indicates that we do indeed have a problem.

In the case it is a claimed invention that serves as a kind of computerized custody system. Corporación Alicia was able to obtain a patent on the system because, although escrow agents are generally not patentable, the computerized component of the system was considered an integral part of the process. CLS Bank arguably infringed Alice Bank’s patent when it also installed a computerized system to track the various transactions that banks conduct with each other throughout the day to prevent either party from promising more than it could deliver.

A trial court invalidated Alice’s patents, saying they represented abstract concepts, which are not eligible for patenting. The Federal Circuit Court of Appeals upheld the trial judge’s decision. However, that appellate decision was divided into seven parts and did not yield a clear majority opinion.

It is unclear whether the Supreme Court will go further than it has in previous intellectual property cases. While many observers expected Alice to be a decision that specifically affected software patents, the arguments seemed to suggest that the Court would focus instead on when, if ever, business method patents are appropriate. In the absence of Congress writing clear rules, the courts must decide where the limits of patent law are located.

Justice Stephen Breyer expressed concern that allowing patents that simply protect the idea of ​​using a computer to do something useful, such as time travel, would divert the system’s focus from fostering genuinely useful innovation.

Experience shows that patents are now broadly issued to cover ideas rather than inventions. Amazon didn’t invent the computer, the mouse, the click, or the credit card. He patented the idea of ​​combining these existing tools more efficiently, an idea that is exactly what business schools have been teaching for decades. While the Supreme Court may not be prepared to effectively ban business method patents, I hope it will at least limit such patents to inventors who develop a genuinely novel idea and a practical way to apply it.

And I will not be at all distressed if the Supreme Court concludes that business methods are ideas, not inventions, and therefore not patentable. It may leave some trolls hungry, but I trust they can find more useful ways to make a living.