Brief History of Software Patents

Apr 17

Brief History of Software Patents

A patent is a set of exclusive rights granted by a government to an inventor for a fixed period of time in exchange for disclosure of an invention. The patent enables the inventor to exclude others from making, using, selling or importing the invention. (wiki)

History of Patents

Evidence suggests the ancient Greeks were the first society to grant special rights to inventors. Italy awarded the first patent in 1421 and passed the first patent law in 1474.

In America, the early colonies granted a few inventors “monopolies” to produce and sell their inventions starting in 1646. James Madison helped create “The Patent and Copyright Clause” of the US Constitution in 1788:

The Congress shall have power . . . to promote the progress of science and useful arts by securing for limited times to authors and inventors the exclusive right to their respective writing and discoveries.

The U.S. Patent Commission was created in 1790 and run by Secretary of State Thomas Jefferson. It granted the first patent on July 30, 1790 to Samuel Hopkins of Philadelphia for a method of producing potash, an essential ingredient used in making soap, glass and gunpowder. (wiki)

The U.S. Patent and Trademark Office (USPTO) was established in 1903 as one of 15 executive departments of the U.S. government. It is headed by the Secretary of Commerce, who is appointed by the President and confirmed by the Senate. (source)

1970s and Before: No Software Patents

The USPTO originally refused to grant patents for computer software. In the 1970s, the USPTO would deny a patent if the invention “utilized a calculation made by a computer” (source). The rationale was that patents could be granted only for “processes, machines, articles of manufacture, and compositions of matter” and not for “scientific truths or mathematical expressions of it.” The USPTO viewed software as mathematical algorithms–not processes or machines–and hence granted no software patents.

1980s: Software Patentable as Part of Process/Machine

In 1981, the U.S. Supreme Court forced the USPTO to change its position on software patents. Ruling on the case of Diamond v. Diehr, the Supreme Court determined that the execution of a process controlled by software was patentable. In that case, the invention was a method for heating rubber so that it could be “cured.” The novel part of the invention was a computer program that determined the optimum heating times. So even though the only novel feature was software, since it was included in an otherwise patentable invention, the entire invention was ruled patentable. (source)

After 1981, there was great confusion among the USPTO and inventors trying to determine whether each invention was solely a mathematical algorithm or in fact a patentable invention that contained algorithms. What patent attorneys quickly discovered was that software could indeed be patented as long as it was combined with another patentable process or machine, even if the software was the only thing new or novel about the invention.

1990s: Software Patentable

In the early ’90s, the Federal Circuit (one step below the Supreme Court) attempted to clarify this issue and ruled that the invention as a whole should be examined. If the invention is solely a mathematical algorithm (such as converting decimal to binary numbers), then the invention is not patentable. However, if the invention uses algorithms that manipulate concrete, real-world values (such as analyzing seismic measurements to predict earthquakes), then the invention is a process describing those real-world concepts and hence is patentable.

In 1998, the Federal Circuit issued its State Street Bank & Trust v. Signature Financial Group decision, which further clarified the patentability of computer software in the United States. In this case, Signature Financial had obtained a patent on a “Hub and Spoke” method of running mutual funds. State Street Bank asked the court to declare this invention unpatentable as a mere mathematical algorithm or business method. The Federal Circuit rejected the arguments and upheld the patent by explicitly stating that business methods can form patentable subject matter. (source)

Today: Anything Goes

After the State Street decision, there is little doubt that computer software, data structures and business methods are patentable in the United States. As a result, the number of software patents has exploded with over 325,000 registered software patents and more than 40,000 new software patents approved in 2006 alone.

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