PROTECTING AND ENFORCING

SOFTWARE INNOVATION:
Understanding the Evolving
Software-Intellectual
Property Landscape
 Authors
Jennifer A. Albert Steven R. Argentieri Dan Burns Shaun P. deLacy
202.346.4322 617.570.1063 650.752.3100 212.459.7123
jalbert@goodwinlaw.com sargentieri@goodwinlaw.com dburns@goodwinlaw.com sdelacy@goodwinlaw.com

Douglas C. Doskocil Nicholas Drew Daniel M. Forman Robert Frederickson III

617.570.1215 617.570.8291 617.570.1793 617.570.1947
ddoskocil@goodwinlaw.com ndrew@goodwinlaw.com dforman@goodwinlaw.com rfrederickson@goodwinlaw.com

Genevie Gold Joel E. Lehrer Todd Marabella Brigid Morris

617.570.1837 617.570.1057 617.570.1174 212.459.7127
ggold@goodwinlaw.com jlehrer@goodwinlaw.com tmarabella@goodwinlaw.com bmorris@goodwinlaw.com

Samuel Sherry Rachel M. Walsh

617.570.8246 415.733.6128
ssherry@goodwinlaw.com rwalsh@goodwinlaw.com
 Page

Software Patent Eligibility ............................................................................................... 7

Software Patent Eligibility in the 1970s and 1980s....................................... 10
The 1990s and The Growth of Software Patents .......................................... 10
Bilski..... 12
Mayo and Alice ................................................................................................... 12
PTO Guidance Since Alice ............................................................................... 13
Effect of Alice on Allowance of Software Patents ......................................... 14
Federal Circuit Cases Since Mayo and Alice ................................................ 18
Trends by Software Type .................................................................................. 24
Computer Implementation of Business Methods and Financial
Transactions................................................................................ 24
Non-Business Applications ................................................................... 26
Internal Computer Operations .............................................................. 28
Industrial Inventions ............................................................................... 28
Claim Drafting Issues for Software Patents:
Functional Claiming/Means-Plus-Function Limitations ................................ 29
Claim Drafting Issues for Software Patents:
Divided and Indirect Infringement .................................................................... 32
Divided Infringement .......................................................................................... 33
Indirect Infringement .......................................................................................... 36
What is a Design Patent? ............................................................................................. 39
Can Design Patents Protect Software? ...................................................................... 40
Should You Seek a Design Patent on Elements of Your Software?...................... 41
How Do I Assert My Design Patent? ........................................................................... 43
Scope of Protection The Basics ............................................................................... 45
Practical Issues............................................................................................................... 46
Ownership ........................................................................................................... 46
Registration ......................................................................................................... 47
Copyright Protection for User Interfaces .................................................................... 48

i
Copyright Protection for Application Program Interfaces ......................................... 50
Opinion of the Northern District of California ................................................. 51
Opinion of the Federal Circuit........................................................................... 51
Implications ......................................................................................................... 52
The Scope of Trade Secret Protection ....................................................................... 54
What Is a Trade Secret? ............................................................................................... 54
Derives Economic Value From It Being Generally Unknown ................... 54
Reasonable Efforts to Maintain Its Secrecy ................................................ 55
Barriers to Trade Secrecy? Cloud Computing, Software as
a Service (SaaS) and Open Source Software ............................................... 56
Enforcing Trade Secret Rights ..................................................................................... 57
Remedies for Misappropriation .................................................................................... 57
General Considerations ................................................................................................ 59
Traditional On Premises Software Licenses ........................................................... 59
Software as a Service.................................................................................................... 60
Scope of License ................................................................................................ 60
Dual Licensing .................................................................................................... 60
Service Quality.................................................................................................... 61
Data Management and Security ...................................................................... 61
Comparison of Key Provisions in Traditional and SaaS Licenses ......................... 63
Forum and Venue Considerations............................................................................... 64
Forum .................................................................................................................. 64
Venue ...64
Current Standards .................................................................................. 64
Pending Legislation................................................................................ 65
Filing Statistics .................................................................................................... 66
Factors That Influence Filing ............................................................................ 66
Damages Statistics ................................................................................ 67
Likelihood of Litigating on Two Fronts ................................................ 67
Litigants Seeking Declaratory Judgment ............................................ 68
Moving for a Change of Venue ........................................................................ 69
Filing a PTAB Challenge ............................................................................................... 70

ii
 Choosing the Appropriate Proceeding ............................................................ 70
PTAB Statistics ................................................................................................... 73
Pleading Standards........................................................................................................ 74
Damages ......................................................................................................................... 77
Summary of Damages Law .............................................................................. 77
Reasonable Royalty & Apportionment ............................................................ 77
Assessing the Royalty Rate.............................................................................. 79
Strategic Implications......................................................................................... 80
The Marking Requirement ............................................................................................ 81
Drafting Considerations: Applicability of the Marking Requirement ........... 81
The America Invents Act & the Costs of Marking ......................................... 81
Playing it Safe: Marking Software Patents ..................................................... 82
Mixed Claim Software Patents ............................................................. 82
Method Claim Software Patents .......................................................... 82
The Marking Requirement & Licensor-Licensee Relationships .................. 83

iii
The United States is in the midst of a
decades-long shift from an economy
centered on industry and manufacturing to
an economy based on technology and
services. This shift is due, in large part, to
the increasingly critical role software plays
in every aspect of the economy. Software
is, of course, a large, thriving industry unto
itself. Indeed, for many years the
commerce department reported that
software was the fastest growing service
industry in the United States. But there is a
much greater impact of software on industry
and the economy. In all firms, in all
industries, software is used extensively in
nearly every area of operations, from
finance, to manufacturing, to supply chain
management, to human resources, to
customer service. Furthermore, nearly
everything that is made, bought and sold
has software in it today. And almost all
companies, such as financial institutions,
automobile manufacturers and healthcare
organizations, are heavily reliant on
software to keep their businesses active,
efficient and innovative.
The importance of software to the U.S.
economy is a modern phenomenon. But
the protections afforded to creators of
software stem from a single sentence in the
Constitution, now known as the Copyright
Clause, adopted by the Constitutional
Convention on September 17, 1787. The
Copyright Clause empowers Congress to
promote the progress of science and useful
arts, by securing for limited times to authors
and inventors the exclusive right to their
respective writings and discoveries.
Especially in recent years, the appropriate
application of this archaic clause to the
protection of software has been the subject
of intense, heated debate.
As an initial matter, it is often unclear
whether software can or should be
protected as intellectual property. And even
1
when protection is available to software,
that protection is available through an
amalgam of copyrights, trade secrets and
patents. Notwithstanding the confusing
intellectual property (IP) landscape for
software, during recent decades, companies
have increasingly sought to protect software
as intellectual property. With this
proliferation, a host of thorny business and
legal questions have arisen for software
developers, software users, technology
companies, and other businesses.
Because all technology companies and
almost all non-technology companies are
reliant on software, understanding whether
software is subject to intellectual property
protection and, if so, the limits of that
protection, is critical. Whether software is at
the heart of a companys identity or instead
a tool that a company uses to ensure that
operations run efficiently, companies do not
succeed without considerable investment in
and reliance on software systems. The
scope of the intellectual property rights
afforded to such software systems can be a
boon or oftentimes an obstacle to
generating revenue and keeping costs
down. Businesses should keep abreast of
recent developments in the law to
understand how best to leverage intellectual
property laws to protect the software they
have developed or acquired. And in the
past few years there have been several
critically important developments that affect
the availability and scope of protection for
software. Among other things:
the Supreme Court dramatically
scaled back patent eligibility for
software inventions;
 the scope of software that can be
protected by copyright expanded;
the smartphone patent wars
revealed the importance of securing
design patent protection for certain
software features;
a new higher bar for pleading patent
infringement in litigation involving
software inventions became
effective; and
the availability of new administrative
proceedings to challenge the validity
of software patents made these
patents much more susceptible to
being invalidated.
All of these new developments are explored
in depth in this publication.
The U.S. intellectual property system
encourages disclosure and provides a
flexible mechanism for companies to decide
which software innovations to share, with
whom, and on what terms. This balancing
act derives from the Constitutional mandate
to secur[e] for limited times to inventors
the exclusive right to their discoveries in
exchange for disclosure to the public of
those discoveries. Thus, for example,
inventors may secure a limited monopoly
over a specific novel software innovation in
exchange for disclosing in a patent the
exact nature of that innovation.
While the intellectual property laws in the
U.S. are anchored in the centuries-old
Copyright Clause, these laws are dynamic
and in flux. Over the past few years in
particular, there have been important
changes in the different options available for
protecting software-based innovation. For
2
one, the calculus for deciding to protect
software through trade secrets, patents or
copyrights has changed. For example, as
noted above, a recent Supreme Court
decision has, perhaps unintentionally,
weakened patent protection for software,
encouraging many software innovators to
protect software through trade secrets or
copyright instead of patent.
In this publication, we survey the current
state of intellectual property law in the U.S.
as it relates to protection available for
software. This publication is meant as a
tool for companies to understand the
options for protecting software, to decide
which intellectual property protection
scheme fits best, to consider which software
technologies to share, with whom and on
what terms, and to learn how to assert or
defend software intellectual property rights
in U.S. courts. Protecting and Enforcing
Software Innovation: Understanding The
Evolving Software-Intellectual Property
Landscape is divided into the following
sections:
Forms of Software IP Protection In
this section, we provide an overview
of the various options for protecting
software and explore the benefits
and drawbacks of protecting
software through copyright, trade
secret, and/or utility or design
patents.
Utility Patents In this section, we
focus on the eligibility of software for
patent protection under the Supreme
Courts recent cases and new legal
developments that underscore the
importance of carefully drafting
 patent claims to protect software
inventions.
Design Patents In this section, we
describe the use of design patents to
protect user interfaces.
Copyright and Trademark In these
sections, we discuss issues
concerning the use of these forms of
protection in the context of software.
Software Licensing In this section,
we discuss emerging issues
concerning licensing of software.
Software Patent Litigation In this
section, we cover a host of issues
that arise when litigating, either as a
plaintiff or defendant, software-
related intellectual property rights.
3
Software is, in many ways, the lifeblood of
nearly every company and, in a larger
sense, a key driving force of the U.S.
economy. Understanding how IP can
encourage or stifle software innovation and
technological change is important for
businesses. We hope this publication will
be a useful tool for executives, management
and in-house counsel at companies who
want to understand how to best leverage IP
to protect, exploit and if necessary defend,
the software that their companies develop,
sell and use.
There are four different forms of intellectual
property that can be used to protect
intellectual property rights in software: (1)
utility patents, (2) design patents, (3)
copyrights and (4) trade secrets.
Utility patents protect an invention as a
functional concept, and if the invention is
patentable, the patent covers all
implementations of the concept, regardless
of whether it was independently developed,
and regardless of whether the inventor
actually implemented it. If someone,
subsequent to issuance of the patent,
implements the patented function with
different code from the code used by the
inventor, the patent is still infringed.
Furthermore, patent infringement is a strict
liability tort. That is, the infringers
knowledge of the patent and intent are not
relevant to direct infringement (knowledge
is, however, relevant to whether one can be
held liable for inducing another to infringe or
contributing to the infringement by another).
Copying the functionality, either from a
patent, a publication or the inventors own
implementation, is not a required element of
patent infringement, although it may be
relevant to whether the infringement was
willful.
Design patents can protect the ornamental
appearance (but not utilitarian features) of
an article of manufacture. Classically,
design patents have been used to protect
the ornamental designs of manufactured
articles such as bottles, eating implements,
lamps and computer cases. Relatively
recently, design patents have become
available to protect the appearance of user
interfaces. If the software presents a
graphical user interface (GUI) on a screen
or device, it might be possible to protect the
appearance of the GUI using design patents
as well as copyright. i For example, Apple
Inc. received a design patent (U.S. Patent
No. D670713) directed to page turn
animation for electronic books. Below are
4
two drawings from the design patent
showing a first state (FIG. 1) and a second
state (FIG. 2).
Copyrights protect the expression of ideas,
but not the ideas themselves, and prohibit
the copying of the authors expression.
Copyright does not, however, prohibit truly
independent development of the same
expression. So, as an overly-simplistic
example, if two authors independently write
substantially the same code to perform an
encryption algorithm, the author who first
wrote the code has no right to prohibit the
second author from using the
independently-developed version.
Copyrights can be used to protect against
unauthorized copying of the source and
object code of a software program, and in
some cases, can be used to protect the
design of a user interface and perhaps an
application program interface (API). They
can also be used to protect against creating
derived works or variations that are
insubstantially different (non-literal copying).
As discussed below, the analysis of non-
literal copying necessarily involves the
analysis of high-level descriptions of what
falls within the expression and may begin
to blur the lines between patent protection
of ideas and copyright protection of
expressions. There may be advantages to
asserting infringement of a design patent
over copyright infringement due to
differences in the difficulty of proving
copyright infringement. ii In copyright, the
test for infringement can be largely
unpredictable, and is often up to experts,
judges, and juries to filter out unprotected
elements, determine whether an allegedly
infringing design is substantially similar to
those elements individually or as a
compilationand what impact such copying
has on the market for the original work. The
test for design patent infringement,
however, is whether an ordinary observer,
not an expert, finds the allegedly infringing
design and the design patent design
substantially the same. iii
Trade secret protection guards against the
unauthorized misappropriation of ideas or
expressions. Trade secrets do not,
however, prevent someone from
independently developing the technology or
obtaining the technology from a public
domain source. In the context of software,
trade secret laws are generally used to
protect application source code (and
sometimes the ideas and algorithms
embodied within software), provided it is not
publicly disseminated and adequate
measures are taken to protect its secrecy.
5
It should be noted that, unlike patent and
copyright protection, trade secret protection
is governed by state law, and what is
protectable and how to protect it varies from
state to state. Furthermore, trade secret
law may complement contractual non-
competition agreements, and its use in that
regard is particularly state-specific.
The four types of intellectual property
protection for software are not mutually
exclusive, and different forms of protection
may be used to protect different aspects of
software innovations. The process for
obtaining each form of each protection and
the lifespan of that protection is different, as
is the analysis of damages for infringement
or misappropriation. Importantly, obtaining
patent protection can be an expensive and
lengthy process as compared to maintaining
trade secrets or copyrights.
The table below summarizes the average well as the duration of the protection and
time and cost it takes to obtain each form of types of damages that are available.
intellectual property protection patent as

vii
Avg. Time to Avg. Cost to Obtain Duration Types of
iv vvi
Obtain and Maintain Damages
viii ix
Utility Patent 2.2 years $47,760 20 years from date Reasonable
x
of filing royalties, lost
xi
profits
xii
Design Patent 1.6 years $20,620 15 years from date Reasonable
xiii
of grant royalties and lost
profits or total
xiv
profits

Copyright None Minimal Life of the author + Statutory + actual

75 years lost profits

Trade Secret None Depends on Indefinite (although Lost profits, unjust

measures required expires once enrichment or
to maintain secrecy secrecy is lost) reasonable
royalty; treble or
additional
damages for willful
misappropriation

6
Contrary to popular belief, there is no
specific definition or statutory classification
of software patents. Although the
discourse over patent reform has frequently
included debates about overbroad,
improvidently-granted software patents, the
U.S. Patent and Trademark Office (PTO)
does not recognize any such distinct
category, and does not keep statistics
concerning software patent applications.
One reason it is difficult to specifically
identify software patents is that the
innovative ideas disclosed in patents are
often described with enough generality that
the patent can cover both hardware and
software implementations of the technology.
For example, software inventions are often
claimed as a system, a method, and a
tangible magnetic storage medium
containing a computer program (or similar
language) in one application. When the
invention is claimed as a system or
method, the claim language may refer to a
processor programmed to carry out a
function or refer more generally to modules
that carry out those functions. Claims of
such patents may be interpreted to cover
hardware as well as software
implementations.
SOFTWARE PATENT ELIGIBILITY
Like all patents, patents on software
inventions must be novel and non-obvious;
however, in the United States the threshold
question of patent eligibility has become an
overriding issue for both obtaining and
litigating software patents. In what is often
referred to as the patentable subject
matter section (Section 101) of the patent
statute, patentable subject matter is
described as any new and useful process,
machine, manufacture, or composition of
matter, or any new and useful improvement
thereof. xv
Until relatively recently, this categorical
limitation was not viewed as a substantial
impediment to the patenting of software
inventions. General purpose computers
programmed to carry out a function met the
literal statutory language of a machine and
methods implemented by software on a
computer met the literal statutory language
of a process.
A number of developments over the past
several years, including the proliferation of
so-called patent troll litigation, have
prompted the courts to look again at Section
101. Beginning in the early 1990s, the PTO
began issuing computer-implemented
business method patents. These patents
have been viewed with suspicion by many
and contributed to the perception that the
PTO was allowing overbroad and vague
patents on obvious ideas.
To help guide patent applicants and the
PTO, courts have set forth certain judicially-
created exceptions to the statutory
categories of patentable subject matter, and
recently the courts have turned to these
exceptions in an attempt to solve the
perceived proliferation of overbroad, vague
patents.
7
There are three judicially-created
exceptions to statutory patentable subject
matter: laws of nature, natural phenomena,
and abstract ideas. xvi The concern
animating these judicial exceptions is that
these exceptions are the basic tools of
scientific and technical work, and should
not be pre-empted for all purposes, even by
the original discoverer of the law,
phenomenon or idea. xvii The abstract idea
exception has had the most relevance to the
patentability of software inventions.
At the same time, the America Invents Act
of 2011 introduced a new administrative
procedure, the Covered Business Method
Review (CBM), allowing patents directed
at certain subjects to be challenged on
subject matter eligibility grounds. As the
table below shows, the number of CBM
challenges to patent eligibility has exploded,
and as discussed below, once a petition for
CBM is granted on eligibility grounds, it is
highly likely that the patent will be
invalidated.

The courts have struggled with the

application of the abstract idea exception
to software inventions for more than 40
years. Initially, experts debated whether
software inventions should be patentable at
all. Following cases in the early 1990s,
patents were routinely granted for software
innovations and few questioned whether the
scope and validity of these patents differed
from those in other technical fields. While
various cases chipped away at these
seemingly invincible patents, this period
came to an abrupt end following a critical
decision by the Supreme Court in 2014 in
Alice Corp. v. CLS Bank Intl. xviii As the
table below shows, the number of
challenges to patent eligibility in district
court actions (for all types of patents) has
increased dramatically since the holding in
Alice, and the success rate for those
challenges has risen to between 60 and
70% (red means motion denied and green
means partially or completely granted). xix

8
Although the charts on this page provide
some sense of eligibility challenges across CBM Decisions (Number)
all types of software in the aggregate, the
picture varies somewhat for different types 90
of patents. In short, business method and 80
e-commerce patents are faring very poorly, 70
while more technical software patents
(e.g., patents aimed at encryption or data 60
Valid
compression, and patents that include some 50
Invalid
form of machine learning) tend to stand a 40
better chance of surviving a challenge.
30
The rest of this section discusses how the 20
courts are approaching eligibility for different 10
types of software inventions. It begins with
a review of the development of the software 0
2013 2014 2015

9
eligibility jurisprudence because that history
may provide some sense of how the courts
have arrived at the current law and how the
law may evolve from here.
Software Patent Eligibility in the 1970s
and 1980s
The Supreme Court first addressed the
patentability of software inventions in a trio
of cases that invalidated two patents,
upheld the validity of a third, and left behind
a confused jurisprudence.
In 1978, in Gottschalk v. Benson, the Court
held that method claims to specific
algorithms for converting numbers in Binary
Coded Data representation to binary
representation claimed unpatentable ideas.
The algorithms had no use except in
connection with digital computers and the
practical effect of the claims was to preempt
the underlying mathematical formula and
grant a patent on the algorithm itself. xx The
Court denied that it was precluding patents
on software altogether, but then suggested
that Congressional action would be needed
[i]f these programs are to be patentable. xxi
In 1982, the Court invalidated claims in
Parker v. Flook to a method for updating
alarm limits in a hydrocarbon conversion
process that used a new and improved
formula for calculating those limits. The
improved formula was not patent-eligible,
and conventional, post-solution
applications of such a formula did not make
the claim patent-eligible. xxii Although the
Court said it was not dissecting the claim
into statutory and non-statutory components
to evaluate the novelty of the statutory
components, that appears to be exactly
what the Court did. xxiii
10
In Diamond v. Diehr, the Supreme Court
upheld the patentability of methods for
curing rubber using a computer to
constantly measure the actual temperature
inside a mold and repeatedly recalculate the
cure time using a known mathematical
formula. xxiv The method was a patent-
eligible process because it transformed an
article into a different state or thing and
incorporated a more efficient solution of the
known mathematical equation. xxv The Court
rejected the approach of dissecting a claim,
and held that the novelty of any element or
step in a process is irrelevant to determining
whether the subject matter is patentable. xxvi
In the end, the notion that the patentability
of software would have to wait for
Congressional action fell by the wayside,
and the relatively easily satisfied machine-
or-transformation test in Diehr seemed to
trump the restrictive dissection and
conventional, post-solution steps inquiry
under Flook.
The 1990s and The Growth of Software
Patents
In 1994, the Federal Circuit in In re Alappat
appeared to provide a broad endorsement
of software-implemented inventions. The
claims in Alappat were directed to a
rasterizer that uses an anti-aliasing
algorithm to produce pixel illumination data
that generates an improved display of a
waveform on an oscilloscope. xxvii The Board
of Patent Appeals rejected the claims as
non-statutory matter, noting that they
covered nothing more than a mathematical
algorithm. xxviii The Federal Circuit reversed,
holding that the proper inquiry is whether
the claimed subject matter as a whole is a
disembodied mathematical concept, . . .
which in essence represents nothing more
than a law of nature, natural
phenomenon, or abstract idea. xxix The
court further held that a general purpose
computer programmed to carry out the
claimed algorithm was not nonstatutory
subject matter because the programming
creates a new machine, and in effect
becomes a special purpose computer once
it is programmed to perform particular
functions . . . . xxx
11
Then, in 1998, the Federal Circuit in State
Street Bank v. Signature Financial Group
rejected the business method exception to
statutory subject matter, agreeing with the
PTO that [c]laims should not be
categorized as methods of doing business
and should be treated like any other
process claims. xxxi Of significance for
software patents was the courts
interpretation of Diehr as limiting Benson,
such that the mere presence of an algorithm
is no longer a sufficient indicium of
nonstatutory subject matter. xxxii The
Federal Circuit held that the test for
patentable subject matter is whether the
process produces a useful, concrete and
tangible result. xxxiii
The result of these two Federal Circuit
decisions was a vast growth in business
oriented software patents. The following
chart shows the growth in issued patents in
software-intensive Cooperative Patent
Classification (CPC) subclasses after
Alappat in 1994 and State Street Bank in
1998. xxxiv
Issued Patents: CPC Classes G06F & G06Q
(1976-2009)
25000
20000
15000
10000
5000
Bilski
After an absence of nearly 30 years, the
Supreme Court returned to the debate over
subject matter patentability in Bilski v.
Kappos in 2010. xxxv The Bilski patent
claimed methods for hedging risks
associated with price changes in energy
commodities markets. xxxvi The Federal
Circuit had held the claims unpatentable,
but in doing so overruled the State Street
12
useful, concrete and tangible result test
and replaced it with the machine-or-
transformation test as the sole test for
deciding patent eligibility. xxxvii The Supreme
Court affirmed the result, but held that that
the machine-or-transformation test is a
useful and important tool, but not the sole
test for deciding whether an invention is
patent-eligible. xxxviii The Court agreed that
the claimed methods failed the machine-or-
transformation test, but then considered
whether the claims might still be a process
under section 101. xxxix The Court decided
that the claims were not patentable
processes because they were attempts to
patent an abstract idea and would either
preempt the use of that idea in all fields,
limit the use of the idea to a single field, or
add only token post-solution components. xl
The Court, however, made it clear that it did
not hold that business method patents were
prohibited.
Mayo and Alice
Two years after Bilski, the Supreme Court
looked at the issue again and arguably
abolished, or at least marginalized, the
machine-or-transformation test, which it
had previously described as a useful and
important tool. In Mayo Collaborative
Servs. v. Prometheus Labs, Inc., the Court
applied a two-step analysis in reviewing a
claim to a medical diagnostic test. First, a
determination is made as to whether a claim
is directed to a patent-ineligible concept,
such as a law of nature, natural phenomena
or abstract idea. xli If it is, one looks for an
inventive concept, sufficient to ensure that
the patent in practice amounts to
significantly more than a patent upon the
[ineligible concept] itself. xlii The Federal
Circuit had upheld the patent eligibility of the
claims under the machine-or-
transformation test; however, the Supreme
Court held that the machine-or-
transformation test does not trump the law
of nature exclusion. xliii The Mayo two-step
analysis applies, regardless of whether the
machine-or-transformation test is satisfied.
As such, the two-step analysis set forth in
Mayo appears to be the sole test to
determine if a claim is directed to patentable
subject matter.
Finally, in 2014, the Supreme Court applied
Mayo to the abstract idea category of
excluded subject matter in Alice Corp. v.
CLS Bank Intl. xliv These patents involved a
computerized process for mitigating
settlement risk by facilitating the exchange
of financial obligations through a computer
system acting as a third-party
13
intermediary. xlv A unanimous Supreme
Court held that all the claims were directed
to the abstract idea of intermediated
settlement. xlvi The Supreme Court also
decided that the mere recitation of a
generic computer cannot transform a
patent-ineligible abstract idea into a patent-
eligible invention. xlvii The method claims
amounted to nothing significantly more than
an instruction to apply the abstract idea
using a generic computer, and the system
claims likewise recited generic hardware.
Accordingly, both the method and system
claims were patent ineligible.
PTO Guidance Since Alice
Immediately after Alice, the PTO issued a
memorandum to the patent examining corps
providing preliminary instructions relating to
subject matter eligibility of claims involving
abstract ideas, particularly computer-
implemented abstract ideas. xlviii The PTO
followed up in December 2014 with its
Interim Eligibility Guidance for use by
USPTO personnel in determining subject
matter eligibility. xlix Under the PTOs 2014
Instructions and Guidance, for Part 1 of the
Mayo analysis, examiners were to consider
whether claims include abstract ideas,
such as:
Fundamental economic practices;
Certain methods of organizing
human activities;
An idea of itself; and
Mathematical relationships/formulas.
For Part 2 of the analysis, the Instructions
and Guidance identified categories of
limitations that may be enough to qualify as
significantly more when recited in a claim
with an abstract idea:
 Improvements to another technology
or technical field;
Improvements to the functioning of
the computer itself;
Meaningful limitations beyond
generally linking the use of an
abstract idea to a particular
technological environment;
Applying the judicial exception with,
or by use of, a particular machine
(citing Bilski);
Effecting a transformation or
reduction of a particular article to a
different state or thing (citing Diehr);
and
Adding a specific limitation other
than what is well-understood, routine
and conventional in the field, or
adding unconventional steps that
confine the claim to a particular
useful application (citing Mayo).
The PTO also listed limitations that are not
enough to qualify as significantly more:
Adding the words apply it (or an
equivalent) with an abstract idea, or
mere instructions to implement an
abstract idea on a computer;
Requiring no more than a generic
computer to perform generic
computer functions that are well-
14
understood, routine and
conventional activities previously
known to the industry;
Adding insignificant extra-solution
activity to the judicial exception, e.g.,
mere data gathering in conjunction
with a law of nature or abstract idea
(citing Mayo); and
Generally linking the use of the
judicial exception to a particular
technological environment or field of
use (citing Mayo).
The PTO, responding to comments solicited
from the public, issued a July 2015 Update:
Subject Matter Eligibility. The July 2015
Update provided additional guidance on
identifying abstract ideas. Examples of
abstract ideas in each of the four categories
identified in the 2014 Preliminary
Instructions are provided in the following
graphic from the July 2015 Update Quick
Reference Sheet: The PTO web page for
the 2014 Interim Guidance and July 2015
Update can be found at
http://www.uspto.gov/patent/laws-and-
regulations/examination-policy/2014-interim-
guidance-subject-matter-eligibility-0. This
page links to examples and training
materials that show how examiners are
supposed to apply Mayo and Alice.
15
 Effect of Alice on Allowance of Software The following graph shows the growth of
Patents issued software patents leading up to
Bilski in 2010 and Mayo in 2012, and the
The PTOs response to Alice has had a mild drop off after Alice in 2014.
significant impact on the number of software
patents that issued in 2015. That impact is Clearly, a substantial number of software
not, however, uniform across all types of patents are still being issued the PTO, even
software patents. Business process-related after Alice.
patents have been affected to a significant
degree, but software patents directed to Most patents that could be described as
more technical inventions have been patents related to financial products or
affected to a much lesser degree, and services are generally classified in CPC
continue to issue in significant numbers. As subclass G06Q. l The following chart shows
noted above, there is no definitive way of the drop in issued patents with this
distinguishing software patents from other classification after Mayo in 2012 and Alice
patents. Similarly, there is no easy way of in 2014.
distinguishing software inventions for
technical applications from inventions for The trend over 2014 and 2015 for the
business applications. Accordingly, we groups within G06Q follows the overall
use two of the CPC classification codes as temporal trend for G06Q; however, some of
proxies that likely produce data that the groups have suffered a larger
approximates the trends of interest. percentage decline pre- and post-Alice than
others.

Issued Patents: G06F & G06Q Issued Patents: CPC G06Q

(2005-2015) (2005-2015)

14000
60000
12000
50000
10000
40000 8000
30000 6000

20000 4000

10000 2000

0
0
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015

16
1800 10
1600 20
1400 30
40
1200
50
1000
800
600
400
200
0
2014Q1 2014Q2 2014Q3 2014Q4 2015Q1 2015Q2 2015Q3 2015Q4

Specifically, Group 40, Finance; Insurance;
Tax strategies; Processing of corporate or
income taxes, shows the largest
percentage decline, pre- and post-Alice
(64%). Group 20, Payment architectures,
schemes or protocols, was next with a
decline of 30%, followed by Group 30,
Commerce, e.g. shopping or e-commerce,
with a decline of 28%.
The chart shows that nearly the entire drop
in granted patents in subclass G06Q can be
attributed to the drop in granted patents that
were not also assigned a technical
subclass.
In summary, Mayo and Alice have had the
most dramatic impact on the prosecution of
patent applications that are focused entirely
on business or e-commerce concepts. It
appears that software patent applications
that are directed to more technical concepts
are being allowed in about the same
numbers as before, and even business-
related applications that were classified with
other more technical CPC subclasses
stand about the same chance of allowance
as before Alice.

17
Federal Circuit Cases Since Mayo and
Alice
During the two years between Mayo and
Alice, the Federal Circuit issued four written
decisions involving patent eligibility of
software inventions, in each case affirming
a district court decision invalidating the
claims at issue as patent-ineligible.
Since the Alice decision, through February
2016, the Federal Circuit has issued thirteen
written opinions in cases in which the
patent-eligibility of software inventions was
Case Patent(s) Subject Matter/
Type of Claims
at issue. li Twelve of those cases were
appeals from district court judgments and
one was from a PTAB Covered Business
Method determination. In all but one of
those cases, the patents had been held
invalid under section 101. lii The Federal
Circuit affirmed the decisions below in all
twelve cases.
The chart below is a summary of the sixteen
written decisions on patent eligibility of
software inventions that the Federal Circuit
has issued since Mayo.

Bancorp Services v. 5,926,792 System for managing a Abstract idea:

Sun Life, 687 F.3d 7,249,037 stable value protected - managing a stable value protected life
1266, 1278 (Fed. Cir. investment plan insurance policy
2012). - Methods and Computer Step 2:
Readable Media - no technical advance in computer technology
- computer merely used to accelerate ineligible
mental process

Accenture Global 7,013,284 Component based Abstract idea:

Services, GmbH v.
Guidewire Software,
728 F.3d 1336 (Fed.
Cir. 2013).
SmartGene, Inc. v 6,081,786
Advanced Biological 6,188,988
Labs., 555 Fed. Appx.
950 (Fed. Cir. 2014).
interface to handle tasks - generating tasks, based on rules, to be
during claim processing completed upon the occurrence of an event
- Methods and Systems Step 2:
- limiting to computer implementation and to
insurance industry insufficient
Systems, methods and Abstract idea:
computer program - comparing new and stored information and
products for guiding the using rules to identify medical options [not
selection of therapeutic explicitly stated in decision]
treatment regimens Step 2:
- Methods, Systems, - no advance in physical implementations of
Computer Program routine mental information-comparison and
Products rule-application processes

Cyberfone Systems, 8,019,060 Telephone/transaction Abstract idea:

LLC v. CNN
Interactive Group,
Inc., 558 Fed. Appx.
988 (Fed. Cir. 2014).
entry device and system - collecting information in classified form, then
for entering transaction separating and transmitting that information
data into database according to its classification
- Methods and Systems Step 2 (applying machine-or-transformation
test):
- requirement of a telephone, which could be a
range of different machines, does not tie claim
to a specific machine and adds nothing of
significance to the claimed abstract idea
- mere collection and organization of data is
insufficient to meet the transformation prong

18
Case Patent(s) Subject Matter/
Type of Claims

Mortgage Grader, Inc. 7,366,694 Financial transactions Abstract idea:

v. First Choice Loan 7,680,728 including a method for a - anonymous loan shopping
Services Inc., ___ borrower to evaluate Step 2:
F.3d. ___, 2016 WL and/or obtain financing, - generic components such as an interface,
362415 (Fed. Cir. e.g., a loan or a credit network, and database do not satisfy the
Jan. 20, 2016) card inventive concept requirement
- Methods and systems

Vehicle Intelligence 7,394,392 Screening and testing Abstract idea:

and Safety LLC v. equipment operators for - testing operators of any kind of moving
Mercedes-Benz USA, impairment and equipment for any kind of physical or mental
___ Fed. Appx. ___ controlling the equipment impairment
(Fed. Cir. 2015) if impairment is detected Step 2:
(nonprecedential) - Methods and systems - patent not explain how claimed methods can
be embedded in the recited specialized
hardware
- post-Alice, being tied to a particular machine
is not sufficient to confer eligibility
- supposedly inventive concepts are not
described with specificity
Digitech Image 6,128,415 Device profiles for use in Abstract idea:
Techs., LLC v a digital image - process of gathering and combining data that
Electronics for processing system does not require input from a physical device
Imaging, Inc., 758 - Device profile and Step 2:
F.3d 1344 (Fed. Cir. methods - method is not tied to an image processor and
2014). does not claim image processors use of the
device profile to capture, transform or render a
digital image
Note: claim directed to the device profile itself
was not even statutory subject matter.

Planet Bingo, LLC v 6,398,646 Storing preselected Abstract idea:

VKGS LLC, 576 Fed. 6,656,045 numbers for use in - managing a game of Bingo, and solving a
Appx. 1005 (Fed. Cir. games of bingo tampering problem and also minimizing other
2014). - Methods and systems security risks during bingo ticket purchase
Step 2:
- claims recite generic computer
implementation of the abstract idea using
generic functions of storing, retrieving and
verifying a chose set of bingo numbers
buySAFE, Inc. v. 7,644,019 Safe Transaction Abstract idea:
Google, Inc., 765 Guaranty - creating a transaction performance guaranty
F.3d 1350 (Fed. Cir. - Methods and computer Step 2:
2014). readable media - the computer functionality is generic; receiving
a request for a guarantee and transmitting an
offer of guarantee

19
Case Patent(s) Subject Matter/
Type of Claims

Ultramercial, Inc. v. 7,346,545 Payment of intellectual Abstract idea:

Hulu, LLC, 772 F.3d
709 (Fed. Cir. 2014).
DDR Holdings, LLC v. 7,818,399
Hotels.com, L.P., 773
F.3d 1245 (Fed. Cir.
2014).
property royalties by - showing an advertisement before delivering
interposed sponsor over free content; using advertising as an exchange
a telecommunications or currency
network Step 2:
- Methods - routine steps of updating an activity log,
requiring a request from a consumer to view an
ad, restrictions on public access, and use of the
Internet comprise only conventional steps
- claims are not tied to any particular novel
machine or apparatus, only a general purpose
computer
- claims fail transformation prong because they
do not transform physical objects or
substances, or anything representative of
physical objects or substances
Expanding commercial Abstract idea:
opportunities for internet - Federal Circuit had difficult characterizing the
websites abstract idea
- Methods and system - Defendant characterized it as increasing
sales by making two web pages look the same
Step 2:
- claimed solution is necessarily rooted in
computer technology to overcome a problem
specifically arising in the realm of computer
networks
- claims do not preempt every application of the
idea; rather they recite a specific way to
automate the creation of a composite web page

Content Extraction 5,768,416 Scanning and Abstract idea:

and Transmission 5,258,855 Information Processing - 1) collecting data, 2) recognizing certain data
LLC v. Wells Fargo 5,369,508 Methodology within the collected data set, and 3) storing that
Bank, N.A., 776 F.3d 5,625,465 - Methods and machines recognized data in a memory
1343 (Fed. Cir. 2014). (interface/system) Step 2:
- merely recited use of existing scanning and
processing technology to recognize and store
data from specific data fields such as amounts,
addresses and dates

20
Case Patent(s) Subject Matter/
Type of Claims

OIP Technologies, 7,970,713 Automatic pricing in Abstract idea:

Inc. v. Amazon.com, electronic commerce - offer-based price optimization
Inc., 788 F.3d 1359 - Methods and computer Step 2:
(Fed. Cir. 2015). readable media - steps of sending a first set of electronic
messages over a network to devices, the
devices being programmed to communicate,
storing test results in a machine-readable
medium, and using a computerized system ...
to automatically determine an estimated
outcome and setting a price, are well-
understood, routine conventional activities
- presenting offers to potential customers and
gather statistics about how customers
responded does not provide a meaningful
limitation
Internet Patents Corp. 7,707,505 Dynamic tabs for a Abstract idea:
v. Active Network, graphical user interface - retaining information in the navigation of
Inc., 790 F.3d 1343 - Methods, systems, online form
(Fed. Cir. 2015). computer readable Step 2:
media - browser Back and Forward button functionality
is conventional, well-known and common
- mechanism for maintaining the state is not
described, although it is stated to be essential
Intellectual Ventures I 8,083,137 Administration of 137 Patent
LLC v. Capital One 7,603,382 financial accounts, and Abstract idea:
Bank (USA), 792 F.3d advanced internet - tracking financial transactions to determine
1363 (Fed. Cir. 2015). interface providing user whether they exceed a pre-set spending limit
display access of (i.e., budgeting)
customized webpages Step 2:
- Methods and Systems - a database, user profile and communication
medium are all generic computer elements

382 Patent
Abstract idea:
- customizing information based on (1)
information known about the user and (2)
navigation data
Step 2:
- delivering customized advertising more
quickly than could be done with non-
computerized advertising does not confer
patentability
- interactive interfaces are generic computer
elements
- the claims to no address problems unique to
the internet

21
Case Patent(s) Subject Matter/
Type of Claims
Versata Development 6,553,350 Pricing products in multi-
Group, Inc. v. SAP level product and
America, Inc., No. organizational groups
2014-1194, - F.3d - Methods, system, and
(Fed. Cir. July 9, computer readable
2015). media
The court has also issued 14 Rule 36
summary affirmances of determinations of
patent ineligibility. Notably, nearly all of the
recent Federal Circuit software eligibility
appeals have been disposed of with Rule 36
summary affirmances.
Even though patent owners have lost in
nearly all of the published appellate
decisions on this topic, the full impact of
Alice is still uncertain, as the Federal Circuit
has issued only one written opinion in
DDR Holdings, LLC v. Hotels.com, LP
where a decision in favor of patentability
was being appealed. liii It is unclear whether
that decision, in which the court found the
patent valid, was an outlier. The zero-
percent reversal rate on determinations of
ineligibility is obviously much lower than
the Federal Circuits reversal rate on other
issues. That raises the question whether
the low reversal rate reflects a hesitation to
confront the Supreme Court (or Congress)
by upholding the eligibility of software
patents.
It is also unclear how the Federal Circuit will
view the high rate of PTO determinations of
ineligibility under the Covered Business
Method review process. Institution of CBM
review of a software patent is a virtual death
22
Abstract idea:
- determining a price, using organizational and
product group hierarchies
Step 2:
- arranging a hierarchy of organizational and
product groups, storing, retrieving and sorting
price information, eliminating less restrictive
pricing information and determining a price are
well-understood, routine, conventional activities
previously known in the industry
sentence, quite often on grounds of patent
ineligibility. The Federal Circuit has only
written one decision involving a CBM review
determination that a patent was ineligible.
While it is possible that the Federal Circuit
will articulate clear reasoning for reversals
as more CBM decisions arrive on its docket,
it may be content to avoid challenging the
PTAB on this issue.
Nonetheless, there are some general
themes that may be gleaned from the
Federal Circuits approach to determining
patent eligibility challenges in the wake of
Alice and Mayo.
First, it is unclear whether the statutory
presumption of validity applies to the issue
of patent eligibility, and accordingly the
courts have not yet conclusively decided
whether the clear and convincing evidence
burden applies to a party challenging
patent eligibility. The only Federal Circuit
opinions that discuss the presumption of
validity are concurrences by Judge Mayer in
which he at least suggests that patent
claims on methods of doing business are
presumptively patent ineligible, liv and in
which he asserts that no presumption of
eligibility attends the section 101 inquiry. lv
In both cases, his assertions went
unchallenged in the opinion of the court. lvi
Second, consistent with the way Alice was
decided by the Supreme Court, the Federal
Circuit does not require analysis of any
actual prior art references when conducting
the second step of the Alice analysis, i.e.,
whether the claims include an inventive
concept. This second step of the Alice
analysis is intended to determine whether
the additional features of the claim (beyond
the abstract idea) recite more than well-
understood, routine, conventional activity. lvii
Although Judge Newman in Internet Patents
observed that the inventive concept inquiry
favors inquiries analogous to those
undertaken for determination of patentable
invention, and is facilitated by
considerations analogous to those of 102
and 103, not a single Federal Circuit
decision has examined even a single prior
art reference to determine whether there
was an inventive concept. In every case
where it affirmed patent ineligibility, the
court merely asserted, without reference to
any specific prior art reference, that the
claim limitations were conventional and
well-known, and therefore failed to
transform the abstract idea into patent-
eligible subject matter.
Third, although the court has consistently
recognized the Supreme Courts directive
that the inventive concept inquiry must
consider the elements of each claim both
individually and as an ordered
combination, lviii that is not clearly what the
Federal Circuit does in practice. When
considering the claim elements
individually, the court tends to re-
characterize the original claim language in
more general terms before determining
whether claim elements were conventional
and well-known. For example, in Versata,
the court re-characterized the limitation:
23
storing pricing information in a
data source, wherein the pricing
information is associated, with (i)
a pricing type, (ii) the
organizational groups, and (iii)
the product groups;
as storing pricing information. lix
It then determined that storing pricing
information was a well-understood,
routine, conventional activity previously
known to the industry. lx
In Internet Patents, the claim language
required:
furnishing a plurality of icons on
a web page displayed to a user
of a web browser, wherein each
of said icons is a hyperlink to a
dynamically generated online
application form set, and wherein
said web browser comprises
Back and Forward navigation
functionalities;
and
maintaining said state upon the
activation of another of said
icons, wherein said maintaining
allows use of said Back and
Forward navigation
functionalities without loss of
said state.
The Federal Circuit determined that these
steps were well-known and conventional
because browser Back and Forward button
functionality was well-known and
conventional, and because the claim did not
specify a particular mechanism for
maintaining said state. lxi The dependent
claims required specific steps for forming
and displaying the dynamically generated
online application form set; however, the
Federal Circuit re-characterized these steps
as merely generic data collection steps or
siting the ineligible concept in a particular
technological environment. lxii
Similarly, the Federal Circuit does not
conduct a prior-art based inquiry into
whether the particular sequence of
conventional steps set forth in a claim was
conventional, well-known or routine. For
example, in Versata, after finding that the
individual claim elements were well-known,
routine, and conventional, the court merely
asserted that the ordered combination of
steps adds nothing more than a generic
computer implementation. The Court did
not attempt to conduct the kind of analysis
that an examiner or court would conduct
when deciding novelty or non-obviousness.
Trends by Software Type
Each of the software patent-eligibility district
court decisions since 2010 can be generally
categorized into one of four categories:
1) Computer implementation of
business methods and
financial transactions;
2) Non-business applications;
3) Internal computer operations
(including enhancements to
internet and web page
processing); or
4) Industrial and process control
applications.
The dividing lines among these categories
are not always clear; they do, however,
provide a useful way of thinking about
software inventions. For example, the
internal computer operations category
encompasses the PTOs guidance that
improvements to the functioning of the
computer itself may be sufficient to render
24
a claims as eligible for patent protection.
Similarly, the industrial and process control
applications category encompasses the
PTOs guidance that improvements to
another technology or technical field may
be sufficient.
The following sections include observations
about the trends and current status of
inventions in each category.
Computer Implementation of Business
Methods and Financial Transactions
This category of patents has fared the worst
of all types of software inventions. Federal
Circuit appeals in this category include
buySAFE (transaction performance
guaranties), Ultramercial (showing
advertisement as a condition for viewing
web content), OIP Technologies (automatic
pricing in e-commerce), Intellectual
Ventures (administration of financial
accounts and delivering customized
advertising), and Versata (pricing products).
Some of the judges appear to recognize
that it may be possible to obtain a patent on
a business method and therefore
presumably a software implementation of a
business method. Judge Taranto, writing in
buySAFE Inc. v. Google, Inc., and joined by
Judge Hughes, observed that Bilski had
rejected a general business method
exception to patentability, implying that
Alice does not categorically exclude
business methods. lxiii According to Judge
Taranto, [i]f enough extra is included in a
claim, it passes muster under section 101
even if it amounts to a business
method. lxiv The buySAFE case does not,
however, provide any useful hints as to
what would be enough extraJudge
Taranto wrote that the claims to a computer-
implemented method for guaranteeing a
partys performance of its online
transaction do not push or even test the
boundaries of the Supreme Court DCT DECISIONS (%)
precedents under section 101. lxv
100%
Judge Mayer, on the other hand, believes 90%
that Alice forecloses any possibility of a 80%
claim covering a software implementation of 70% Valid
a business method. According to Judge 60%
Mayer, Alice set out a technological arts Invalid
50%
test for patent eligibility when it invalidated 40%
the claims at issue because they did not 30%
improve the functioning of the computer 20%
itself or effect an improvement in any other 10%
technology or technical field. lxvi According 0%
to Judge Mayer, a rule holding that claims 2010 2011 2012 2013 2014 2015
are impermissibly abstract if they are
directed to an entrepreneurial objective,
such as methods for increasing revenue,
Apparently, the Bilski decisions in 2010 had
minimizing economic risk, or structuring
relatively little effect on the number of patent
commercial transactions, rather than a
eligibility decisions, and it wasnt until Alice
technological one, would comport with the
was decided in 2014 that large numbers of
guidance provided in both Alice and
successful dispositive motions were filed.
Bilski. lxvii
The following charts show the trend in
The following charts show district court
Covered Business Method decisions on
trends over the past five years regarding
patent eligibility grounds:
motions seeking a finding of patent
ineligibility:

CBM DECISIONS (NUMBER)

DCT DECISIONS (NUMBER)
90
80 Valid 80
70 Invalid 70
60 60
Valid
50 50
Invalid
40 40
30 30
20
20
10
10
0
0 2013 2014 2015
2010 2011 2012 2013 2014 2015

25
 CBM DECISIONS (%)
100%
90%
80%
70%
60%
Valid
50%
40% Invalid
30%
20%
10%
0%
2013 2014 2015
These charts demonstrate the extremely
high rate at which software patents are
being invalidated in CBM reviews.
Non-Business Applications
This category of patents includes a wide
variety of software inventions, including for
example the patent at issue in Content
Extraction, a patent concerning scanning
and processing information. The dividing
line between business and non-business
applications is not always clear, for
example, the Federal Circuits Planet Bingo
decision concerning a patent covering
storing preselected numbers for use in
games of bingo could be in either category.
There are fewer cases in this category than
in the business method and financial
transactions category, and to the extent a
comparison is possible with this sample
size, it appears that this category fared
better, as expected based on the hostility to
business method inventions.
26
DCT DECISIONS (NUMBER)
9
8
7
6 Valid
5
Invalid
4
3
2
1
0
2011 2012 2013 2014 2015
There was no discernable pattern in the
decisions in this category. There were three
cases involving computer-aided design or
computer-aided drafting inventions, and
these cases illustrate the difficulty of
reaching a consistent understanding of how
Mayo and Alice will be applied in particular
cases. The invention in Philippi-Hagenbuch
et al. v. Western Tech. Services Int'l, Inc. lxviii
was patent eligible while the inventions in
East Coast Sheet Metal Fabricating Corp. v.
Autodesk, Inc. lxix and Synopsys Inc. v.
Mentor Graphics Corp. lxx were ineligible.
The method at issue in Philippi-Hagenbuch
(U.S. Patent No. 7,369,978) was for
designing a custom dump truck body based
on characteristics of the load to be carried
and a specific field operating environment.
The independent claim was very general,
requiring the steps of determining a center
of gravity and capacity, developing a three-
dimensional model of the load to be carried
(without specifying how the model is to be
developed), adjusting unspecified design
parameters in unspecified ways until the
center of gravity and volume approximates
the desired quantities, and producing the
body. The courts rejected an overly-rigid
interpretation of the machine or
transformation test, and refused to over
generalize the claim to remove concrete
limitations, as urged by the defendant.
In East Coast Sheet Metal, the exemplary
claim discussed by the court (U.S. Patent
No. 7,917,340) was directed to a CAD/CAM
system for designing a ventilation system
using a visual representation of components
of the system, mapping the components to
standard fittings, and generating a
manufacturing blueprint. The patent owner
conceded that the claim was directed to the
abstract concept of mapping, and failed to
convince the court that the claims included
an inventive concept. The court found the
level of detail in the claim lacking. But just
as significantly, the court was guided by the
principle that an inventive concept is one
that creates a better result and not merely
one that creates the same result more
quickly than humanly possible. The claimed
invention failed to solve a recognized
problem with CAD/CAM software, and
therefore lacked an inventive concept.
The methods at issue in Synopsis (U.S.
Patent Nos. 5,748,488, 5,530,841 and
5,680,318) relate to the use of a computer
tool to interpret a designers description of
operations of an integrated circuit and then
generate the circuit components that
perform those operations. The invention
allows designers to describe the signals to
be produced without specifying the needed
hardware components. The court held that
the claims were directed to an abstract idea
because they do not entail anything
physical, but instead merely describe
27
various algorithms for determining
components and layout that can be
performed mentally. The court further held
that the claims preempt a building block of
human ingenuity (i.e., a mental process)
even though the process is not found in the
prior art and that the specific process
claimed was different from the mental
process used by humans to design circuits.
Finally, the court rejected the patent owners
machine or transformation argument
because the claimed methods do not
transform the user-supplied description into
another form, but instead use that
description as a starting point for inferring a
physical layout of a chip.
There was nothing dramatically different
about the specifications or claims in these
three cases, yet the courts reached different
results using differing rationales. One
possible explanation for the result in
Philippi-Hagenbuch is that it was decided
after Mayo but before Alice. Although the
test for eligibility did not change after Alice,
the view of software patents did.
Internal Computer Operations
This category includes inventions like that at
issue in Benson. Federal Circuit appeals
involving this type of software include DDR
Holdings (manipulation of web pages) and
Internet Patents Corp. (dynamic tabs for
graphical user interface). There have been
a modest number of district court decisions
involving this type of software, the outcomes
of which are shown below.
DCT DECISIONS (NUMBER)
10
9
8
7 computerized context. Claims in the patent
6 directed to screening for computer viruses
5 in data transmissions, however, were
4 determined not to be directed to an abstract
3 idea because the claims were not directed
Valid
2
1
Invalid
0
2010 2012 2013 2014 2015
It is difficult to discern any particular pattern
from this small set of cases. We would
expect that this category would fare
relatively better than the non-business
applications category because these
inventions are directed to improving the
operation of computers. There is no clear
explanation for the relatively larger number
of cases finding invalidity in 2013, prior to
Alice, compared to the more even split in
2015 after Alice.
It seems possible that the courts are simply
confused about how to apply Mayo and
Alice to more technical inventions, resulting
in a greater degree of inconsistency. For
example, the court in Intellectual Ventures I
28
LLC v. Symantec Corp. lxxi held two patents
directed to detecting SPAM e-mail ineligible,
but found a third patent directed to detecting
computer viruses eligible because viruses
are a problem specifically arising in the
realm of computers and the human mind
cannot screen for computer viruses. Claims
directed to the e-mail SPAM patents related
to identifying characteristics of e-mails,
filtering e-mails, providing a service on the
Internet, an e-mail post office on a computer
network, a process for controlling the
delivery of e-mail messages in a business,
and the like. The court was convinced that
these claims were directed to abstract ideas
because the claimed processes, viewed at a
sufficiently-high level of abstraction, could
be carried out by a human being in a non-
to screening generic data or information,
and because the human mind cannot
perform the steps described in the
specification for screening for viruses in a
telephone network. As in DDR Holdings,
the upheld claim is Internet-centric
because the key idea of the patent is that
virus detection can take place remotely
between two entities in a telephone
network. This saves resources by
performing virus detection at a central
location, thereby improving computer
technology itself. The distinction between
examining the contents of e-mail files for
SPAM using mathematical algorithms and
examining other files for viruses, however,
is certainly not clear at a technical level.
Industrial Inventions
This category is intended to capture
inventions like those at issue in the Flook
and Diehr cases, where the claimed
inventions controlled manufacturing
processes. Other types of inventions that
would fit in this category include inventions
for diagnostic, process control and
embedded software. There have been no
Federal Circuit appeals of inventions in this
category and likely only one district court
case. In Oleksy v. General Electric Co., CA
No. 1:06cv1245 (N.D. Ill.), the court held
that claims directed to machine-controlled
methods of manufacturing turbine blades
was not invalid under section 101.
CLAIM DRAFTING ISSUES FOR
SOFTWARE PATENTS: FUNCTIONAL
CLAIMING/MEANS-PLUS-FUNCTION
LIMITATIONS
The backlash against software patents was
fed, in part, by the perception that the PTO
had become too lax in allowing vague,
overly-general claims that laid claim to
broad swaths of functionality without
describing a technical invention. Even
before the Alice decision, the Federal Circuit
had tightened up the rules concerning
functional claiming, and that trend
continued in 2015.
Functional claims define an invention by
what it does (i.e., the function of the
invention), rather than by structural
elements. Functional claiming is fairly
common in claims directed to software-
based inventions because, by its nature,
software has no physical structure and is
purely functional. Software can, of course,
exist on a physical medium, such as a hard
drive or DVD, and can also be part of a
system that include physical hardware
necessary for the software to execute (e.g.,
a processor and memory). However, claims
directed to such systems and physical
media tend to resemble those drafted in
method form, which recite the functions
performed by the software. For example,
29
an Uber method claim might be drafted in
system form as follows:
A system for connecting a passenger
and a driver, the system comprising:
a memory for storing
computer-executable
instructions; and
a processor for executing the
instructions stored on the
memory, wherein execution of
the instructions by the
processor results in a plurality
of modules comprising:
a passenger communication
module for receiving a request
for transportation from a
passenger via a passenger
mobile software application
and for providing information
associated with an accepting
driver to the passenger;
a location module for
identifying one or more drivers
in proximity to a user making
the request; and
a driver communication module
for transmitting the request to
the identified drivers and for
receiving an acceptance from
one of the identified drivers via
a driver mobile software
application.
In the above claim, some physical structure
(i.e., processor and memory) is recited.
However, it is difficult to imagine what other
physical structure could be recited to
adequately capture the remainder of the
ride-sharing invention. Therefore, the claim
includes software-based structure in the
form of modules (i.e., passenger
communication module, location module,
and driver communication module) that are
defined by the particular function(s) each
module performs. Note that the claimed
functions correspond to the steps performed
in the method claim, though this need not
always be the case.
Claims must be adequately supported by
the written description portion of a patent in
order to be valid. The set of requirements
to meet the necessary disclosure standards
is codified in 35 U.S.C. 112. The basic
requirements of this section of patent law
are that the specification must include (a) a
written description of the invention showing
that the inventor had possession of the
claimed invention at the time of filing, (b)
sufficient description to enable any person
skilled in the art to make and use the
invention without undue experimentation,
and (c) the best mode of practicing the
invention. lxxii Further, the claims must be
definite, i.e., they must particularly point[]
out and distinctly claim[] the subject matter
of the invention. lxxiii
35 U.S.C. 112(f) (formerly 112,
paragraph 6, prior to the implementation of
the America Invents Act) sets out a special
case for what are known as means-plus-
function limitations in a claim. Section
112(f) states: An element in a claim for a
combination may be expressed as a means
or step for performing a specified function
without the recital of structure, material, or
acts in support thereof, and such claim shall
be construed to cover the corresponding
structure, material, or acts described in the
specification and equivalents thereof. A
common example of this is seen in
apparatus-type claims in which two
elements are joined together by a fastening
means. The fastening means is a
structural element which must be defined in
30
the specification, but also includes
equivalents thereof. Thus, the specification
may state that the fastening means can
include a nail or screw, but a rivet or bolt,
even if not specifically described, might be
considered to serve as an equivalent
fastening mechanism.
The means-plus-function issue becomes
particularly interesting when applied to
software-based claims. For example, what
corresponding structure might need to be
described in the patent in order to support
a means for playing a streaming video or
a module for evaluating a customer
recommendation? A failure to describe the
necessary structure may result in a finding
that the claim is invalid for indefiniteness.
In 2008, the Federal Circuit addressed the
requirements for the disclosure of a section
112(f) corresponding structure, arguably
requiring greater specificity and providing
defendants with new weapons to challenge
functional claim elements as being
indefinite. lxxiv In Aristocrat Technologies v.
International Game Technology, the
defendant challenged the following means-
plus-function claim element as indefinite:
game control means being arranged to
pay a prize when a predetermined
combination of symbols is displayed in a
predetermined arrangement of symbol
positions selected by a player, playing a
game, including one and only one
symbol position in each column of the
array. lxxv
The court held that the disclosure of a
general purpose computer or
microprocessor is not sufficient to satisfy the
requirements of section 112(f), and that a
specific algorithm that transforms the
general purpose computer into a special
purpose computer must be disclosed. lxxvi
The specification gave examples that
illustrated the function of the game control
means but provided no algorithm at all. lxxvii
The claim was, therefore, indefinite. lxxviii
Another 2008 Federal Circuit case, Finisar
v. DirecTV Group, produced the same
result. lxxix The claim limitation in that case
was database editing means . . . for
generating a hierarchically arranged set of
indices . . . and for embedding said indices
in said information database. lxxx The
specification provides nothing more than a
restatement of the function. lxxxi The court
did not require any particular form for the
disclosure of corresponding structure,
allowing the patentee to express that
algorithm in any understandable terms
including as a mathematical formula, in
prose, or as a flow chart, or in any other
manner that provides sufficient
structure. lxxxii
Before the requirement to disclose an
algorithm applies, the language of a claim
must first be analyzed to determine
whether section 112(f) is even applicable.
The long-recognized threshold question is
whether the claim element includes or does
not include the word means (e.g., as in
means for [doing something]). lxxxiii
Specifically, the use of the word means
creates a rebuttable presumption that
112(f) applies, whereas failure to use the
term creates a rebuttable presumption that
112(f) does not apply. lxxxiv For instance,
even if a claim uses the word means, the
presumption might be rebutted by showing
that the claim includes sufficient structural
language so that that the specification does
not have be relied on for the corresponding
structure. With respect to the fastening
means example, if the claim were to
instead recite a riveting means, this might
be sufficient structure such that 112(f)
would not apply.
31
As for the presumption that 112(f) does
not apply in the absence of the word
means, the Federal Circuit explained in
Lighting World, Inc. v. Birchwood Lighting,
Inc., the presumption flowing from the
absence of the term means is a strong one
that is not readily overcome. lxxxv This
heightened bar was favorable to patent
owners because it made it easier to avoid
implicating 112(f), and the accompanying
disclosure requirements. However, in
Williamson v. Citrix Online, the court found
this high bar to be unjustified, and
emphasized that the correct standard is
whether the words of the claim are
understood by persons of ordinary skill in
the art to have a sufficiently definite
meaning as the name for structure. lxxxvi In
other words, if a claim element does not
include means, the claim may still invoke
112(f) if a person of ordinary skill in the
field would not interpret the words of the
claim as defining structure.
In Williamson, the patent at issue contained
the system claim element: a distributed
learning control module for receiving
communications transmitted between the
presenter and the audience member
computer systems and for relaying the
communications to an intended receiving
computer system and for coordinating the
operation of the streaming data
module. lxxxvii The court found this element
to be in a format consistent with means-
plus-function limitations, with the word
module being operable to substitute for the
word means in context of 112(f). lxxxviii As
the phrase distributing learning control did
not define the type of structure associated
with the module (as would be understood by
a person of ordinary skill in the art), the
court determined that the claim did indeed
invoke 112(f) and, therefore, the
specification would need to disclose
sufficient structure to correspond to the
claimed function. lxxxix Williamsons patent
described various functions of the
distributed learning control module, but
failed to actually describe how such
functions would be performed. Thus, one of
ordinary skill in the art would be unable to
determine, based on the disclosure in the
patent, what structure (i.e., algorithm) was
necessary to implement the claimed
functions. xc
Thus, even though an applicant can attempt
to draft claims in a way that avoids invoking
112(f), there are various ways to
nonetheless invoke 112(f) without using
means or means for. Indeed, the PTO
provides examiners with various training
materials regarding recognizing claim
language in a 112(f) format, including
materials that suggest that terms such as
mechanism and module can be
substitutes for means. xci Provided that a
means-type claim does not recite structure
that performs the claimed function, the
examiner may read the claim to invoke
112(f) regardless of the particular
terminology used.
The PTO also provides 112(f) guidelines
to its examiners specifically with respect to
software and programmed computer
functions. These software guidelines define
two types of computer-implemented
functions: specialized (i.e., functions
requiring a special purpose computer, as
described in Williamson), and non-
specialized (functions known to those of
ordinary skill in the art). Specialized
functions, as noted above, require a
description of the corresponding algorithmic
structure, while non-specialized functions,
being known to those of ordinary skill, need
not be described in detail. Such non-
specialized functions include, for example,
well-known means of data transmission and
storage, as well as other basic or well-
32
known computer functions, and generally
only require the description of a general
purpose computer capable of performing
the non-specialized functions.
Bearing all this in mind, when drafting a
software patent application, the drafter
should ensure that the specification
describes sufficient algorithmic structure for
any claimed function whose implementation
is not already well known to avoid a
rejection of the claims as indefinite during
prosecution, as well as to reduce the
possibility that the claims may later be found
invalid for indefiniteness after issuance of
the application.
CLAIM DRAFTING ISSUES FOR
SOFTWARE PATENTS: DIVIDED AND
INDIRECT INFRINGEMENT
A U.S. patent grants the right to exclude
others from making, using, selling, offering
to sell, and importing the invention covered
by the patent in the U.S. xcii It follows, then,
that the infringement of a patent arises from
the unauthorized performance of any of the
foregoing rights. Patents can be infringed
directly or indirectly (i.e., contributory or
induced infringement); xciii however, under
current law, an important part of determining
whether infringement has occurred is
identifying a single, direct infringer of the
patented system, method, or other claimed
subject matter.
Generally, for a court to find that patent
infringement has occurred there must be
direct infringement, meaning that each
element of the claim at issue, whether a
step in a claimed method, making a
component of a claimed system, or
otherwise, is attributable to a single
entity. xciv This raises an interesting
problem: what if multiple parties structure
their activity so that no single one of them
performs every claim element? Worse still
for a patent owner, what if the claims of the
patent are drafted in such a manner that
they essentially require multiple parties to
fulfill all the claimed elements? Such
instances are referred to as divided
infringement, and can seriously limit or
even negate a patent owners ability to
enforce its patent.
Divided Infringement
The issue of divided infringement can arise
across nearly any type of technology, but is
a particular concern when drafting and
enforcing claims directed to software-based
systems and methods. Consider, for
example, this very simplified representation
of Ubers system architecture, below.
For example, a user can request a ride with
the Uber user app on his smartphone. The
request is transmitted to Ubers backend
server, which forwards the request to
drivers in the users area. Once a driver
has accepted the users request with the
Uber driver app on his device, the driver
app notifies the backend server of the
acceptance, which then provides the
drivers information to the user.
Now, consider a fictitious claim for a method
directed to this concept:
33
A method of connecting a
passenger and a driver, the
method comprising:
creating, by a passenger, a
request for transportation using
a passenger mobile software
application;
identifying one or more drivers
in proximity to a user making
the request;
transmitting the request to the
identified drivers;
accepting, by one of the
identified drivers, the request
using a driver mobile software
application; and
providing information
associated with the accepting
driver to the passenger.
The problem with this claim is that in
practice, no single person or entity would
perform every step of the method. Assume,
for example, that Lyft owns a backend
server analogous to that in the above Uber
claim. Then, following the steps of the
claim, a passenger creates the request,
Lyfts server performs the identifying and
transmitting steps, a driver accepts the
request, and the backend server provides
the driver information to the passenger.
Unless all of the acts can be attributed to a
single entity, the passenger, the driver, and
Lyft will not be held liable as joint infringers
for each performing a portion of the claim.
There is no single, direct infringing party.
Such a claim is virtually unenforceable, and
puts the patent owner in a very undesirable
position.
This outcome can be fairly easily avoided by
careful claim drafting. For the most part, the
language of a claim should be constructed
so that each element is performed,
constructed, operated, or otherwise, from
the perspective of a single party when
possible. For example, in the case of a
client-server architecture, it may be
preferable to draft the claims either from the
perspective of the server or from the
perspective of the client (or have multiple
claim sets, each from the perspective of a
different party).
Before jumping back to recast the Uber
claim from a single-party perspective, it is
worth putting thought into which party or
parties should be the focus of a particular
claim. The primary question to consider is,
If the patent would need to be enforced,
who would be the ideal party to enforce the
patent against?
A number of considerations go into
answering this question. For example, it
may be preferable to draft a method claim
such that the steps would necessarily be
performed by a company or other entity
(e.g., Lyft) rather than that companys
customers (e.g., passengers and drivers).
As a result, were the claims to be infringed,
the patent owner would only need to sue a
single party rather than file multiple lawsuits
against a large number of individual
infringers. Further, if a company with
substantial assets were determined to
infringe the patent, the patent owner is more
likely to recover damages in a lawsuit
against that company than in a handful of
lawsuits against individuals. Finally, it is
also worth considering the reputation factor;
that is, Uber v. Lyft is less likely to draw the
ire of the general public than Uber v. Lyfts
customers.
34
Returning now to the Uber method claim,
one way to redraft it is as follows:
A method of connecting a
passenger and a driver, the
method comprising:
receiving a request for
transportation from a
passenger via a passenger
mobile software application;
identifying one or more drivers
in proximity to a user making
the request;
transmitting the request to the
identified drivers;
receiving an acceptance from
one of the identified drivers via
a driver mobile software
application; and
providing information
associated with the accepting
driver to the passenger.
In this version of the claim, the creating
step formerly performed by the passenger
and the accepting step formerly performed
by the driver are reworded so that they are
both implemented from the perspective of
the backend server (i.e., they are now
receiving steps). As such, a single entity
is now much more likely to perform each
step of, and thereby directly infringe, the
new claim.
Now, consider a newcomer to the ride-
sharing industry, Lufter, learns of the
above claim in a patent issued to Uber.
Assuming Lufter uses a backend server that
performs all of the steps of the claim, can
Lufter structure its activity so that there is
no single entity directly infringing the claim?
For example, if Lufter were to outsource the
identifying step to a third party that
provides GPS-tracking and mapping
functionality, would it be able to avoid
liability for infringement? In this instance,
given the continuously evolving law in this
area, the answer is probably not. This is,
however, an interesting area to explore
given such recent cases as Akamai
Technologies, Inc. v. Limelight
Networks, Inc.
The Akamai line of cases is noteworthy for
addressing the issues of divided
infringement as well as induced
infringement. Briefly, Akamai is the
exclusive licensee of a patent (U.S. Patent
No. 6,108,703) which claims a method of
delivering electronic data using a content
delivery network (CDN). The 703 patent
claims methods including the step of
tagging certain components of a content
providers website, thereby designating the
components for storage on Akamais CDN
servers. Limelight also operates a CDN and
carries out several of the steps claimed in
the 703 patent but, instead of tagging those
components of its customers websites that
it intends to store on its servers, Limelight
requires its customers to do their own
tagging.
The Supreme Court took up the case in
2014, limiting its decision to the issue of
whether a defendant may be liable for
inducing infringement of a patent under 35
U.S.C. 271(b) when no direct infringement
exists under 35 U.S.C. 271(a) or any other
statutory provision. xcv The court found that
direct infringement is indeed required for a
finding of induced infringement. xcvi In other
words, if all the steps in a 703 patent
method claim are not attributable to a single
entity, there can be neither direct
infringement nor induced infringement.
However, it should be noted that the court
35
did not decide whether Limelight was a
direct infringer, leaving that issue for the
Court of Appeals for the Federal Circuit on
remand.
Given the above discussion of divided
infringement, it might seem at first
counterintuitive that it is possible for a court
to identify a single, direct infringer when
multiple, different parties are performing the
steps of a method claim. The Federal
Circuit, however, made precisely that finding
in August of 2015 in an en banc decision,
vacating its finding of no direct infringement
by Limelight just three months earlier.
As noted above, direct infringement of a
method claim under 35 U.S.C. 271(a)
occurs when all of the steps of the method
are performed by or attributable to a single
entity. xcvii When there is more than one
actor involved in practicing the steps, there
are two sets of circumstances in which a
single entity will be held responsible for
direct infringement: (1) where that entity
directs or controls others performance, and
(2) where the actors form a joint
enterprise. xcviii For example, a single actor
will be liable for direct infringement if it acts
through an agent (applying traditional
agency principles) or contracts with another
to perform one or more steps of a claimed
method. xcix
Considering the general principles of
vicarious liability, the Federal Circuit
concluded that liability under 35 U.S.C.
271(a) can also be found when an
alleged infringer conditions participation in
an activity or receipt of a benefit upon
performance of a step or steps of a
patented method and establishes the
manner or timing of that performance. c
Applying this principle to the facts of the
case, the court determined that a jury could
find that Limelight directly infringed the 703
patent. ci Specifically, the court found that
Akamai presented substantial evidence
demonstrating that Limelight conditions its
customers use of its CDN upon its
customers performance of the tagging and
serving steps (i.e., Limelights customers
must sign a standard contract, which
delineates the steps customers must
perform if using the service, including
tagging and serving content), and that
Limelight establishes the manner or timing
of its customers performance (i.e., Limelight
provides to its customers a welcome letter
and step-by-step instructions on how to use
the service and Limelight engineers
continuously monitor customers
activities). cii Thus, Limelight, exerting
direction and control over its customers
activities, was found to be a direct infringer.
The Court left open the possibility that other
future scenarios may arise that warrant
attributing others performance of method
steps to a single actor. ciii
Putting this all together, it is critical that
claims be drafted from the perspective of a
single infringer whenever possible. The
infringement issue arising in Akamai would
likely have been much more easily resolved
had the tagging step been worded so as
not to be performed by the customer. civ
Relying on a court or jury to find the
existence of a direct infringer by attributing
all of the elements of a claim to a single
actor should be considered at best a
fallback position. Furthermore, Limelight
has appealed to the Supreme Court, so the
expanded scope of divided infringement
under the Federal Circuits en banc decision
is still unsettled. From the perspective of
the accused infringer, divided infringement
will not necessarily be a perfect defense to
a poorly drafted claim. Given the
willingness of the Federal Circuit to explore
the bounds of vicarious liability and
formulate broadened circumstances in
36
which the acts of multiple actors will be
attributed to a single entity, any party that
relies solely upon the divided infringement
argument in working around a patent claim
(e.g., by structuring its activities) may be in
for an unwelcome surprise should the issue
be adjudicated.
Indirect Infringement
Having discussed direct infringement,
above, it should be understood that liability
for patent infringement can extend as well to
indirect infringers or those who aid or abet
direct infringement by others. From a
statutory standpoint, 35 U.S.C. 271(a)
enumerates the activities that can result in
direct infringement; i.e., whoever without
authority makes, uses, offers to sell, or sells
any patented invention, within the United
States or imports into the United States any
patented invention during the term of the
patent therefor, infringes the patent.
Section 271(b) imposes liability on those
who induce or encourage infringement of a
patent, and 271(c) defines who is liable for
contributing to infringement. cv
As one example, with reference to the
revised Uber method claim, consider the
situation in which Lufter does not perform
the steps itself, and does not direct or
control the activity of another such that it
could be considered a direct infringer but,
instead, makes and sells a ride-sharing
system to third parties who would perform
the steps in operating the system.
Depending on Lufters involvement with the
third party purchasers and its activities
relating to the sale and use of the system,
Lufter could nonetheless be held liable for
indirectly infringing the Uber claim.
Direct infringement is a necessary, but not
sufficient, condition for indirect infringement.
Indeed, one notable distinction between
direct and indirect infringement is the
requirement of knowledge or intent on
behalf of an accused infringer. Whereas
direct infringement follows in essence a
strict liability standard such that knowledge
and intent are irrelevant to a finding of
liability, the same cannot be said for indirect
infringement. cvi Specifically, liability for
inducing infringement arises only if the
accused infringer knows of the particular
patent at issue and knows that the induced
acts constitute patent infringement. cvii
Likewise, contributory infringement requires
knowledge of both the patent and the patent
infringement. cviii Thus, any finding that
Lufter indirectly infringes the Uber claim
would necessarily require a determination
that Lufter had knowledge of the patent
containing the Uber claim, as well as
knowledge that the activities at issue (i.e.,
the steps of the method performed by the
third party purchasers) constituted
infringement of the patent.
For these reasons, it is worth reiterating the
importance of including well-drafted system
claims in a patent application. For example,
if the patent containing the Uber claim also
included a corresponding system claim,
then Lufter might be held liable for directly
infringing the system claim by making and
selling the ride-sharing system. In this
manner, a patent owner might avoid having
to rely solely on a claim of indirect
infringement, and thereby avoid having to
satisfy the burden of proving the
defendants knowledge.
The Supreme Court addressed the
knowledge issue not long ago in Global-
Tech Appliances, Inc. v. SEB S.A., and
found, as noted above, that a party who
actively induces infringement of a patent
must know that the induced acts constitute
patent infringement. cix The Court then
looked to criminal law principles and found
37
that the appropriate standard for evaluating
knowledge is the willful blindness
doctrine. cx In essence, a willfully blind
defendant is one who takes deliberate
actions to avoid confirming a high
probability of wrongdoing and who can
almost be said to have actually known the
critical facts. cxi This standard sets a higher
bar than mere negligence (i.e., the
defendant should have known that the
induced acts were infringing) or
recklessness (i.e., the defendant knows of a
substantial and unjustified risk of the
wrongdoing). cxii In Global-Tech, the Court
found that the willful blindness standard was
met by the infringers activities, which
included copying all but the cosmetic
features of the patent product and engaging
an attorney to provide a freedom-to-operate
opinion without informing the attorney of the
copying. With respect to this last point, the
Court noted that it could not fathom the
motive for withholding that information from
the attorney other than to manufacture a
claim of plausible deniability in the event
that [the] company was later accused of
patent infringement. cxiii
More recently, the Supreme Court
addressed induced infringement in Commil
USA, LLC v. Cisco Systems, Inc. cxiv
Commil had originally brought suit against
Cisco, alleging that Cisco directly infringed
Commils patent relating to short-range
wireless networks by making and using
networking equipment and, further, that
Cisco induced infringement of Commils
patent by selling the infringing equipment for
use by its customers. cxv As a defense to the
inducement claim, Cisco argued that it had
a good-faith belief that Commils patent was
invalid. cxvi Stating that infringement and
validity are separate issues, the Court found
that such a belief is not a defense to a claim
of induced infringement. cxvii
Nevertheless, in its decision, the Court also
confirmed the soundness of the rationale in
Global-Tech, which found that induced
infringement requires proof that the
defendant had knowledge that the induced
acts were infringing a patent. cxviii Thus,
although a reasonable belief of patent
invalidity will not serve as a defense, the
inducers reasonable reading of the claims
as not covering the induced acts may
reduce the likelihood that the knowledge
requirement for finding indirect infringement
is not met. cxix
Ideally, then, a party accused of infringing a
patent should timely obtain a
noninfringement opinion from counsel in
order to memorialize its good-faith belief
that its activities, induced or otherwise, do
not infringe. Note, however, that the failure
to obtain the advice of counsel cannot be
used to prove that an accused infringer
willfully infringed or intended to induce
infringement of a patent. cxxi

The decision in Commil is, in some ways,

favorable to patentees, including non-
practicing entities, who often send notice
letters broadly alleging patent infringement.
The Court recognized this issue, but noted
that other avenues for challenging the
validity of a patent are available, including
declaratory judgment actions, inter partes
review at the Patent Trial and Appeal Board,
and ex parte reexamination at the Patent
and Trademark Office, and further reiterated
that sanctions are appropriate in frivolous
cases. cxx On the other hand, in supporting
the holding in Global-Tech, a good faith
belief by an accused infringer of
noninfringement remains a viable defense
to induced, and assumedly contributory,
infringement.

38
WHAT IS A DESIGN PATENT?

A design patent is a form of patent

protection for the aesthetic features of an
article of manufacture. cxxii A design patent
has a 15-year term that begins once the
design patent application is granted by the
PTO. A design patent consists of a brief
description of the nature and intended use
of the article that embodies the design, a
description of the ornamental features of the
article and a drawing or drawings that
clearly depict the claimed design.

In contrast to a utility patent that protects

the functional aspects of an article of
manufacture, a design patent protects only
the look of such an article. The look or
ornamental design of the article can be
embodied in its shape, or the designs and
appearance of its surface. A design patent
is only valid if, on the whole, it is primarily
ornamental and not primarily functional or
merely a by-product of functional aspects
of the article of manufacture. cxxiii Examples
of designs that can be patented include the
shape of a particular cell phone, the tread
pattern of a tire, and a computer icon.
Design patent for a graphical website interface. Note
that the Google logo and some text is
shown in dashed lines. These indicate that those
portions of the drawing are not claimed.
Design patents, like utility patents, protect
the patent owner from infringement of the
claimed design during the term of the
patent. Design patent infringement is
evaluated based on the design as a whole
that is, the overall aesthetic of the article of
manufacture that embodies the design. An
accused design is found infringing if it is
substantially the same as the patented
design. This determination is made through
the eyes of an ordinary observer who uses
pre-existing designs of a similar type as
context to highlight the differences between
the patented design and accused design.
Generally, the range of designs that infringe
a patented design is significantly narrower
where the court determines that the
patented design has functional aspects and
is not merely aesthetic. cxxiv

Design patent application publication

for a well-known computer icon.

39
 The Federal Circuit clarified the breadth of
protection offered to software by design
patents in the blockbuster case, Apple v.
Samsung. cxxv In that case, the Federal
Circuit upheld a district court decision
finding that Samsung infringed numerous
Apple patents relating to the iPhone. cxxvi Of
particular note is a design patent, D604,305,
which covers the appearance of the iOS
home screen interface.

The patented design of the Vortex football (above)

was found to be partly functional because the fins
improved the aerodynamics of the football. As a
result, the design of a similar and competing finned
football (below) was found non-infringing.

CAN DESIGN PATENTS PROTECT

SOFTWARE?

Design patents can protect generated

images among other things, digital
images on a screen. These generated
image design patents are classified in
subclasses 485-495 of design patent class The iOS interface claimed by the D305 patent. The
D305 patent includes both a color and black-and-
D14. These subclasses are the white drawing of the home screen shown above,
counterparts of utility patent classes 345 claiming both the layout and colorful appearance of
and 715 which cover various forms of the interface.
software including graphics display systems
and user interfaces.

Generated image designs can cover icons,

digital images, the appearance of a menu or
a toolbar, or even the look of an entire user
interface like the Google browser. Recently,
the PTO began accepting sequential series
of images as designs, which allows an
applicant to cover animations frame-by-
frame.
40
Despite the apparent functionality of the Samsung has appealed the Federal
array layout of the iOS interface, which Circuits ruling to the Supreme Court,
facilitates easy use, the Federal Circuit did challenging both the scope of design patent
not narrow the scope of the D305 patents protection and the measure of damages.
claims. The Federal Circuit found that a Noting the length of time since the Supreme
particular graphical software element is Court has addressed design patents,
deemed ornamental unless its appearance Samsung urges that [t]he law of the
is dictated by its function. Generally, smartphone cannot follow reflexively from
appearance is not dictated by function when the law of the spoon. On March 21, 2016,
multiple different designs can be employed the Supreme Court granted Samsungs
without compromising functionality. Unlike petition challenging the $400 million
in earlier cases involving physical articles, awarded to Apple for Samsungs
the district court and Federal Circuit found infringement of Apples design patents.
no cause to read functional limitations on
the scope into Apples D305 patent. This
holding indicates it is likely that the
arrangement of screen elements for a
graphical user interface is a protectable
design, even where the arrangement serves
a functional purpose, provided there are
alternative layouts (even inferior ones) for
accomplishing the same purpose.

41
SHOULD YOU SEEK A DESIGN PATENT
ON ELEMENTS OF YOUR SOFTWARE?
Design patents on software elements have
become increasingly common. Over the
past few years especially, design patents
have represented a growing proportion of
the total number of all kinds of patents on
software. While design patents do not offer
the same scope of protection as their utility
patent counterparts, it is clear that design
patents are being viewed as a viable
measure of protection for software elements
protection offered by a utility patent.
Whereas a utility patent lays claim to the
function of a particular piece of software and
its operation, a design patent allows the
applicant to protect the visual appearance of
a particular piece of software, which can be
equally important. Furthermore, as
evidenced in Apple v. Samsung, software
design patents can be drafted such that
they offer protection on the functions of a
piece of software that are inherently tied to
its appearance. This is especially true for
graphical user interface elements and

16000

14000

12000

10000

8000

6000

4000

2000

Design Class D14 - Generated Image Subclasses 485-495

Utility Class 345 Computer Graphics Processing and Selective Visual Display Systems

Utility Class 715 Data Processing: Presentation Processing of Document, Operator Interface
Processing, and Screen Saver Display Processing

Trends in software patent grants, both for utility and animated elements.
design patents. Data from USPTO.gov.

Design patents offer complementary

protection for software in addition to the
42
Design patents are relatively inexpensive to
prosecute and are typically not difficult to
obtain compared to utility patents. Because
design patent terms run from the date the
patent is granted, not the date the
application is filed, in many ways design
patents can be file and forget IP
protection. This is especially true given the
lower bar for allowance generally an
applicant need only submit clear, complete
and detailed drawings of the design cxxvii for
the PTO to grant a design patent, unlike the
typically lengthy negotiations that take place
between the PTO and a utility patent
applicant before issuance. Finally, design
patents require no maintenance fees after
granting. cxxviii As a result, it is advisable to
seek a design patent on the appearance of
graphical software elements to supplement
other IP protection.
A utility patent claiming a futuristic automatic shoe
lacing system (left) and a complimentary design
patent application claiming a futuristic shoe design
(right) intended for a shoe incorporating the lacing
system.

HOW DO I ASSERT MY DESIGN

PATENT?

As mentioned above, design patent

infringement claims proceed in much the
same way as utility patent infringement
claims, although infringement is ultimately
evaluated differently by the court. Design
patent infringement claims are raised in
federal district court and asserted against
the design of an allegedly infringing article
of manufacture. Emphasizing the
complimentary nature of design patent
protection, a design patent covering the
design of a particular article of manufacture
can be asserted in the same case as a
utility patent covering the article of
manufacture itself.

One key difference between utility and

design patent infringement is the measure
of damages. Utility patent damages often
come in the form of a reasonable royalty

43
that embodies the value of the patented
technology in a commercial product the
cost of the license to the patent. cxxix Design
patent infringement entitles the patent
owner to these same remedies or to the
entire profits derived by the alleged infringer
from sale of the infringing design. cxxx Thus,
design patent holders may be entitled to
significant damages over and above what
they may receive for infringement of a
related utility patent. cxxxi
It should be noted that evaluation of design
patent infringement claims is often a highly
contextual proposition. As a result, it can be
difficult to consistently predict the outcome
in many such litigations or how any one
court decision, such as the Federal Circuits
decision in Apple v. Samsung, will impact
the IP landscape moving forward. Although
44
it is clear that graphical software elements
can be protected with design patents, many
other considerations, such as the actions of
the parties and the greater context of the
litigation, will factor in to the outcome of any
given case.
In sum, design patents offer complimentary
protection of the aesthetic aspects of a
particular software element that can be
asserted along with utility patent rights or
other forms of IP protection to provide
robust, comprehensive coverage of
technology.
SCOPE OF PROTECTION THE BASICS
Copyrights protect an authors expression
and provide a remedy for the copyright
holder if the authors expression is copied or
if derivative works based on that expression
are created. To show infringement of a
copyright covering source code, the
copyright owner must prove that the
infringer had access to the work and copied
it, and that there was substantial
misappropriation of protectable expression.
In the simplest scenario, an employee who
walks away with source code cannot do
anything with that source code, including
loading it onto another computer, without
infringing the copyright. Note that copyright
protection has an advantage over trade
secret protection in this scenario because
the owner does not have to prove that
reasonable measures were taken to protect
the secrecy of the source code. In fact, the
source code does not have to be secret at
all.
Nonetheless, source code is often still kept
as a secret because copyright protection
does not protect the underlying ideas
contained within the source code. The
copyright statute specifically sets forth a list
of what cannot be protected by a copyright:
In no case does copyright protection for
an original work of authorship extend to
any idea, procedure, process, system,
method of operation, concept, principle,
or discovery, regardless of the form in
which it is described, explained,
illustrated, or embodied in such work.
(17 U.S.C. 102(b).)
To use a very simple example, the source
code and resulting object code for a binary
search function might be protected by
copyright; however, the copyright does not
protect the binary search algorithm itself.
We say might be protected because, to
the extent there are relatively few ways to
code a binary search algorithm, the aspects
45
of the code that are dictated by the
algorithm might not be protected, even if
actual copying is proven.
So what happens if source code is used to
create a new version of the program? Is
that a copy? What happens if the source
code is modified by changing all the variable
and function names? Is that still the
authors protected expression? What
happens if the source code is used to create
a new program that performs similar
functions?
Some of these situations are relatively easy
to deal with and can be analogized to more
traditional copyrighted works such as
literary works. Changing variable and
function names should be analogous to
changing the names of characters in a book
without changing its plot. Other situations
raise more difficult questions, and may blur
the line between protecting expression and
protecting ideas.
The protection of non-literal aspects of a
computer program is usually analyzed using
the three-step process called the
Abstraction-Filtration-Comparison test set
forth in 1992 in Computer Associates
International, Inc. v. Altai, Inc. (Altai). cxxxii
The Abstraction step involves characterizing
the program with increasing levels of
abstraction:
Initially, in a manner that resembles
reverse engineering on a theoretical
plane, a court should dissect the
allegedly copied programs structure
and isolate each level of abstraction
contained within it. This process begins
with the code and ends with an
articulation of the programs ultimate
function. cxxxiii
The Filtration step separates out, for each
level of abstraction, the protectable
expression from non-protectable material.
This process entails examining the
structural components at each level of
abstraction to determine whether their
particular inclusion at that level was idea
or was dictated by considerations of
efficiency, so as to be necessarily incidental
to that idea; required by factors external to
the program itself; or taken from the public
domain and hence is nonprotectable
expression. cxxxiv
Finally, the Comparison step determines
whether there has been sufficient copying of
protectable material to constitute
infringement:
Once a court has sifted out all elements
of the allegedly infringed program which
are ideas or are dictated by efficiency
or external factors, or taken from the
public domain, there may remain a core
of protectable expression. . . . At this
point, the courts substantial similarity
inquiry focuses on whether the
defendant copied any aspect of this
protected expression, as well as an
assessment of the copied portions
relative importance with respect to the
plaintiffs overall program. cxxxv
In Altai, a Computer Associates (CA)
employee took the source code to a
component called ADAPTOR and used it to
create a similarly-functioning component for
an Altai product. The function of ADAPTOR
was to isolate specific interfaces to different
operating systems so that CAs
SCHEDULER program could run on three
different operating systems. Approximately
30% of the source code for Altais product
was copied from ADAPTOR. After CA
discovered Altais literal copying and filed
suit, Altai assigned several developers who
had never seen the ADAPTOR code to
rewrite those portions of the Altai product.
The court determined that the new Altai
product did not include any source code
from ADAPTOR. Moving up a layer of
46
abstraction, the court found there was some
similarity for only a few parameter lists and
macros, but that the number of instances of
similarity was not sufficient to warrant a
finding of infringement given their relative
contribution to the overall program. cxxxvi At
a higher level of abstraction, the court
considered the overlap between the list of
operating system services provided;
however, that aspect of the program's
structure was dictated by the nature of other
programs with which it was designed to
interact and, thus, is not protected by
copyright. cxxxvii At the highest level of
abstraction, CA argued that there were
similarities in the programs organizational
charts; however, the court held that the so-
called organization was not protectable
because it was simple and obvious, and
followed naturally from the purpose of the
programs. cxxxviii
PRACTICAL ISSUES
Ownership
A threshold question for protecting software
under copyright is who owns the intellectual
property rights to the software? Generally,
the author of the software initially owns the
copyright, but there is an exception to this
rule for works made for hire. cxxxix Under
the work made for hire doctrine, an
employer is considered the author of, and
maintains ownership of the copyright in,
works created by its employees within the
scope of their employment. 17 U.S.C.
101, 201. Ownership of the copyright in
software created by employees should be
straightforward unless there is a question of
whether creating the software is within the
scope of a given employees employment.
Any residual uncertainty in that regard can
be addressed by including a present
assignment of rights in an employment
agreement and not relying entirely on the
statutory work made for hire provision.
The application of the works made for hire
provision of the Copyright Act is
considerably less straightforward in the
case of independent contractors and third
party software development companies.
The Copyright Act sets forth the following
definition of a work made for hire by a non-
employee:
a work specially ordered or
commissioned for use as a
contribution to a collective work,
as a part of a motion picture or
other audiovisual work, as a
translation, as a supplementary
work, as a compilation, as an
instructional text, as a test, as
answer material for a test, or as
an atlas, if the parties expressly
agree in a written instrument
signed by them that the work
shall be considered a work made
for hire.
17 U.S.C. 101(b). Even assuming the
work is specially ordered, and there is a
written agreement reciting work for hire,
the work still must fit within one of the
identified categories of work. Generally,
these categories might not cover software
source code in any given situation. For
example, even if a computer program
developed by a contractor could
theoretically be a contribution to a
collective work if combined with software
written by others (and this proposition is not
without doubt), a computer program might
not fall within this category if a contractor
writes the entire program.
Therefore, the best practice when dealing
with independent contractors or third party
software development companies is to
obtain a present assignment of all rights to
the developed software. cxl There may still
be some advantage to obtaining the
author status conferred by work made for
hire, and the agreement can do both:
assert that the work is made for hire and, to
47
the extent it does not qualify as a work for
hire, is presently assigned. Note, however,
that California Labor Code section 3351.5(c)
and California Unemployment Insurance
Code section 686 and 621(d) deem an
agreement that provides for work made for
hire to create an employer/employee
relationship, and implicates an obligation to
maintain workers compensation and
unemployment insurance. Companies
contracting with independent software
developers in California may, therefore,
wish to dispense with the work made for
hire provision and rely entirely on
assignment provisions.
Registration
Registration is not a prerequisite to the
creation or ownership of a copyright.
Authors own the copyright in their works
regardless of whether the copyright is
registered. Registration is, however, a
prerequisite to bringing a claim of
infringement against another party who has
unlawfully copied the software. The
copyright can be registered after the
misappropriation has occurred; however,
the timing of registration affects the type of
damages that are available. Registering
within three months of publication or before
infringement makes statutory damages and
attorneys fees available.
Registering a copyright can be
accomplished online on the US Copyright
Office website at
http://www.copyright.gov/eco/. The process
involves completing the application, making
the required payment, and depositing the
registered work. The Copyright Offices
Circular No. 61, available at
http://copyright.gov/circs/, describes special
considerations for registering computer
programs, three of which bear mention
here.
First, separate versions of a computer
program are registered separately.
Registering the first version is not sufficient
to gain the benefit of registration for
subsequent versions. So if you want to sue
for infringement of version 2.0, you must
register (and deposit) version 2.0.
Furthermore, the registration of a
subsequent version covers only material
added to that version. It may be necessary
to deposit numerous versions to obtain
coverage for all of the material that was
copied.
Second, the deposit requirements vary
depending on whether the programs contain
trade secrets. The Copyright Office offers
options for blocking out portions of the
deposited source code where the source
code includes trade secrets. The blocked
out portions must, however, be less than the
remaining visible material and the visible
material must represent an appreciable
amount of original code. cxli
Finally, the Copyright Office allows the
registration of a program and its screen
displays with a single registration. Notably,
html or other formatting code does not
automatically cover the display, and images
or printouts of screen displays should be
included in the deposited material. Circular
No. 66 discusses registration of Online
Works in further detail.
COPYRIGHT PROTECTION FOR USER
INTERFACES
As discussed above, the Copyright Office
makes an explicit provision for registration
of at least one aspect of user interfaces,
screen displays, separately from the
underlying code that implements them.
Circular 61 also recognizes video games as
containing user interface components that
can be registered. The ability to register
user interface components does not,
however, resolve the issue of the extent of
copyright protection for the user interface,
48
particularly with respect to aspects of the
user interface with which the users actually
interact. That is because user interfaces
are inherently functional, and 17 U.S.C.
102(b) excludes procedures, processes and
methods of operation from copyright
protection.
Two early cases that involved the scope of
protection for user interfaces resulted in a
very narrow scope of protection, bordering
on almost no protection at all.
In Apple Computer, Inc. v. Microsoft
Corp., cxlii Apple claimed that Windows 2.03
and 3.0 infringed Apples copyright on the
graphical user interface (GUI) in its Lisa and
Macintosh computers. Apple had licensed
Microsoft to use the visual displays in
Windows 1.0, which Microsoft conceded
were derivative works of Apples GUI, but
complained that Microsoft exceeded the
scope of its license by making Windows
2.03 and 3.0 look even more Apple-like, cxliii
Apple also argued that the total concept
and feel of its GUI was protected,
substantially similar to, and infringed by,
the new versions of Windows. cxliv The Court
of Appeals for the Ninth Circuit rejected
Apples interpretation of the license and
held that the total concept and feel of the
GUI was not protectable, and that only
those specific elements of Apples GUI that
were virtually identical to elements of the
Windows GUIs could be infringed.
The courts copyright analysis used a four-
step test in which (1) the plaintiff identifies
the sources of alleged similarity, (2) the
court determines whether any of the
allegedly similar features are protected (the
court referred to this as analytic
dissection), (3) the court determines scope
of protection (broad or thin), and (4) the
finder of fact (in this case the judge)
performs a subjective comparison to
determine infringement. cxlv The court
described its analytic dissection process
as the same as the analysis in Altai. cxlvi
Apple identified the overall concept of a
desktop metaphor, as well as a list of
particular features of its GUI, that were
similar to features found in Windows. In the
second step, the district court rejected the
desktop metaphor as an unprotectable idea,
and grouped Apples other identified
features into the following categories of
standardized features or ideas:
(1) use of windows to display multiple
images on a computer screen and
facilitate interaction with the
information contained in the
windows;
(2) use of icons to represent familiar
objects from the office environment
and facilitate organization of
information stored in the computers
memory;
(3) manipulation of icons to convey
instructions and to control operation
of the computer;
(4) use of menus to store information or
functions of the computers in a place
that is convenient to reach, but
saves screen space for other
images; and
(5) opening and closing of objects as a
means of retrieving, transferring or
storing information. cxlvii
The Ninth Circuit agreed with the district
court that these were unprotectable
ideas. cxlviii The Ninth Circuit also agreed
that more specific features, such as the use
of overlapping windows (as opposed to tiled
windows), a document icon shaped like a
page, and the way of depicting a moving
window (using just the outline of the
window) were either merged with a more
general idea, excluded as scenes a faire
49
(e.g., indispensable or standard expressions
of an idea or dictated by external factors,
such as hardware performance constraints),
or not original. cxlix Finally, the Ninth Circuit
agreed with the district court that
infringement could only occur if the works
as a whole were virtually identical, because
almost all the similarities spring from either
the licensed visual displays or from basic
ideas and their obvious expression. cl Apple
had chosen not to assert that the GUIs
were virtually identical, and there was,
therefore, no infringement.
The second case was Lotus Development
Corp. v. Borland International, Inc., in which
the Court of Appeals for the First Circuit
held that the menu command hierarchy of
Lotus 1-2-3 was not entitled to copyright
protection. cli Borlands Quattro and Quattro
Pro version 1.0 programs contained a
virtually identical copy of the entire 1-2-3
menu tree. clii Borland sought to gain
acceptance for its product from users of
Lotus 1-2-3 who had memorized the Lotus
menu commands and their short-cuts, and
who had created macros that used the
Lotus menu commands. cliii
The district courts analysis followed an
approach that was similar to the abstraction-
filtration-comparison test. cliv The court
considered different levels of abstraction,
and concluded that the correct way to view
the idea Lotus 1-2-3 interface was that:
its user interface involves a system of
menus, each menu consisting of less
than a dozen commands, arranged
hierarchically, forming a tree in which
the main menu is the root/trunk of the
tree and submenus branch off from
higher menus, each submenu being
linked to a higher menu by operation of
a command, so that all the specific
spreadsheet operations available in
Lotus 123 are accessible through the
 paths of the menu command
hierarchy. clv
The court then determined that the Lotus-1-
2-3 interface included protectable
expression that was not dictated by the
functional considerations of the idea
because there were at least hundreds of
ways of arranging a satisfactory menu
tree. clvi
The First Circuit rejected the district courts
analysis and reversed its judgment of
infringement. The court considered the Altai
abstraction-filtration-comparison test to be
irrelevant because it provides a framework
for addressing nonliteral copying of
computer code, and the issue in Lotus was
literal copying of a menu command
hierarchy. clvii In fact, the court considered
the Altai test to be misleading because it
seems to encourage [courts] to find a base
level that includes copyrightable subject
matter. clviii
For the First Circuit, the determining issue
was whether the menu command hierarchy
was a method of operation, and therefore
excluded from protection by 17 U.S.C.
102(b). The court concluded that it was a
method of operation because it provides
the means by which users control and
operate Lotus 1-2-3. clix It was analogous to
the buttons on a VCR, and the court
reasoned that the labels on those buttons
were not protectable expression because
they are the method of operating the VCR. clx
The fact that the Lotus 1-2-3 command
hierarchy was one of many the developers
could have chosen was immaterial to
whether it was a method of operation and
therefore unprotectable. clxi
Apple and Lotus, taken together, appear to
limit protection for user interfaces to virtually
identical copying of purely ornamental
aspects of user interfaces. Apple, however,
can be viewed as limited to its facts, in
which a significant portion of the disputed
50
user interface had been licensed to
Microsoft. And the First Circuits categorical
method of operation rule in Lotus has not
been universally accepted by other circuits.
In 2014, the Federal Circuit in Oracle
America, Inc. v. Google, Inc., interpreting
Ninth Circuit law, rejected the method of
operation rule, and noted that the Tenth
and Third Circuits have done likewise. clxii It
appears, therefore, that there is a good
argument to be made that copying of user
interfaces should be treated like copying of
any other aspect of programs and subject to
the same analysis. We note that the
currently-pending litigation between Cisco
and Arista involves Ciscos claim that Arista
literally copied Ciscos command line
interface to its switches. This argument,
which might not have fared well under
Lotus, now has support in the Ninth Circuit
under Oracle v. Google.
COPYRIGHT PROTECTION FOR
APPLICATION PROGRAM INTERFACES
The Oracle v. Google case mentioned
above is about the scope of copyright
protection for application program
interfaces. The degree of protection
accorded APIs arguably raises more
difficult issues than the issues raised by
user interfaces because there are no visual
elements involved. APIs are a literal
expression, and the expression has a
functional purpose. Accordingly, they raise
difficult questions about the idea/expression
dichotomy.
In Oracle v. Google, the district court and
Federal Circuit came to opposite
conclusions regarding these issues.
Oracles Java Platform includes the Java
Class Library, which at the relevant time
included 166 packages, containing more
than 600 classes with over 6,000
methods. clxiii Google wished to use Java in
its Android operating system, and also
wished to use 37 of the packages in the
Java Class Library. Google believed Java
application programmers would want to find
the same 37 sets of functionalities in the
new Android system callable by the same
names as used in Java. clxiv After licensing
discussions failed, Google created its own
version of the 37 packages by copying
verbatim the class and method declarations
from the Java Class Library packages, and
then independently writing the code to
implement the functionality of the
methods. clxv The district court found that the
class and method declarations, and their
organization within the 37 packages, were
not protectable. clxvi The Federal Circuit
reversed, holding that they were
protectable, and remanded for trial on
Googles fair use defense.
Oracle v. Google: Opinion of the
Northern District of California
The district court first rejected the
protectability of the individual class and
method specifications based on the premise
that [t]he method specification is the
idea. clxvii The courts premise was based
on its belief that it would be impossible to
implement the function of a Java method
without using an identical method
specification. clxviii Of course that might be
true for simple methods (the court used
java.lang.Math.max, which has two identical
inputs, as an example), but the court made
no attempt to show how that might be true
for more complex methods with more
complex, and dissimilar, parameters. The
court made the same incorrect assumption
with respect to class declarationsthat the
class declaration for a given functionality
must always read the same. clxix By
assuming that the method specification
[declaration] is the idea, the court
predetermined the outcome of the analysis.
The court also held that the names of the
packages, classes and methods were not
protectable, because names and short
phrases cannot be copyrighted. clxx
51
The district court then rejected the
protectability of the structure, sequence and
organization of the 6,000 methods into 600
classes and 37 packages. Although the
grouping of methods, classes and packages
resembled a taxonomy, which is protectable
under Seventh Circuit precedent, the overall
scheme is also a command structure for a
system or method of operation of the [API],
and was therefore excluded from protection
by 102(b). clxxi The interoperability
considerations that motivated Google to
copy Javas package structure served to
confirm the functional nature of the
structure, sequence and organization. clxxii
Oracle v. Google: Opinion of the Federal
Circuit
The Federal Circuit rejected both of the
district courts reasons for finding the
individual method declarations
unprotectable. The court held that there
was no merger of the ideas of the methods
and the declarations of the methods
because (1) there were unlimited options as
to the selection and arrangement of the
7,000 lines Google copied (e.g., Oracles
developers could have called the
Java.lang.Math.max method
Math.maximum or Arith.larger); and (2)
the district court focused its merger analysis
on options available to Google at the time of
copying instead of the options available to
Oracle at the time the packages were
created. clxxiii Neither of these points,
however, addressed the district courts
finding that the method declaration is the
idea, and that it would be impossible to
implement the function of a given method
without using an identical declaration. The
selection and arrangement of the 7,000
lines of declarations seems irrelevant to
whether any individual declaration is
protectable. As for the copying of class,
method and parameter names, the Federal
Circuit held that those names should not
have been considered individually, rather
the issue was whether the selection and
arrangement of the names as they were
strung together throughout the 7,000 lines
of declarations exhibited creativity. clxxiv The
court found that they did and that the words
and short phrases doctrine did not apply. clxxv
The Federal Circuit also rejected the district
courts analysis of the structure, sequence
and organization of the packages. The
court rejected the hard and fast method of
operation rule in Lotus, and held that the
proper analysis under Ninth Circuit law was
the Altai abstraction-filtration-comparison
test. clxxvi It reasoned that a categorical
method of operation rule would preclude
protection for all computer programs and
would be inconsistent with Congresss
express intent. Section 102(b) does not, as
Google seems to suggest, automatically
deny copyright protection to elements of a
computer program that are functional. clxxvii
The Federal Circuit also rejected the district
courts reliance on interoperability
considerations, holding that interoperability
could only be considered when deciding
whether Oracles choices of expression
were limited when they created the
packages, not whether Googles choices
were limited when it copied the
packages. clxxviii Finally, the Federal Circuit
held that under Ninth Circuit law, a
copyrighted work does not lose protection
when it becomes an industry standard. clxxix
Implications
The Supreme Court refused to grant
Googles petition for certiorari,
notwithstanding the apparent circuit split
regarding the scope of protection for
software structure, sequence and
organization, and the proper interpretation
of 102(b). clxxx Thus, there remains
52
uncertainty as to whether Oracles approach
and result will stand the test of time. Until
that uncertainty is resolved, the circuit split
may drive forum shopping and may also
drive tactical considerations as to whether
related patent and copyright claims should
be brought in the same action for fear (or
hope) of triggering Federal Circuit
jurisdiction.
Although there has been much
handwringing in the press about the
implications of Oracle, there remain
questions about the potential impact of the
decision. First, while it is likely to act as a
chilling agent on the use of non-open
source APIs in open source applications,
the majority of APIs used in open source
applications are themselves governed by
open source permissive licenses such as
the GPL. There has also been the
argument made that Oracle will slow the
culture of repurposing old APIs for new
uses. The EFF, for example, has listed
examples of API recycling that led to major
software advancements, including perhaps
most famously the repurposing of AT&Ts
Unix API into the myriad Linux operating
system permutations, one of which serves
as the core for Googles Android. The
concern is, therefore, that developers may
be more inclined to spend copious hours
reinventing the architecture of known APIs,
increasing costs and potentially decreasing
interoperability. The Federal Circuits
Oracle decision has not, however, affected
the outcome of any copyright cases since it
was decided in May 2014 and does not
appear to have resulted in a deluge of
copyright infringement lawsuits asserting
broad copyright coverage for user interfaces
or APIs.
The only case to consider the analysis in
Oracle found that the facts of the two cases
were not analogous. In SAS Inst. Inc. v.
World Programming Ltd., SAS Institute
alleged that the defendant infringed its Oracle does not, however, stand for the
copyright by creating and selling a proposition that the syntax and semantics of
compatible replacement for its SAS a programming language cannot receive
protection under the abstraction-filtration-
Language compiler and interpreter. clxxxi It comparison test. It is far from clear,
was undisputed that the defendant therefore, whether Oracle would have
implemented its compiler/interpreter influenced the SAS Institute court to reach a
independently in a different programming different conclusion had the plaintiff made a
language. clxxxii Still, SAS Institute argued more explicit abstraction-filtration-
that by recognizing elements of the SAS comparison argument and introduced more
Language, such as names of functions, evidence of copying of the specification of
macros, options, etc., the plaintiff infringed the SAS Language.
in the same way that Google did when it
copied the names of Java classes and
methods. clxxxiii The court rejected SAS
Institutes analogy, finding that the
elements of the SAS Language are more
analogous to words of the English
language, and that SAS Institute was
seeking to copyright the SAS Language
itself. clxxxiv

53
Trade secrets are an additional way of
protecting software intellectual property
aside from patent and copyright protection.
Though trade secrets lack formal
procedures to establish protection, they
depend on keeping protected information
secret from the public. This leads to a
number of unique issues relating to the
scope of protection, the steps necessary to
maintain protection, and the remedies for
misappropriation.
THE SCOPE OF TRADE SECRET
PROTECTION
Trade secret protection differs from other
kinds of IP protection in several ways that
are important to software. First, trade
secrets require no formal procedures to
obtain protection they must merely be
kept secret, as described below. In turn,
there is no requirement to disclose the
subject of a trade secret to the public, as
with patent protection. Second, trade secret
protection can be, in theory, perpetual,
lasting as long as the material is kept
secret. But this means that trade secret
protection is also in some sense fragile,
because as soon as it is disclosed to the
public, the trade secret is no longer
protectable. Third, trade secrets do not give
protection against independent
development or reverse engineering by
others. Individuals that do so without
misappropriation are free to use and profit
from the purported trade secret.
WHAT IS A TRADE SECRET?
At its most basic, a trade secret is:
information, which derives economic
value from being generally unknown and
is subject to reasonable efforts to
maintain secrecy. clxxxv While software
technology is capable of being a trade
secret, to maintain trade secret protection,
owners must ensure that information related
to software technology is handled
appropriately.
54
Derives Economic Value from it Being
Generally Unknown
A key element in trade secret protection is
that the informations value comes from not
being known to the public at large.
However, because a trade secret must
derive economic value from generally not
being known, courts have distinguished
between those portions of software that are
visible, such as the look and feel of a
product, or its functionality, and the
underlying code itself, which is not visible.
The functionality, look and feel of software
is generally not protectable as a trade
secret as it is readily ascertainable by
proper means. That is, while source code
and process flows that are hidden from a
user are protectable as trade secrets, the
visible features of a program are not eligible
for trade secret protection generally. In
some circumstances, however, the form
and function of software can be eligible for
trade secret protection provided sufficient
steps are taken to maintain their
secrecy. clxxxvi
Trade secret protection may also be
available for processes that are purely
internal to software, such as algorithms and
process flows. Examples of this might
include the algorithm that a search engine
uses to find and rank results. As an
algorithm or a process flow is more
portable than source code (that is,
potentially simpler to disclose), special care
needs to be taken to protect such
information as a trade secret.
The flow chart below summarizes when
trade secret protection is available:
Reasonable Efforts to Maintain Its
Secrecy
Secrecy is essential to trade secret
protection, and in the context of software
technology, this can pose particular
obstacles. A company looking to protect its
software technology must be mindful to
maintain secrecy with a view to not only the
public at large, but also its own employees,
business partners, as well as actual and
potential consumers. Each of these
categories of people poses risks of
disclosure.
General Precautions: In general, one best
practice for trade secret protection is to
restrict access to trade secret information by
55
using barriers both physical and electronic.
Physical barriers include old-fashioned
doors and locks to restrict physical access
to trade secret information. Electronic
barriers include password protection, copy
protection, encryption, and secured
electronic source code repositories.
Where potential trade secret information
must leave the company, confidentiality
agreements are critical in protecting trade
secrets. Here, there are several classes of
people to whom trade secret protectable
information may need to be made available
to achieve business objectives, and each
poses different risks. These include the
public-at-large, business partners,
consumers, and employees.
Public: For the public-at-large, best
practices come down to limiting disclosure
to only that which is necessary.
Business Partners: For disclosure to
business partners, companies should use
non-compete agreements and
confidentiality agreements to protect their
information internally (vis--vis employees)
and externally (such as when working with
business partners). clxxxvii
Consumers: For companies that advertise
to potential customers by showing previews
or samples, confidentiality provisions should
also be used, and limiting how long the
customer has access to the information is
important. clxxxviii Similarly, companies whose
products give customers sensitive
information should make use of license
agreements to protect their proprietary
information. clxxxix
Employees: Employees pose a unique risk
with regard to trade secret protection. While
employed, employees may require access
to sensitive information to do their jobs, but
there is a risk that they might retain that
information after their employment ends.
For many companies, having strong internal
policies to protect proprietary information is
key. For companies that need to ensure that
information shared internally is duly
protected, employee education on how to
handle company information appropriately is
important. Further, companies can use
human resources protocols such as
entrance and exit interviews as a means to
maintain secrecy.
Companies should also consider technical
measures to improve security. For
example, if there is no need for different
product groups to have unrestricted access
to each others source code, consideration
should be given to restricting source code
access to just those employees who work
on the respective products. The same
consideration might apply to particularly
sensitive subsets of source code within a
product. Policies prohibiting most
employees from exporting source code to
removable media may be appropriate.
Consideration should also be given to
logging and auditing access, copying and
exporting of source code.
After employment, non-disclosure and non-
compete agreements can provide additional
protection for trade secrets, though they are
generally limited in time and scope. For
example, a non-compete agreement can
prevent a former employee from obtaining
employment in the same field for a period of
time. A non-disclosure agreement can
similarly prevent an employee from
disclosing information about their
employment for a period of time. It is worth
noting, however, that non-compete
agreements are essentially unenforceable
under California law. cxc Under statute,
56
California law recognizes exceptions to its
prohibition on non-compete agreements for
the protection of trade secrets but the scope
of this exception, and how it will be
enforced, is uncertain and depends on
circumstances.
Incoming employees can also pose a risk of
liability for trade secret misappropriation.
Just as they may retain information from
their current employer, so too can they
retain information from their prior employer.
This can include trade secret protected
information which, if disclosed to and used
by a current employer, can give rise to
liability. Again, human resources policies
and protocols can provide a defense against
potential claims. For incoming engineers
and employees involved in product
development, it may be necessary to
institute so-called clean room procedures
for product development. This involves
segregating employees who pose a
potential disclosure risk from those working
on a particular product or service.
BARRIERS TO TRADE SECRECY?
CLOUD COMPUTING, SOFTWARE AS A
SERVICE AND OPEN SOURCE
SOFTWARE
Software companies face pressure today
from the market to use open-source
software, and are increasingly delivering
their products through the use of Software
as a Service (SaaS) platforms. Both of
these tools, however, are in tension with the
limitation on trade secret protection to
proprietary information that is kept private
and confidential. Using open source
software will likely prohibit a company from
obtaining trade secret protection, as many
open-source licenses require disclosure of
the portions of open-source code used, and
the code itself is known. However, to the
extent that some components of software
do not use open source, those portions of
the software may be protectable as trade
secrets.
SaaS platforms pose different challenges,
as they may require the owner of the
software to provide additional disclosure, or
increased visibility into code and the inner
workings of software, to the services that
host the software. With respect to
customers, however, SaaS platforms may
decrease the risk of disclosure because the
code itself does not have to be distributed to
customers, since they use the software in
the cloud. Customers may have less
visibility into the code and may be less likely
to be able to reverse engineer or compile
the code. Using SaaS platform or cloud
computing, however, requires companies to
think about secrecy measures with respect
to their cloud carrier; and make sure to
negotiate confidentiality provisions with their
cloud carrier; companies should consider
negotiating confidentiality provisions with
their cloud carrier. customers.
ENFORCING TRADE SECRET RIGHTS
Trade secret law provides a number of
potential claims and remedies if trade
secrets are misappropriated (used without
authorization), including civil and criminal
claims and remedies. Unlike patent and
copyright claims, trade secret claims
generally arise under state law and (when
litigated without patent or copyright claims),
are generally filed in state courts.
A claim for trade secret misappropriation
generally requires showing that another
party obtained the trade secret information
by improper means, and used, or disclosed
it. In a number of jurisdictions, including
California, a plaintiff pursuing a trade secret
57
claim must show that the trade secret was
actually used, not merely taken. In the area
of software, this causes unique issues of
proof for example, if the trade secret is
source code, this may require comparison
of the trade secret source code to the
accused infringers source code. For
algorithms and internal processes, this may
involve showing that the accused infringer
did not independently develop the trade
secret.
Some jurisdictions, California in particular,
require trade secret plaintiffs to identify with
reasonable particularity the trade secrets
that were allegedly misappropriated before
proceeding with discovery on their trade
secret claim. cxci This sets up a potential
double-bind for the trade secret plaintiff;
disclose too broadly, and courts will likely
deny the plaintiff the opportunity to get the
information it needs to prove its trade secret
claims. If the plaintiff discloses too
narrowly, the plaintiff may later discover that
additional trade secret materials were taken
beyond the scope of the disclosure. Care
must be taken properly to identify the scope
of trade secrets that were taken as soon as
possible in a trade secret litigation.
REMEDIES FOR MISAPPROPRIATION
In the event a companys trade secret is
misappropriated by another, there are a
number of potential remedies available
against a misappropriating partyincluding
both civil and criminal remedies.
States Uniform Trade Secrets Act. Forty-
eight states have adopted the Uniform
Trade Secrets Act, which provides lost
profits, unjust enrichment or a reasonable
royalty as remedies for individual or
corporate victims of trade secret
misappropriation. Courts may award
compensatory damages, punitive damages
and issue injunctive relief for findings of
misappropriation. Injunctive relief is useful,
as it can prevent the misappropriating party
from using or disclosing the trade secret.
Recently, the Tenth Circuit affirmed a jury
award of $2.92 million under the Utah
Uniform Trade Secrets Act for trade secret
appropriation where the defendant did not
use the information for its own commercial
benefit, but instead shared the source code
with a rival company. cxcii In another case,
the Fifth Circuit affirmed a jurys award of
$4.8 million for trade secret
misappropriation of a few lines of [] source
code. cxciii Further, some states also have
criminal remedies for trade secret
misappropriation. cxciv
Economic Espionage Act. cxcv The
Economic Espionage Act (EEA), first
enacted in 1996, allows the federal
government to combat the misappropriation
of trade secrets for use abroad. The goal of
the EEA is not to prosecute trade secret
theft generally, but instead to target high-
level offenders. In recent years the EEA has
risen in prominence as the Administration
has taken aggressive efforts to combat
cyber espionage and address the multiple
vectors of attack for persons and
governments seeking to steal trade
secrets. cxcvi For instance, in May 2015 the
Obama Administration announced the
indictment of a professor and five other
Chinese citizens under the EEA. cxcvii
58
Computer Fraud and Abuse Act. cxcviii The
Computer Fraud and Abuse Act (CFAA)
allows parties to protect proprietary
information by offering a remedy for
damage to a computer system or network.
The CFFA is particularly useful for
employers who seek remedies for abuse by
a former employee. cxcix
Pending Legislation: Defend Trade
Secrets Act of 2015. (H.R. 3356) In the
summer of 2015, both the House and
Senate introduced the Defend Trade
Secrets Act of 2015 in an effort to
harmonize state trade secret laws by
providing a federal cause of action for trade
secret misappropriation. In addition to
providing a federal remedy, the bill would
also create an ex parte seizure application,
which would allow parties to seize property
in order to prevent the dissemination of
trade secrets. As of this writing, the bill has
left committee and has gone through a
number of amendments, but has not yet
been passed.
GENERAL CONSIDERATIONS
A central consideration in any software
licensing agreement is the scope of subject
matter covered. Drafters should consider
what version of a product or service will be
licensed: only the versions in existence
when the agreement was executed? Any
version created during the lifetime of the
agreement? Or only versions enumerated
on a schedule? Customized software
deliverables may be defined with reference
to functional specifications in a statement of
work or other preliminary document.
Similarly, drafters should clearly specify any
intellectual property rights at issue. For
licenses that implicate patent rights, drafters
should consider which patent family
members should be included or excluded.
Courts may presume that continuations and
reissues of issued patents explicitly
enumerated are also impliedly covered
unless expressly excluded.
Importantly, any agreement that involves
patent rights should clearly distinguish
between patent-based royalties and any
royalties that will be paid after each patent
expires (based on any unexpired patents or
on non-patent IP). In Kimble v. Marvel
Enterprises, the Supreme Court held that a
license agreement that encompassed
inseparable patent and non-patent rights
with a single royalty rate could not be
enforced beyond the expiration date of the
patent. Workarounds to this ruling may
include (1) framing any post-expiration
payments as payments deferred based on
pre-expiration use, (2) setting royalties in
multi-patent agreements to run until the
latest-running patent covered in the
agreement expires, (3) creating a step down
to enable post-expiration royalties based on
non-patent rights (e.g. 5% for patents plus
trade secrets, then 4% for trade secrets
59
alone), or (as an extreme alternative) (4)
framing the agreement as a joint venture
with risk/reward sharing, rather than as a
license.
The level of effort and quality a software
vendor must provide is another important
consideration that is sometimes overlooked.
As discussed below, different software
delivery models raise different concerns for
addressing vendor efforts and quality. For
any delivery model, however, the lack of an
express provision likely will not excuse poor
vendor performance. For exclusive
licenses, courts may find that common law
implies a duty of best or reasonable efforts.
Courts are less likely to find such terms
implied in nonexclusive licenses, but even
for nonexclusive licenses courts may find
that an implied covenant of good faith and
fair dealing provides a minimum standard of
conduct for vendor.
TRADITIONAL ON PREMISES
SOFTWARE LICENSES
Historically, software was provided via
physical media, or, more recently,
downloaded from servers into the users
environment. Such software is often
referred to as on premises or on-prem
software. However, the rapid adoption of
cloud-based software development and
deployment and the web-based hosting
services platforms such as Amazons AWS,
Microsofts Azure, and Googles Cloud
Platform have had an enormous impact on
the methods of software delivery and use.
As a result, many conventional mechanisms
used to protect the intellectual property
rights of the licensor and to allocate risks
between the licensor and licensee have
evolved to address this new paradigm.
Traditional methods of licensing software
relied on some form of master license
agreement (for large scale implementations)
or end user agreement (for single use) to
grant rights to download, copy, perform and
use software. For large scale licenses,
additional services such as custom
development, implementation, training, and
maintenance and support were heavily
negotiated. Moreover, because the
software was operated within the licensees
environment, risks of infringement claims
loomed over its use, and provisions
regarding warranties, indemnification and
limitations of liability became critical aspects
of these agreements. In some
circumstances, the ability of licensees to
modify or incorporate the licensed software
into their own systems also raised the issue
of rights in derivative works. For mission
critical applications, licensees often insisted
on source code escrow and other business
continuity terms. Release of source code
would typically be triggered by bankruptcy
of the software provider or a breach of its
service obligations.
SOFTWARE AS A SERVICE
Scope of License
With the shift to hosted web services, or
SaaS usage, the applicability and scope of
these elements have changed dramatically.
For example, the traditional copyright rights
needed to download, host, operate and use
software within an organization are no
longer needed, as SaaS-based applications
are hosted remotely and available via an
Internet connection and conventional
browser the user is not copying
displaying or distributing the software.
Instead, users only need to receive the
service provided by the SaaS provider.
Specifically, a license grant that historically
included statutory copyright rights, similar to
the following:
60
Licensor hereby grants
Licensee the right to install and
use the Software on a single
central processing unit of a
single computer solely for the
User's personal use or internal
business or professional
purposes consistent with the
terms of this Agreement.
Licensee may make limited
copies of the Software solely for
the purpose of backup and
recovery
can now be replaced with:
Provider hereby provides User a
non-exclusive right to access
and receive the Services via the
public Internet solely for the
Users personal use or internal
business purposes
Dual Licensing
In instances in which multiple access
methods are used, dual licensing models
may be appropriate. For example, a
provider of a SaaS-based application may
also offer a mobile application to allow for
remote use via a smartphone. In such
cases, a separate end user agreement
governs the use of the mobile application.
This type of agreement may be referred to
as a EULA or Terms of Use and often
includes terms and conditions imposed by
the entity providing the application, such as
Apple (for apps downloaded from the Apple
AppStore) or Google (for apps downloaded
from Google Play). These agreements take
a more conventional form, and generally are
presented to the users in a click-through
format. However, when used in conjunction
with a more robust SaaS platform, the terms
governing use of the app may include
restrictions or obligations in the primary
SaaS Agreement. For example, users may
be required to maintain a subscription to the
primary service in order to login using the
mobile app.
Service Quality
Another significant difference between
traditional software license agreements and
hosted services agreements is the need for
maintenance and support. In a traditional
maintenance provision, the software vendor
agrees to fix bugs and provide periodic
upgrades. However, in a SaaS-based
model, the vendor need only maintain one
copy of the software, which is accessed and
used by each of its customers. The very
nature of the vendors provision of the
services involves maintaining its operational
status, else all customers will lose the
benefit of the software. Upgrades and
updates become less burdensome, as there
is no need for patches to be distributed to
and installed at each customer location.
Of course, a SaaS-based deployment
model does not completely eliminate the
vendors obligation to meet certain levels of
application quality and uptime. Many SaaS
agreements contemplate detailed service
level obligations, which may include credits
for extended downtime and incident
escalation protocols. Note, however, that
vendors should be careful to carve out
liability for any incidents or obligations
related to connectivity issues caused by the
customers network infrastructure or those
resulting from general Internet traffic and
ISP bottlenecks.
Data Management and Security
Data management and security play a more
important role in SaaS implementations that
in traditional on-premises systems because
the customers sensitive data is either on
the vendors servers, or being managed by
61
a third party service provider on behalf of
the vendor. Even with the benefits of a
single, centralized application, some
customers (especially those in the financial
services or healthcare fields) may insist on
a dedicated copy of the application, often
justifying this need by citing statutes and
rules related to data security and privacy
obligations.
Such requests can often be addressed
through dedicated database instances,
whereby a particular clients data is held
separate from others, so that the application
can remain multi-tenant, and the vendor
can continue to maintain only one version of
the application code. cc Even then, some
users may request the development of
custom features or functionality, thus
introducing potential IP ownership issues.
Customers may also request that their data
be maintained on servers physically located
in a certain country, or that the data security
and privacy policies governing the use and
storage of the data comply with a particular
states data security statutes. One common
approach used by many SaaS vendors who
use third party hosting services is to include
provisions governing such services that
refer to particular certifications and
programs (e.g., ISO 27001, U.S. Safe
Harbor Program Privacy Principles), and
may include other geographic and technical
restrictions.
A benefit to a vendor who employs a SaaS-
based model is that it has immediate and
continuous access to all the data being
entered into and generated by each and
every user. While in some instances there
may be no significant value to the data, in
other cases the data can be mined and
manipulated and may become a source of
revenue itself. If such a use is
contemplated, it is recommended that the
vendor include a data use provision that
permits the vendor to exploit the data in the Services and related systems
manner(s) contemplated. In most and technologies (including,
instances, such use will be subject to without limitation, Customer Data
confidentiality obligations, including and data derived therefrom), and
restrictions that the data be aggregated Provider will be free (during and
and anonymous and not be used to identify after the term hereof) to (i) use
any particular individual or transaction. such information and data to
improve and enhance the
An exemplary set of data ownership and Services and for other
use provisions may look something like the development, diagnostic and
following: corrective purposes in
connection with the Services and
Customer shall own all right, other Provider offerings, and (ii)
title and interest in and to the disclose such data solely in
Customer Data. Provider shall aggregate or other de-identified
own and retain all right, title and form in connection with its
interest in and to (a) the Services business. No rights or licenses
and Software, all improvements, are granted except as expressly
enhancements or modifications set forth herein.
thereto, (b) any software,
applications, inventions or other
technology developed in
connection with Professional
Services or support, and (c) all
intellectual property rights
related to any of the foregoing.
Notwithstanding anything to the
contrary, Provider shall have the
right to anonymize, collect and
analyze data and other
information relating to the
provision, use and performance
of various aspects of the

62
COMPARISON OF KEY PROVISIONS IN of the differences between provisions in
TRADITIONAL AND SOFTWARE AS A traditional and SaaS software licenses is set
SERVICE LICENSES out below.

The rise of SaaS licenses has transformed

the structure and content of key provisions
in traditional software licenses. A summary

Issue Traditional Software Licenses SaaS Licenses

License Form Master license agreement or end Multiple access methods may
user agreement require dual licensing models

Licensee Actions Downloading, copying, Accessing and receiving

performing, using, creating
derivative works

Maintenance and Support Vendor obligated to fix bugs and Vendor may be obligated to
provide periodic upgrades provide service level obligations

Infringement Provisions Key provisions include No longer essential because

warranties, indemnification, software not operated in
limitations on liability licensees environment

Source Code Issues Source code escrow and other Business continuity terms may
business continuity terms suffice

Responsibility for Data Licensee primarily responsible Vendor primarily responsible

Management and Security and may be required to maintain
dedicated database instances,
host data in a particular location,
and/or comply with particular
data security certifications and
programs.

Vendor exploitation of user data

addressed through data use
provision subject to anonymity
and confidentiality restrictions.

63
FORUM AND VENUE CONSIDERATIONS
Both patent owners and alleged infringers
face a number of threshold choices when
determining where to litigate software patent
infringement cases. Patent holders need to
decide where to sue. In some cases,
alleged infringers will also face that question
if they are deciding whether to file a
preemptive declaratory judgment action
against patent holders. In addition, alleged
infringers will need to determine whether to
pursue invalidity challenges before the
Patent Trial and Appeal Board (PTAB).
That does not end the inquiry, however.
Alleged infringers must determine which
PTAB challenge to file: either a petition for
inter partes review (IPR), a petition for
covered business method review (CBM), or
post grant review (PGR). This section
evaluates some of these key
considerations, with an emphasis on patent
infringement cases for software.
Forum
Before courts can hear a case, they
generally follow a two-step inquiry to
determine whether personal jurisdiction
exists over the defendant. cci ccii First, courts
will examine whether personal jurisdiction
exists under the law of the state in which
they sit (typically known as the state long-
arm statute). cciii If statutory jurisdiction is
established, courts will then examine
whether such jurisdiction is consistent with
the Due Process Clause of the U.S.
Constitution. cciv However, some states
define the reach of their long-arm statutes
as coextensive with the Due Process
Clausecausing the two inquiries to
effectively collapse into one combined
analysis. ccv
In any event, personal jurisdiction can be
satisfied by establishing the existence of
either (1) general jurisdiction or (2) specific
64
jurisdiction. Id. General jurisdiction exists
when it can be shown that the defendant
has had continuous and systematic
contacts with the forum state. ccvi This is
typically the case when the defendant is a
resident of the forum state orin the case
of corporationshas its principal place of
business or is incorporated in the forum
state. ccvii Specific jurisdiction, on the other
hand, exists when the courts jurisdiction
arises out of or relates to the cause of
actioneven if those contacts are isolated
and sporadic. ccviii Each states long-arm
statute will uniquely identify what minimum
contacts are required for specific jurisdiction
to exist. ccix Importantly, specific jurisdiction
is broad for software patents and usually will
attach wherever an allegedly infringing
product is sold. ccx
Venue
Current Standards
Once it is established that a court has
personal jurisdiction over a defendant (i.e.,
that the defendant has sufficient contacts
with the forum state), it must next be shown
that the particular trial court is the proper
venue within the forum state. In other
words, it is not enough for a court to have
personal jurisdiction over a defendant;
instead, venue limitations further protect
defendants from the inconvenience of
having to defend an action in a trial court
that is either remote from the defendants
residence or from the place where the acts
underlying the controversy occurred. ccxi
Patent infringement cases are governed by
a unique venue statute codified at 28 U.S.C.
1400(b), which reads: Any civil action for
patent infringement may be brought in the
judicial district where the defendant resides,
or where the defendant has committed acts
of infringement and has a regular and
established place of business.
Furthermore, it has been held that venue in
a patent action against a corporate
defendant exists wherever there is personal
jurisdiction. ccxii Thus, no separate venue
inquiry is needed for corporate defendants.
Pending Legislation
fact that an overwhelming majority of
patent infringement cases [are] filed and
decided in the Eastern District of Texas,
despite the fact that there is little or no
manufacturing, research or development in
East Texas. ccxvi Critics of the Bill, on the
other hand, argue that the measure would
unfairly limit access to courts offering
expedited, efficient proceedings, and would
disproportionately benefit large firms at the
expense of smaller firms. ccxvii

Litigants should be cognizant of legislation

pending in the U.S. House of
Representatives, whichif enactedwould
dramatically change the patent litigation
landscape by introducing strict venue
provisions for patent litigation. ccxiii
Specifically, House Bill 9 (the Bill) seeks
to ensure that patent infringement suits are
only brought in judicial districts that have
some reasonable connection to the
dispute. ccxiv The hotly contested changes
are designed to target growing concerns
over improper venue shopping. ccxv For
example, venue-shopping critics point to the

65
Filing Statistics Factors that Influence Filing

As mentioned above, because specific As the below graph suggests, software

jurisdiction is easily satisfied for software
patents, and because there is no separate
venue inquiry for corporate defendants, the
requirements of personal jurisdiction and
proper venue have not meaningfully
restricted where software patent cases are
filed and litigated. Given this freedom,
forum and venue can become important
strategic decisions for software patent
litigants. The following chart illustrates how
the majority of software patent cases are
concentrated in a small number of
jurisdictions. ccxviii
patent holders prefer certain jurisdictions
over others. Some factors that these
litigants preferand which influence their
filing decisionsinclude: quick-to-trial
jurisdictions, jurisdictions that are reluctant
to grant summary judgment, ccxix jurisdictions
that are generally considered plaintiff
friendly, and jurisdictions that are
associated with large damages awards.

Percentage of All Software Patent Cases Filed ( 2008 - August 2015 )

50.00%
45.00%
40.00%
35.00%
30.00%
25.00%
20.00%
15.00%
10.00%
5.00%
0.00%

66
Damages Statistics
The following chart presents data on the
average damages awards per software
patent for the 10 jurisdictions that had at
least 4 damages awards from 2010 to
August 2015.
As a result, litigants should be aware of
which jurisdictions are more or less likely to
stay litigation. The following graph presents
motion to stay statistics for software patent
cases in the most active jurisdictions from
2010 to 2015.

Average Damages Award for Software Patent Cases

Western District of Pennsylvania ccxx $258,631,564
Northern District of California ccxxi $76,010,842
Middle District of Florida ccxxii $26,415,870
Southern District of Texas $45,277,050
Western District of Wisconsin $42,254,051 ccxxiii
Eastern District of Texas $38,803,622
Eastern District of Vermont $12,416,865
District of Delaware $4,156,789
District of Minnesota $1,918,756
District of Utah $414,000

Likelihood of Litigating on Two Fronts

After plaintiffs initiate patent infringement

claims against defendants in a trial court,
defendants frequently seek to challenge the
validity of the patent through a proceeding
with the PTAB. ccxxiv Some courts,
depending on the circumstances, will stay
litigation pending the results of the PTAB
proceeding. Other courts, however, decline
to do soforcing parties to litigate two
simultaneous proceedings. ccxxv

67
 Percentage of Motions to Stay Granted (2008 - 2015)

80% 75%
69%
70% 67%
61% 60% 60%
60%
50%
50% 47%
40% 40%
40%

30%

20%
13%
10%

0%

*does not include motions granted-in-part, denied-in-part

Litigants Seeking Declaratory Judgment the added benefit of avoiding litigating in

Declaratory judgment plaintiffs ccxxvi typically
prefer to file in their home jurisdiction for a
number of reasonsone of which is the
simple matter of convenience. In addition,
it may be more advantageous for some
litigants to file in their home jurisdiction.
Large financial institutions, for example,
may particularly benefit from a home court
advantage. Litigating at home also provides
patentee-friendly jurisdictions. The chart
below lends support for these observations,
illustrating that the most active jurisdictions
for software patent cases become
statistically less significant when specifically
analyzing filings for declaratory judgment
software patent cases.

68
 Number of Software Patent Declaratory Judgment Actions (2008 - 2015)

180
166
160

140

120 112
100

80 68
60
40
40 27
17 17 17 16
20 10
3
0

Moving for a Change of Venue
Plaintiffs choice of forum is afforded weight
in a venue analysis, but it is not
dispositive. ccxxvii Defendants looking to
move to a more favorable venue can do so
when it promotes the convenience of the
parties and witnesses. ccxxviii See, e.g., 28
U.S.C. 1404(a).
The following chart presents statistics for
the success rates of motions to transfer
venue and motions to dismiss for improper
venue filed in software patent cases among
the most active patent jurisdictions from
January 2010 to December 2015.

69
 Motion to Transfer Success Rate in Software Patent Cases (2010 - 2015)

90%

80%

70%

60%

50%

40%

30%

20%

10%

0%

FILING A PTAB CHALLENGE Choosing the Appropriate Proceeding

Litigants who consider filing a PTAB
challenge can choose between three types
of review: (1) PGR, (2) IPR, or (3) CBM.
There are benefits and drawbacks to each
kind of PTAB proceeding. Litigants should
be cognizant of the differences among
these proceedings in order to ensure that
the proper review is selected.

70
Such differences include varying standards Below are informational tables published by
of review, eligibility requirements, and bases PTO designed to illustrate these differences
upon which patents can be challenged. ccxxix and allow for easy comparison

Major Differences between IPR, PGR, and CBM

Inter Petitioner Estoppel Standard Basis
Partes
Review
(IPR)

Post Person who is not the Raised or reasonably More likely than not 101, 102, 103,
Grant patent owner and has not could have raised OR 112, double
Review previously filed a civil action Novel or unsettled patenting but
(PGR) challenging the validity of a Applied to subsequent legal question not best mode
claim of the patent USPTO/district court/ITC important to other
action patents/
Must identify all real parties applications
in interest

Inter Person who is not the Raised or reasonably Reasonable 102 and 103
Partes patent owner, has not could have raised likelihood based on
Review previously filed a civil action patents and
(IPR) challenging the validity of a Applied to subsequent printed
claim of the patent, and has PTO/district court/ITC publications
not been served with a action
complaint alleging
infringement of the patent
more than 1 year prior
(exception for joinder)

Must identify all real parties

in interest

Covered Must be sued or charged Officeraised or Same as PGR Same as PGR

Business with infringement reasonably could have (some 102
Method Financial product or service raised differences)
(CBM)
Excludes technological Court-raised
inventions

Must identify all real parties

in interest

71
 Major Differences between IPR, PGR, and CBM
Proceeding Available Applicable Timing

Post Grant From patent grant to 9 months Patent issued under Must be completed within
Review (PGR) after patent grant or reissue first-inventor-to-file 12 months from institution,
with 6 months good cause
exception possible

Inter Partes For first-inventor-to-file, from Patent issued under Must be completed within
Review (IPR) the later of: (i) 9 months after first-to-invent or 12 months from institution,
patent grant or reissue; or (ii) first-inventor-to-file with 6 months good cause
the date of termination of any exception possible
post grant review of the patent.
For first-to-invent, available
after grant or reissue (technical
amendment)

Covered Available 9/16/12 (for first- Patents issued under first- Must be completed within
Business inventor-to-file only after PGR to-invent and first- 12 months from institution,
Method (CBM) not available or completed) inventor-to-file with 6 months good cause
exception possible

72
PTAB Statistics

The following pie charts illustrate the instituted against software patents to date
relative number of PGR, IPR, and CBM have been IPR challenges, which have also
proceedings filed against software patent invalidated the largest percentage of
ownersas well as the percent of software software patents to date.
patents that have been invalidated under
each proceeding. As can be seen below,
the vast majority of PTAB proceedings

Percent of Proceedings Filed Against Software

Patents
0%

19%
IPR
CBM
PGR

81%

Percentage of Proceedings Where Software

Patents Found Unpatentable or Cancelled
0%

23% IPR
CBM
PGR

77%

73
PLEADING STANDARDS
The Supreme Courts decisions in Bell
Atlantic v. Twombly in 2007 and Ashcroft v.
Iqbal in 2009 heightened the required
pleading standards in federal courts. These
decisions, along with recent amendments to
the Federal Rules of Civil Procedure (the
FRCP), have implications for pleading
practices in IP cases involving software.
Twiqbal, as the two Supreme Court cases
are colloquially known, require a party to
plead a claim that is plausible rather than
merely conceivable. The Court has
described the heightened pleading standard
as requiring more than labels and
conclusions, and a formulaic recitation of a
cause of actions elements. ccxxx Instead,
the allegations must be sufficient to raise a
right to relief above the speculative
level. ccxxxi Although this new standard
appeared to apply across the board for
parties pleading claims in federal courts, the
FRCP seemed to provide an exception for
some forms of pleading, including patent
infringement. Recent changes to the FRCP,
however, have likely put an end to that
exception, and parties pleading infringement
will now be subject to the same heightened
pleading standards as those pleading other
federal claims.
On April 29, 2015, the Supreme Court
adopted amendments to the FRCP, which
became effective on December 1, 2015.
One of the amendments is the abrogation of
Rule 84 and its corresponding forms. In the
pre-December 2015 FRCP, Rule 84 stated
that the forms provided in the appendix
suffice under these rules and illustrate the
simplicity and brevity that these rules
contemplate. Form 18, provided in the
appendix to the FRCP, was a very simple,
bare-bones form complaint for patent
infringement. A patent plaintiff could plead
patent infringement pursuant to this form
74
with a brief statement describing the patent
and its owner, and alleging that a defendant
is infringing the patent. Before the adoption
of the new FRCP, federal courts usually
upheld Form 18 as an adequate form of
pleading, despite the standards described in
Twiqbal. ccxxxii
Although courts permitted plaintiffs to rely
on Form 18 to plead direct infringement,
courts required a patent plaintiff to plead
indirect infringement under the heightened
standards expressed in Twiqbal. ccxxxiii When
pleading induced infringement, the plaintiff
was required to plead facts plausibly
showing that [the alleged infringer]
specifically intended [a third party] to
infringe [the patent-in-suit] and knew that
the [third partys] acts constituted
infringement. ccxxxiv Similarly, for
contributory infringement, the plaintiff was
required to plausibly allege that the
defendant offers to sell or sells within the
United States or imports into the United
States the product or component at
issue. ccxxxv Courts have also applied the
Twiqbal standards to cases where the
plaintiff is pleading willful infringement. ccxxxvi
Since the new FRCP amendments have
become effective, Rule 84 no longer exists,
and neither does Form 18. It is likely that
this amendment spells the end of federal
courts allowing a more lenient pleading
standard for direct patent infringement, and
will instead bring all infringement pleading
into the realm of Twiqbal. The heightened
pleading standard may present unique
difficulties for plaintiffs alleging infringement
of software patents. Being able to
sufficiently allege infringement of software
code, for example, would be much easier if
a plaintiff could identify the parts of a
defendants code that infringe on the code
at issue. This is problematic, however,
when the plaintiff may not be able to even
 review defendants source code until well
into the discovery phase. Under the
Twiqbal standard requiring plaintiffs to plead
a plausible case supported by sufficient
factual allegations, courts may reject
complaints before plaintiffs have the
opportunity to truly discover the potential
infringement that is occurring.
Courts may be sensitive to the unique
challenges of pleading infringement in
software cases. In Miller v. Facebook, Inc.,
the Northern District of California upheld the
software developers copyright infringement
claim, stating that [o]ne reason for [the]
finding is because a plaintiff can rarely
examine the source code of an accused
infringing software program without
resorting to discovery. ccxxxvii It remains to
be seen whether most courts will take this
difficulty into consideration when assessing
the sufficiency of claims under the new
heightened pleading standards of the
FRCP.
In addition to the Twiqbal decisions and
changes to the FRCP, Congress has
proposed new legislation, H.R. 9 -
Innovation Act, which contains heightened
pleading requirements for parties filing
patent infringement claims. The proposed
legislation, reintroduced in February 2015,
includes a requirement that the filing party
identify with specificity all of the limitations
of the asserted claims and patents that are
found in the accused product. Again, such
heightened pleading requirements may
prove problematic in cases dealing with
computer software implemented inventions,
for the reasons discussed above.
The Supreme Courts decision in Alice Corp
v. CLS Bank Intl in 2014 may also have an
impact on the way courts view pleading
standards in software cases. In Alice the
Court ruled that the claims at issue were not
patent eligible under 35 U.S.C. 101,
75
because they were drawn to an abstract
idea, a decision that has implications for the
patentability of software. Defendants are
now able to obtain dismissals for failure to
state a claim upon which relief can be
granted (a 12(b)(6) dismissal) on the
grounds that the patents are ineligible for
protection under Alice. Two recent Federal
Circuit cases, for example, affirmed the
lower courts dismissals of two software
patent infringement lawsuits on the basis
that the patents-in-suit did not claim
patentable material. In OIP Technologies v.
Amazon.com, Inc., the suit involved
infringement of a patent claiming computer-
implemented pricing methods. ccxxxviii The
defendant filed a 12(b)(6) motion, arguing
that the claims were ineligible for patent
protection. The Federal Circuit agreed with
the defendant and, citing the Alice tfound
the subject matter to be ineligible for patent
protection, thus affirming the dismissal for
failure to state a claim. The concurring
opinion specifically addressed the issue of
challenges to patent eligibility at the
pleading stage, with Judge Mayer stating
that this is the sort of basic deficiency that
should be determined at the pleading stage.
Judge Mayer cited the Supreme Courts
opinion in Bilski v. Kappos, where the Court
referred to patentability as a threshold
issue. ccxxxix Two weeks later, the Federal
Circuit reached a similar result in Internet
Patents Corp. v. Active Network, Inc., a
case involving patents related to web page
functionality. ccxl Again, citing Alice, the court
found the claimed idea to be abstract and
affirmed the motion to dismiss for failure to
state a claimest,
While the Federal Circuit is comfortable
applying the Alice test at the pleading stage,
the district courts vary in their approach.
Most significantly, Judge Rodney Gilstrap of
the Eastern District of Texas, who has a
busy patent docket, has implemented new
procedures in the wake of the increasing
number of Alice motions. Under a Standing
Order issued by Judge Gilstrap on
November 10, 2015, if an accused infringer
wishes to bring an Alice motion before claim
construction, the accused infringer may do
so only after engaging in a meet and
This likely results in fewer Alice motions
being filed at the pleading stage in the
Eastern District of Texas. Furthermore, the
likelihood of getting a case dismissed at the
pleading stage when an Alice motion is
brought in the Eastern District of Texas is
significantly lower than in other districts.
The chart below shows that Eastern District
of Texas judges are far more likely to defer
ruling on the merits of an Alice motion.

Success Rate of Section 101 Motions on the Pleadings: Nationwide vs.

E.D. Texas

100%

90%

80%
Motion Denied Without
70% Prejudice

60% Motion Denied

50% Motion Granted

40%

30%

20%

10%

0%
Nationwide E.D. Texas

confer process to determine whether the
patent plaintiff agrees or disagrees that prior
claim construction is needed to inform the
Courts analysis as to patentability. The
party who seeks to file a pre-claim
construction Alice motion must then submit
a certificate of compliance indicating the
parties respective positions on this issue.
Some have speculated that the relative
difficulty of prevailing on an early Alice
motion in the Eastern District of Texas has
resulted in a greater-than-ever percentage
of patent cases being brought in that district.

76
DAMAGES
Software has been at the epicenter of
recent developments in patent damages law
as courts have struggled to evaluate how
much of a complex integrated products
success should be attributed to the
component of that product covered by an
infringed patent. Because accused
software products often contain many
features, assessing damages can require a
complex blend of technical, economic and
survey analysis. This section offers an
overview of the law of damages generally, a
description of how patent damages law
applies specifically to software patents, and
a snapshot into the damages awards courts
have ordered in software patent cases. The
law of damages is particularly important for
potential patentees, as courts have ordered
very large patent damages awards to
successful litigants.
Summary of Damages Law
Courts primarily use two metrics to evaluate
damages: lost profits and the reasonably
royalty. ccxli Lost profits are an estimate of
the total amount a patent owner has lost on
account of the infringement. To assert lost
profits, a patent owner must prove that he
would have made the sale but-for the
infringement, and that he has presented
proper evidence to calculate the amount of
lost profits. ccxlii
More widely used, the reasonable royalty is
understood as the product of the royalty
base times the royalty rate. ccxliii Loosely, the
royalty rate is the margin of profit a potential
infringement victim would receive from the
77
sale of a product. The royalty base is the
unit or total product value to which the
royalty rate is applied to determine the
actual royalty amount. While there are
multiple ways to prove the amount of a
reasonable royalty, generally courts and
damages experts use the market approach,
where the reasonable royalty is found by
looking at the data available on the market
to ascertain the royalty which would be
agreed upon in a hypothetical negotiation
between the patentee and the infringer. ccxliv
Regardless of the method used, the law of
damages demands that awards only
represent the profit associated with the
infringing patent. Therefore, unless the
infringing patent is coextensive with the
entire product, there must be an allocation,
or apportionment, of profits between
patented and non-patented features. ccxlv
Reasonable Royalty & Apportionment
[T]he basic methodological rule
for expert analysis remains the
same: calculate the value of those
features that infringe, and cut out
the value of all the rest.
Discerning the appropriate reasonable
royalty can be done by apportioning the
royalty base, i.e. separating the overall
value of the patented features from the non-
patented features. Courts have permitted a
handful of different methods to determine
how to apportion a royalty base in software
cases.
 TECHNIQUES ALLOWED TO APPORTION ROYALTY BASE
Consumer Percentage of Source
Surveys ccxlvi Code ccxlvii
Consumer Surveys Courts have allowed
the use of consumer surveys to determine
the value of a particular patented feature in
a larger product. In one case, Microsoft v.
Motorola, Microsoft challenged the use of a
damages experts conjoint analysis
survey. The customer survey had
attempted to isolate the value to the
customer of one particular feature (in this
case the patent at issue involved Wi-Fi
capabilities in the Xbox 360). ccl The court
allowed the survey analysis, characterizing
Microsofts objections (that the sample was
non-representative and that the
questionnaire was unclear), as going to the
weight of the evidence, rather than its
admissibility. ccli
Frequency of Use Analysis Courts have
permitted damages experts to rely on
measurements that determine how often an
accused feature is used as relevant cclii to
the extent to which the infringer has made
use of the invention; and any evidence
probative of the value of that use. ccliii
78
Frequency Adjusting the
of Use ccxlviii Royalty Rate ccxlix
Percentage of Source Code Additionally,
at least one court allowed an expert to use
the percentage of source code attributable
to the infringing patents-in-suit to determine
the apportioned royalty base. The plaintiff
objected to the experts use of the
percentage of source code on multiple
grounds, including that the amount of
source code used could be the product of
an inefficient programmer, or alternatively
that the source code attributed to the
patented features did not actually account
for all of the relevant code. The court
rejected the plaintiffs objections, finding that
the objections went to the correctness of
facts underlying ones expert testimony, an
issue better left for a determination by a
jury. ccliv
Apportioning the Royalty Rate Courts
have also allowed litigants to prove
apportionment through the royalty rate, i.e.
by assigning an extremely low profit margin
to reflect the portion of profits that the
patented features represent. However, in
Ericsson v. D-Link Systems, the court
cautioned that this method of apportionment
may inappropriately mislead juries through
the presentation of a larger royalty base. cclv
While courts have allowed a variety of
methodological approaches to determine
the appropriate manner to apportion a
royalty base, not all evidence will be taken
into account. Notably, one court rejected a
defendants experts attempt to use the
plaintiffs patent portfolio to show how to
properly apportion the royalty rate. cclvi The
court found that the patent portfolio as used
by the expert contained patents that were
asserted after the dates that a hypothetical
negotiation would have taken place
between the two parties, and thus were not
relevant to discerning the reasonably
royalty. cclvii Additionally, while admitted in
Microsoft v. Motorola, the use of consumer
surveys to show the value of a particular
patent has also been rejected by some
courts. For instance, in Rembrandt v.
Facebook, the court rejected the use of
customer surveys to help apportion the
royalty base when it found the expert
correlated the consumers use of a feature
to the advertising revenue received by
Facebook without adequately proving the
link between data usage and revenue. cclviii
In applying apportionment to discern that
value of the product that should constitute
the royalty base, courts have pressed for
rigorous apportionment. In VirnetX v. Cisco
Systems, the court considered infringement
based on various patents related to
technology for providing security across
networks. cclix The jury instructions on
damages allowed the jury to apply the full
value of the product in determining
damages if they found that either: 1) the
patented feature drove consumer demand
(the entire market value rule) or 2) the
product constituted the smallest salable
79
unit. cclx Previously, parties had used the
smallest salable unit as a means to
apportion the royalty base for products with
multiple components. Defendant Apple,
however, argued that allowing the jury to
use the smallest salable unit was
inappropriate. The court sided with Apple
and rejected the jury instructions, explaining
that in the case where the smallest salable
unit is, in fact, a multi-component product
[that] contains several non-infringing
featuresthe patentee must do more to
estimate what portion of the value is
attributable to the patented technology. cclxi
As patent litigants have attempted to apply
the apportionment principle to 21st century
technology, courts have provided guidance
about what evidence will be admissible to
show apportionment. Courts have deferred
to the fact-finder (i.e. the jury) to determine
whether an apportionment theory is correct,
allowing a variety of apportionment theories.
However, whether a particular theory of
apportionment is admissible will not depend
just on the type of evidence or damages
theory used, but also on the partys ability to
show a connection to the patent at issue.
Assessing the Royalty Rate
Courts have rejected rules of thumbs or
theoretical baselines when determining the
royalty rate, and have instead looked for
applicants to support their royalty rates with
market data.
The Federal Circuit has repeatedly rejected
the use of a theoretical baseline to
determine the royalty rate. In VirnetX, the
court considered the partys reliance on the
Nash Equilibrium, a mathematical theorem
where one assumes that the parties would
begin with a 50/50 profit split, and then
modify that split by looking at the relative
bargaining positions of each party. cclxii The
court rejected the experts reliance on the
theorem, explaining that the theorem
arrives at a result that follow from a certain
set of premises but asserts nothing about
what situation in the real world fit those
premises. cclxiii
Similarly, in Uniloc v. Microsoft, the court
rejected a $388 million damages award and
put to rest the use of the 25% rule, where
the patentee would receive a quarter of the
infringers profits. cclxiv Uniloc involved
patents related to the product activation
feature for Microsofts software programs.
At trial, plaintiff Unilocs expert testified that
damages should be $564,946,803 after
applying the 25% rule rule. cclxv The court
rejected the 25% rule as an approximation
of the royalty rate and explained that it failed
to take into consideration the unique
relationship between the patent and the
accused product and the parties, finding the
rule essentially arbitrary. cclxvi
Strategic Implications
Changes in patent damages law have been
driven primarily by a series of recent
decisions by the Federal Circuit striking
down damages verdicts not based on
substantial, reliable evidence. cclxvii Although
courts have long had a duty to exclude
expert testimony that is not based on valid
methods, cclxviii historically courts had been
hesitant to exclude testimony from patent
damages experts. cclxix Because district
courts look to each other for consistency,
and because all patent cases are appealed
to the Federal Circuit, once a new method
80
of analyzing damages is accepted by
multiple district courts, that method can
become widespread even when the Federal
Circuit is silent on its merits. cclxx Until a few
years ago, many district courts had allowed
damages experts to gloss over the
importance of the specific patented feature
to the accused product and neglected to
impose rigorous apportionment standards
for calculating reasonable royalty damages.
The recent decisions from the Federal
Circuit described above have put an end to
this practice.
The evolution of patent damages has had a
significant impact on litigation strategy.
Software patent plaintiffs must contend with
the fact that any significant damages award
will be subject to an appeal several years
after the plaintiffs damages expert prepared
a report. Since allowable damages theories
can shift significantly over that time,
plaintiffs counsel are well advised to
present multiple damages theories in
parallel to guard against the possibility that
a previously accepted method will be
rejected by the Federal Circuit. Likewise,
defendants are well advised to present their
own apportionment theories while
aggressively pursuing motion practice to
strike plaintiffs damages theories. Plaintiffs
without a viable damages theory can prevail
on infringement and yet fail to recover
anything. cclxxi
THE MARKING REQUIREMENT
Patents bestow a wide range of rights upon
patentees seeking to safeguard their
intellectual property. In exchange for these
protections, however, the law also imposes
a number of obligations upon patentees.
One such obligation is known as the
Marking Requirement, codified at 35
U.S.C. 287(a). cclxxii Section 287(a) limits
patentees recoverable damages to those
incurred after notice of infringement has
occurred (e.g., by filing an action for
infringement)unless patentees provide the
public with advance notice by marking
their patented articles. cclxxiii In other words,
patentees who do not satisfy the Marking
Requirement risk forfeiting potentially
significant damages. In contrast, patentees
who do mark will be able to recover
potentially significant pre-filing damages.
According to the Federal Circuit, the
Marking Requirement serves three
purposes: (1) helping to avoid innocent
infringement, (2) encouraging patentees to
give notice to the public that the article is
patented, and (3) aiding the public to
identify whether an article is patented. cclxxiv
The question for software patentees whose
intellectual property may never yield a
tangible article is whether they too must
comply with the Marking Requirement, and
if so, how best to do so.
Drafting Considerations: Applicability of
the Marking Requirement
Software patentees may be able to
altogether avoid the Marking Requirement
through careful claim drafting. For example,
it is well settled that patents consisting
solely of method or process claims are not
subject to the Marking Requirement (the
Method Exception). cclxxv In fact, the
Federal Circuit has affirmatively held that a
software patent comprised exclusively of a
81
method claim was not subject to the
Marking Requirement. cclxxvi
On the other hand, the Federal Circuit has
held that where patents contain both
process and apparatus claims (mixed claim
patents), patentees will be subject to the
Marking Requirement to the extent that
there is a tangible item to mark. cclxxvii The
Federal Circuit has also held, however, that
the Marking Requirement will not apply in
such cases to the extent that patentees
choose to enforce solely their process
claims. cclxxviii
The America Invents Act & the Costs of
Marking
The primary reason patentees may seek to
avoid marking is that complying with the
Marking Requirement will inevitably require
some degree of financial expenditure.
Indeed, the burden of complying with the
Marking Requirement has traditionally been
viewed as both cost prohibitive and
cumbersome for many patent holders who
faced the necessity of regularly updating
products with new patent numbers and
recalling products marked with an expired
patent number. cclxxix
Nevertheless, there are a number of
reasons such costs may not be particularly
onerous for software patentees today. First,
the costs of maintaining compliance with the
Marking Requirement would unlikely be as
high for patentees of intangible objects, who
do not face the traditional burdens
necessarily borne by patentees of tangible
objects, such as the cost of manufacturing
molds and tooling to reflect new patent
numbers and the costs associated with
coordinating recalls of physical
products. cclxxx In addition, the 2011 America
Invents Act (AIA) has made marking both
easier and less costly through the advent of
virtual marking. cclxxxi Under the AIA, patent
holders can simply mark their products with
the word patent and provide a URL
addressallowing any necessary changes
and updates to marked products to occur
much more cheaply by simply updating the
relevant web page. cclxxxii
Playing it Safe: Marking Software
Patents
Mixed Claim Software Patents
Although mixed claim patents are ostensibly
only subject to the Marking Requirement to
the extent that there is a tangible item to
mark, cclxxxiii prudent mixed claim software
patentees should endeavor to comply with
the Marking Requirement because, for
purposes of patent law, courts have treated
some conventionally intangible objects as
tangibleincluding software. cclxxxiv
For example, consider the Eastern District
of Texas case Soverain Software LLC v.
Amazon.com, Inc. cclxxxv cclxxxvi At issue in
Soverain was whether the Marking
Requirement would limit damages owed by
the defendant, who was alleged to have
infringed upon three mixed-claim patents
covering a software product. cclxxxvii The
plaintiff argued that the Marking
Requirement did not apply because the
websites on which the underlying patented
software technology ran were
intangible. cclxxxviii The court disagreed with
the plaintiff, and found instead that because
the websites could be marked, the websites
were tangible and the Marking Requirement
applied. cclxxxix
The Federal Circuit has also treated
software like a tangible object. ccxc In Eolas
Technologies Inc. v. Microsoft Corp., for
82
example, the Federal Circuit did so for
purposes of calculating patent infringement
damages, noting: This court cannot
construct a principled reason for treating
process inventions different than structural
products and software and hardware . . .
are practically interchangeable in the field of
computer technology. ccxci
Method Claim Software Patents
In addition to mixed claim software
patentees, method claim software patentees
too should consider complying with the
Marking Requirement because the policies
supporting marking are no less applicable to
software patents. ccxcii For example, as
mentioned, one purpose of the Marking
Requirement is to encourage the patentee
to give notice to the public of the
patent. ccxciii Providing the public with notice
of software patents is at least equally as
important as providing notice of other kinds
of patents.
In addition, the policies underlying the
Method Exception arguably do not support
extending this exception to software
patents. The Method Exception exists
because ordinarily, where the patent claims
are directed to only a method or process
there is nothing to mark. ccxciv Yet marking
arguably can occur with regard to software
patents. For example, the Soverain court
held that marking could occur on company
websites. ccxcv In addition, software
companies can provide notice by marking
the splash screens that appear when
software is launchedas Adobe already
does. ccxcvi
Taking these policy considerations into
account, in the future, it would be
unsurprising if the Federal Circuit chose to
tie the Method Exception to whether an
object can be marked, as opposed to the
classification of a patents claims.
The Marking Requirement & Licensor-
Licensee Relationships
Software patentees should also be wary of
the Marking Requirement with regard to
licensees of their patents. Importantly, the
Federal Circuit has held that a patentee has
the burden to ensure that its licensees
comply with the Marking Requirement. ccxcvii
In other words, licensing patents to others
does not abdicate software patentees of
their responsibility to ensure that the patent
licensees comply with the Marking
Requirement. This was explicitly expressed
in Soverain, where although the plaintiff
attempted to comply with the Marking
Requirement itself, its damages were
nevertheless limited because it failed to
ensure that its licensees also complied with
the Marking Requirement. ccxcviii
83
Although the Marking Requirement may not
apply to software patentees under certain
circumstances, prudent software patentees
should endeavor to comply with the
requirement. While it is true that the
Marking Requirement will only apply to
mixed claim patents to the extent that there
is a tangible item to mark, courts have
treated some conventionally intangible
objects as tangible for purposes of patent
lawincluding software. In addition,
although method claim software patentees
currently benefit from the Method Exception
to the Marking Requirement, policy
considerations suggest that this could
feasibly change in the future. Finally, the
costs of complying with the Marking
Requirement are unlikely to be overly
burdensome for software patentees,
particularly considering the advent of virtual
marking under the AIA, whereas the
benefits of complying with the Marking
Requirement could be considerable if a
software patentee chooses to enforce its
patents.
ENDNOTES xxxi
149 F.3d 1368, 1377 (1998).
xxxii
Id. at 1374.
xxxiii
Id. at 1374-75.
xxxiv
i The PTO does not classify or otherwise identify software
MPEP 1504.1(a) (9th ed., March 2014).
ii patents as such. Many of what are thought of as software
Rachel Stigler, Ooey GUI: The Messy Protection of
patents are likely to have Cooperative Patent Classification
Graphical User Interfaces, 12 NW. J. TECH. & IP 3, 32
subclasses of G06F and G06Q. CPC subclass G06F is
(2014).
iii titled Electric Digital Data Processing and CPC subclass
Id.
iv G06Q is titled Data Processing Systems Or Methods,
Average pendency measured as the number of months
Specially Adapted For Administrative, Commercial,
from the patent application filing date to the date the
Financial, Managerial, Supervisory Or Forecasting
application has issued.
v Purposes; Systems Or Methods Specially Adapted For
Note that the cost of obtaining and maintaining a patent in
Administrative, Commercial, Financial, Managerial,
other countries can typically be 2-3 times the cost of a
Supervisory Or Forecasting Purposes, Not Otherwise
corresponding U.S. application.
vi Provided For.
Includes PTO filing, issuance, and maintenance fees for xxxv
561 U.S. 593, 606 (2010).
large entities. xxxvi
vii Id. at 599.
Measured from the earliest priority date. xxxvii
viii In re Bilski, 545 F.3d 943, 954-56, 95960, and n. 19
Average pendency measured as the number of months
(Fed. Cir. 2008).
from the patent application filing date to the date the xxxviii
Id. at 604.
application has issued as a patent as reported by the PTO in xxxix
Id. at 609.
August of 2015 (see xl
Id. at 611-12.
http://www.uspto.gov/dashboards/patents/main.dashxml.) xli
ix 132 S. Ct. 1289, 1294 (2012).
Assumes patent drafting cost of $12,000, four Office action xlii
Id. at 1294.
responses drafted at a cost of $4,000 each and three xliii
Id. at 1303.
Requests for Continuations. xliv
x 134 S. Ct. 2347 (2014).
See 35 U.S.C. 154. xlv
xi Id. at 2352.
See 35 U.S.C. 284. xlvi
xii Id.
Assumes patent drafting cost of $25,000, two Office action xlvii
Id. at 1358.
responses drafted at a cost of $15,000 each and one xlviii
http://www.uspto.gov/sites/default/files/patents
Request for Continuation.
xiii /announce/alice_pec_25jun2014.pdf.
See 35 U.S.C. 173. xlix
xiv 79 FR 74618 (Dec. 16, 2014).
See 35 U.S.C. 173, 35 U.S.C. 289. A design and l
CPC subclass G06Q is titled Data Processing Systems Or
utility patent that cover the same product can both be
Methods, Specially Adapted For Administrative, Commercial,
asserted in litigation. The damages available for
Financial, Managerial, Supervisory Or Forecasting
infringement of a utility or design patent claim are governed
Purposes; Systems or Methods Specially Adapted for
by 35 U.S.C. 284. Reasonable royalty damages
Administrative, Commercial, Financial, Managerial,
represents the floor that the patent owner may receive in
Supervisory or Forecasting Purposes, Not Otherwise
compensation for infringement of its patent and are usually
Provided For.
calculated based on a hypothetical negotiation between the li
In one other case, I/P Engine, Inc. v. AOL Inc., 576 Fed.
patent holder and the infringer. The patent owner may also
Appx. 982 (Aug. 15, 2014), Judge Mayer wrote a concurring
seek lost profits. A design patent offers the additional
opinion in which he argued that the claims at issue failed the
remedy of recovery of the infringers total profits from the
Alice test, and that the issue of patent eligibility should be
sale of the infringing article.
xv addressed as a threshold issue before considering
35 U.S.C. 101
xvi subordinate invalidity issues. Id. at 992-997. (Judge
Diamond v. Diehr, 450 U.S. 175, 185 (1981).
xvii Mayer made this same point in concurrence in Ultramercial,
Parker v. Flook, 437 U.S. 584, 589 (1978).
xviii Inc. v. Hulu, LLC, 772 F.3d 709 (Fed. Cir. 2014)). The
134 S. Ct. 2347 (2014).
xix district court did not, however, rule on the issue of patent
Source: Docket Navigator
xx eligibility, and that issue was not raised by either party on
409 U.S. 63, 71-72 (1972).
xxi appeal.
Id. at 72. lii
xxii In one of those twelve cases, Developments US, LLC v.
437 U.S. 584-85, 594 (1978).
xxiii Microsoft Corp., 2015 WL 2445055 (Fed. Cir. May 22, 2015),
See id at 594-95 (analyzing claim by assuming new and
the court held that a claim for a universal speech-recognition
presumably better method was known and finding all other
interface did not claim any of the statutory classes of subject
components of the claim well known); see also id. at 600
matter because an interface is not a physical, tangible
(Stewart, J., dissenting) (arguing that Court improperly
article. It did not, therefore, have to perform the two-step
imported concepts of novelty and obviousness into inquiry
Mayo/Alice analysis.
under section 101). liii
xxiv DDR Holdings, LLC v. Hotels.com, LP, 773 F.3d 1245
450 U.S. 175, 178-79 (1982).
xxv (Fed. Cir. 2014).
Id. at 184, 188. liv
xxvi I/P Engine, 576 Fed. Appx. at 996 (Mayer, J., concurring).
Id. at 188-89. lv
xxvii Ultramercial Inc. v. Hulu LLC, 772 F.3d 709, 717 (Fed. Cir.
33 F.3d 1526, 1537 (1994).
xxviii 2014) (Mayer, J., concurring).
Id. at 1539-40. lvi
xxix As recently as June 2013, the Federal Circuit expressly
Id. at 1544.
xxx held that the statutory presumption of validity and the
Id. at 1545.
associated clear and convincing evidence burden apply to

84
 xcvi
challenges to the eligibility of patent subject matter. Id.
xcvii
Ultramercial Inc. v. Hulu LLC, 722 F.3d 1335, 1338 (Fed. Cir. Akamai, 797 F.3d at 1022 (citing BMC Res., Inc. v.
2013); however, that MAY no longer be the law. Paymentech, L.P., 498 F.3d 1373, 137981 (Fed. Cir.
lvii
Mayo, 132 S. Ct. at 1298. 2007)).
lviii xcviii
See, e.g., Versata, 793 F.3d at 1332; Internet Patents, Id.
xcix
790 F.3d at 1346; OIP Technologies, 788 F.3d at 1362; Id. at 1023 (citing BMC, 498 F.3d at 1379).
c
Content Extraction, 776 F.3d at 1347; Ultramercial, 772 F.3d Id.
ci
at 715; buySAFE, 765 F.3d at 1353; Id. at 1025.
lix cii
Versata, 793 F.3d at 1334. Id. at 1024-25.
lx ciii
Id. Compare, however, the CAFCs conclusion in Akamai with
lxi
Internet Patents, 790 F.3d at 1348. the result in Voter Verified, Inc. v. Premier Election
lxii
Id.at 1349. Solutions, Inc. (Fed. Cir. 2012). In the Voter Verified case, a
lxiii
765 F.3d 1350, 1354 (Fed. Cir. 2014). claim for an automated voting system included a step to be
lxiv
Id. performed by a voter. The court stated, Notwithstanding
lxv
Id. at 1354-55. Voter Verifieds conclusory arguments that the Defendants
lxvi
Ultramercial, Inc. v. Hulu, LLC, 772 F.3d 709, 717 (Fed. necessarily control[] all of the voters actions, the record
Cir. 2014) (Mayer, J., concurring). shows, at most, that the Defendants provide instructions on
lxvii
Id. how to use their systems. But the fact that an accused
lxviii
Civ. Action No. 1:12cv1099 (C.D. Ill. July 30, 2013). infringer controls access to its system and instructs [others]
lxix
Civ. Action No. 1:12cv0517 (D.N.H. Jan. 15, 2015). on its use is not sufficient to incur liability for direct
lxx
Civ. Action No. 3:12cv6467 (N.D. Cal. Jan 20, 2015). infringement. BMC Resources Inc. v. Paymentech, L.P.,
lxxi
Civ. Action No. 10-1067-LPS, 2015 WL 1843528 (D. Del. 498 F.3d 1373, 1330 (Fed. Cir. 2007). Might the
Apr. 22, 2015). circumstances in Voter Verified satisfy the CAFCs new
lxxii
See 35 U.S.C. 112(a) (formerly 35 U.S.C. 112, 1, criteria for finding a direct infringer?
civ
prior to the America Invents Act). It is also advisable to include corresponding system claims
lxxiii
35 U.S.C. 112(b) (formerly 35 U.S.C. 112, 2, prior for any method claims when drafting a patent application.
to the America Invents Act). The use of a claimed system under 35 U.S.C. 271(a) is
lxxiv
See Aristocrat Techs. Austl. Pty Ltd v. Intl Game Tech., the place at which the system as a whole is put into service,
521 F.3d 1328 (Fed. Cir. 2008). i.e., the place where control of the system is exercised and
lxxv
Id. at 1331. beneficial use of the system obtained. NTP, Inc. v.
lxxvi
Id. at 1333, 1338. Research in Motion, Ltd., 418 F.3d 1282, 1317 (Fed. Cir.
lxxvii
Id. at 1337. 2005). In NTP, the court found that Blackberry users did not
lxxviii
Id. at 1338. infringe NTPs method claims because certain steps were
lxxix
Finisar Corp. v. DirecTV Grp., Inc., 523 F.3d 1323, 1340- performed outside the U.S. However, the court found
41 (Fed. Cir. 2008) infringement of the system claims because the location of
lxxx
Id. at 1340. the use of the communication system as a whole occurs in
lxxxi
Id. the United States. Id. at 1318. Accordingly, there is an
lxxxii
Id. avenue to potentially finding direct infringement by the use of
lxxxiii
See Williamson v. Citrix Online, LLC, et al., 792 F.3d a claimed system, even if a corresponding method claim
1339, 1348 (Fed. Cir. 2015). would result in a divided infringement situation.
lxxxiv cv
Id. (citing Personalized Media Communications, LLC v. A contributory infringer, under 35 U.S.C. 271(c), is
International Trade Commission, 161 F.3d 696, 703-04 (Fed. defined as [w]hoever offers to sell or sells within the United
Cir. 1998)). States or imports into the United States a component of a
lxxxv
382 F.3d 1354, 1358 (Fed.Cir.2004). patented machine, manufacture, combination or
lxxxvi
Id.at 1349. composition, or a material or apparatus for use in practicing
lxxxvii
Id. at 1344. a patented process, constituting a material part of the
lxxxviii
Id. at 1350. Other generic terms that can substitute for invention, knowing the same to be especially made or
the word means include mechanism, element, device, especially adapted for use in an infringement of such patent,
and other nonce words that are mere verbal constructs that and not a staple article or commodity of commerce suitable
do not define sufficient structure. Id. for substantial noninfringing use . . . .
lxxxix cvi
See id.at 1350-51. Commil USA, LLC v. Cisco Systems, Inc., 135 S. Ct.
xc
Id. at 1354. 1920, 1926 (2015).
xci cvii
http://www.uspto.gov/patent/laws-and- Id. at 1925 (citing Global-Tech Appliances, Inc. v. SEB
regulations/examination-policy/examination-guidance-and- S.A., 131 S. Ct. 2060, 2068-69 (2011)).
cviii
training-materials. Id. at 1926 (citing Aro Mfg. Co. v. Convertible Top
xcii
See 35 U.S.C. 154(a). Replacement Co., 377 U.S. 476, 488 (1964)).
xciii cix
See 35 U.S.C. 271. 131 S. Ct. at 2068-69.
xciv cx
See Akamai Technologies, Inc. v. Limelight Networks, Id. at 2068-69. The standard presumably applies to the
Inc., 797 F.3d 1020, 1022 (Fed. Cir. 2015) (en banc). The knowledge requirement for contributory infringement as well.
cxi
acts of another may also be attributable to a single entity Id. at 2070-71.
cxii
and, thus, direct infringement may be found, where the entity See id.
cxiii
directs or controls anothers performance or where the Id. at 2071.
cxiv
actors form a joint enterprise. Id. 135 S. Ct. 1920 (2015).
xcv cxv
Akamai Technologies, Inc. v. Limelight Networks, Inc., Id. at 1924.
cxvi
134 S. Ct. 2111, 2115 (2014). Id.

85
cxvii cxlvi
Id. at 1928. Id. at 1445.
cxviii cxlvii
Id. at 1927-28. Apple Computer, Inc. v. Microsoft Corp., 799 F. Supp.
cxix
See id. at 1928. 1006, 1026 (N.D. Cal. 1992).
cxx cxlviii
See id.at 1929. Apple v. Microsoft, 35 F.3d at 1443-44.
cxxi cxlix
35 U.S.C. 298. Id. at 1444-45.
cxxii cl
35 U.S.C. 171. Id. at 1447.
cxxiii cli
Manual of Patent Examining Procedure 1504.01(c); 49 F.3d 807, (1st Cir. 1995).
clii
Blisscraft v. United Plastic Co., 189 F. Supp. 333, 337 Id. at 810.
cliii
(S.D.N.Y. 1960); L.A. Gear Inc. v. Thom McAn Shoe Co., Id. at 809-10.
cliv
988 F.3d 1117, 1123 (Fed. Cir. 1993). Lotus v. Borland, 799 F. Supp. 203, 211-12 (D. Mass.
cxxiv
This principle is well-illustrated in the case OddzOn 1992).
clv
Products, Inc. v. Just Toys, Inc., 122 F.3d 1396 (Fed. Cir. Id. at 216-17.
clvi
1997). In that case, which dealt with the popular Vortex Id. at 218.
clvii
football toy, the court found that fins claimed by the Vortex Lotus, 49 F.3d at 815.
clviii
design served a functional purpose to stabilize the ball Id.
clix
during flight, allowing the likes of Joe Montana and Peyton Id.
clx
Manning to throw the ball more than 100 yards in a Id. at 817.
clxi
ubiquitous series of mid-90s commercials. As a result of the Id. at 816.
clxii
functionality of the fin design, the court viewed the design 750 F.3d 1339, 1365-66 (2014).
clxiii
claims very narrowly and found a similar finned football 750 F. 3d 1339, 1347 (Fed. Cir. 2014). Packages can
design non-infringing of OddzOns design patent. be thought of as files containing functionally-related classes.
cxxv
786 F.3d 983 (Fed. Cir. 2015). The classes contain methods, referred to as subroutines or
cxxvi
On March 21, 2016, the Supreme Court granted functions in other programming environments, which
Samsungs petition for writ of certiorari challenging the $400 include executable statements that carry out the function of
million awarded to Apple for Samsungs infringement of the method.
clxiv
Apples design patents. Id. at 1350.
cxxvii clxv
See Manual of Patent Examining Procedure 1503.02. Id. at 1351.
cxxviii clxvi
Manual of Patent Examining Procedure 1502.01. Id. at 1352.
cxxix clxvii
35 U.S.C. 284. Oracle America, Inc. v. Google Inc., 872 F. Supp. 2d
cxxx
35 U.S.C. 289. 974, 998 (N.D. Cal. 2012).
cxxxi clxviii
Note, however, that the Supreme Court may cut back the Id.
clxix
amount of damages available to a design patent holder. The Id.
clxx
Court, in granting Samsungs petition for writ of certiorari, Id. at 983-84, 998.
clxxi
agreed to address the following question: Id. at 999.
clxxii
Where a design patent is applied to only a Id. at 1000.
clxxiii
component of a product, should an award of Oracle, 750 F.3d at 1361.
clxxiv
infringers profits be limited to those profits Id. at 1362-63.
clxxv
attributable to the component? Id.
clxxvi
Samsung Electronics Co. v. Apple Inc., No. 15-777, Granting Id. at 1366.
clxxvii
Cert. Petition (March 21, 2016). Id. at 1367.
cxxxii clxxviii
Computer Associates International, Inc. v. Altai, Inc., 982 Id. at 1371. The Federal Circuits analysis seems to
F.2d 693 (2d Cir. 1992) miss the point of the district courts discussion of
cxxxiii
Id. at 707. interoperability, which was merely that Googles desire for
cxxxiv
Id.. interoperability with the Java API tends to confirm that the
cxxxv
Id. at 710. API is functional.
cxxxvi clxxix
Id. at 714-15. Id. at 1372 (citing Practice Mgmt. Info. Corp. v. Am. Med.
cxxxvii
Id. at 715. Assn, 121 F.3d 516 520 n.8 (9th Cir. 1997)).
cxxxviii clxxx
Id.. Google, Inc. v. Oracle Am., Inc., 135 S. Ct. 2887 (2015).
cxxxix clxxxi
Ownership issues for employers and employees exist 64 F. Supp. 3d 755, 763-64, 776 (E.D.N.C. 2014).
clxxxii
for all forms of intellectual property including patents, trade Id. at 776.
clxxxiii
secrets, trademark, etc. The work made for hire doctrine is Id. at 777.
clxxxiv
specific to copyrights. Id. at 776-77.
cxl clxxxv
In addition to a present assignment, the employment The law on trade secrets is generally state law, although
contract should include provisions requiring the developer to many states follow the Uniform Trade Secrets Act.
support the company and cooperate with the filing of Additionally, trade secrets may also be protected under the
documents to protect intellectual property rights in the works. Economic Espionage Act of 1996, and the Computer Fraud
cxli
Circular No. 61 mentions additional deposit requirements. and Abuse Act.
clxxxvi
If user manuals or other printed documentation accompanies See AirWatch, LLC v. Mobile Iron, Inc., No. 1:12-cv-
the program, the documentation must be deposited. Also, if 3571, 2013 WL 4757491 (N.D. Ga. Sept. 4, 2013)
clxxxvii
the program is normally distributed on CD-ROM, the entire Even California courts, which generally do not enforce
CD-ROM should ordinarily be provided. non-compete agreements, have used non-compete
cxlii
35 F.3d 1435 (9th Cir. 1994). agreements in determining whether a company has taken
cxliii
Id. at 1440. reasonable measures to maintain the secrecy of its trade
cxliv
Id. at 1442. secrets. Farmers Ins. Exch. v. Steele Ins. Agency, E., No.
cxlv
Id. at 1443. 2:13-CV-00784-MCE, 2013 WL 3872950, at *13 (E.D. Cal.

86

July 25, 2013) (At times, courts have applied this principle
to create a trade secret exception to section 16600,
pursuant to which a non-compete or non-solicitation clause
may be valid under section 16600 if it is necessary to protect
a trade secret.).
clxxxviii
Airwatch LLC v. Mobile Iron, Inc., 2013 U.S. Dist.
LEXIS 125817, at *13, (N.D. Ga. Sept. 4, 2013).
clxxxix
Electro-Craft Corp. v. Controlled Motion, Inc., 332
N.W.2d 890, 902 (Minn. 1983).
cxc
See Cal. Bus. & Prof. Code, 16600; Edwards v. Arthur
Andersen LLP, 44 Cal. 4th 937 (2008).
cxci
See Cal. Civ. Proc. Code 2019.210; see also Perlan
Therapeutics, Inc. v. Superior Court, 178 Cal. App. 4th 1333,
1350 (2009); Jobscience v. CVPartners, 2014 WL 852477,
at *4 (N.D. Cal. Feb. 22, 2014).
cxcii
Storagecraft Tech. Corp. v. Kirby, 744 F.3d 1183 (10th
Cir. 2014)
cxciii
Aspen Tech, Inc. v. M3 Tech., Inc. 569 Fed. Appx. 259
(5th Cir. May 29, 2014).
cxciv
See, e.g. 499c of the California Penal Code, which
authorizes imprisonment in a county jail not exceeding one
year, or [] imprisonment pursuant to subdivision (h) of
Section 1170, or by a fine not exceeding five thousand
dollars ($5,000), or by both that fine and imprisonment.).
cxcv
18 U.S.C. 1831-39.
cxcvi
Administration Strategy on Mitigating the Theft of U.S.
Trade Secrets, February 2013, available at:
https://www.whitehouse.gov/sites/default/files/omb/IPEC/ad
min_strategy_on_mitigating_the_theft_of_u.s._trade_secrets
.pdf.
cxcvii
David Sanger an Nicole Perlroth, 6 Chinese Men
Indicted in Theft of Code from U.S. Tech Companies, NY
Times, May 19, 2015, available at:
http://www.nytimes.com/2015/05/20/technology/6-chinese-
men-indicted-in-theft-of-code-from-us-tech-companies.html
cxcviii
10 U.S.C. 1030
cxcix
See e.g., Farmers Ins. Exch. v. Steele Ins. Agency, Inc.,
No. 2:13-CV-00784-MCE, 2013 WL 3872950, at *13 (E.D.
Cal. July 25, 2013)
cc
Products and services that involve sandboxing may
implicate provisions in licenses for third party programs
(such as Microsoft Word) that prohibit the creation of
virtualized copies of programs without permission.
cci
The Supreme Court recently narrowed the scope of
personal jurisdiction over corporations. Specifically, in
Daimler AG v. Bauman, the Supreme Court clarified that
general jurisdiction over corporations will only arise in certain
exceptional circumstances; namely, when contacts have
been so continuous and systematic the corporation can be
considered at home. See Bernadette Bollas Genetin, The
Supreme Courts New Approach to Personal Jurisdiction, 68
SMU L. REV. 107, 141 (2015); see also Daimler AG v.
Bauman, 134 S. Ct. 746, 760-61 (2014).
ccii
Trintec Indus., Inc. v. Pedre Promotional Products, Inc.
cciii
395 F.3d 1275, 1279 (Fed. Cir. 2005).
cciv
The Due Process Clause requires non-resident
defendants to have engaged in certain purposeful minimum
contacts with the forum state before personal jurisdiction will
attach to ensure that there is fair warning that they may be
subject to litigation within the forum. See Beverly Hills Fan
Co. v. Royal Sovereign Corp., 21 F.3d 1558, 1565 (Fed. Cir.
1994) (holding in a patent infringement case that
purposefully shipping a product into a state through an
established distribution channel was sufficient to establish
specific jurisdiction).
87
ccv
Trintec, 395 F.3d at 1279.
ccvi
In re Cashman Equip. Co., 584 F. App'x 930, 931 (Fed.
Cir. 2014).
ccvii
See Daimler AG v. Bauman, 134 S. Ct. 746, 761 (2014).
ccviii
Trintec Indus., 395 F.3d at 1279 (internal quotation
marks omitted).
ccix
For example, the Massachusetts long-arm statute
provides courts with personal jurisdiction over a person as to
a cause of action arising from, inter alia, the persons
transacting any business in [the] commonwealth,
contracting to supply services or things in [the]
commonwealth, and causing tortious injury by an act or
omission in [the] commonwealth. Mass. Gen. Laws Ch.
223A, 3(a)-(c).
ccx
See, e.g., Nuance Commc'ns, Inc. v. Abbyy Software
House, 626 F.3d 1222, 1234 (Fed. Cir. 2010) (holding that
no more [was] required for specific jurisdiction where it was
shown that the defendant purposefully ship[ped] the
accused software product into [the state] through an
established distribution channel, with the expectation that
copies of those products [would] be sold [there]).
ccxi
VE Holding Corp. v. Johnson Gas Appliance Co., 917
F.2d 1574, 1576 (Fed. Cir. 1990).
ccxii
Trintec Indus., 395 F.3d at 1280.
ccxiii
Gene Quinn & Steve Brachmann, Strict Venue
Provisions for Patent Litigation Added to Innovation Act,
IPWATCHDOG (June 11, 2015),
http://www.ipwatchdog.com/2015/06/11/strict-venue-
provisions-for-patent-litigation-added-to-innovation-
act/id=58625/; see Innovation Act, H.R. 9, 114th Cong.
(2015).
ccxiv
Id. (internal quotation marks omitted); see H.R. 9 sec.
3(g)(1), 1400(b)(1)-(7). Some of these proposed
connections include requiring defendants to have a principal
place of business in the venue, requiring the defendant to
have committed the infringing act in the venuewhile having
a regular and established physical facility in the venueor
requiring the invention to have been conceived or actually
reduced to practice in the venue. H.R. 9 sec. 3(g)(1),
1400(b)(1)-(2), (4).
ccxv
Quinn & Brachmann, supra.
ccxvi
Id.
ccxvii
Id.
ccxviii
These twelve jurisdictions are illustrated as they
represent the jurisdictions with the highest concentration of
software patent cases filed. For this reason, these
jurisdictions were used throughout this section to discuss
other metrics related to software patent cases, including but
not limited to the data regarding jurisdictional likelihood of
granting a stay, etc. The one exception to this is with regard
to the damages data, infra, where the jurisdictions with at
least 4 damages awards between 2010 to August 2015 were
utilized.
ccxix
As the name hints, summary judgment is a procedural
device that allows parties to seek an early disposition of their
case and completely avoid going to trial. BLACK'S LAW
DICTIONARY 1664 (10th ed. 2014).
ccxx
Includes an outlier damages award of $1,169,140,271.00.
Without this award, the average is $76,529,823.20.
ccxxi
Includes outlier damages awards of $929,780,039.00
and $548,176,477. Without these awards, the average is
$20,763,557.
ccxxii
Includes an outlier damages award of $172,704,600.
Without this award, the average is $2,034,415.
ccxxiii
Includes an outlier damages award of $234,277,669.
Without this award, the average is $10,250,114.
ccxxiv
The PTAB is comprised of a set of Administrative Patent
Judges whose responsibilities include rendering decisions
on: appeals from adverse examiner decisions, post-issuance
challenges to patents, and interferences. About PTAB, U.S.
PAT. & TRADEMARK OFFICE, http://www.uspto.gov/patents-
application-process/patent-trial-and-appeal-
board/resources/about-ptab (last modified May 13, 2015,
1:28 PM); see 35 U.S.C. 6(a)-(b).
ccxxv
Although parties may request a stay pending PTAB
proceedings, district courts are not obligated to grant the
stay; instead, Congress has identified four factors that
judges consider when evaluating whether a stay should be
granted pending CBM review:
(A) whether a stay, or the denial
thereof, will simplify the issues
in question and streamline the
trial;
(B) whether discovery is complete
and whether a trial date has
been set;
(C) whether a stay, or the denial
thereof, would unduly
prejudice the nonmoving party
or present a clear tactical
advantage for the moving
party; and
(D) whether a stay, or the denial
thereof, will reduce the burden
of litigation on the parties and
on the court.
Leahy-Smith America Invents Act, Pub. L. No. 112-29,
18(b)(1), 125 Stat. 284, 331 (2011). For example, in
Smartflash LLC v. Apple Inc., the Federal Circuit affirmed the
trial courts denial of Apples motion to stay after holding that
each of the AIA factors weighed against staying the
litigationwhich had already progressed past the point of
trial. See No. 2015-1701, 2015 WL 4603820, at *3-9 (Fed.
Cir. July 30, 2015). Stays pending IPR review, on the other
hand, typically take into account the impact of inter partes
review, to include whether a stay would simplify the issues in
question and streamline the trial; how far the litigation has
progressed, taking into account whether discovery is
complete and a trial date has been set; and whether a stay
would unduly prejudice or present a clear tactical
disadvantage to the non-moving party. See, e.g., CANVS
Corp. v. United States, 118 Fed. Cl. 587, 592 (2014).
ccxxvi
Note that declaratory judgment plaintiffs are typically
would-be defendants in an impending patent infringement
suit. Such parties frequently seek declaratory judgment
regarding invalidity and noninfringement to get ahead of a
lawsuit, securing the advantage of choosing the jurisdiction.
ccxxvii
See Piper Aircraft Co. v. Reyno, 454 U.S. 235, 241
(1981).
ccxxviii
Such factors may include (1) the plaintiffs' choice of
forum; (2) the respective parties contacts with the forum; (3)
the contacts relating to the plaintiffs' claims for relief in the
chosen forum; (4) the ease of access to sources of proof; (5)
the familiarity of each forum with applicable law; and (6) the
availability of compulsory process to compel attendance of
unwilling non-party witnesses. See, e.g., Broad. Data
88
Retrieval Corp. v. Sirius Satellite Radio, Inc., 2006 WL
1582091, at *2 (C.D. Cal. June 6, 2006).
ccxxix
In IPR reviews, for example, litigants may not raise a 35
U.S.C. 112 indefiniteness challenge. Thus, this may have
the perverse result of causing an IPR prior art challenge to
be denied where the claims are indefinite such that the
PTAB is unable to meaningfully compare the prior art to the
asserted claims.
ccxxx
Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 545
(2007).
ccxxxi
Id.
ccxxxii
See, e.g., In re Bill of Lading Transmission and
Processing System Patent Litigation, 681 F.3d 1323, 1333-
35 (Fed. Cir. 2012) (to the extent the parties argue that
Twombly and its progeny conflict with the Forms and create
differing pleading requirements, the Forms control).
ccxxxiii
See id.; Core Wireless Licensing S.A.R.L. v. Apple
Inc., Civil Action No. 6:14-CV-752-JRG-JDL, 2015 WL
4910427 (E.D. Tex. August 13, 2015).
ccxxxiv
M2M Solutions LLC v. Telit Communications PLC,
Civ. A. No. 14-1103-RGA, 2015 WL 4640400 (D. Del.
August 5, 2015).
ccxxxv
See id.
ccxxxvi
See e.g., Cap Co., Ltd. v. Symantec Corp., Case Nos.
14-cv-05068-JD and No. 14-cv-05071-JD, 2015 WL
3945875 (N.D. Cal June 26, 2015); Paone v. Broadcom
Corp., Nos. 15 Civ. 0596 (BMC)(GRB), 15 Civ. 0608
(BMC)(GRB), 15 Civ. 0610 (BMC)(GRB), 15 Civ. 0639
(BMC)(GRB), 15 Civ. 0647 (BMC)(GRB), 2015 WL 4988270
(E.D.N.Y Aug. 19, 2015).
ccxxxvii
Miller v. Facebook, Inc., No. C 10-00264 WHA, 2010
WL 2198204 at *6 (N.D. Cal. May 28, 2010).
ccxxxviii
788 F.3d 1359 (Fed. Cir. 2015).
ccxxxix
Id. at 1364.
ccxl
790 F.3d 1343 (Fed. Cir. 2015).
ccxli
Lucent Technologies, Inc. v. Gateway, 580 F.3d 1301,
1324 (Fed. Cir. 2009).
ccxlii
Versata Software Inc. v. SAP Am., Inc., 2011 U.S. Dist.
LEXIS 102339, *9 (E.D. Tex. Sept. 9, 2011).
ccxliii
Whitserve, LLC v. Computer Packages, Inc., 694 F.3d
10, 27 (Fed. Cir. 2012)
ccxliv
Two other approaches that can be used include the
income approach, which looks to the revenues brought in by
a company relative to other products or alternative products,
or the cost approach, which bases damages on the cost of
research and development needed to create an alternative
to the intellectual property at issue.
ccxlv
One exception to the apportionment principle is the
entire market value rule. According to the entire market
value rule, apportionment is not necessary when a patent
owner can prove that the patented feature drives the
demand for the entire product as a whole. Good Tech. Corp.
v. Mobileiron, Inc., No. 5:12-CV-05826-PSG, 2015 WL
4090431, at *1 (N.D. Cal. July 5, 2015). Despite the entire
market value rule exception, software patent holders are
generally tasked with applying the apportionment principle
and face unique challenges in proving what damages are
owedor not owedfor patents that exist in multilevel
systems within multifunctional products.
ccxlvi
Microsoft v. Motorola, Inc., 904 F. Supp. 2d 1109 (W.D.
Wash. 2012).
ccxlvii
Finjan Inc., v. Blue Coast Systems, Inc., 2015 WL
4272870 (N.D. Cal. July 15, 2015).
ccxlviii
Id.
ccxlix cclxxii
Ericsson, Inc. v. D-Link Sys., Inc., 773 F.3d 1201 (Fed. Although 287(a) indicates that marking is technically
Cir. 2014) non-obligatory, in light of the consequences for failure to
ccl
Microsoft v. Motorola, Inc., 904 F. Supp. 2d 1109 (W.D. [mark] it is usually described as a duty. Stephen Lindholm,
Wash. 2012). Marking the Software Patent Beast, 10 STAN. J.L. BUS. & FIN.
ccli
Id. at 1120. 82, 113 n.419 (2005).
cclii cclxxiii
Finjan Inc., v. Blue Coast Systems, Inc., 2015 WL Section 287 provides patentees with detailed
4272870, *4 (N.D. Cal. July 15, 2015) (permitting the use of instructions regarding what constitutes adequate marking:
WebPulse categorization data to show that software for Patentees . . . may give notice to the
categorizing potentially malicious webpages only implicated public . . . either by fixing thereon the
the patent-in-suit for a small number of the numerous word patent or the abbreviation pat.,
features available using the accused software); Lucent together with the number of the patent,
Tech., 580 F.3d at 1333. or by fixing thereon the word patent or
ccliii
Georgia-Pacific Corp. v. United States Plywood Corp., the abbreviation pat. together with an
318 F. Supp. 1116, 1120 (S.D.N.Y. 1970) (Georgia-Pacific address of a posting on the Internet,
Factor 11). accessible to the public without charge
ccliv
Id. for accessing the address, that
cclv
Ericsson, Inc. v. D-Link Sys., Inc., 773 F.3d 1201, 1227 associates the patented article with the
(Fed. Cir. 2014) (It is not that an appropriately apportioned number of the patent, or when, from the
royalty award could never be fashioned by starting with the character of the article, this can not be
entire market value of a multi-component productby, for done, by fixing to it, or to the package
instance, dramatically reducing the royalty rate to be applied wherein one or more of them is
in those casesit is that reliance on the entire market value contained, a label containing a like
might mislead the jury, who may be less equipped to notice.
understand the extent to which the royalty rate would need
to do the work in such instances.). 35 U.S.C. 287(a).
cclvi
Id. at 7.
cclvii
Id. cclxxiv
cclviii
Rembrandt Soc. Media, LP v. Facebook, Inc., 561 Fed. Nike, Inc. v. Wal-Mart Stores, Inc., 138 F.3d 1437, 1443
Appx. 909 (Fed. Cir. 2014) (Fed. Cir. 1998).
cclxxv
cclix
VirnetX v. Cisco Systems, Inc. 767 F.3d 1308 (Fed. Cir. See, e.g., Am. Med. Sys., Inc. v. Med. Eng'g Corp., 6
2014). F.3d 1523, 1538 (Fed. Cir. 1993).
cclxxvi
cclx
Id. at 1328. Fujitsu Ltd. v. Netgear Inc., 620 F.3d 1321, 1332 (Fed.
cclxi
Id.(emphasis added). Cir. 2010).
cclxxvii
cclxii
Virnetx, Inc. v. Cisco Sys., Inc., 767 F.3d 1308, 1325 Am. Med., 6 F.3d at 153839.
cclxxviii
(Fed. Cir. 2014) Hanson v. Alpine Valley Ski Area, Inc., 718 F.2d 1075,
cclxiii
Id. at 1333. 1083 (Fed. Cir. 1983).
cclxxix
cclxiv
Uniloc v. Microsoft, 632 F.3d 1292 (2011). See Alana M. Fuierer, Your Client has a Patent; It Also
cclxv
Id. at 1311. has a Website, THE DAILY RECORD, July 16, 2013,
cclxvi
Id. at 1313-14. http://nydailyrecord.com/blog/2013/07/16/ip-frontiers-your-
cclxvii
See, e.g., Lucent Technologies Inc. v. Gateway, 580 client-has-a-patent-it-also-has-a-website/.
cclxxx
F.3d 1301, 1324 (Fed. Cir. 2009); Ericsson, Inc. v. D-Link See id.
cclxxxi
Sys., Inc., 773 F.3d 1201 (Fed. Cir. 2014); Virnetx, Inc. v. See id.
cclxxxii
Cisco Sys., Inc., 767 F.3d 1308, 1331 (Fed. Cir. 2014); See id.
cclxxxiii
LaserDynamics, Inc. v. Quanta Computer, Inc., 694 F.3d 51 Am. Med., 6 F.3d at 153839 (emphasis added)
cclxxxiv
(Fed. Cir. 2012); Uniloc USA, Inc. v. Microsoft Corp., 632 See John LaBarre & Xavier Gmez-Velasco, Ready,
F.3d 1292 (Fed.Cir.2011). Set, Mark Your Patented Software!, 12 RICH. J.L. & TECH. 3,
cclxviii
Daubert v. Merrell Dow Pharmaceuticals, 509 U.S. 579 3839 (2005).
cclxxxv
(1993), Kumho Tire Co. v. Carmichael, Because nearly 38% of all software patent cases filed
526 U.S. 137 (1999). from 2008 through August of 2015 were filed in the Eastern
cclxix
E.g. Aspex Eyewear, Inc. v. E'Lite Optik, Inc., No. CIV.A. District of Texas, decisions from that court have particular
398CV2996D, 2002 WL 1751381, at *37 (N.D. Tex. Apr. 4, bearing on software patent cases.
cclxxxvi
2002); see also Daralyn J. Durie and Mark A. Lemley, A 383 F. Supp. 2d 904 (E.D. Tex. 2005)
cclxxxvii
Structured Approach to Calculating Reasonable Royalties, Id. at 90609.
cclxxxviii
14 LEWIS & CLARK L. REV. 627, 648, available at Id. at 909.
cclxxxix
http://ssrn.com/abstract=1567019 (offering a review of Id.
ccxc
Federal Circuit cases between 1993 and 2009 that showed See LaBarre & Gmez-Velasco, supra, at 3839.
ccxci
only 10 challenges to orders on motions to exclude expert 399 F.3d 1325, 1339 (Fed. Cir. 2005); see also Minton v.
testimony on patent damages). Nat'l Ass'n of Sec. Dealers, Inc., 336 F.3d 1373, 1378 (Fed.
cclxx
See Uniloc v. Microsoft, 632 F.3d 1292, 1314 (2011) Cir. 2003) (treating software like a tangible object for
(Lower courts have invariably admitted purposes of the on-sale bar codified at 35 U.S.C. 102(b)).
ccxcii
evidence based on the 25% rule, largely in reliance on its See Tim Hsieh, The Adequacy of the Mark: Raising the
widespread acceptance or because its admissibility was Standard Under 35 U.S.C. S 287(a) for Patented Online
uncontested.). Software Methods, 48 IDEA 69, 118 (2007) (illustrating the
cclxxi
E.g., Toshiba v. Imation, No. 09-CV-305-SL (W.D. WI ). import of marking for online software methods, which
cannot actually be seen or felt by consumers).

89
ccxciii
Am. Med., 6 F.3d at 1538.
ccxciv
Am. Med., 6 F.3d at 1538.
ccxcv
383 F. Supp. 2d at 909.
ccxcvi
Hsieh, supra, at 96 n.166.
ccxcvii
Maxwell v. J. Baker, Inc., 86 F.3d 1098, 1111 (Fed. Cir.
1996).
ccxcviii
See 383 F. Supp. 2d at 90809.

90
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