The purpose of this paper is to address some of the unique issues in patent law that have emerged in response to the internet and the need to protect cyberspace inventions. The writer’s goal is to provide the reader with a useful guide to the choices presented in the prosecution of internet and cyberspace patents. In particular this paper will provide an in-depth analysis of the different ways that a cyberspace inventor can define her invention and the advantages and limitations presented by those different choices. In light of the volatility of the law in this area, this paper will also discuss possible changes in patent law that would address its present limitations.

 A. Background of Cyberspace and the Internet
 

The internet is a giant network which interconnects innumerable smaller groups of linked computer networks.[1] It is thus a network of networks.[2] Cyberspace refers to the intangible world in which electronic commerce, electronic communication, and internet networking are used by a society. The worlds more advanced societies have recently entered a cyberspace era. The less advanced societies will soon be following.

 As the world tries to adapt to the cyberspace era, the legal system is being forced to evolve along with society. Repeatedly, the pre-cyberspace legal system is being forced to adapt.[3] Sometimes the old law is just being applied in the new realm of cyberspace.[4] In other situations, new laws are being drafted.[5] In almost all cyberspace legal contexts, the limits of our pre-cyberspace legal system are being tested.[6]

Patent law, like all other pre-cyberspace law, is beginning to evolve as it enters the cyberspace era. For instance, two changes in patent law have recently expanded the doctrine of subject matter eligibility under section 101 of the Patent Act of 1952 (hereafter section 101). The first expansion of the law of subject matter eligibility allows an inventor to patent software by tying the software to a computer readable medium.[7] The second expansion of the law of subject matter eligibility allows an inventor to define and patent an internet or cyberspace invention as a method of doing business.[8]

The two expansions in the law of patent subject matter eligibility present both advantages and limitations to a cyberspace or internet inventor. However, the expansion of the law of subject matter eligibility has come under attack by the public in response to some of the recent internet patents. This paper will address the changes in the law of subject matter eligibility of United States patents and will analyze the advantages and limitations that the new patent laws present to an inventor. This paper will also address the public concerns with regard to the changed law, and will argue that the patent law is well equipped to deal with those concerns.

This section of this paper presents the reader with a very general survey of the law that regulates the prosecution of patent applications in the United States. Its purpose is to provide an adequate background to those not familiar with patent law and to set the stage for the rest of this paper. It is in no way meant to be comprehensive.[9]

Patent law in the United States has constitutional foundations. Article I, section 8, clause 8, of the Constitution gives Congress the power:

In the most general terms, there are three requirements to obtaining a patent in the United States. First, the invention must be shown to be patent eligible.[12] That is, the invention must be subject matter that the lawmakers have determined to be eligible to receive patent protection. Second, to be patentable, an invention must be useful.[13] Finally, to be patentable, an invention must be inventive, specifically meeting the statutory requirements of novelty and non-obviousness.[14]

The eligible subject matter requirement in patent law is found in section 101.[15] Generally, to be "patent eligible", an invention must be defined as a process, a machine, an article of manufacture, or a composition of matter.[16] Although section 101 has been read broadly by the courts, some subject matter was traditionally excluded from eligibility under section 101. For instance, mathematical algorithms and methods of doing business were traditionally excluded from being patent eligible under section 101.[17]

The second requirement for patentability is the "usefulness" requirement. This requirement also finds its support from section 101.[18] The usefulness requirement, however, has been interpreted by the courts as more or less a minimal standard, requiring only that the invention "not be frivolous or injurious to the well being, good policy, or sound morals of society."[19]

The final requirement to patentability is the "inventiveness" requirement found in sections 102 and 103(a) of the Patent act of 1952 (hereafter sections 102 and 103 respectively). Section 102 provides that a patent may not be obtained if the invention has already been described in a document that has been placed in the public domain.[20] Thus, if all of the features of the invention can be found in a "prior-art" reference, the invention is said to be "anticipated" by the prior art, and section 102 bars the invention from being patented. Section 103 provides that a patent may not be obtained if invention would have been "obvious to one with ordinary skill in the art".[21] Showing that an invention is non-obvious is generally the last step in the patenting process, and is often considered the most difficult hurdle for an inventor.[22]

II. The Present Situation on Internet and Cyberspace Patents

The emergence of the cyberspace era has caused more and more companies to seek patent protection on computer inventions. In 1998 alone, 151,024 utility and statutory patents were issued in the United States of America.[23] Compared to 1997, this was a thirty-three percent increase.[24] While the trend reflects growing patent activity in all areas of technology, increased numbers of computer inventions and internet inventions are likely a major cause. Indeed, companies in the computer industry continue to receive more patents every year than companies in other industries. For instance, IBM received more United States patents than any other company for the sixth year in a row in 1998 with 2,657 utility patents.[25] Moreover, several of the other companies that received the most patents were computer companies as well: Canon, NEC, Motorola, Sony, Samsung, Fujitsu, Toshiba, Eastman Kodak, and Hitachi.[26] Moreover, this trend has continued into the present year.[27]

The sheer number of patents issued for computer and cyberspace inventions has caused lawmakers to clarify and evolve the patent law in this area. In 1996, the Patent and Trademark Office issued official Guidelines for Computer Related Inventions.[28] In addition, as the courts began reassessing old doctrines on software inventions, the law changed substantially in the area of software patents.[29] The present Patent and Trademark Office policy is both revolutionary and perhaps subject to continued evolutionary change.[30] In addition, the evolution of the internet itself has changed the way that some companies focus their patent strategies, both in seeking patent protection and in defending or prosecuting patent litigation. Finally, the recent trends on computer patents involving cyberspace and the internet have raised the public concern, and may prompt lawmakers to change the law in this area even more.[31]

In February 1996, United States Patent and Trademark Office adopted Guidelines to assist the patent examiners on the examination process for computer related inventions.[32] These guidelines changed the patent examination procedure for both hardware and software inventions.[33] While the Guidelines were based on the Patent and Trademark Office’s understanding of the binding precedent of the courts at the time they were written, the Guidelines themselves have no legal effect.[34] Nevertheless, they are a good place to begin an analysis of cyberspace inventions because they essentially illustrate which inventions the Patent and Trademark Office considers patentable.

The Guidelines state that the first step in examining a computer related invention is to determine precisely what the applicant is seeking to patent and determine how the patent claims relate to and define that invention.[35] To determine what the applicant has invented, the Guidelines instruct examiners to identify and understand any practical applications of the invention, to review the disclosure and specific embodiments of the invention, and to review the patent claims.[36]

This first step of the Guidelines is a change from the status quo prior to the passing of the Guidelines and is crucial to cyberspace patent protection. Prior to the passing of the Guidelines, the first step in patent examination was to determine whether the claimed invention was simply a mathematical algorithm.[37] Since the mathematical algorithm doctrine precluded patents for inventions relating to software, this change in the Guidelines made patenting cyberspace inventions easier.

The second step in examining a computer related invention under the Guidelines is to conduct a thorough search of the prior art.[38] A thorough search, the Guidelines state, is one that involves reviewing both U.S. and foreign patents and non-patent literature.[39] However, the Guidelines give little instruction as to the extent to which an examiner should go to search for related art.

The cyberspace era has opened an enormous research library to anyone with access to the internet. The internet has tremendous consequences on the accessibility of prior art relating to both cyberspace inventions and any other invention. Anyone with a computer and an internet service provider can access the internet and post information on the internet. The effect is that the internet provides a vast library of information that could potentially be patent-defeating prior art.

Although the patent examiners do perform searches of prior art as mandated by the Guidelines, the workload of the Patent and Trademark Office is such that these searches are often not extensive.[40] Thus the effect of the emergence of the vast internet library on the examination of patents does not appear to be substantial. However, the internet could still be used effectively by defendants in patent litigation to find patent-defeating prior art.

After the examiner has performed a search of the prior art, the Guidelines next mandate that the examiner determine whether the invention is patentable subject matter.[41] Answering this question requires an analysis of Section 101.[42] Under Section 101, an invention must fall into one of four categories --process, machine, manufacture, or composition of matter-- to be considered statutory subject matter. Unlike inventions in other fields and technologies, the patentable subject matter analysis of section 101 can be a very formidable one for internet or cyberspace inventions.[43] The Patent and Trademark office has nevertheless found that certain cyberspace inventions comply with section 101 when defined as methods, processes, or even articles of manufacture.[44]

Once an invention is found to be patentable subject matter under section 101, the Guidelines instruct the patent examiner to evaluate the patent application for compliance with section 112 of the Patent Act of 1952 (hereafter section 112).[45] The examiner usually begins such an analysis by determining whether the claims actually set forth what the inventor regards as her invention, and whether the claims particularly point out and distinctly claim that invention.[46] Next, the examiner must determine whether the patent application has "an adequate written description" and "an enabling disclosure."[47] Although analysis of patentability under section 112 is very important, it raises no unique issues with regard to cyberspace inventions. Therefore, an in-depth analysis of section 112 shall be avoided in this writing.[48]

The final step in examining a computer invention under the Guidelines is to determine whether the claimed invention complies with sections 102 and 103. Patentability under section 102 requires that the invention be novel, i.e., by showing that the invention is not "anticipated" by an earlier invention.[49] Patentability under section 103 requires that the invention be "non-obvious", i.e., by showing that the invention would not have been obvious to a person with "ordinary skill in the art."[50] A showing of novelty and non-obviousness are two of the most important requirements in obtaining a patent in any technology. Indeed, a showing of non-obviousness is the most difficult hurdle for an inventor to overcome in the patenting process.[51] These requirements may be applied more vigorously for internet and cyberspace inventions in the future.[52]

III. Whether a Cyberspace Invention is Statutory Subject Matter in Compliance with Section 101 can be an Important Issue Facing a Cyberspace Inventor.

Historically it has not been very difficult to show that an invention was statutory subject matter in compliance with section 101. The standards set by courts for showing patentable subject matter were quite minimal. Indeed, one court went so far as to make the extremely broad, though perhaps sexist, statement that patentable subject matter included "anything under the sun that is made by man."[53] Nevertheless, several doctrines emerged in the law that would have precluded patenting most cyberspace and internet inventions.

One doctrine which would have greatly limited one’s ability to patent a cyberspace or internet invention was the method of doing business doctrine.[54] This doctrine generally precluded the patenting of any method that was simply a method of doing business. The method of doing business doctrine, however, was rejected by the Court of Appeals for the Federal Circuit in the 1998 State Street decision.[55] In State Street, the court said, "we take this opportunity to lay the ill-founded [business method exception] to rest… business methods [are] subject to the same legal requirements for patentability as applied to any other process or method."[56]

The death of the business method exception marked an important milestone for patenting internet inventions. Before State Street, an internet invention defined as a method of doing cyberspace business that met all requirements for patentability could still be rejected under section 101 as non-statutory subject matter. Now, after State Street, a vast number of previously unpatentable cyberspace ideas and innovations are patentable. However, the public debate over whether internet patents on a methods of doing business over the internet are in the public interest continues to be a hot topic, and therefore, the law in this area may continue to evolve.[57]

A second historical doctrine that would have greatly limited one’s ability to patent a cyberspace or internet invention was the "mathematical algorithm" exception to patentable subject matter. This doctrine emerged after the decision of Diomond v. Diehr, in which the Supreme Court held that laws of nature, natural phenomena, and abstract ideas were unpatentable.[58] However, the mathematical algorithm exception was an evasive doctrine for the courts to apply, and many exceptions to it emerged.[59]

As a result, the "mathematical algorithm" exception to patentable subject matter became less and less robust over the years. In an attempt to test the limits of the exception, IBM filed a patent application in which they attempted to patent a computer program saved on a computer readable medium such as a computer disk or a CD ROM.[60] The Patent and Trademark Office rejected IBM’s patent claims, but later abandoned its arguments and conceded that computer software programs embodied in a tangible medium such as floppy diskettes are patentable subject matter under 35 U.S.C. §101.[61] Then, with the passage of the Examination Guidelines for Computer Related Inventions, the Patent and Trademark Office declared that it would no longer begin the section 101 inquiry by asking whether the invention was merely a mathematical algorithm.[62] Moreover, the Guidelines made it clear that software inventions could be statutory subject matter under section 101.[63]

Today it is well settled that software may be a statutorily claimed invention if the software is tied to a tangible hardware medium such as floppy diskettes or CD ROM.[64] However, the internet poses a potential problem to those who wish to patent software by defining it in terms of the hardware on which it is stored. For instance, there is a possibility that at some future point the same software developed by someone else will not infringe the patented software simply because it is embedded on different hardware of the future. Moreover, a question might arise as to whether selling patented software over the internet instead of selling it via a hardware storage medium is an act of infringement. These issues must be addressed if the patent system we have created is to continue to be robust in the cyberspace future.

As the law stands today, inventors of cyberspace or internet inventions have several choices of how to define their invention in compliance with section 101. For instance, since the business method exception to patentable subject matter has been put to rest, it is now clear that a method of doing business over the internet may be patentable subject matter. Similarly, the erosion of the "mathematical algorithm" exception to patentable subject matter makes it possible to patent internet software. Even further, a claim directed to a manufactured transient phenomenon, such as an electrical, optical, or acoustical signal, may be patentable.[65] Needless to say, before an inventor defines her invention in accordance with any of the choices listed above, the inventor should understand the potential limits of patent protection that correspond to each choice.

The Federal Circuit’s decision in State Street made previously unpatentable "Business methods" patentable subject matter under section 101.[66] As a result, numbers of previously unpatentable cyberspace ideas and innovations are now patentable. On one hand, inventions that claim methods of doing business over the internet can present us with truly unique ideas that were inconceivable prior to the creation of the internet. On the other hand, some internet business method inventions might merely be old methods disguised as new inventions simply because they use the internet. It is this latter issue that has raised the public concern about internet inventions.

One example of an internet patent that has raised the public’s concern is U.S. Patent Number 5,774,870 that was issued to Netcentives Inc. on June 30, 1998.[67] The patent is entitled "Fully Integrated, On-Line Interactive Frequency and Award Redemption Program."[68] It teaches a method of doing business over the internet whereby shoppers who make purchases from merchants affiliated with Netcentives earn rewards for their purchases. By giving their customers rewards for their internet purchases, the company is giving incentives for the customers to continue to shop with Netcentives’ affiliates.

Public concerns have arisen around the Netcentive patent because the patented method of doing business over the internet looks strikingly similar to old methods of doing business that did not use the internet. For instance airline companies have been using similar business methods since American Airlines created the first frequent-flier program in 1981.[69] In addition, credit card companies have frequently given incentives to their card users. The Discover Card, for instance, has advertised for years that it pays you cash incentives back on purchases that you make with their card.[70] Therefore, the public concerns over the Netcentive patent and internet business method patents seem to be well founded, at least at first glance.

Another patent that has raised the public eye of concern is U.S. Patent 5,794,210 that was issued to CyberGold Inc. on August 11, 1998. The CyberGold patent is entitled "Attention Brokerage," and it teaches a system by which a business pays computer users for responding to online ads or surveys.[71] Like the Netcentive patent, the public has shown concern over the CyberGold patent because it looks quite similar to old methods of doing business that existed prior to the internet.[72]

Skeptics in the general public have responded with concern over cyberspace business method patents such as those issued to CyberGold or Netcentive. For instance, one worried organization opined:

Members of the business world have also raised concern about the recently issued cyberpatents. The members of the business world have noted:

Although the Netcentive patent and CyberGold patent raise valid concerns about the patenting of cyberspace business methods, the public outcry against internet business method patents is misguided. The potential problem with the internet patents like those issued to Netcentive and CyberGold is not that the patents cover business methods per se. The problem is that the Netcentive and CyberGold patents cover business methods that may not be new. Since the concerns of the public are misguided, the solutions proposed by the public are inadequate.

Whether Netcentive’s method of giving on-line incentives should have been patentable in light of the airline companies’ prior methods of giving incentives are questions of novelty under section 102 and non-obviousness under section 103.[78] Similarly, the CyberGold patent also raises questions of novelty and non-obviousness. However, the question of whether internet business methods should be patentable subject matter is a question of eligibility under section 101.[79] Just because internet business methods are now patentable subject matter does not affect the analysis of novelty and non-obviousness. Thus, the problem, if there is a problem, with the Netcentive or CyberGold patents may be the fact that the Netcentive or CyberGold patents are not new ideas in compliance with the novelty and non-obvious requirements.

One of the requirements for obtaining a United States patent is the eligibility requirement.[80] The courts have recently extended the eligibility requirement to allow patenting of business methods.[81] Following the change in the law, recent cyberspace patents have been criticized in the public. This criticism incorrectly focuses on patent eligibility as the problem. The real problem with the recently patented internet inventions, if there is a problem, is that the recent patents are not for new inventions.

Notwithstanding the public outcry against business method patents, they appear to be here to stay (at least for the time being). Therefore, claiming an invention as a method of doing business may be the best way for an internet or cyberspace inventor to patent her invention. Indeed, for some internet or cyberspace inventions, it may be the only way to obtain property rights to the invention. Nevertheless, Method patents do have limitations that internet and cyberspace inventors should be aware of.

The most glaring limitation of an internet business method patent is that infringement of the patent will usually occur through an end user. In other words, a patent holder's competitor does not usually infringe an internet business method patent; rather, infringement would usually occur by the actions of the patent holder’s competitor’s customer. While this distinction may seem insignificant at first, it has quite drastic ramifications on the usefulness of an internet business method patent.

For a method claim, there is no infringement unless the accused process substantially follows the patented method and employs all the steps or stages of the patented process.[82] Therefore, since a method of doing business would usually require both a business and its customers, a business method patent would not be infringed until the customer actually does business. However, a patent holder of an internet or cyberspace business method patent would probably not want to sue a competitor's customer because the customer would not have the deep pockets to pay the cost of the alleged infringement. An internet or cyberspace business method patent holder could, however, allege contributory infringement of the patent on these facts against its competitor.

Contributory infringement is defined section 271(c) of the Patent Act of 1952.[83] There can be no contributory infringement, however, in the absence of direct infringement.[84] Moreover, there must be a showing that the alleged contributory infringer had knowledge of the infringement.[85] In addition, some courts have required a showing of intent in contributory infringement cases.[86]

If a business method patent requires a showing of contributory infringement, then business method patents are more difficult to enforce than other patents. A patent holder would first be required to show direct infringement by an end user. In addition, the patent holder must show that the contributory infringer had knowledge and intent to infringe the patent. These hurdles in enforcement of internet business method patents reduce the value of these patents. Needless to say, the issue should be given consideration before an inventor pays the costs of obtaining a business method patent.

Recent changes in the Patent and Trademark Office’s position on software patents have paved the way for patenting internet inventions as an article of manufacture. It is now clear that a cyberspace inventor can define her as an article of manufacture.[87]

Inventors can claim software improvements to the internet by defining the software invention as being tied to a computer readable medium.[88] Such patent claims are called "Beauregard Claims". They have been accepted by the Patent and Trademark Office as statutory subject matter because the software is tied to an article of manufacture (i.e. the computer readable medium).[89] Since a tremendous amount of innovation can be achieved in cyberspace via improving and developing software, these "Beauregard Claims" give cyberspace inventors a very useful tool in the quest for internet or cyberspace patents. However, "Beauregard Claims" have several potential drawbacks as well.

One potential problem with "Beauregard Claims" is the fact that the status of future of hardware is unknown. Thus, a cyberspace software invention defined in terms of the hardware on which it is stored may not provide adequate protection if the future hardware proves to be completely different than the present hardware. If this does prove to be the case, a problem could arise that future software that performs the same function as the patented software might not infringe the "Beauregard Claim" simply because the future software is embedded on future hardware.

Another potential problem with "Beauregard Claims" could arise in the context of selling the software. Clearly "Beauregard Claims" would cover the selling of an internet software invention by selling a computer disk or CD ROM that contained the patented software. However, whether it is infringement to sell patented software over the internet instead of selling it via a hardware storage medium may be unclear. If future companies could get around infringement of "Beauregard Claims" simply by selling downloadable software over the internet (for instance via a volatile memory storage) then "Beauregard Claims" would be of little value. Nevertheless, this issue has yet to be addressed by the courts.

Still another potential problem with "Beauregard Claims" is the fact that the high courts have yet to address their validity. Even though the Patent and Trademark Office has acquiesced in inventors claiming software inventions as an article of manufacture by tying the software to a computer readable medium, the validity of the claims is not definite until courts so declare. This concern, however, is probably insubstantial since both the Patent and Trademark Office and the Patent Bar generally have embraced these new "Beauregard Claims".[90]

Regardless of the validity or breadth of "Beauregard Claims", software patents may continue to change in the future. Indeed, some commentators have already criticized the Patent and Trademark Office’s new policies regarding software inventions, while others have proposed alternatives to "Beauregard Claims".[91] In light of this potential volatility, cyberspace and internet inventors must stay on top of the changing laws.

One distinguished commentator, Vincent Chiappetta, has criticized "Beauregard Claims" as being both over-inclusive of inventions that should not be patentable and under-inclusive with regard to patents that should be issued.[92] He argues that a better system lies in distinguishing between two possible functional uses of software, (i.e. software as language and software as a technological vehicle for implementing new or existing activities as part of a computer system). Software as a technological vehicle for implementing new or existing activities as part of a computer system, he argues, should be patentable subject matter, while software as a language should fail patentability under section 101.[93] Under his proposed solution, for patentable software, the section 101 barrier should be lowered while the section 102 and section 103 requirements should be raised.[94]

Chiappetta’s proposed changes for software patents are especially interesting because they address some of the limits of "Beauregard Claims" discussed above. Under Chiappetta’s approach, software could be patentable by itself, without being tied to a computer readable medium. This would solve some of the potential problems discussed above for internet inventors. For instance, under Chiappetta’s approach internet software inventions would not risk future unenforceability simply because the hardware that stored the software had changed. Moreover, infringers could not get around the patent simply by offering infringing software for sale via a download over the internet instead of selling it via a computer disk or CD ROM.

If nothing more, Chiappetta’s proposals prove that some commentators are not satisfied with the status quo of software patents. In addition, his proposals show that alternatives exist to the present system that acquiesces in claiming software via "Beauregard Claims". The fact that commentators are wrestling with this issue should be a particular caveat to cyberspace and internet inventors, indicating that the law may indeed change.

There may be still another alternative to "Beauregard Claims". The alternative is quite similar to "Beauregard Claims", but it may grant an internet or cyberspace inventor broader property rights. The alternative is to claim the internet invention on a propagated signal, where the propagated signal is the article of manufacture in compliance with section 101.

Following the Patent and Trademark Office’s acquiescence to "Beauregard Claims", and the release of the Computer Related Invention Guidelines, the Patent and Trademark Office made training materials available.[95] Located in these training materials was an example of a propagated signal claim in the form of a "computer data signal embodied in a carrier wave".[96] Moreover, the patent claim was supported in the training materials by legal analysis of the Patent and Trademark Office. Although the concept of the propagated signal claim has not yet been addressed by any court, it remains a possible format for protecting an internet or cyberspace invention in electrical, optical, acoustic, or other mediums.[97]

While the propagated signal claims present a potential solution to some of limits of normal "Beauregard Claims", they introduce limitations of their own. For instance, a propagated signal claim appears to solve the problem of future software developers selling downloadable software over the internet to avoid infringing a software patent whose claims were tied to a computer medium. A propagated signal claim would cover the instance where infringing software was sold over the internet because the data travels over the internet via a propagated signal. However, a propagated signal claim has exactly the opposite limitations that the normal "Beauregard Claim" has. That is, if an inventor claimed a software invention as a propagated signal, she would have little or no protection against someone who sold the same software via a computer disk or CD ROM.

While, the propagated signal claims solve one problem with "Beauregard Claims," they introduce a related problem. Therefore, if an inventor wanted her invention to be fully protected against both present and future infringements, she would be forced to prosecute two separate sets of patent claims. One set directed towards the internet invention stored on a computer readable medium, and the other set directed towards the internet invention contained in a propagated signal.

The effect of forcing an internet or cyberspace inventor to prosecute two sets of claims is to increase the cost of acquiring patent rights to internet inventions. The cost of filing additional claims can be substantial since the $790 filing fee grants an inventor the right to file only three independent claims and 20 total claims.[98] Moreover, filing additional claims means that the inventor will be forced to pay additional lawyer’s fees as well. A patent system that imposes higher costs on cyberspace inventors by requiring them to file multiple sets of claims to protect their invention hardly seems fair.

In sum, as the law stands today, an internet or cyberspace inventor has the option of claiming her software invention by tying it to an article of manufacture. However, there are many limitations to this method of claiming one’s invention including: uncertainty of validity, uncertainty of future scope, and increased cost. Moreover, given that commentators have recognized the limitations of the present system and have hypothesized alternative solutions to the present system, the system may be subject to future change. If change to the system does come, this too may affect the rights afforded to an internet or cyberspace inventor that chooses to define her invention as an article of manufacture.

IV. The Future of the Law on Cyberspace inventions.

The Cyberspace era has caused drastic changes in patent law. The old doctrine that precluded patents for "business methods" was overruled, and the "mathematical algorithm" exception to patentability has eroded.[99] However, the law that emerged in the wake of these changes has limitations and problems of its own. For instance, many recent internet "business method" patents have come under vigorous attack by the general public.[100] In addition, the Patent and Trademark Office’s policy that emerged in response to the erosion of the "mathematical algorithm" exception to patentability presents enforcement loopholes and unfair costs to cyberspace inventors. Thus, the future of cyberspace and internet patent law may continue to evolve to more adequately govern our cyberspace society.

Section 103 of the Patent Act precludes the grant of a patent:

A key aspect of the administration of the non-obviousness standard is the ability of the patent examiner to defeat patentability by combining two or more prior art references in a given case.[105] It is this aspect that makes non-obviousness the most likely solution to the public outcry against internet "business method" patents.

One of the most difficult determinations in a non-obviousness analysis involves determining whether combination of prior art references is appropriate.[106] To make an obviousness determination by combining prior art references, the courts in the past have required that the patent examiner show that the prior art has at least some motivation to make the combination.[107] Therefore, if obviousness is to be used to preclude patentability of internet "business method" inventions, the examiner must be able to show some motivation to combine the prior art business method with the prior art internet.

This writer believes that future obviousness analysis of internet "business method" inventions should presume that an inventor had a motivation to combine old business methods with the internet. Such a presumption would preclude patentability of any old business method that was merely implemented on the internet. Moreover, it would answer the public’s outcry against the recent internet "business method" patents without overturning the State Street decision.

By requiring the Patent and Trademark Office to presume that all inventors were motivated to combine old teachings with the internet, the "obviousness" requirement would solve the perceived problems with "Business method" patents. For example, the Netcentives patent entitled "Fully Integrated, On-Line Interactive Frequency and Award Redemption Program" might have been unpatentable because it was "obvious" to combine the internet with the prior art of offering frequent-flyer miles. In addition, the CyberGold patent entitled "Attention Brokerage" might have been unpatentable if it were obvious to combine the internet with the prior art methods of paying people to complete surveys.

The Patent and Trademark Office’s position on software patents has undergone drastic changes in response to cyberspace. It is now clear that a cyberspace inventor can claim her invention as an article of manufacture.[108] However, problems with the present system include uncertainty in the scope of software patents and increased cost to cyberspace inventors.[109] The problems with the present system could cause future change in the law.

One concern surrounding article of manufacture software patents is that the courts have yet to address them. Although the Patent and Trademark Office has acquiesced in "Beauregard Claims", their validity is not certain until the courts address them. Therefore, it is still possible (although unlikely) the courts will strike down the validity of "Beauregard Claims".

In light of the potential limitations of "Beauregard Claims", it is also possible that future law could abolish them in favor of an alternative system. Indeed, commentators have advocated alternatives to "Beauregard Claims".[110] For instance, Vincent Chiappetta has proposed an alternative system under which software could be patentable without being tied to a computer readable medium.[111] Since alternative systems address many of the limitations presented by the present law, it is possible that proposals of a commentator like Chiappetta might be adopted in the future.

This writer, however, believes that the present law, with all of its drawbacks and limitations, will continue to be the law of the future. Since the emergence of "Beauregard Claims" and "Propagated Signal Claims" greatly help cyberspace inventors, the Patent and Trademark Office will probably not respond to the potential limitations of the new system. Moreover, cyberspace inventors are better off now than they were with the law of the past. Nevertheless, if the law does not change, the future will tell whether the concerns about the limitations of "Beauregard Claims" are valid concerns.

V. Conclusion

Cyberspace and the internet have caused changes in the patent law system of the United States. However, the changes in the law have raised concerns for both the public and for cyberspace inventors. The law as it stands today affords an internet or cyberspace inventor more rights than ever before. Nevertheless, the future of patent law on cyberspace and internet inventions may continue to evolve in the future.

The best place for an internet or cyberspace inventor to look for guidance on patent law is the Patent and Trademark Office’s Guidelines on Computer Related Inventions. The Guidelines, enacted in 1996, outline the step by step process by which patent examiners analyze computer inventions. Therefore, they give internet and cyberspace inventors insight into the thought process of the Patent and Trademark Office on computer related inventions.

One recent change in patent law that helps internet and cyberspace inventors is the change of the law of "Business method" patents. The Federal Circuit’s decision in State Street made previously unpatentable "Business methods" patentable subject matter.[112] Therefore, an internet or cyberspace inventor may now claim inventions as methods of doing business over the internet.

After the Federal Circuit’s State Street decision, many internet patents claiming methods of doing business over the internet emerged. Several of these patents came under attack by the general public because they look very similar to old methods of doing business that did not use the internet.[113] The public criticism of the internet business method patents questioned the Patent System and the changes that the State Street decision caused.[114]

The public’s criticism of internet patents, however, is misguided. The problem with some business method patents is not that they are claiming business methods; rather, the problem is that the claimed inventions are not new. To address the concerns of the public, the patent system should not overturn the State Street decision. Instead, the patent requirement of obviousness should be used to make sure that internet business methods are indeed new inventions worthy of a patent.

This writer has proposed that the obviousness analysis of internet business method patents should presume that all inventors were motivated to combine old teachings with the internet. A presumption of a motivation to combine old teachings with the internet would solve all of the perceived problems with "Business method" patents. Moreover, it would insure the public’s confidence in the patent system.

Another recent change in the patent law that is important to cyberspace and internet inventors is the change in the law of software patents. It is now clear that a cyberspace inventor can claim her invention as an article of manufacture by tying a software improvement to a computer readable medium.[115] These new claims are referred to as "Beauregard Claims", and they present many limitations and uncertainties to an inventor.[116]

The courts have yet to address "Beauregard Claims", and therefore one potential limitation to using such claims is the possibility that the courts will reject their validity.[117] Another limitation of "Beauregard Claims" is that the future scope of the claims are uncertain since the future of computer hardware is unknown.[118] If a software invention is defined in terms of present hardware, it may be unclear whether future hardware that uses that patented software will be infringing.[119] A final limitation to "Beauregard Claims" is the potential for increased cost they pose to a cyberspace or internet inventor.[120] Forcing cyberspace and internet inventors to file multiple types of patent claims at an increased cost seems unfair.[121]

In light of the limitations of "Beauregard Claims", it is possible that the future may yield additional changes to the law.[122] Indeed, some commentators have proposed alternative systems. One such alternative, proposed by Vincent Chiappetta is system under which software could be patentable without being tied to a computer readable medium.[123] This writer believes, however, that "Beauregard Claims" are here to stay regardless of their limitations.

As cyberspace continues to evolve, the legal system must be forced to evolve along with it. Since patent law is closely related to technology, one might hope that the evolution of patent law will keep up with the evolution of cyberspace. Thus far, it has done a pretty good job. 

[1] See ACLU v. Reno http://www.eff.org/pub/Censorship/Internet_censorship_bills/HTML/960612_aclu_v_reno_decision.html#findings (providing findings of fact on the internet and cyberspace)

[2] Id.

[3] See David Loundy, E-Law Locator, (updated regularly) http://www.Loundy.com/E-LAW_Links.html (providing a comprehensive list of cyberspace case law)

[4] See David Loundy, E-Law Locator, Tortious Speech, (updated regularly) http://www.Loundy.com/E-LAW_Links.html#tortious_speech (providing a list of tortious speech cases involving the internet, all of which deal with the issue of interpreting the limits of the First Amendments right to free speech in the new cyberspace forum)

[5] See, e.g., Apollo Media v. Reno http://annoy.com/cda/ruling.html (challenging a provision of the newly enacted Communications Decency Act)

[6] See David Loundy, E-Law Locator, Jurisdiction http://www.Loundy.com/E-LAW_Links.html#jurisdiction (providing links to cases on the issue of personal jurisdiction in a Cyberspace context, and illustrating the present inconsistencies in the law across the United States and the world)

[7] See discussion infra at section III(B)

[8] See discussion infra at section III(A)

[9] See Donald S. Chisum, Chisum On Patents, (1999) (providing a comprehensive treatise on patent law).

[10] U.S. Const. Art. I, §8 cl. 8.

[11] See 35 U.S.C. §§ 1-376 (1999) http://www.uspto.gov/web/offices/pac/mpep/27.txt

[12] See 35 U.S.C. § 101 (1999), reprinted infra at note 15.

[13] Id.

[14] See 35 U.S.C. § 102 (1999) and 35 U.S.C. §103(a) (1999), reprinted infra at notes 20 and 21

[15] 35 U.S.C. § 101 (1999) provides: Whoever invents or discovers any new and useful process, machine, manufacture, or composition of matter, or any new and useful improvement thereof, may obtain a patent therefor, subject to the conditions and requirements of this title.

[16] Id.

[17] See discussion infra at section III.

[18] See 35 U.S.C. § 101 (1999) reprinted infra note 15. Specifically the usefulness requirement follows from the language of 35 U.S.C. § 101 which provides "... Whoever invents or discovers any new and useful process, machine, manufacture, or composition of matter..."

[19] See Lowell v. Lewis, 15 F. Cas. 1018 (Mass. Ct. App. 1817).

[20] See 35 U.S.C. § 102 (1999) which provides:

A person shall be entitled to a patent unless—

(a) the invention was known or used by others in this country, or patented or described in a printed publication in this or a foreign country, before the invention thereof by the applicant for patents, or

(b) the invention was patented or described in a printed publication in this or a foreign country or in public use or on sale in this country, more than one year prior to the date of the application for patent in the United States, or

(c) he has abandoned the invention, or

(d) the invention was first patented or caused to be patented, or was subject of an inventors certificate, by the applicant or his legal representatives or assigns in a foreign country prior to the date of the application for patent in this country on an application for patent or inventor’s certificate filed more than twelve months before the filing of the application in the United States, or

(e) the invention was described in a patent granted on an application for patent by another filed in the United States before the invention thereof by the applicant for patent, or on an international application by another who has fulfilled the requirements of paragraphs (1), (20, and (4) of section 371(c) of this title before the invention thereof by the applicant for patent, or

(f) he did not himself invent the subject matter sought to be patented, or

(g) before the applicant’s invention thereof the invention was made in this country by another who had not abandoned, suppressed, or concealed it. In determining priority of invention there shall be considered not only the respective dates of conception and reduction to practice of the invention, but also the reasonable diligence of one who was first to conceive and last to reduce to practice, from a time prior to conception by the other.

[21] See 35 U.S.C. § 103(a) (1999) which provides:

A patent may not be obtained though the invention is not identically disclosed or described as set forth in section 102 of this title, if the differences between the subject matter sought to be patented and the prior art are such that the subject matter as a whole would have been obvious at the time the invention was made to a person having ordinary skill in the art to which said subject matter pertains.

[22] See Martin J. Adelman et al., Cases and Materials on Patent Law, 407, (1998).

[23] See Wired News, "IBM Hogs Patent List" (Jan. 11, 1999) http://www.wired.com/news/news/business/story/17263.html

[24] Id.

[25] See Rodney Ho, "Number of U.S. Patents Is Skyrocketing", The Asian Wall Street Journal, 1999, January 19, 1999. See also Brian Longest, Software Patent News, at the SPN February archive link off of the Software Patent News web page (Feb. 1999) http://www.longest.com/spn/spn.shtml

[26] See Brian Longest, Software Patent News, at the SPN February archive link off of the Software Patent News web page (Feb. 1999) http://www.longest.com/spn/spn.shtml

[27] Id.

[28] Examination Guidelines for Computer Related Inventions, 61 Fed. Reg. 7,478 (1996). For a downloadable version of the Patent and Trademark Office’s Official Guidelines for Computer Related Inventions, see http://www.uspto.gov/web/offices/pac/dapp/oppd/patoc.htm

[29] See discussion infra at section III(B)

[30] See discussion infra at Section II.

[31] See discussion infra at Section IV.

[32] Examination Guidelines for Computer-Related Inventions, 61 Fed. Reg. 7,478 (1996). [hereinafter Guidelines] See infra at note 5 for a internet URL to the Guidelines. For a more comprehensive analysis of the Guidelines, see Wayne M. Kennard, Obtaining and Litigating Software Patents and Protecting Software on the Internet, 471 PLI/Pat 457, 507-528 (March 1997) (providing a legal analysis to Support Proposed Examination Guidelines for Computer Implemented Inventions).

[33] Guidelines at § I.

[34] Id.

[35] Guidelines at § II.

[36] Id.

[37] Id.

[38] Guidelines at § III.

[39] Id.

[40] See Martin J. Adelman et al., Cases and Materials on Patent Law, 735, (1998).

[41] Guidelines at § IV.

[42] 35 U.S.C. § 101 (1999), reprinted infra at note 15.

[43] See discussion infra at section III.

[44] See discussion infra at sections III(A) and (B)

[45] Guidelines at § V.

[46] See 35 U.S.C. § 112, (1999), which provides in the second paragraph:

The specification shall conclude with one or more claims particularly pointing out and distinctly claiming the subject matter which the applicant regards as his invention

[47] See 35 U.S.C. §112 (1999), which provides in the first paragraph:

The specification shall contain a written description of the invention, and of the manner and process of making and using it, in such full, clear, concise, and exact terms as to enable any person skilled in the art to which it pertains, or with which it is most nearly connected, to make and use the same, and shall set forth the best mode contemplated by the inventor of carrying out his invention.

[48] See Donald S. Chisum, Chisum On Patents §§ 7.03-7.05 (1999) (providing an in depth explanation of the requirements of 35 U.S.C. § 112).

[49] See 35 U.S.C. §102 (1999) reprinted infra at note 20.

[50] See 35 U.S.C. §103(a) (1999) reprinted infra at note 21.

[51] See Martin J. Adelman et al., Cases and Materials on Patent Law, 407, (1998).

[52] See this writers proposal infra at section IV(A)

[53] See Diamond v. Chakrebarty, 447 U.S. 303, 309 (1980); see also Diamond v. Deere 450 U.S. 175, 182 (1981)(citing to the Committee Reports accompanying the 1952 Patent Act which informed them that Congress intended statutory subject matter to "include anything under the sun that is made by man.")

[54] See Hotel Security Checking Co. v. Lorraine Co. 160 F. 467 (2nd Cir 1908). See also In re Schrader, 22 f.3d 290, (Fed.Cir 1994) (making reference to the business method exception to statutorily patentable subject matter).

[55] State Street Bank and Trust Co. v. Signature Financial Group, Inc. 149 F.3d 1368 (Fed. Cir. 1998)

[56] Id.

[57] See discussion infra at section IV(A)

[58] Diamond v. Diehr 450 U.S. 175, 182 (1981).

[59] See In re Alappat 33 F.3d 1526, (Fed.Cir. 1994) (holding that data, transformed by a machine through a series of mathematical calculations to produce a smooth wave form display on a rasterizer monitor constituted a practical application of an abstract idea and is therefor patentable). See also Arrhythmia Research Technology Inc. v. Corazonix Corp. 958 F.2d 1053 (holding that the transformation of electrocardiograph signals from a patient’s heartbeat by a machine through a series of mathematical calculations constituted a practical application of an abstract idea and was therefore patentable).

[60] See In re Beauregard 53 F.3d 1584 (Fed.Cir. 1995)

[61] Id. The PTO’s argument in In Re Beauregard was premised on rejecting the applicant’s argument that relied on law stated in the decision of In re Bernhart 417 F.2d 1395 (C.C.P.A. 1969). The PTO abandoned its argument when the law stated in the decision of In re Bernhart was argued and upheld by the Federal Circuit in the case In re Lowrey 32 F.3d 1579 (Fed. Cir. 1994). See also, Vincent Chiappetta, Patentability of Computer Software Instruction as an "Article of Manufacture:" Software as Such as the Right Stuff, 17 J.Marshall J. Computer & Info. L. 89, 106-121 (Fall 1998) (providing an in depth discussion of the development of article of manufacture claims in software patents).

[62] See Guidelines at § I.

[63] Guidelines at § III

[64] An exemplary claim is claim one of U.S. Patent 5,710,578:

1. An article of manufacture comprising:

a computer usable medium having computer readable program code means embodied therein for causing a polygon having a boundary definable by a plurality of selectable pels on a graphics display to be filled, the computer readable program code means in said article of manufacture comprising:

computer readable program code means for causing a computer to effect, with respect to one boundary line at a time, a sequential traverse of said plurality of selectable pels of each respective said boundary line;

computer readable program code means for causing the computer to store in an array during said traverse a value of an outer pel of said boundary of said plurality of selectable pels for each one of a plurality of scan lines of said polygon; and

computer readable program code means for causing the computer to draw a fill line, after said traverse, between said outer pels having said stored values, for each said one of said scan lines.

[65] See infra at section III(B).

[66] State Street Bank and Trust Co. v. Signature Financial Group, Inc. 149 F.3d 1368 (Fed. Cir. 1998)

[67] See Scott Thurm, "Online: A Flood of Web Patents Stirs Dispute Over Tactics", The Wall Street Journal, October 9, 1998. See also Shannon Brown, "Patents in the E-Age" (1998) http://www.rubicongulch.com/articles/article2.htm (criticizing the Patent and Trademark Office's policy of issuing "e-patents). See also Elizabeth Gardner, "E-Commerce Companies Wielding Patents in Fight for Competitive Edge" (Sept. 7, 1998) http://www.internetworld.com/print/1998/09/07/ecomm/19980907-patents.html (Criticizing cyberspace patents).

[68] A representative claim of U.S. Patent 5,774,870 is claim one:

1. A system for an incentive award program, including a computer system accessible for on-line interactive communication with users, said computer system comprising;

a first memory area for storing product catalog, said product catalog including product descriptions and product prices for each product available for purchase;

a second memory area for storing an awards catalog, said awards catalog including an award description and award points value for each award; and,

a frequency database storing account information for each enrolled user of said incentive award program.

[69] See the American Airlines homepage at http://www.aa.com

[70] See the Discover Card homepage at http://discovercard.com

[71] A representative claim of U.S. Patent 5,794,210 is claim one:

1. In an arrangement comprising plural computers connected to a digital computer network, said network carrying and routing digital information between said plural computers, said plural computers including at least one personal computer associated with at least one user, at least one computer associated with at least one attention broker, at least one computer associated with at least one provider of negatively priced information, and at least one computer associated with at least one provider of positively priced information, said network being decentralized in that any pair of said personal and information provider computers may communicate without said communication passing through any of the other said personal and information provider computers, said personal computer having a display device and at least one user input device, the display device being capable of providing a visual display based at least in part on the digital information delivered to the personal computer said network, said displayed information including at least one visual link associated with one of said information provider computers, said user being able to operate said user input device to select and activate said link in order to erect a network connection to said information provider computer, a method for permitting the provider of negatively priced information to orthogonally sponsor user purchases of positively priced information, the method comprising:

(1) supplying negatively priced information to the personal computer from at least one negatively priced information provider;

(2) providing said user with the opportunity to receive compensation in connection with said negatively priced information by connecting via the network to said attention broker computer;

(3) compensating, via said attention broker computer, the user in connection with the supplied negatively priced information;

(4) presenting the user, via said personal computer display, with a choice of at least one item of positively priced information, and allowing the user to select said item by operating the user input device;

(5) collecting at least one selection from step (4) and communicating, via the network, said selection to at least one computer associated with a positively priced information provider; and

(6) allowing the user to pay for the selected positively priced information at least in part using compensation provided in step (3)

[72] See Teresa Riordan, "Paying computer users to read Internet ads and then storing their data", New York Times, February 1, 1999, Section C Page 1, (criticizing the CyberGold Patent).

[73] See Shannon Brown, "Patents in the E-Age" (1998) http://www.rubicongulch.com/articles/article2.htm

[74] Id. (stating "The GNU Project and Open Source initiative could effectively control the technology without impeding development of e-society. Businesses seriously concerned with promoting the development of the Internet and e-society will turn over the patents to an open standards body. This action will enhance the reputation of the businesses who turn over the patents and will resolve the problem of inappropriate patent grants in a fair and effective manner.")

[75] See Rebecca S. Eisenberg, Patents and the Progress of Science: Exclusive Rights and Experimental Use, 56 U. Chi. L. Rev. 1017 (1989) (giving an in depth discussion of the policy arguments behind patent law, including a discussion of incentive to invent theory and a discussion of incentive to disclose theory of patent law).

[76] Elizabeth Gardner, "E-Commerce Companies Wielding Patents in Fight for Competitive Edge" (Sept. 7, 1998) http://www.internetworld.com/print/1998/09/07/ecomm/19980907-patents.html

[77] See Rebecca S. Eisenberg, Patents and the Progress of Science: Exclusive Rights and Experimental Use, 56 U. Chi. L. Rev. 1017 (1989)

[78] See 35 U.S.C. § 102 (1999) and 35 U.S.C. § 103(a) (1999) reprinted infra at notes 20 and 21 respectively.

[79] See 35 U.S.C. § 101 (1999) reprinted infra at note 15.

[80] see discussion infra at section I(B).

[81] See State Street Bank and Trust Co. v. Signature Financial Group, Inc. 149 F.3d 1368 (Fed. Cir. 1998)

[82] Royer v Coupe, 146 US 524 (1892); Goodyear Dental Vulcanite Co. v Davis, 102 US 222 (1880).

[83] 35 U.S.C. §271(c) provides:

Whoever sells a component of a patented machine, manufacture, combination, or composition, or a material or apparatus for use in practicing a patented process, constituting a material part of the invention, knowing the same to be especially made or especially adapted for use in an infringement of such patent, and not a staple article or commodity of commerce suitable for substantial non-infringing use, is liable as a contributory infringer.

[84] Deepsouth Packing Co. v. Laitram Corp., 406 US 518, rehearing denied 409 US 902.

[85] See 35 U.S.C. §271(c) reprinted infra at note 83

[86] See Zangerle and Peterson Co. v. Venice furniture Novelty Mfg. Co. 133 F2d 266.

[87] See 35 U.S.C. § 101 (1999) reprinted infra at note 15.

[88] An example of a "Beauregard Claim" can be found infra at note 64.

[89] See discussion infra at note 61.

[90] See discussion infra at note 61.

[91] See Vincent Chiappetta, Patentability of Computer Software Instruction as an "Article of Manufacture:" Software as Such as the Right Stuff, 17 J.Marshall J. Computer & Info. L. 89, (Fall 1998)

[92] Id.

[93] Id.

[94] Id.

[95] The training materials are available at http://www.uspto.gov/web/offices/pac/dapp/oppd/patoc.htm

[96] See Jeffrey R. Kuester et al., Symposium: "Article of Manufacture" Patent Claims for Computer Instruction, A New Frontier in Patents: Patent Claims to Propagated Signals, 17 J. Marshall J. Computer & Info. L. 75, note 6 (Fall 1998) (providing an exemplary claims which reads as follows:

A computer data signal embodied in a carrier wave comprising:

a compression source code segment comprising

[the code], and

an encryption source code segment comprising

[the code]).

[97] See Jeffrey R. Kuester et al., Symposium: "Article of Manufacture" Patent Claims for Computer Instruction, A New Frontier in Patents: Patent Claims to Propagated Signals, 17 J. Marshall J. Computer & Info. L. 75 (Fall 1998) (providing an in depth analysis of Propagated Signal Claims).

[98] See Patent and Trademark Office Fees (effective Nov. 10, 1998), http://www.uspto.gov/web/offices/ac/qs/ope/fee1999.htm

[99] See discussion infra at section III.

[100] See discussion infra at section III(A).

[101] Id.

[102] Id.

[103] 35 U.S.C. § 103(a) (1999), reprinted infra note 21.

[104] See Martin J. Adelman et al., Cases and Materials on Patent Law, 407, (1998).

[105] Id. at 446.

[106] Id.

[107] In re Beattie 24 U.S.P.Q 2d 1040 (Fed. Cir. 1992); See also In re Oetiker 24 U.S.P.Q. 2d 1443 (Fed Cir. 1992).

[108] See discussion infra section III(B).

[109] Id.

[110] Id.

[111] Id.

[112] State Street Bank and Trust Co. v. Signature Financial Group, Inc. 149 F.3d 1368 (Fed. Cir. 1998)

[113] See discussion infra at section III(A)

[114] Id.

[115] See discussion infra at section III(B).

[116] Id.

[117] Id.

[118] Id.

[119] Id.

[120] Id.

[121] Id.

[122] Id.

[123] Id.