Anuwave’s Suit Against Coinbase Demonstrates a Longstanding Flaw in the Patent System

This month’s Stupid Patent of the Month deals with SMS (short messaging service), a technology that goes back to the mid-1980s. Modern-day SMS messages, typically bundled with mobile phone services, have been around since 1992, but one company believes that you should have to pay a licensing fee simply to incorporate them into your app or service.

That company is Anuwave, which recently sued cryptocurrency exchange Coinbase (PDF) for infringement of US Patent 8,295,862. That’s only the most recent suit: Anuwave has sued dozens of companies since 2015 for alleged infringement of the patent—Symantec, Avast, and Bitdefender, just to name a few that have faced lawsuits.

Anuwave’s patent is on a software application using SMS to check for information—for example, for use on a device that can send and receive SMS messages, but doesn’t have an Internet connection. Anuwave alleges that Coinbase infringed the patent by letting users perform tasks like checking their balance via SMS.

Illustration from US Patent 8,295,862

Here’s the first claim of the patent:

A method of enabling communication through SMS communication channel, comprising:

  • listing all services at a terminal station that are available with an SMS gateway according to meta information available at the terminal station;
  • upon selecting a service, a network aware application displaying associated parameters that a user needs to select or enter;
  • upon user selection, submitting a request to the SMS gateway; and
  • the SMS gateway responding back with a response,
  • wherein the associated parameters include the parameters listed at the terminal station and the parameters desired by the user and not listed at the terminal station.

Coinbase is not the first company to use SMS messages to perform basic software commands. Unified Patents filed a complaint in 2017 with the Patent Trial and Appeal Board to invalidate Anuwave’s patent (PDF), and Unified’s complaint identifies three different provisional patent applications as prior art. (Unfortunately, the PTAB never made a decision: Unified reached a settlement with Anuwave and dropped the complaint.)

In the world of software, combining existing technologies or processes happens every day as a matter of course.

According to the law, a person isn’t entitled to a patent if the claimed invention already existed when the application was filed or would have been obvious to someone skilled in the relevant technology area. The Supreme Court has held that a combination of existing inventions can be ruled obvious even if that particular combination didn’t previously exist before the patent was issued.

In the world of software, combining existing technologies or processes happens every day as a matter of course. As patent expert Charles Duan wrote, “Non-proprietary software developers and other innovation communities value interoperability and combinability of software. Thus, the legal assumption that new combinations are uncommon and often worthy of patents conflicts with the experiences of those software developers, for whom new combinations are routine and expected.”

But let’s put aside the question of whether combining SMS with other services would have been obvious before Anuwave’s patent was granted. It really shouldn’t have been issued for a much more basic reason: it’s not an invention.

The landmark Supreme Court opinion Alice v. CLS Bank says that an abstract idea does not become a patentable invention simply by being implemented on a computer. At its core, Anuwave’s patent is on the idea of using SMS messages to provide information to a device. It’s clearly vulnerable to a challenge under Alice.

Anuwave v. Coinbase is one of the first patent lawsuits ever in the blockchain world, so we expect that the cryptocurrency community will be watching it closely. But it tells an all-too-common story about how low-quality software patents all too often undermine innovation: a company that does not produce anything wields an overly broad software patent against an entire field of actual, practicing companies. This is only the most recent example.

Today, some members of Congress are bent on undermining the Alice decision, destroying the most valuable tool that innovators can use against these stupid software patents. Please take a moment to write your members of Congress and urge them to reject the Tillis-Coons proposal.

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