Jan 132011

Some of you may recall my fascination last year with the distinction in software between a license and a sale. I argued that it makes more sense to consider computer program transactions as sales rather than licenses. Well since my post, a lot has changed in the patent-eligibility landscape. The Supreme Court in Bilski went deep into analyzing process patents. Even though the Court sidestepped software, opening it up for a future time, some of the issues it raised with regards to general process claims were quite interesting.

Just the other day I was reading about particular exercises used to optimize the human body in certain ways. True to my patent-law geek form, I immediately thought about the patentability of such exercises as novel techniques. As the dissent in Bilski pointed out, a couple hundred years ago, processes people would not have thought about patenting, are today at least being considered for patentability. Without saying whether this is a good or a bad thing, it is interesting that process patents are finding their own niche in the realm of inventions. This refinement has a long ways to go in terms of defining what a non-patentable process is, such as an abstract idea.

I’d like to take you back to my post about the difference between sales and licenses. If I teach someone else how to do a process in exchange for something in return, is this a sale or a license? It may depend on how the arrangement is set up. According to the MPEP, however, it is per se a license. You see, I’m currently studying for the USPTO registration examination and I just read a section in the patentability section of the MPEP, discussing the 102(b) sale requirement.

A claimed process, which is a series of acts or steps, is not sold in the same sense as is a claimed product, device, or apparatus, which is a tangible item. “‘Know-how’ describing what the process consists of and how the process should be carried out may be sold in the sense that the buyer acquires knowledge of the process and obtains the freedom to carry it out pursuant to the terms of the transaction. However, such a transaction is not a ‘sale’ of the invention within the meaning of §102(b) because the process has not been carried out or performed as a result of the transaction.” In re Kollar, 286 F.3d 1326, 1332, 62 USPQ2d 1425, 1429 (Fed. Cir. 2002). MPEP 2133.03(c) (8th Ed. 4th Rev.)

This simplifies process patents for now, applying a broad brush stroke to all process patents not being sales, but I am predicting that the delineation will soon need to be more precise. Some process patents are gray in their conceptualization and I sometimes like the challenge of exploring gray areas. More to come.

 Posted by at 10:37 pm
Jan 142010

Software (or computer program) transactions occur all the time and literally everywhere in our society. Such transactions can consist of downloading a program for free or it can involve going to the store and buying a particular program. The phrasing that I just used, you will note, gives an ordinary person the impression that there is an element of ownership in the computer program. More often than not, however, the transaction is not a sale of the digital good, but rather a license to use the software. On either opening the software packaging (shrink-wrap) or installing the program, there is undoubtedly an accompanying license that automatically enters you into. As previously noted, I purchased Microsoft Office last year and the license can be found here. Currently, there is a Circuit split on whether software should be considered a sale even though the software distributors want it to be a license. One side of the split has reclassified these licenses as sales. See Step-Saver Data Systems, Inc. v. Wyse Technology, 939 F.2d 91 (3d Cir. 1991); Vault Corp. v. Quaid Software Ltd., 847 F.2d 255 (5th Cir.1988). I am interested in how classifying software as licenses, rather than something to be owned, will affect the registration of Intellectual Property, especially as we are moving away from physical embodiments of digital property.

In a new article What Virtual Worlds Can Do for Property Law, Juliet M. Moringiello focuses on a couple recent virtual-property disputes in the computer game Second Life. 62 Fla. L. Rev. 159 (2010). One dispute involved a user who exploited a glitch and obtained land for a low cost. The owner of Second Life, Linden, said that the user breached the license and the virtual property was confiscated. The bottom line question that this case involved was who had rights to the virtual property in Second Life? Did the creator of the game merely grant the user a license to access the “proprietary server software, storage space, and computational power that enabled the experience of the ‘virtual land’ in Second Life”? or did the creator wrongfully take the virtual property that the user had acquired? This interesting question did not get resolved due to settlement. The author concludes that the limited amount of tangible property classifications should also apply to the virtual world. I wonder if the current classifications of tangible property are sufficient for intangible property.

Wherever you try and put digital property, it is an awkward fit. First, it is difficult to classify digital transactions as a sale. When we think of the sale of tangible goods, an owner gives up the actual good and transfers it to another. On the other hand, when a record company sells music, it can transfer an unlimited amount of music without diminishing its supply. Using a true sale perspective, when the record company sold its copy of an album, it would not possess that album anymore. In a Unix world, a true sale of a digital transaction would be the command “mv location/album.zip .” However, the command is instead “cp location/album.zip .” which means that the record company always has access to its original album.

Having said that digital property doesn’t fit perfectly in the category of a sale, the category of license doesn’t fit any better. Courts have used several factors to reclassify digital property from licenses to sales:

    The intent on the licensor to regain possession
    The absence of a recurring benefit
    A reason for construing it as a license other than restraining trade
    The pricing structure was more like a sale
    The licensee could sell the property

In re DAK Industries, Inc., 66 F.3d 1091 (9th Cir. 1995); UMG Recordings, Inc. v. Augusto, 558 F. Supp. 2d 1055 (C.D. Cal. 2008).

Perhaps we are in need of another category to fit emerging digital property into. The license/sale debate will most likely not get any easier or less heated as we move away from physical embodiments of software and towards cloud computing.

 Posted by at 9:31 pm