Call +41 71 230 1000 to speak to a Patent or Trademark Practitioner or email us
Background - Software Patentability
A. The Economics:
Economics are what drive the filing of patent applications. Software patents are
used by firms to gain a competitive advantage vis-à-vis competitors in that they represent
a government sanctioned monopoly permitting the patent holder to exclude a competitor
from a lucrative market. The holders of these patents may be entitled to injunctions,
which can stop competition in their tracks, as well as court awarded damages. To a
certain extent, software patents level the playing field. This is evidenced by the victory
of Eolas (a one man company) against the software giant Microsoft.
IBM obtains 1800 patents and $1 Billion each year in royalty income (averaging
$555k per year, per patent). Success stories help spur the growth in software patenting.
Today, in the U.S. alone, there are 20,000 software patents filed each year for a total of
more than 200,000, and, although only 15% of all patents, software inventions represent
25% of the growth in total patent applications filed. Ten years ago, only a few thousand
software applications were filed each year.
B. Legal—International: GATT/TRIPS
In 1995, the World Trade Organization passed the Agreement on Trade-Related
Aspects of Intellectual Property Rights (TRIPS) to reconcile the world’s patent laws by
imposing uniform minimal standards modeled after the laws of industrialized nations.
TRIPS is part of the General Agreement on Tariffs and Trade (GATT), the purpose of
which was to eliminate trade barriers.2 Under TRIPS, signatory countries are required to
make patents available for "any inventions in all fields of technology" (Article 27(1)).
Further, they can’t discriminate against technologies (except, in some respects, in the
field of biotech). This would seem to require the patentability of software, even business
methods, under international law. However, TRIPS is subject to interpretation.
C. Legal--United States
1. Procurement in the U.S.: The issue of the patentability of software and business
methods has been resolved for years
In the United States, the statutory scope of patent protection is defined in the U.S.
Constitution and the Patent Statutes. As far as software protection in the U.S. is
concerned, case law plays a significant role. In 1981, the first major case dealing with
the patentability of software was decided. In Diamond v. Diehr, a mathematical
algorithm of a well-known formula was held patentable when applied in a novel and
inventive way, to cure rubber in a mold. The court in this case emphasized that one must
"look to the invention as a whole" in determining whether an invention is statutory.
Given its long established practice of granting software patents, the U.S. has
developed a body of jurisprudence that makes software patenting more predictable. For
example, as in Diamond v. Diehr, traditional inventions enabled by software are
patentable. Pure software operating on an ordinary computer is patentable. See
Beauregard, Intra. Later cases, such as In re Lowry, defined the scope of protection for
data structures. Even pure business methods are patentable. State Street Bank & Trust
v. Signature Financial Group, Inc held that there is no "business methods" exception,
"instead such claims should be treated like any other process claim, and that
mathematical algorithms are patentable if applied to a practical application yielding a
"useful, concrete and tangible result"
2. Enforcement in the U.S.:
In the United States, there is one harmonized body of jurisprudence for patent
enforcement: the case law of the Federal Circuit Court of Appeals. The Federal Circuit
was formed in 1982 to bring a greater degree of predictability to the resolution of patent
appeals. This effort appears to have been successful. The number of cases upholding
patent validity has increased, with the result being an increase in the number of patent
cases brought and an increase in reliance upon patent protection by technology based
1. Procurement in Europe:
The European Patent Convention (the "EPC") and the rules of practice of the
European Patent Office (the "EPO") govern European patent practice, including
Jurisprudence as to statutory subject matter.
NEXT: Flavors and the cutoff point