In the mid-1990s, one court ruled that anything may be patented so long as it has a technically physical aspect—-simply recording a number on a piece of paper is sufficient to make a mental or theoretical process a physical object under current patent law. This has led to patents on software, business methods, and tax loopholes. Because pencils and computers are everywhere, almost everyone now runs risk of prosecution for patent infringement. Since this expansion of what is patentable, problems with frivolous and malicious patent suits have grown to the point that they stifle the freedom to invent. Therefore, we intend to return the scope of what is patentable to include only bona fide physical devices such as machinery and chemicals.
For the economists:
Patents are not simply a right handed to somebody who has exerted effort—-otherwise authors and musicians could patent their papers and recordings. Patents must balance the deadweight loss associated with any monopoly with the benefits of public dissemination of an innovative work. But the deadweight loss due to patents with no physically innovative step is exponentially greater than the deadweight loss due to traditional mechanical, chemical, and process patents. Anyone with a computer or a business could infringe a patent on software or a business method, so lawsuits over independent invention of a patented work are almost guaranteed. This is not merely theoretical: software authors see new lawsuits over independent invention of patented designs every day, and are increasingly stifled in their own work as a result. Empirically, several analysts have tried to find any benefit to offset the deadweight loss of software patents, and have found no statistically significant benefit.
For the lawyers:
Case law from 1776 - 1994 specified a number of exemptions from patent law, including laws of nature and mathematics. There was also a clear understanding that a trivial physical step does not make something a patentable device - for example, the printed matter doctrine states that writing a novel formula on a piece of paper does not make the paper patentable. Simply put, that's what copyright is for. In the mid-1990s, the CAFC struck from the law all existing restrictions on patentable subject matter, meaning that patents for mathematical equations and formulas written to a hard drive exist on the books today. The history of patent law, from the writings of the founding fathers to several Supreme Court rulings about patentable subject matter, indicate that these exceptions to patent law are recognized and well-reasoned, and the CAFC erred in eliminating them.