December 12 is a significant anniversary for the high-tech industry: 36 years ago, Congress enacted the Computer Software Copyright Act. This law ended a debate by judges and government officials that raged for more than a decade about whether software should be protected under intellectual property laws. What followed in the 1980s was the PC revolution.
Computer software has revolutionized the world. It is in everything, not just our laptops and smart phones. This is not hyperbole. It runs mundane consumer products like coffee machines, refrigerators, and cars. It runs commercial and industrial processes, such as cash registers, elevators, and oil drilling platforms. There is no more prominent example of innovation today.
But this essential technology in our modern innovation economy is at risk. Today, the high-tech industry is in a quagmire of legal uncertainty. Software innovation had been secured in stable and effective patent rights for several decades. But courts and the U.S. Patent and Trademark Office recently have changed course and are now invalidating patents on software innovation willy-nilly, with little to no analysis, and at astronomical rates. This uncertainty is a death knell for investment and commercial development in the high-tech sector.
History should be our guide here. Economic historians have repeatedly identified intellectual property rights as serving a key role in promoting new technological innovation. This leads to a growing innovation economy, increased jobs, and higher standards of living. For economists, this is unsurprising. This is exactly what stable and effective property rights achieve for everyone—economic prosperity and a flourishing society.
For software, the protection of intellectual property laws was essential to the growth of the high-tech industry. Although this is long forgotten, there was once a raging legal debate in the 1960s and 1970s about whether software code should be copyrighted. In 1980, Congress saved software from this early crisis of legal uncertainty by enacting the Computer Software Copyright Act. This law expressly confirmed that software is protected by copyright, and it is little surprise that the PC Revolution occurred in the following decade.
Today, Congress should save software again by expressly confirming that it is a patentable technological invention. With changes in technology after the PC Revolution, courts rightly recognized in the 1990s that the functional value in software should be secured in the patent system. Software is the equivalent of a “digital machine,” as a federal court stated in 1994. If a typewriter is a patentable invention that improves on a pen, then a word processor is a patentable invention that improves on a typewriter. This is innovation par excellence—exactly what the patent system should be securing to inventors.
In recent years, though, the Supreme Court has announced that some software inventions are merely an “abstract idea.” The exclusion of abstract ideas from the patent system has a long history; patents protect only real-world technological inventions, not ideas like E=MC^2. This rule is rooted in the first laws enacted in the Founding Era and in early court decisions.
Unfortunately, the Supreme Court has not defined an “abstract idea” and has provided no guidance to the courts or the Patent Office as to how to make this determination. The result has been as disheartening as it has been unsurprising: the Patent Office is now rejecting vast numbers of patent applications and courts are invalidating vast swaths of issued patents. It is often done with an entirely unreasoned and unsupported I-know-it-when-I-see-it assertion that the invention is “abstract.” One study by the American Bar Association found that almost two-thirds of court decisions invalidating a patent as an “abstract idea” did so without reference to any evidence. Even when reasons are provided by some judges, their opinions are often contradicted by prior decisions or follow-on decisions.
This is not the rule of law—legal rules applied equally to all citizens and consistently in all similar situations. This is chaos. Worse yet, this chaos has spawned uncertainty, which is undercutting the foundations of the American innovation economy.
Just as in 1980, the solution is clear: Congress must step in and end this legal chaos and uncertainty imperiling software innovation. This is exactly how the checks and balances work in our constitutional system. Congress must bring the contradictory court decisions to an end by expressly confirming that software innovation should be protected by the patent system. Nothing less is at stake than the innovation economy itself.
Adam Mossoff is Professor of Law at Antonin Scalia Law School at George Mason University. Charles Sauer is President of the Market Institute.
