In this Weeks Update
Quincy gives an overview of the upcoming ATC events you need to look out for
Norton Rose Fulbright talks about recent developments of patent law
Consero's Bill Klein offers his views on finance and back office administration
Cooper's Catch Up
It's been a while, hasn't it? Between the formation of the ATC Policy Coalition and the intro of our newest team member, Eddie Gamez, ATC is moving full steam ahead.
For the next few weeks, I'll be focused on planning the logistics for our fall and winter events. In addition to the anticipated CEO Summit, this year we're offering a suite of networking and learning opportunities for our members to attend.
First and foremost, our next Sponsor Mingle & Member Happy Hour is scheduled for September 1st at the famous spot, Mean Eyed Cat. Crossover, one of ATC's newest members, is sponsoring and will introduce themselves and the unique services they provide. All members are welcome to join!
Additionally, this year we are hosting a series of events that feature Austin City Council members who are up for re-election, as well as a a handful of broader policy events where we'll discuss the upcoming Mobility Bond. Stay tuned for further details!
Lastly, we are developing a series of events that touches on the importance of diversity in technology. Specifically, we will discuss military women in tech, the cruciality of women in product development roles, and potential solutions for reducing the diversity gap. This series is still in planning stages, so keep an eye out for more info.
Needless to say, we are busy bees around ATC. If you want to know more or have questions about the exciting things we have coming up, feel free to give me a shout. I am always looking to get to know our members.
"If everything seems under control, you're not going fast enough." - Mario Andretti
Recent Developments in the Law of Patent Subject Matter Eligibility
For those working in technological fields, it is almost certain that, at some point, one may need to decide whether to apply for a patent to cover a particular technological innovation. Some members of ATC may be familiar with the novelty and obviousness requirements for patentability. In order to satisfy the novelty requirement, the invention must not have been disclosed to the public before the filing date of the patent application. In order to satisfy the obviousness requirement, the invention must be sufficiently different from the prior art that it would not have been obvious to a person in the field. While there are additional exceptions and intricacies to these rules, these are two of the three key requirements. However, the third requirement of patent subject matter eligibility has become much more important over the past few years. Section 101 of the patent act defines the subject matter that is patentable under the US system. This patentable subject matter includes any new and useful process, machine, manufacture, or composition of matter. There have been many recent decisions by the US Supreme Court and other US courts that have fleshed out this definition of patentable subject matter, which has resulted in an increased number of patent applications being rejected by the US Patent & Trademark Office (USPTO) and patents being invalidated by various courts.
Judicial Framework for Determining Patentability under Section 101
The courts have recently developed a two-step framework to use when evaluating patent subject matter eligibility. For the first prong of the framework, the courts decide whether the claims of the patent are directed to subject matter listed as patentable in Section 101 (i.e., a process, machine, manufacture, or composition of matter) or if they are directed to a judicial exception (i.e., a law of nature, a natural phenomenon, or an abstract idea). If the claims are not directed to a judicial exception, the claims satisfy Section 101 and the analysis ends. However, if the claims are drawn to one of the judicial exceptions, the courts must proceed to a second prong of the framework. For the second prong of the framework, the courts decide whether the claims of the patent describe “significantly more” than the law of nature, natural phenomenon, or an abstract idea. If the claims of the patent satisfy this prong, they may be considered patentable even if directed to a judicial exception. This framework has affected certain fields of innovation more than others.
1) Software Patents
It is increasingly common for claims directed to software processes to be invalidated under Section 101. In many of these instances, the software processes are first determined to be an abstract idea in the first prong of analysis and then determined to not be “significantly more” in the second prong of analysis. One of the most common pitfalls for software patents is that they claim mere abstract process steps performed on a generic computing device. For example, a patent describing a mobile phone software application that can schedule taxi rides may emphasize benefits such as avoiding cash transactions, increased scheduling options, and specific driver selection. However, the claims may merely describe software steps for instructing the mobile phone processor to perform certain actions. A court may determine that scheduling a taxi ride is an abstract idea and that merely using a mobile phone software application to schedule the taxi ride instead of another medium such as a phone call may not be adequate to be “significantly more” than the abstract idea. Other examples the courts have rejected under this rationale include software that organizes data using mathematical correlations and software that uses categories to organize, store, and transmit data.
However, the courts have been sympathetic to claims that are drawn to software that improves the functioning of a computer itself or software used with a particular, non-generic machine. For example, claims drawn to a software program that enables a computer to perform previously unavailable functions or enables a computer to perform previous functions faster or more efficiently may satisfy the “significantly more” prong. In addition, the courts have also recently been more willing to consider whether software is an abstract idea under the first prong. For example, a patent with claims directed to software steps for configuring a computer memory in accordance with a self-referential table for a computer database may not be an abstract idea because it may define an innovation defined by logical structures and processes rather than physical structures.
2) Business Methods
Claims drawn to business methods may suffer from many of the same issues as software claims described above. Similar to many software claims, the claimed methods are often first determined to be an abstract idea in the first prong of analysis and then determined to not be “significantly more” in the second prong of analysis. However, business methods may be more problematic under this framework because the very crux of the innovation is often using a generic computer to automate an abstract business process. For example, a claim may describe a method that uses a computer to perform a financial transfer transaction, mitigate settlement risk, create an online contractual relationship, or manage a game of bingo or poker. A court may determine that performing a financial transaction is an abstract business method that may have previously been conducted in person at a bank or over the phone with a stockbroker. Therefore, merely performing the financial transaction using a computer may not be patentable under Section 101 even if conducting business in this way may be cheaper or more efficient from a business perspective.
Although the line for patentability for business methods is unclear, the courts have given some guidelines that may increase the likelihood that claims satisfy the “significantly more” prong. One guideline is to draft the claims and specification in such a way as to specifically highlight how the business method is performed on a particular machine and how it is different than prior processes. Another guideline is to make sure specific claim elements highlight the technical advantages of the described invention over conventional methods. A well-drafted specification presenting specific technical details and advantages of the invention is also essential to increase the odds that business method claims will be upheld by the courts.
3) Life Sciences
Claims drawn to life sciences innovation may be particularly problematic under this framework due to difficulties with both the first and second prongs. Because life sciences innovation may be closely related to natural phenomena such as biological and chemical processes, DNA, or genes, patent claims describing life sciences inventions may have difficulty satisfying the first prong. For example, courts have invalidated claims directed to an isolated DNA, a chemical principle defining a union between fatty biological elements and water, and a biological correlation resulting when a certain compound is metabolized by the body.
Many life sciences innovations have the same difficulty satisfying the second prong as discussed above for software and business methods; claims must describe “significantly more” than a general abstract idea implemented by a generic computer. For example, claims directed to a method of diagnosing a disease or condition or a method of administering a treatment using a computer may not be patentable over a doctor or nurse performing the same methods without the computer.
Life sciences innovation may also have the unique problem of overlapping both the first and second prongs. For example, a claim directed to a method for administering a drug treatment using a computer may theoretically be able to sufficiently describe the technical details and advantages of the invention to satisfy the “significantly more” second prong. However, if the drug treatment is administered based on the detection of a naturally existing biological element such as a hormone, a protein, or the like, the court may not even consider the second prong based on a finding that the claim fails to satisfy the first prong as directed to a natural phenomenon.
Recent developments in the law of patent subject matter eligibility have made it increasingly difficult to obtain and defend patents in the fields of software, business methods, and life sciences. Because these fields may increasingly overlap with the innovative fields of small/medium-sized businesses and start-ups, consulting patent counsel is crucial when making business decisions relating to intellectual property. It is important to understand that while a particular innovation may be the foundation of a business plan and provide important market share and revenue to a business, it may be challenging to obtain patent protection for the innovation for the reasons discussed above. The intellectual property attorneys at Norton Rose Fulbright US LLP have a vast amount of experience in these matters and welcome the opportunity to help ATC members navigate these challenges.
By Eric J. Wendler – Associate, Norton Rose Fulbright US LLP
Does Your Finance and Accounting Drive Growth and Profitability?
Most small businesses do not understand what finance should be giving them. It’s that lack of understanding that paints a negative image in their mind of a necessary evil. They know they have to invoice the customer, pay vendors and get information to their CPA or accountant. Unfortunately, they see no value in spending time on these types of tasks.
The finance department should be giving information to the business to helps them operate better. It’s that deeper understanding and forward-thinking, proactive approach that provides real value … giving small businesses insight into what drives their business and helping them understand their financial position at any time.
In this video, Bill Klein, President of Consero Global, offers his views on finance and back office administration.