Patents Under Scrutiny

After years of complaints by high-tech companies that the U.S. patent system is misused, too slow or completely outdated, patent attorneys are about to get their day in court.

The U.S. Supreme Court has agreed to review an appeal between Alice Corp., an electronic marketplace for trading IP, and CLS Bank International, involving what kinds of inventions can be patented, according to the Supreme Court of the United States blog. Arguments begin March 31.

While this may seem rather distant from EDA and IP, patent experts are watching this case closely. They say it could affect everything from software to online shopping, business methods and even medical diagnostics. And depending on the court’s decision, it could raise questions about whether a number of patents should ever have been approved in the first place.

Patents are a political hot potato in Silicon Valley, where long-time executives argue that most of the semiconductor industry’s early gains occurred only because patents were ignored. But as small software and IP companies seek to gain a foothold, they are facing a wave of patent threats as well as some gray areas about what exactly is patentable. Some 89% of the increase in suits between 2010 and 2011 were software-related. The issue is made far more volatile by the fact that Non Practicing Entities (NPEs) now make up a fifth of all lawsuits, according to the latest Government Accountability Office report. http://www.gao.gov/products/gao-13-465

“Many patents are issued with claims that are too wide to be defensible, but that does not stop big companies from using them, says Kurt Shuler, vice president of marketing at Arteris. “And unless you have an equal number of patents you are vulnerable. The whole thing is a mess. Personally, I would like to see it be a lot more restricted. We need a higher gate to get a patent, but then once you get one it would be more defensible.”

The Free Software Foundation argues that software patents are no different than works of literature and should not be allowed. Richard Stallman wrote in an article published by the Guardian of London in 2005, “A 2004 study of Linux, the kernel of the GNU/Linux operating system, found 283 different U.S. software patents that seemed to cover it. That is to say, each of these 283 different patents forbids some computational process found somewhere in the thousands of pages of source code of Linux.” He contends that this restricts the software industry and concludes, “The way to prevent software patents from bollixing software development is simple: Don’t authorize them.”

Protection options
There is debate about whether patents are even the right mechanism for protecting IP. “There are several ways to protect software intellectual property (trade secret, copyright and patent), but it is not clear that any of them are perfect,” says Bernard Murphy, chief technology officer at Atrenta. “Secrets are only as good as your ability to keep the secret, which is challenging in a highly mobile software workforce. Copyright is valuable in cases of blatant copies, but forensics to detect such copying are struggling to keep up with more sophisticated copying methods. Patents protect the implementation concept, but leave open to challenge whether the idea was ‘obvious’ or overlaps with prior art.”

But the alternatives are worrisome, too. “Some say that if the EDA industry decided to give up patents we would have seen faster growth,” says Tomeq Cwienk, PR manager for Digital Core Design. “But on the other hand, anarchy has never been a good option, and that’s why patents and copyrights are the part of our landscape.”

Today, U.S. patent law excludes “abstract ideas,” but a claim is patentable if it contains a mathematical formula and implements or applies the formula in a structure or process which, when considered as a whole, is performing a function which the patent laws were designed to protect. This is open to a lot of interpretation, however, leading to unanswered questions about how this applies to EDA tools or hardware IP.

“The argument [against software patents] is out of date because the U.S. economy is increasingly service-centric, rather than manufacturing-centric,” said Atrenta’s Murphy. “An IP-protection system designed only to work for the manufacturing half of the economy would rightly be considered deeply flawed.”

He’s clearly not alone in this view. Shamita Etienne-Cummings, a partner at White & Case LLP, a law firm that has a lot of experience with patent litigation, worked in the semiconductor industry before becoming a lawyer, so she is knowledgeable about the design and implementation process. “The U.S. is no longer a manufacturing country, but we do perform a lot of the design that goes into products,” she says. “We are seeing a lot of litigation in this area. This is more than about software patents. It is an industry issue, a national issue.”

Hardware often starts life as software, and most companies within the semiconductor design-to-manufacturing chain do not actually manufacture anything. Companies such as ARM license IP in the form of software. Companies such as Cadence, Synopsys and Mentor Graphics have the tools that turn this into a more detailed form, plus the mechanisms necessary for manufacturing, and then a third type of company, such as TSMC and GlobalFoundries, physically manufacture it.

But consider the case of Tela Innovations. The company created tools for layout and then licensed that technology to TSMC. That relationship ended last year and it now has no active licensees. Late last year, Tela filed suit against a number of handset makers. This is the point at which its technology, if found to have been used without being properly licensed, is imported into the country in a physical form. A few weeks ago it also filed suit against TSMC. But has Tela, which for all intents and purposes is an EDA company, become a Non-Practicing Entity? The answer isn’t clear, and it very well could change.

Last week, Qualcomm acquired roughly 2,400 U.S. and foreign patents and applications from Hewlett-Packard. The portfolio comprises patents held by Palm and Bitfone, two companies acquired by HP, along with patents related to the company’s iPAQ pocket PC.

When firms that compete with each other have significant patent portfolios, those patent portfolios can create a form of patent detente. One firm may be deterred from initiating patent litigation against another for fear of drawing a patent countersuit. But we are now seeing many cases where this balance has been upset, including the selling of patents.

Both Qualcomm and Hewlett-Packard clearly feel that buying and selling patents is just good business. While Qualcomm is unlikely to file frivolous lawsuits, there is a gray area between a company that sells patents to another development company and one that just wants to monetize the patents.

“We need protection for ideas that are implemented and advance a technology and that is what we are seeing in software,” says Etienne-Cummings, “I believe the Supreme Court will look at this and say we want to protect it to a certain degree, but where the line is has yet to be found.”

There is no shortage of opinions on both sides, though. “Without patents and copyright protection many of the IP vendors would struggle with abuses of their design,” says Cwienk. “That is why the copyright is or rather should be a constant part of EDA industry.”

By looking at data from patentmaps.com, it appears that the number of patent application filings in each of the big three EDA companies has been going down quite significantly over the past few years. But there are still thousands of patents that could be affected by the current Supreme Court case.

“Patents may not be the best possible solution, but they are reasonable, defensible and fair, which may be the most we can expect given current legal thinking,” concludes Murphy.