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The President's Executive Action Addressing Overbroad Functional Claiming ~pj
Thursday, June 06 2013 @ 08:59 PM EDT

When President Obama announced several moves he's intending to make to address the patent mess trolls have made, the biggest news was that he said out loud that it's a mess, that patent trolls are damaging the US economy. I've been reading what others have written about the announcement, and reactions have varied. Those who adore patents are calling for their smelling salts. The head of Intellectual Ventures, I read the other day, wonders why people don't realize patent trolls like IV contribute to the economy. He didn't say the word trolls, but now that the President has, I guess we are all free to do so too. And some cynics say the Congress won't do anything anyhow.

That part is likely true, unless a lot of folks contact their representative and raise the roof. But I thought I'd explain why it doesn't matter, even if Congress proves the cynics right. Because one executive action on the list has the capability to make a real difference, and it doesn't require Congressional approval or action at all. That's the beauty of executive actions.

The President has absorbed and accepted Professor Mark Lemley's suggestion that the USPTO look at functional claims more closely and make sure patent applications are for something specific, not claiming broad functions instead of specific implementations.

You can't build a better mousetrap if someone has already gotten a patent on "trapping mice", regardless of how or what device is used.

The President is a lawyer, after all. So it's not a total surprise that he understands what Lemley wrote. Here's the paper [PDF], if you'd like to read it for yourself. And here's Professor Lemley tweeting that he noticed that the President's suggestions included one about functional claiming.

Here's a snip from Professor Lemley's paper, detailing the problem:

Patent law purports to promote innovation by giving inventors the exclusive right to their inventions. In fact, however, modern patent law pays far less attention to what the patentee actually invented than to the patent “claims” – the legal definition of the scope of the patent drafted by lawyers. And lawyers have a natural tendency to broaden those claims as much as possible in order to secure the strongest possible rights for their clients. The result, particularly in the software and Internet industries, has been a proliferation of patents with extremely broad claims, purporting to own everything from international electronic commerce to video on demand to emoticons to means of hedging commodity risk....

Functional claiming is back. While experienced patent lawyers today generally avoid writing their patent claims in means‐plus‐function format, software patentees have increasingly been claiming to own the function of their program itself, not merely the particular way they achieved that goal. Both because of the nature of computer programming and because of the way the means‐plus‐function claim rules have been interpreted by the Federal Circuit, those patentees have been able to write those broad functional claims without being subject to the limitations of section 112(f). They have regained the ability to claim ownership not of what they built, but of what it does. They claim to own the function itself.

It is broad functional claiming of software inventions that is arguably responsible for most of the well‐recognized problems with software patents.

Of course, you can defend yourself in court if you have megabucks to spare, but good luck with that if you are a small company. The result, Lemley wrote is a patent thicket of claims that cover such a broad swath they can be used to go after anyone for anything. It is unique to software. In no other area are such broad claims accepted by the USPTO, he said. And the result is, patents become a block against innovation instead of an encouragement.

CCIA patent counsel Matt Levy commented on the executive action regarding functional claiming and explained it like this:

The most important order, and perhaps the most difficult to understand, is the Executive Order "Tightening Functional Claiming." This could help disarm some future trolls by staunching the flow of new overly broad software patents.

A patent "claims" an invention, which means that no one is allowed to make or use the invention without the patent owner's permission. A patent claim is the part of the patent that describes the invention, and it has to be clear and accurate. But a big problem with many software patents is that the claims only describe the features of the invention in broad terms instead of what the inventor actually did. That's how we get patents that cover the idea of backing up your computer over a network, which was the patent that NPR covered in "When Patents Attack!" It's like claiming the idea of an automobile when all you built was a go-cart. The President’s executive action should prevent trolls from running over businesses by claiming their patent covers wheeled personal transportation when all they invented was a go cart.

I have another real-life example for you from NPR's This American Life, When Patents Attack, Part 2. The transcript is available now, and look at this tragedy:

Laura Sydell: Not long ago, I was at a meeting in San Francisco put on by the Electronic Frontier Foundation, an advocacy group that's been critical of the patent system. It was an open meeting. And this guy you hear talking, Nick Desaulniers, had decided on the spur of the moment to drop in. And after hearing a couple of other people tell their stories, he got up to tell his.

He's an engineer. And his father's death had spurred him to invent a low-cost heart monitor, which he believed might have saved his dad's life. He developed a prototype in a graduate school class. And he'd started dreaming a bit.

Nick Desaulniers: You know, I got really excited about it. And I was thinking, maybe I can make a business out of this. My grandfather started his own business.

My father made his own business. I need to make my own business someday. So this was something I was really thinking, like, hey, I can make a business out of this.

Laura Sydell: But then he started a patent search to see if anyone else had come up with something resembling his idea already.

Nick Desaulniers: I was horrified at how generic some of the patents were-- "a system for remotely monitoring physiological signals." What the hell does that mean? There are so many ways, so many variables.

How are you getting the data from point A to point B? There are so many ways to do that. And this patent, it covers-- I guess it covers them all.

And seeing some of the numbers that these companies are going back and forth suing each other for, I'm terrified to create a business because of the patent system. I'm horrified. And I'm scared.

And I'm not going to create a business because of it. So however many jobs I could have created or however many lives I could have saved, that's it. Man ...


Alex Blumberg: And that is the current state of things. Something as dry as the US patent system can move somebody to tears.

A patent that covers all ways of getting data from point A to point B is too broad. That's obvious to you and me. But not to USPTO examiners sometimes. So, that's the point of the retraining, to make sure it *is* clear to examiners.

Now do you understand the damage that software developers have been telling the world about here on Groklaw for a decade? It's real. They can't do *any*thing any more without risking getting sued. And that also explains why the smartphone patent wars are so inconclusive and confusing and ridiculous. First Apple accuses Samsung of being a copycat and being guilty of infringing its design and utility patents. It wins in a US court, although it failed to get an injunction, but it lost in the UK and had to post a public apology. Then Samsung gets an injunction against Apple for infringing one of Samsung's patents at the ITC.

Who's the copycat now?

You want to know the real answer? -- Nobody. Or depending on how you look at it, everybody. Too many patents have issued. Too many bad patents have issued. And no one can do a thing in software development now without infringing somebody's patents.

Here's how the President's Executive Office report, "Patent Assertion and U.S. Innovation," described functional claiming abuse:

An additional reason that the issue of overbroad patents is particularly salient in software is due to the prevalence of “functional claiming” in these patent classes (Lemley 2012). A claim term is “functional” when it recites a feature by “what it does rather than by what it is” (In re Swinehart 1971).4 Functional claiming involves claiming exclusive rights over any device that performs a given function, regardless of how that function is performed.

Functional language can therefore lead to very broad and/or vague claims. These problems are especially acute for software patents. For these patents, it has been argued that the code is the function, with the implication that a software patent arguably excludes any other code that performs that same function. In contrast, in pharmaceuticals, the distinction between a function and the means used to perform that function is generally clear. For example, several patents have been awarded for the function of reducing cholesterol; each patent covers a different chemical compound—a different means of providing that function.

Compounding the problem is the fast-moving, interdependent nature of technical change in the software industry. Functional claims can be used to ‘over-assert’ a patent by attempting to cover products and processes that were never contemplated by the inventor or the examiner as being within the claim scope at the time of the invention. For example, a patent claim about a programmed processor could be asserted broadly to cover any and all devices that achieve the claimed result, rather than being limited to a device programmed with the specific software used by the inventor.

In addition, a single piece of software or website might have several thousand “functions” that could be claimed in as many patents. It is also difficult for an outsider to judge what an inventor meant by a claim and to know what sort of invention would be “obvious” to a skilled practitioner and thus unworthy of a patent. For example, in the case discussed earlier, the appeals court had to consider detailed features of twenty-year-old technologies to determine whether the shopping basket patents in fact made novel claims.

Thus, it can be very difficult to know if one is infringing patents. These broad, functionally-defined, and intertwined patents are therefore a key part of the PAE business model. These intermediaries acquire broad patents and threaten suit, in hopes of extracting settlements. If even one patent in a complex product is held to be infringed, the product cannot be legally sold (Lemley and Shapiro, 2005). This situation can lead to problems for practicing firms both large (note that a single smartphone may read on over 100,000 patents) and small (the basis of the demand letters discussed in the examples above is the alleged interaction between components of a computer network found in most offices). The stakes are particularly high when the venue for an infringement dispute is the U.S. International Trade Commission (ITC), given the ITC’s inability to award damages and reliance instead on exclusion orders barring import of products deemed infringing into the United States.

4 For example, functional language is often used to add further description to a structure or step, e.g., a claim may recite a conical spout (a structure) that allows several kernels of popped popcorn to pass through at the same time (a function). In re Schreiber, 128 F.3d 1473, 1478(Fed. Cir. 1997).

These days even end users, like some small restaurant in Podunk, USA, are getting letters from trolls claiming that because their customers are allowed to use the restaurant's WiFi, the restaurant owner owes the troll money. Any WiFi. All WiFi. No matter how it works. The restaurant didn't invent WiFi or do anything but buy a WiFi router and let the customers use the WiFi.

So, the problem is real. What is the President suggesting? Here are the five executive actions he proposes -- and remember that these are the actions he can take without Congress's approval. The one we really want to focus on is the second one:


Today the Administration is also announcing a number of steps it is taking to help bring about greater transparency to the patent system and level the playing field for innovators. Those steps include:

1. Making “Real Party-in-Interest” the New Default. Patent trolls often set up shell companies to hide their activities and enable their abusive litigation and extraction of settlements. This tactic prevents those facing litigation from knowing the full extent of the patents that their adversaries hold when negotiating settlements, or even knowing connections between multiple trolls. The PTO will begin a rulemaking process to require patent applicants and owners to regularly update ownership information when they are involved in proceedings before the PTO, specifically designating the “ultimate parent entity” in control of the patent or application.

2. Tightening Functional Claiming. The AIA made important improvements to the examination process and overall patent quality, but stakeholders remain concerned about patents with overly broad claims — particularly in the context of software. The PTO will provide new targeted training to its examiners on scrutiny of functional claims and will, over the next six months develop strategies to improve claim clarity, such as by use of glossaries in patent specifications to assist examiners in the software field.

3. Empowering Downstream Users. Patent trolls are increasingly targeting Main Street retailers, consumers and other end-users of products containing patented technology — for instance, for using point-of-sale software or a particular business method. End-users should not be subject to lawsuits for simply using a product as intended, and need an easier way to know their rights before entering into costly litigation or settlement. The PTO will publish new education and outreach materials, including an accessible, plain-English web site offering answers to common questions by those facing demands from a possible troll.

4. Expanding Dedicated Outreach and Study. Challenges to U.S. innovation using tools available in the patent space are particularly dynamic, and require both dedicated attention and meaningful data. Engagement with stakeholders — including patent holders, research institutions, consumer advocates, public interest groups, and the general public — is also an important part of our work moving forward. Roundtables and workshops that the PTO, DOJ, and FTC have held in 2012 have offered invaluable input to this process. We are announcing an expansion of our outreach efforts, including six months of high-profile events across the country to develop new ideas and consensus around updates to patent policies and laws. We are also announcing an expansion of the PTO Edison Scholars Program, which will bring distinguished academic experts to the PTO to develop — and make available to the public — more robust data and research on the issues bearing on abusive litigation.

5. Strengthen Enforcement Process of Exclusion Orders. Once the U.S. International Trade Commission (ITC) finds a violation of Section 337 and issues an exclusion order barring the importation of infringing goods, Customs and Border Protection (CBP) and the ITC are responsible for determining whether imported articles fall within the scope of the exclusion order. Implementing these orders present unique challenges given these shared responsibilities and the complexity of making this determination, particularly in cases in which a technologically sophisticated product such as a smartphone has been successfully redesigned to not fall within the scope of the exclusion order. To address this concern, the U.S. Intellectual Property Enforcement Coordinator will launch an interagency review of existing procedures that CBP and the ITC use to evaluate the scope of exclusion orders and work to ensure the process and standards utilized during exclusion order enforcement activities are transparent, effective, and efficient.

Number 1 means that operators like Intellectual Ventures won't be able to hide behind shells any more. New applicants will have to reveal who the real owner is, and current owners involved in any proceedings at the USPTO in any process will have to update their ownership information to show the real owner.

Number 3 is addressing the trolls going after end users, like the one sending dunning letters to restaurants letting customers using WiFi.

But it's Number 2 that we are particularly interested in:

The PTO will provide new targeted training to its examiners on scrutiny of functional claims and will, over the next six months develop strategies to improve claim clarity, such as by use of glossaries in patent specifications to assist examiners in the software field.
This means, going forward, that examiners will have to make sure applicants are not getting patents on claims as big as the sky. Will it work? The realistic answer is it can't fail to help.

As you know, I think the real problem is that software is mathematics, which is not patentable subject matter. So no, it won't solve all the issues. I don't think they expect it to, in that there are other suggestions for steps Congress needs to take. And even then, there are remaining issues. But it's a start.

If you look up the patent case mentioned in the patent report in the footnote, In re Schreiber, you'll find a reference to this case from 1971, In re Swinehart, that demonstrates that the problem is not just with patent examiners. Judges too have been enabling broad functional claiming. The problem has partly been, what is "too broad"? Where is the line? If you are a fan of patents and think they are bolstering the economy and encouraging innovation, you aren't going to rule that the line is at the same point as someone who thinks they are destroying the US economy. And judges on the Federal Circuit have historically been the biggest fans of patents anywhere but maybe the patent bar. In fact, in this case, the USPTO tried hard to deny a patent and the court reversed.

However, the functional claiming executive action will still help even with judges. First, the plan is to define terms so that the line is going to be made a lot clearer. Second, what the President said went out to judges too, not just to USPTO examiners, and they are all on notice that the government feels there is a huge problem and that he expects them to do their part against trolls. That made me think about what Judge Posner said in a debate in April, that he likes patent trolls. He called them buccaneers and privateers, and he said he thinks trolls are skillful. I'll guessing he'll think twice before saying that again. At least I hope he will.

Do you remember when one of the justices at the US Supreme Court in a hearing asked if bad patents were really such a big problem? The President has now answered his question with a resounding yes, there is a problem. And he's identified the problem as being functional claims that are too broad. And it's harming America. The harm to the US economy is real, he has told them. Now that the President has said that out loud, what judge is going to feel free to insist on damaging the US economy by approving broad functional claims?

Judge Newman, you're saying under your breath. Kidding. Sort of. She was on that 1971 case, though. And she thought CLS Bank was wrongly decided. *That* stupid patent was good enough for her tastes. But judges seriously are not trying to damage the US economy. That is the last thing they would knowingly do. And the US Supreme Court usually shows deference to agency rules, so the President saying he will set up a new rulemaking process at the USPTO regarding listing real owners resonates.

When implemented, the executive action tightening functional claiming, then, has the advantage that it will keep judges out of the picture, because such patents won't issue in the first place. It would then require an applicant to litigate to try to get a reversal of the USPTO's rejection, and not all can afford to do that, and even when they can and do, not all of them will succeed, particularly now, so at least there should be a real thinning of the ever-expanding patent thicket.

After that happens, hopefully folks will notice that the patent system is *still* a mess and still harming the economy, and maybe then they'll try the real solution, which is to face up to the reality that the courts damaged the US economy when they decided to let software be patented. It was a major mistake, and we are paying for it now.

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