Software Is Now Patentable

In 1996, the U.S. Patent and Trademark Office adopted its "Final Computer Related Examination Guidelines." As with all "Final" guidelines, these were later updated with the next guidelines. Currently, the guidelines used by the U.S. Patent and Trademark Office for computer related inventions are found in Section 2106 of the Manual of Patent Examination Procedure. These guidelines are designed to assist patent examiners in handling hardware and software related inventions. Since hardware and software are almost always interchangeable, it is not surprising that these guidelines reflect both types of computer related inventions. Although the guidelines assist in analyzing all requirements for patentability, they are most important in connection with determining whether these types of inventions are statutory and therefore patentable.

Even these guidelines, however, have become outdated with the 2010 Bilski v. Kappos decision of the Supreme Court. In this case, the Supreme Court determined that a business method relating to a process for hedging risks in flat-rate utility billing was not patentable since the process preempted an abstract idea. This decision made it more difficult for some business method patents to become patentable by rejecting several previously established tests for determining when business methods and software are patentable (in particular, the tests developed by the Federal Circuit in their State Street Bank and In re Bilski decisions). Although the majority's opinion clearly rejected previously created rules for analyzing these types of inventions, the Supreme Court did not create clear guidelines as to how these inventions should be analyzed. Our best understanding is that business methods and software inventions are eligible for patent protection as long as they do not preempt an abstract idea, a law of nature, or a physical phenomenon. The latest Memorandum on this subject from the U.S. Patent and Trademark Office supports this interpretation. As the law now stands, most observers agree that computer software remains patentable in the United States when properly claimed.

Although most software related inventions are statutory under current law, it is important to remember that neither "software" nor "data structures" are per se patentable. What is patentable is a "process, machine, manufacture or composition of matter." Thus the guidelines are framed so as to assist in determining when computer related inventions are to be considered patentable processes or machines. This determination is based upon the concept of descriptive materials, which is described in the guidelines as follows:

Descriptive material can be characterized as either "functional descriptive material" or "nonfunctional descriptive material." In this context, "functional descriptive material" consists of data structures and computer programs which impart functionality when employed as a computer component. (The definition of "data structure" is "a physical or logical relationship among data elements, designed to support specific data manipulation functions." The New IEEE Standard Dictionary of Electrical and Electronics Terms 308 (5th ed. 1993).) "Nonfunctional descriptive material" includes but is not limited to music, literary works and a compilation or mere arrangement of data.

Neither type of descriptive material is patentable alone. However, functional descriptive material (software and data structures) does become patentable when it is claimed in combination with computer-readable media. Thus if an inventor submits a patent application with a claim to computer software standing alone, the claim will be rejected as unpatentable. If the claim were to describe the software as stored on a magnetic or optical disk, or on a "physical, computer-readable media," the claim would be patentable. Alternatively, the software or data structures can be claimed in combination with a computer or processor that operates on the data structure or utilizes the software.

Nonfunctional descriptive materials do not become patentable merely by claiming the material on a computer-readable media. This means that a new song, book or poem is unpatentable subject matter, and this does not change merely by storing such materials on a computer-readable media.

For a more detailed discussion on the current state of software patents under the Supreme Court's Bilski v. Kappos decision, see the Bitlaw discussion of "Are Software and Business Methods Still Patentable after the Bilski Decision?"