1 00:00:08,776 --> 00:00:14,314 These people are lined up to hear the oral argument in the first software patent case to be brought before the Supreme Court in almost 30 years 2 00:00:14,564 --> 00:00:16,990 - Do you guys want to introduce yourselves and spell your names? 3 00:00:17,882 --> 00:00:21,729 - Yeah, uh, uh, Bernie Bilski. B - I - L - S - K - I 4 00:00:24,180 --> 00:00:30,302 - Rand - R - A - N - D, Warsaw - W-A-R-S-A-W 5 00:00:30,552 --> 00:00:33,268 - Could you guys tell us in a nutshell what you've invent? 6 00:00:33,318 --> 00:00:39,498 - The invention is a guaranteed energy bill, which is like a budget bill without a true-up,- 7 00:00:39,748 --> 00:00:46,768 -and it's a method of hedging both sides in the transaction. So, behind giving consumers,- 8 00:00:47,018 --> 00:00:50,518 -energy consumers are guaranteed energy bill. There's a lot of mechanics. 9 00:00:50,768 --> 00:00:54,468 And the mechanics involve financial transactions between energy consumption, 10 00:00:54,718 --> 00:00:58,218 or energy consumers, and the energy providers. 11 00:00:58,468 --> 00:01:03,830 THESE MEN HOPE TO GAIN A PATENT ON A BUSINESS METHOD OF HEDGING COMMODITY RISK 12 00:01:04,066 --> 00:01:08,994 And that's what the invention is in a nutshell. It's a method of generating guaranteed bills- 13 00:01:09,244 --> 00:01:12,744 -for consumers and, also, for protecting energy company earnings. 14 00:01:12,994 --> 00:01:16,743 The outcome of the case will have profound implications for software 15 00:01:17,020 --> 00:01:22,190 - The Bilski Case itself is someone applied for a patent on a business method or software,- 16 00:01:22,440 --> 00:01:27,396 -and patent office rejected it. And now this is that person suing the patent office, saying- 17 00:01:27,396 --> 00:01:30,390 -"You have to grant me that patent." 18 00:01:30,640 --> 00:01:34,140 This case is about what does it mean to be a patentable process. 19 00:01:34,390 --> 00:01:38,913 And so, since software patents fall under the category of processes, because they are not- 20 00:01:39,163 --> 00:01:43,166 -the machine, and they're not a composition of matter, which are some of the other categories- 21 00:01:43,413 --> 00:01:47,357 -of things that are patentable. This case will define what it means to be a patentable process. 22 00:01:52,257 --> 00:01:54,276 - What about justice Roberts? He said, you know, 23 00:01:54,468 --> 00:01:57,452 basically your patent involves people picking up the phone and calling other people. 24 00:01:57,770 --> 00:02:03,065 - It could be reduced to that level, as the certain acts that are performed, but it's much more than that. 25 00:02:03,365 --> 00:02:08,438 It has to do with selling commodity that effects price to one party, selling to a different party 26 00:02:08,738 --> 00:02:12,706 at a different fixed price, identifying counter risk positions. 27 00:02:12,956 --> 00:02:18,668 If you look at claim four in the patent, we have things called claims which describes what the invention is, - 28 00:02:18,668 --> 00:02:25,318 -there's a long mathematical formula in there, that didn't exist in nature or anywhere in the literature, 29 00:02:25,502 --> 00:02:28,110 that these very inventive folks come up with. 30 00:02:28,352 --> 00:02:32,052 - Once upon a time math was not patentable. And nowadays we can have someone - 31 00:02:32,302 --> 00:02:37,812 -like Bilski coming in and saying: "You know, I worked hard on this mathematical equation -" 32 00:02:38,012 --> 00:02:41,564 "- and therefor I should have a patent on this information processing method here." 33 00:02:41,814 --> 00:02:45,249 - You mention in your claim that there's a very long calculation shown there. 34 00:02:45,464 --> 00:02:50,710 Do you think a strong calculation or good math is a basis for a patent? 35 00:02:50,910 --> 00:02:51,714 - It can be. 36 00:02:51,964 --> 00:02:57,710 - The basic process of writing software is that you take a broad algorithm of some sort, you know, - 37 00:02:57,960 --> 00:03:01,760 -some means of doing something with abstract data, and then you apply variable names. 38 00:03:02,010 --> 00:03:05,910 - So for our first derivation let's start with a simple matrix, a matrix of values. 39 00:03:06,160 --> 00:03:11,830 And we'll find the mean of each column, mu one, mu two, mu three. 40 00:03:12,030 --> 00:03:21,184 And we're gonna define Y to be X minus mu for each column. 41 00:03:21,434 --> 00:03:29,468 Now if we have some other factor, X, we can take X dot S and find the projection of X onto this space. 42 00:03:29,718 --> 00:03:31,950 This is called the singular value decomposition (SVD). 43 00:03:32,200 --> 00:03:41,609 Now, here's the trick. Here's the great part. Let's say that this first row, X1, equals sexuality. 44 00:03:41,859 --> 00:03:45,359 Let's say X2 equals "Do you own cats?" 45 00:03:47,126 --> 00:03:51,836 And X3 equals, I dunno, affection. 46 00:03:55,022 --> 00:04:05,502 Ok, so, now we'll also say that, let's take a factor J1 equals Jane's responses on this survey. 47 00:04:05,752 --> 00:04:10,086 Let's say J2 equals Joe's responses. 48 00:04:10,336 --> 00:04:21,308 Now let's do the same projections as we did before. We're gonna take J1 dot S subtract J2 dot S. 49 00:04:21,558 --> 00:04:27,062 We're gonna find the distance between these two points, and we're gonna call that compatibility. 50 00:04:28,414 --> 00:04:35,901 And in that simple step, we've derived patent number 6 735 568. 51 00:04:37,750 --> 00:04:44,286 The trick of our derivation was that before with the SVD, we had abstract numbers. 52 00:04:44,536 --> 00:04:49,974 What the guys at eHarmony did to get this patent, was to assign names to our variables. 53 00:04:50,224 --> 00:04:55,870 So instead of an abstract X1 we have sexuality, instead of X2 we have a preference for cats. 54 00:04:56,120 --> 00:04:59,948 And by making those assignments, by setting variable names in this matter, - 55 00:05:00,198 --> 00:05:05,390 -they were able to take an abstract concept and turn it into a patentable device. 56 00:05:06,440 --> 00:05:13,569 - What we want to do according to the heads of our patent institutions, is take mathematics and 57 00:05:13,819 --> 00:05:18,246 slice it up into as many slices as possible, and hand those slices out. And, say, if you do a 58 00:05:18,496 --> 00:05:26,238 principle component analysis, if you multiply matrices for dating sites, we'll give that to eHarmony. 59 00:05:26,488 --> 00:05:31,532 If it's for equities we'll give that to State Street. And so on and so forth. 60 00:05:31,782 --> 00:05:39,718 And what we're giving out is basically exclusive rights to use mathematics, - 61 00:05:40,083 --> 00:05:44,883 -to use a law of nature, in whatever context. And what we get in return is basically nothing. 62 00:05:45,733 --> 00:05:52,121 - The patents is a government grant, in the US it arises out of the constitution. 63 00:05:52,471 --> 00:05:58,721 - The Framers included the provision for granting exclusive rights to inventors in our constitution, 64 00:05:58,971 --> 00:06:06,093 and the belief was that that was important in order to reward people who had made technological - 65 00:06:06,243 --> 00:06:09,343 - advances that would benefit society. 66 00:06:13,272 --> 00:06:18,156 - The rights that they are granted are not the rights to do the things that they invent, - 67 00:06:18,406 --> 00:06:21,409 -but the right to exclude others from doing that thing. 68 00:06:21,659 --> 00:06:28,345 - So the idea was you have a machine or a thing, which is not previously described in any literature, - 69 00:06:28,595 --> 00:06:34,449 -and which no skilled mechanic could figure out how to make given what is described in literature, - 70 00:06:34,699 --> 00:06:36,457 -and for that you get a patent. 71 00:06:36,707 --> 00:06:42,550 - The basis for determining what is patentable subject matter has continued to evolve - 72 00:06:42,800 --> 00:06:46,300 - over the last 200 years of our national existence. 73 00:06:46,550 --> 00:06:54,588 - In 1953 the Patent Act was modified by Congress, to add the words "or processes" to the word - 74 00:06:54,838 --> 00:06:57,697 - "product" in describing what could be patented. 75 00:07:04,760 --> 00:07:10,833 The Congress which did that was plainly thinking of processes of industrial manufacture. Processes - 76 00:07:11,083 --> 00:07:19,481 - that produced something at the other end. Float glass on molten tin, and it'll become flat, or whatever. 77 00:07:19,731 --> 00:07:25,065 - And it's unlikely that anybody thought of process at that time in terms of computer software, - 78 00:07:25,315 --> 00:07:33,748 -because we didn't have applications on computer software for many years after that last revision - 79 00:07:33,998 --> 00:07:36,998 - of the Patent Act. 80 00:07:46,267 --> 00:07:52,282 - Back in the late 70s the patent law was interpreted such that you couldn't patent software. It was - 81 00:07:52,532 --> 00:07:55,449 - considered a mathematical algorithm, a law of nature. 82 00:08:01,821 --> 00:08:09,430 The legal world changed. The environment was quite different starting with some decisions by- 83 00:08:09,649 --> 00:08:11,254 - the Supreme Court, like Diamond v. Diehr. 84 00:08:11,504 --> 00:08:17,905 - The patent applicant was coming in with a new process for curing rubber. The temperature, and- 85 00:08:18,155 --> 00:08:23,873 - the preciseness of the temperature is essentials in curing rubber well. And the innovation - 86 00:08:24,123 --> 00:08:30,753 -that was being patented in this case was an algorithm to monitor a thermometer - 87 00:08:31,003 --> 00:08:37,038 - that was basically in the process and determined when the rubber needs to be released and cooled. 88 00:08:37,288 --> 00:08:42,505 - And they said "Processes for curing rubber are patentable, there's nothing new about that, -" 89 00:08:42,755 --> 00:08:47,526 "- the fact that they use a computer in implementing it shouldn't change anything." 90 00:08:55,602 --> 00:09:00,070 - The Supreme Court makes it clear that you can't patent software, because it's only a set of - 91 00:09:00,320 --> 00:09:09,300 - instructions, or an algorithm. Abstract laws of nature, algorithms, are unpatentable in the US itself. 92 00:09:09,550 --> 00:09:17,209 However, then there was the creation of the Court of Appeals of the Federal Circuit. 93 00:09:17,459 --> 00:09:24,657 - The problem being solved, in some sense, begins with the fact that trial court judges always - 94 00:09:24,907 --> 00:09:27,180 - hate patent cases. 95 00:09:27,430 --> 00:09:35,310 And the reason they hate patent cases is, for a single trial judge, a lawyer who has spent his/her life- 96 00:09:35,560 --> 00:09:43,914 -doing litigation, a patent case in which she/he is going to be required to find detailed facts about how paint is- 97 00:09:44,164 --> 00:09:52,713 -made or how computers work or how radio broadcast- ing operates, is an opportunity just to made into a fool. 98 00:10:00,133 --> 00:10:05,369 - Congress is attempting to change the system in which patent cases are litigated. 99 00:10:05,619 --> 00:10:11,934 But instead of changing who tried patent cases, Congress left a non-specialist district judge- 100 00:10:12,184 --> 00:10:17,326 -in charge of the trial. And then created a new court of appeals called the Federal Circuit,- 101 00:10:17,576 --> 00:10:22,081 -who's job it was to hear all appeals from patent cases. 102 00:10:22,331 --> 00:10:25,313 Rapidly, of course, this court filled up with patent lawyers. 103 00:10:25,563 --> 00:10:32,622 And the patent lawyers then made the law in the court of appeals that applied to all those district judges- 104 00:10:32,872 --> 00:10:37,556 -who were still making non-specialist decisions of which they were afraid. 105 00:10:37,806 --> 00:10:42,721 Naturally the Federal Circuit turned out to be a place which loved patents. 106 00:10:42,971 --> 00:10:49,537 And it's chief judge, Giles Rich, who lived to be very very old and died in his late 90s,- 107 00:10:49,787 --> 00:10:53,068 -was a man who particularly loved patents on everything. 108 00:10:53,318 --> 00:11:00,273 The Federal Circuit court under Giles Rich sort of broke Diamond against Diehr lose from it's original meaning,- 109 00:11:00,523 --> 00:11:05,068 -and came to the conclusion that software itself could be patented. 110 00:11:05,318 --> 00:11:09,609 - The Supreme Court basically left everything to this court to decide. 111 00:11:09,859 --> 00:11:16,473 - The PTO actually used to reject patents on software, like in the early 1990s, and they did not allowed them. 112 00:11:16,723 --> 00:11:20,223 And the applicants would appeal those rejections to the Federal Circuit. 113 00:11:43,280 --> 00:11:46,798 - In the world of machines you show the Patent Office the machine,- 114 00:11:47,048 --> 00:11:51,697 -and you've got a Patent Office who's claims were "I claim this machine." 115 00:11:52,946 --> 00:11:56,636 In the world of computer software there was no way of defining what the unit was. 116 00:11:56,886 --> 00:12:03,777 I don't claim a program, I claim a technique that any number of programs doing any number of things could- 117 00:12:04,027 --> 00:12:11,492 -possibly use. The consequence of which is very rapidly we began to build up as real estate that somebody- 118 00:12:11,742 --> 00:12:19,014 -owned and could exclude other people from a whole lot of basic techniques in computer programming. 119 00:12:19,314 --> 00:12:24,516 - What happened was, starting in the mid-90s, the number of patents on software started soaring. 120 00:12:24,766 --> 00:12:27,806 An industry attitude started changing too. 121 00:12:28,056 --> 00:12:32,558 So you had Microsoft, which originally didn't deal with software patents very much at all,- 122 00:12:32,808 --> 00:12:36,885 -I guess they got sued in the early 90s by Stac and lost a, uh,- 123 00:12:37,085 --> 00:12:40,817 -significant judgment against them, they started patenting. 124 00:12:41,067 --> 00:12:43,932 - They're gonna have their own set of patents. 125 00:12:44,182 --> 00:12:49,116 So that if a major patent holder threatens them, they can fire back. 126 00:12:49,366 --> 00:12:55,382 - Gradually companies like Oracle were forced to set up patent departments just for defensive reasons. 127 00:12:55,632 --> 00:13:00,481 They had to patent their stuff so that they had some- thing to trade with the companies that had patents. 128 00:13:00,731 --> 00:13:10,945 Mark Webbink: - And so the arsenal started to develop. By year 2001 Microsoft now holds thousands of software patents. 129 00:13:11,195 --> 00:13:15,350 Oracle was probably approaching a thousand software patents. Adobe... 130 00:13:15,600 --> 00:13:19,713 James Bessen: - All of them become more and more aggressive. Patenters and some of the ones who were against- 131 00:13:19,963 --> 00:13:25,516 -software patents ended up suing other companies, and so what you had is an explosion of patenting first- 132 00:13:25,766 --> 00:13:27,729 -and then an explosion of litigation. 133 00:13:32,484 --> 00:13:37,404 By the late 90s about a quarter of all patents granted were software patents. 134 00:13:38,551 --> 00:13:44,233 About a third of all litigation, patent litigation, involves software patents. 135 00:13:44,483 --> 00:13:50,329 About 40% of the cost of litigation is attributable to software patents. 136 00:13:50,579 --> 00:13:52,631 And those numbers have been going up. 137 00:13:52,881 --> 00:13:59,270 So Charles Freeny invented a kiosk that goes in retail stores, and the idea is you'd come in,- 138 00:13:59,520 --> 00:14:05,306 -you could select the music selection, swipe your credit card, put in a blank 9 track tape,- 139 00:14:05,556 --> 00:14:10,917 -and this is is how long ago this patent was, and it would write that music selection onto the tape- 140 00:14:11,167 --> 00:14:13,988 -and you could go away with it. 141 00:14:14,238 --> 00:14:21,649 The patent was drafted in a very vague language so there were terms like "point of sale location",- 142 00:14:21,899 --> 00:14:25,060 -and "information manufacturing machine". 143 00:14:25,310 --> 00:14:32,902 And Freeny eventually sold this patent to somebody who wanted to interpret those terms very broadly. 144 00:14:33,352 --> 00:14:36,652 To basically cover e-commerce. 145 00:14:36,902 --> 00:14:44,956 So here was this very limited invention for this kiosk, and he wanted to interpret those terms in such a- 146 00:14:45,206 --> 00:14:50,102 -broad way so that it would cover transactions that took place over the Internet,- 147 00:14:50,352 --> 00:14:56,228 -you could make them in your office, in your bedroom, in your house, anywhere. 148 00:14:56,478 --> 00:15:00,817 And so it covered virtually all of e-commerce. 149 00:15:01,067 --> 00:15:08,382 The courts initially didn't agree with that interpretation but they appealed it, and the appellant court largely- 150 00:15:08,632 --> 00:15:16,254 agreed with them, and they were able to extract some settlements out of well over a hundred companies. 151 00:15:16,504 --> 00:15:23,452 But the significant thing is, here is this patent you can't tell what it's boundaries were until you get to- 152 00:15:23,702 --> 00:15:29,236 -the appellant court. What most people thought it's boundaries were turned out to be wrong. 153 00:15:29,486 --> 00:15:32,644 - One of the key properties of programming languages is they're very very precise. 154 00:15:32,894 --> 00:15:39,292 You can look at any program language in any language, in C, Python, any language like this,- 155 00:15:39,542 --> 00:15:43,910 -and you know exactly what it's doing. You can look at two pieces of service code and you can say- 156 00:15:44,160 --> 00:15:48,662 "Are this doing the same thing or different things?" And we do this because computers are very picky- 157 00:15:48,912 --> 00:15:53,801 -and we need to tell the computer exactly what we need to do in order to accomplish some task. 158 00:15:54,051 --> 00:15:57,551 The language patent lawyers use is almost the opposite. 159 00:15:57,801 --> 00:16:03,001 There's an advantage in being vague, and being broad, being non-specific, because the broader your language- 160 00:16:03,251 --> 00:16:06,751 -the more things you, sort of, catch in your net. 161 00:16:07,001 --> 00:16:12,361 - So it is a large problem in our patent system just defining simply what is the context or the borders- 162 00:16:12,611 --> 00:16:16,148 -of the patent. And what does it cover, and what does it not cover. 163 00:16:16,398 --> 00:16:21,658 And that ambiguity causes a lot of chilling effects, because people are going to avoid doing anything- 164 00:16:21,908 --> 00:16:27,013 -that could possibly be covered by the patent, even if in reality the patent wouldn't cover what they wanna do. 165 00:16:27,263 --> 00:16:33,406 - Let's imagine that in the 1700s the governments of Europe had decided to promote the progress of- 166 00:16:33,656 --> 00:16:41,162 -symphonic music, or as they thought, promote it. Will a system of musical idea patents, meaning- 167 00:16:41,412 --> 00:16:48,306 -anybody who could describe a new musical idea in words could get a patent which would be a monopoly- 168 00:16:48,556 --> 00:16:54,998 -on that idea and then he could sue anybody else that implemented that idea in a piece of music. 169 00:16:55,248 --> 00:17:09,121 So a rhythmic pattern could be patented, or a sequence of chords, or a set of instruments to use together,- 170 00:17:09,371 --> 00:17:17,212 -or any idea you could describe in words. Now imagine it's 1800 and you're Beethoven, and you want to write- 171 00:17:17,462 --> 00:17:23,748 -a symphony. You're gonna find it's harder to write a symphony that you won't get sued for, than write- 172 00:17:23,998 --> 00:17:29,102 -a symphony that sounds good. Because to write a symphony and not get sued you're gonna have to- 173 00:17:29,302 --> 00:17:34,638 -tread your way around thousands of musical idea patents. 174 00:17:34,888 --> 00:17:40,388 And if you complained about this, saying it's getting in the way of your creativity, the patent holders would- 175 00:17:40,638 --> 00:17:44,484 -say "Oh, Beethoven you're just jealous because we had these ideas before you." 176 00:17:44,651 --> 00:17:46,873 "Why should you steal our ideas?" 177 00:17:47,123 --> 00:17:52,634 - People have been making music for thousands of years. There were never any need for patents in- 178 00:17:52,884 --> 00:18:01,148 -the field of music. And since the computer industry has made programming possible, people have been- 179 00:18:01,398 --> 00:18:07,054 -developing software as well, since right from its beginning, there was never a need to have patents- 180 00:18:07,304 --> 00:18:10,516 -in this field in order for the activity to happen. 181 00:18:10,766 --> 00:18:20,582 - Almost everything we were doing back before 1980, 1981, in those things, patent played no role in it. 182 00:18:20,832 --> 00:18:30,324 Cut & paste, the embedded ruler in a word processing, word wrapping, a lot of the things that are real- 183 00:18:30,574 --> 00:18:37,566 -important and we take for granted, and that are much more innovative in many ways than patents we have- 184 00:18:37,816 --> 00:18:44,198 -today, 'cos patents can be on some very minute things, that's the way the law works. 185 00:18:44,448 --> 00:18:49,841 Those things happened, we had great advances without patents. 186 00:18:50,091 --> 00:18:54,100 - One of the world's most respected computer scientists, 187 00:18:54,350 --> 00:19:02,422 Donald Knuth, has said that if software patents had been available in the 1960s and 70s when he was- 188 00:19:02,672 --> 00:19:07,084 -doing his work, that it's probably the case that computer science wouldn't be where it is today. 189 00:19:07,334 --> 00:19:15,164 There would be blockades on innovation that could've seriously prevented the kinds of technical solutions- 190 00:19:15,414 --> 00:19:17,942 -that we take for granted today. 191 00:19:18,192 --> 00:19:24,137 - The programmer writing a long program might conceivably need to check whether 500 or- 192 00:19:24,387 --> 00:19:28,622 -thousand different techniques are patented, and there is no way that she possibly could. 193 00:19:28,872 --> 00:19:35,590 - The Patent Office issues hundreds of software patents all the time. Every Tuesday they issue 3,500 patents- 194 00:19:35,790 --> 00:19:41,032 -and a large number of those relate to software. It's just impossible to review all those patents every week- 195 00:19:41,232 --> 00:19:43,580 -to make sure you're not doing something that could infringe them. 196 00:19:43,830 --> 00:19:53,505 - So there's a provision in the US patent laws that basically holds patent infringers, ahem, at I guess- 197 00:19:53,755 --> 00:20:01,117 -a greater liability if they are shown to willfully infringe. So basically the idea is that if you knew- 198 00:20:01,367 --> 00:20:07,094 -about a patent and you infringed on it, you should have a stricter penalty than if you didn't know about it. 199 00:20:07,344 --> 00:20:14,356 But what this results in is a situation where there is a real disincentive to follow what patent has been made- 200 00:20:14,606 --> 00:20:21,228 -and what new inventions there has been through the patent system, because if you read every patent or- 201 00:20:21,478 --> 00:20:28,070 -there's evidence to show that you have read patents, then you are liable for willful infringement, you knew- 202 00:20:28,320 --> 00:20:32,737 -about the patent and you infringed it anyway, and the penalty is triple damages. 203 00:20:32,987 --> 00:20:39,137 - A number of people suggested that software should be removed from the- 204 00:20:39,387 --> 00:20:40,760 -scope of patentability. Can you comment on that? 205 00:20:41,010 --> 00:20:45,894 - Yes, well, I obviously disagree with that. And I don't believe that software should ever be removed. 206 00:20:46,144 --> 00:20:51,441 It's one of our greatest sources of technical innovation in this country. And to come up with a test that would- 207 00:20:51,691 --> 00:20:55,230 -somehow eliminate software would, I think, be a disaster for the economy. 208 00:20:55,480 --> 00:21:01,852 WOULD IT THOUGH? - Mike and I estimate that outside of pharmaceuticals and chemicals the patents, sort of, are acting like- 209 00:21:02,102 --> 00:21:10,454 -10 or 20 percent tax. You know, the small developer developing something, down the road he has to pay- 210 00:21:10,704 --> 00:21:18,892 -that tax. And every small company I know in software, as long as they've been around a few years and hit- 211 00:21:19,142 --> 00:21:26,950 -the market, somebody is asserting a patent against them, they're running into some potential difficulties. 212 00:21:27,200 --> 00:21:31,609 They very frequently feel obligated to get patent themselves for defensive purposes. 213 00:21:31,859 --> 00:21:40,646 So all of that activity is a tax. It's not something that's helping them innovate, it's an unnecessary activity. 214 00:21:40,896 --> 00:21:47,313 - The primary thing we do is an issue tracking system called RT, or Request Tracker, so it's customer service,- 215 00:21:47,563 --> 00:21:53,506 -help desk, bug tracking, network operations, anything where you've got a whole bunch of tasks that need to- 216 00:21:53,756 --> 00:21:58,089 -get kept track of. And you need to know what happened, what didn't happen, who did it,- 217 00:21:58,339 --> 00:22:04,609 -who didn't do it, when. It's kind of a to do list on steroids designed for a whole organization. 218 00:22:04,859 --> 00:22:10,297 Pretty much everything is open source or free software, under one license or another. 219 00:22:10,547 --> 00:22:18,009 We'll get consulting customers or support costumers who add indemnification language to our standard- 220 00:22:18,259 --> 00:22:27,038 -contract or need us to sign theirs. And it says, in the standard legalese, it's gonna say something like- 221 00:22:27,288 --> 00:22:34,324 -we indemnify and hold them harmless and agree to pay their legal fees and sacrifice our first-born, if- 222 00:22:34,574 --> 00:22:41,468 -something happens and someone discover that our software is violating a somebody else's patent. 223 00:22:41,718 --> 00:22:46,276 It's very very rarely the case that we end up signing something that has that kind of language in it. 224 00:22:46,526 --> 00:22:48,476 But it eats up a lot of legal fees. 225 00:22:48,726 --> 00:22:59,648 - Look at the innovative people in software in ICT, and ask "Would they be better of if the patent system- 226 00:22:59,898 --> 00:23:03,161 -was abolished?" The answer is probable "Yes". 227 00:23:03,411 --> 00:23:11,472 - Who's benefiting? Patent lawyers is number one. Number two, you've a small number of so called- 228 00:23:11,722 --> 00:23:17,822 -trolls who are benefiting, but it's not clear even most of them is making much money. 229 00:23:18,072 --> 00:23:25,580 You're seeing more recently, in the last 4 or 5 years, companies like Intellectual Ventures and- 230 00:23:25,830 --> 00:23:32,364 -hedge fonds who are acquiring large volumes of these trash patents and using them to extract hundreds- 231 00:23:32,614 --> 00:23:38,129 -of millions of dollars from companies. They're benefiting, they maybe the biggest beneficiaries. 232 00:23:38,379 --> 00:23:42,872 - There's a lot of bad press in the last few years about the harm that's caused by software patents. 233 00:23:43,122 --> 00:23:49,268 And we think that's had a political influence on the PTO to get them to slow down their issuance and start- 234 00:23:49,518 --> 00:23:51,444 -rejecting them, and that's what has resulted in the Bilski case. 235 00:24:00,270 --> 00:24:07,630 - Well the biggest, first bad press story was the Blackberry patents, where all the Congressional- 236 00:24:07,880 --> 00:24:12,228 -representatives have their Blackberrys and there was a company called NTP that sued the manufacture of- 237 00:24:12,478 --> 00:24:17,425 -Blackberry saying that all Blackberrys infringed it's patent. Well, NTP was this company which is just a- 238 00:24:17,675 --> 00:24:22,532 -one person holding company, they didn't make any products or services themselves, and so- 239 00:24:22,782 --> 00:24:29,764 -this got a lot of attention in the Wall street Journal and Washington Post, and Congress persons were really- 240 00:24:30,014 --> 00:24:34,039 -upset that they may lose their Blackberrys and they may not be able to communicate efficiently. 241 00:24:34,289 --> 00:24:40,950 So that caused a lot of attention, then you had all these patents on banking methods and imaging for checks,- 242 00:24:41,200 --> 00:24:44,188 -those patent holders were asserting against the banking industry, and the banking industry has- 243 00:24:44,438 --> 00:24:47,686 -a lot of influence on Capitol Hill, and so they've been going down there and saying "Look, these types of- 244 00:24:47,936 --> 00:24:52,553 -patents are causing us lots of harm." Then you add into that the whole patent troll phenomenon in- 245 00:24:52,803 --> 00:24:58,457 -Eastern District of Texas, with small patent holders suing large IT companies like Google, Microsoft- 246 00:24:58,707 --> 00:25:04,293 -IBM and Hewlett Packard. And all these companies also have legislative influence, and they've said- 247 00:25:04,543 --> 00:25:08,612 -"These types of patents are causing real harm to our business, they're costing us jobs, they're increasing- 248 00:25:08,862 --> 00:25:13,881 -the price of products and services that we offer to our customers, and you need to do something about it." 249 00:25:21,620 --> 00:25:27,428 - The situation we find ourselves in is that the lower court, the Court of Appeals of the Federal Circuit,- 250 00:25:27,678 --> 00:25:32,140 -is essentially a court for patents, for hearing patent cases. 251 00:25:32,390 --> 00:25:40,741 And this is the first time the Supreme Court has taken up that scope of patentability. 252 00:25:40,991 --> 00:25:47,852 And specifically this test that was implemented by lower court, does talk to software patents. 253 00:25:48,102 --> 00:25:55,724 And so, it's basically a 20 year history of software patents being granted due to the lower court. 254 00:25:55,974 --> 00:26:01,286 And so, we're hoping that the Supreme Court will clear up the mess that the lower courts created. 255 00:26:01,536 --> 00:26:06,065 And restamp it's authority which basically said that you cannot have software patents. 256 00:26:06,315 --> 00:26:12,078 - When you saw the arguments that where brought by Bilski's lawyer, the patent bar is in some sense- 257 00:26:12,328 --> 00:26:21,238 -an organized lobby. And an expansive subject matter that's available to be patented is in their interest. 258 00:26:21,488 --> 00:26:26,406 And it's clear that that was frustrating to some of the justices. Some of them were frustrated by how- 259 00:26:26,656 --> 00:26:28,685 -expansive patentable subject matter has become. 260 00:26:28,935 --> 00:26:34,553 - They seem somewhat dismissive of the idea that you could patent this particular idea. 261 00:26:34,803 --> 00:26:40,169 - I think people has a hard time getting over the idea that you can get a patent on hedging commodity- 262 00:26:40,419 --> 00:26:45,580 -risk. But if you actually look at the claims and look at what's in there, it is a process and it's no- 263 00:26:45,830 --> 00:26:50,080 -different than any other process. It just may be that it's not the way that they thought of patent- 264 00:26:50,330 --> 00:26:51,817 -law in the past. 265 00:26:52,067 --> 00:26:56,321 - We were encouraged by the comments by the justices which showed that they were skeptical- 266 00:26:56,571 --> 00:27:02,630 -and which suggested that they understood that software is little more than a series of steps,- 267 00:27:02,880 --> 00:27:08,441 -that could be written out as mathematical formula, or written out on a piece of paper, or, as was- 268 00:27:08,659 --> 00:27:11,638 -mentioned by one of the justices, typed out on a typewriter. 269 00:27:11,809 --> 00:27:17,117 - Software patents on a general purpose computer have never been explicitly endorsed by this court. 270 00:27:17,367 --> 00:27:23,798 And this court has also shown no compunction about reversing rules that've held for a very a long time. 271 00:27:24,048 --> 00:27:27,662 They clearly thought that the petitioners here was trying to get a patent on something very basic,- 272 00:27:27,912 --> 00:27:29,924 -some basic forms of human activity. 273 00:27:30,174 --> 00:27:34,861 MORE THAN 200,000 SOFTWARE PATENTS HAVE BEEN GRANTED IN THE U.S. 274 00:27:35,611 --> 00:27:42,489 PROGRAMMERS FIND IT INCREASINGLY DIFFICULT TO WRITE SOFTWARE THEY WON'T BE LIABLE TO BE SUED FOR 275 00:27:42,739 --> 00:27:46,239 NOW IMAGINE... 276 00:28:39,908 --> 00:28:46,257 Transcript version 2.2 by Martin Karlsson. 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