On Monday, June 1, the U.S. Supreme Court granted review in Bilski v. Doll, setting the stage for a landmark showdown over whether so-called “business methods” — processes and procedures, not widgets or machines — are patentable. The case is a challenge to a ruling last October by the U.S. Court of Appeals for the Federal Circuit in Washington, which held that a process for predicting and hedging risk in commodities markets did not deserve a patent because it was not tied to a machine and did not result in a physical transformation. The federal circuit’s decision significantly narrowed the processes eligible for patent protection, limiting eligible innovations to those “tied to a particular machine or apparatus” or transforming “a particular article into a different state or thing.” That ruling sent ripples through the IP and tech transfer community, with critics asserting that the decision would slow innovation in the areas of information technology and financial services, where patents are sought, and had been granted, for new processes that are less tangible than a physical invention.

J. Michael Jakes, partner at Finnegan, Henderson, Farabow, Garrett & Dunner, is representing Pittsburgh inventors Bernard L. Bilski and Rand A. Warsaw, who sought the high court’s review after being denied a patent on their computerized method for using weather data to predict commodities prices and energy costs. In its ruling, the appeals court reversed course on earlier cases suggesting that business processes could be patented so long as they yielded useful, concrete, and tangible results. In urging the Supreme Court to hear the case, the petitioners said the appeals court’s decision put tens of thousands of patents at risk in a decision that “threatens to stifle innovation in emerging technologies that drive today’s information-based economy.”

“This is the most important patent case in 50 years, in particular because there is so much damage and so much good the Court could do,” said John F. Duffy, a law professor at George Washington University. “The newest areas of technology are most threatened by the issues at stake here. The Court taking this is likely to make a lot of people nervous, including software manufacturers and biotechnology companies.” In fact, there was some doubt the Court would hear the case — its first review in 28 years of business method patent issues — because other issues, such as obviousness, were also involved. In addition, the federal circuit’s decision brought it more in line with current Supreme Court sentiment against broad interpretation of patent law. “By accepting the case, we hope the court is signaling its desire to reaffirm that patent protection is available to a broad range of inventive processes that drive today’s information economy,” Jakes said after the Court’s announcement. He acknowledged, however, that the justices could set a more restrictive standard for what is patentable than his clients would like. “You get what you ask for when you ask the Supreme Court to take the case. But I think the fact that the court was willing to step in and take the case is a good sign for us. The government urged them not to, so it shows they’re interested and maybe feel like the federal circuit’s definition isn’t the right one,” Jakes said.

Although some software and business consulting giants backed Bilski’s quest for a broad, inclusive definition of what is patentable, others — including Microsoft and IBM — argued in support of the USPTO’s move to impose a physicality test after years of rather liberal interpretations by patent examiners over what qualified as an invention. Before the federal appeals court’s ruling on Bilski, patent examiners used the test of whether an invention was “new, useful, and not obvious.” Since then, courts have relied on the decision of the appeals court to deny patent protection to methods of marketing software products, detecting fraud in credit card transactions, and creating real estate investment instruments. In March, a federal judge in San Francisco wrote that the appeals court’s decision signaled that “the closing bell may be ringing for business method patents, and their patentees may find they have become bagholders.” The justices are expected to review the case during their next session, which begins in October.

Go to: The BLT, Los Angeles Times, and The New York Times

Posted June 3rd, 2009 under Tech Transfer

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