Patents and The Internet: Utility Patents

Utility Patents for Computer Applications

This post is part of a series of posts entitled A Legal Guide to the Internet. For a comprehensive list of articles contained in this series, click here.

Many inventions related to the Internet have been patented. Patents relating to electrical communication, data storage and retrieval, cryptography, information processing, and system organization are a few of the many Internet-related patents. A large portion of patent issues associated with the Internet are those surrounding software patents. Traditionally, software has been protected under copyright law. However, computer software may also be granted patent protection. Given a choice between copyright and patent protection, software developers generally prefer patent protection, as it provides greater protection than copyright. To obtain patent protection, the software must do more than solve a mathematical problem, as algorithms and abstract ideas are considered laws of nature and are therefore not patentable. For a discussion of copyrightability of software, see this post on Copyrightable Subject Matter.

What Types of Software Can Be Patented?

Various types of functional software applications can be protected by utility patents, including word processing applications, compilers, web browsers, database programs, spreadsheets, utility programs, language translation programs, and even computer games. Utility patents can also protect aspects of the software design other than the main functional application, such as control functions, editing functions and data structures. Data transmission schemes are also commonly the subject of utility patents, including communications protocols, encryption and data compression techniques.

Software that uses a mathematical algorithm or abstract idea may be protected by a utility patent if the inventor imposes sufficient limitations on the invention as to avoid preemption of the claimed algorithm or idea. The USPTO has identified several “safe harbors” where an invention can be patented if it:

  1. incorporates sufficient “post-solution” activity
  2. incorporates sufficient “pre­solution” activity
  3. is sufficiently limited to a practical application

Sufficient post-solution activity

Sufficient post-solution activity exists if the invention performs physical operations after using the mathematical algorithm. Merely conveying the result of a calculation, however, is not sufficient. Sufficient pre-solution activity exists if the data used in the mathematical algorithm represents measurements of physical objects or activities outside the computer. A mere data gathering step, however, is not sufficient. The measurements must be transformed into data before being used in the mathematical algorithm. Sufficient limitation to a practical application exists only when specified in the claim language.

In State Street Bank & Trust v. Signature Financial Group, 149 F.3d 1368 (Fed. Cir. 1998), cert. denied, 525 U.S. 1093 (1999), the Federal Circuit held that a processing system that takes data representing discrete dollar amounts through a series of mathematical calculations to determine a share price was patentable subject matter because the final result was a useful, concrete, and tangible result. The computer system, identified by Signature Financial Group as Hub and Spoke®, facilitates a structure whereby mutual funds (Spokes) pool their assets in an investment portfolio (Hub) organized as a partnership. The Court noted that a process facilitated by a computing arrangement is a “machine,” or in some cases a “process,” either of which is statutorily available for patent protection. In sum, the Court’s ruling reveals that nearly any software-related invention producing a useful, concrete and tangible result is patentable subject matter.

This and the following posts have been copied or adopted from A Legal Guide To The INTERNET – Sixth Edition, published through a collaborative effort by the Minnesota Department of Employment & Economic Development and Merchant & Gould.

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