It used to be very difficult to obtain patent protection for software related inventions; patent applications covering software related inventions were typically rejected as "unstatutory." Now, we have a decision from the U.S. Supreme Court specifying that not only is software capable of being patented, certain business methods are capable of being patented as well.
Unstatutory inventions are those which fall within certain classes for which patent statute prohibits issuance of patents. Algorithms are included on the list of unstatutory inventions. In the past, software related inventions were rejected as unstatutory for attempting to patent an algorithm. Software related inventions also frequently received "printed matter" rejections. Merely arranging information on a piece of paper is not considered to be patentable unless the printed matter bears a new and non-obvious functional relationship to the substrate, and software code has been rejected in the past on these grounds.
Various rejections were appealed to the Court of Appeals for the Federal Circuit, which has found many software related inventions to be statutory, and capable of patent protection. For example, claims including an analog to digital converter were found statutory in one case, and claims including a ROM look up table were found statutory in another case. However, the U.S. Patent and Trademark Office interpreted these decisions very narrowly, and continued to reject patent applications covering software related inventions. The Patent Office was most likely to allow a software related application if there was some novel hardware other than the computer itself. Thus, the Patent Office favored inventions relating to control processes, but not inventions involving pure software. Patent attorneys took steps such as disguising an invention as hardware, to try to avoid such rejections.
Because of these difficulties, and controversy about whether software should be capable of patent protection, some companies relied in the past solely on copyright protection and licensing agreements to protect their software. Unfortunately, copyright protection is very weak and can easily be defeated.
During the evolution of patent law, case law eroded the value of copyright protection of software. In addition to the fact that copyright protection does not prevent against independent invention, but requires copying, menu structures have been held to be not capable of copyright protection in an important case between Lotus and Borland.
When asked to compare the difference between copyright and patent protection for his PC spreadsheet program, the inventor of Visi Calc was quoted to state "With a patent the only difference would have been several hundred million dollars."
Procedural and substantive conditions for patent grants vary from one country/region to another. For instance, in some countries, inventions inside the meaning of patent law must have a “technical effect" and software patents are not possible unless there is a hardware improvement. In the U.S. and a few other countries, such requirements do not exist, so that software patents are routinely granted when there is sufficient novelty.
While it is fairly easy to obtain software patents in the U.S., if properly drafted, case law in other countries is less favorable to software patents. For example, it can still be extremely difficult to obtain software patents in Europe, unless there is some improvement in computer performance or other change in the physical world.
It's recommended that you consult a knowledgable patent attorney such as Deepak Malhotra, who specializes in intellectual property or the intellectual property offices of those countries in which you are interested to get protection.
Software patent guidelines, as issued in 1996, made it substantially easier than before to obtain patents on software related inventions.
The software guidelines issued by the U.S. Patent and Trademark Office in 1996 for internal use by Examiners, were very helpful in that they provide instructions to Examiners as to when they must find inventions to be statutory. This was an internal procedure that had to be followed. Patent applications could more easily be drafted to ensure that the software inventions they cover will be considered statutory after these Guidelines were published.
After those Guidelines issued, in the case of State Street Bank v. Signature Financial in 1998, a new, narrower test was announced. The court held that a claimed invention was eligible for protection by a patent in the United States if it involved some practical application and produces a useful, concrete and tangible result. The U.S. Patent and Trademark Office issued new interim Guidelines in 2005 and Examiners were again hostile to software patents.
In 2008, the U.S. Supreme Court rejected the “useful, concrete and tangible result” test in Bilski v. Kappos and we again are seeing liberal allowances of software patents (when novel).
Are you interested in the history of software patents? I prepared a history of selected important cases relating to the patenting of software related inventions: PatentsUSA.BlogSpot.com (a new window will open).
The Supreme Court noted that Section 101 specifies four independent categories of inventions or discoveries that are patent eligible: "process[es]," "machine[es]," "manufactur[es]," and "composition[s] of matter." The Supreme Court noted that they had stated in their earlier decision of Diamond v. Chakrabarty, 447 U.S. 303 that in choosing such expansive terms, Congress plainly contemplated that the patent laws would be given wide scope in order to ensure that ingenuity should receive a liberal encouragement. The Court's precedents provide three specific exceptions to Section 101's broad principles: "laws of nature, physical phenomena, and abstract ideas." While not required by the statutory text, these exceptions are consistent with the notion that a patentable process must be "new and useful." The exceptions have defined the statute's reach going back 150 years.
The Federal Circuit, the Court of Appeals that hears patent cases, had previously used a “machine or transformation” test to consider whether Bilski’s claims were patent-eligible.
However, according to the Supreme Court, the machine-or-transformation test is a useful and important clue for determining whether some claimed inventions are processes under Section 101. But the machine-or-transformation test is not the sole test for deciding whether an invention is a patent-eligible "process." It is true that patents for inventions that did not satisfy the machine-or-transformation test were rarely granted in earlier eras, especially in the Industrial Age, but times change. The machine-or-transformation test would create uncertainty as to the patentability of software, advanced diagnostic medicine techniques, and inventions based on linear programming, data compression, and manipulation of digital signals.
The Supreme Court stated that it was not commenting on the patentability of any particular invention, let alone holding that any of the above-mentioned technologies from the Information Age should or should not receive patent protection.
Section 101 similarly precludes the broad contention that the term "process" categorically excludes business methods. Federal law explicitly contemplates the existence of at least some business method patents. See 35 U.S.C. 273(b)(1).
So while we know that the machine-or-transformation test is not the only test, we also know that if a software invention can be framed as involving a machine or transformation, it is capable of being issued as a software patent.
There is no doubt that software can be protected by patent law. Patents provide strong protection in that they prevent against independent invention, and against reverse engineering.
Software patent applications are typically more complex than patent applications covering mechanical inventions.
Because software inventions are more complex than mechanical inventions, they are obviously more expensive to prepare. If desired, the actual computer code can be included in the application, or appended as a microfilm. The more information that is included, the more likely the application will be valid, but more trade secrets will be lost. If the source code will be generally available, and not kept as a trade secret, it may be advisable to include a microfilm of the code. Otherwise, source code is typically not disclosed in a patent application.