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Patent value of business methods and software at the SCOTUS

The patentability and, therefore, the value of business methods and software are in the balance as oral arguments in the Bilski v. Kappos case are heard at the Supreme Court.

The future of software and business method patents still hangs in the balance, after oral arguments were heard by a Supreme Court with significant unknown factors as far as Intellectual Property law is concerned.

Few IP cases have had the breadth of potential consequences for industries like finance and software as the Bilski case. The economic value of myriad companies can be significantly affected if the Supreme Court refines the interpretation of what is patentable.

In essence, the Bilski patent claims to cover a method of hedging risks in commodities trading. The PTO’s Board of Patent Appeals (BPAI) found that Bilski’s such claimed “invention” of a business method does not satisfy the patentable subject matter requirements of patent law (35 U.S.C. § 101).

In Re Bilski (Fed. Cir. 2008)(en banc) the Federal Circuit affirmed this coclusion and, in doing so, the nine-member majority opinion spelled out what is known as the “machine-or-transformation” test as the sole test of subject matter eligibility for a claimed process. The “test” at issue here is: “A claimed process is surely patent-eligible under § 101 if: (1) it is tied to a particular machine or apparatus, or (2) it transforms a particular article into a different state or thing.”
Mr. Bilski appealed to the Supreme Court earlier this year, and a total of 68 amicus briefs were filed, a third of them in support of neither party, thus reflecting the importance of the ruling per se, more than the fate of the specific patent.
Positions on the matter are quite definite, for example, The Electronic Frontier Foundation considers business method patents are harmful and asks in its brief that such patents should not be allowed to stand. Rather, to be patentable, an invention must be a technological advance. Justice Sotomayor seemed to express this concern during the hearing when she asked a question regarding the difficulty in where to draw the line if there is no tie to science/technology, remarking that, otherwise, why not patent the method of speed dating?

The Software and Information Industry Association, on the other hand, argues that the patent eligibility of software is well established and should not be disturbed. The consequences for the software industry are clearly dramatic, but it borders on stretching the original concept of the “useful arts,” those activities suitable for patentability, beyond the comfort zone for both Justices Scalia and Ginsburg, for example. The latter, in particular, explicitly asked Mr. Jakes, representing Bilski’s side, why the U.S. should not limit patentability to science and technology, as in Europe.
In a well known position, the American Bar Association’s position is to support the elimination of patents covering tax planning methods in particular, and generally, that Patent law should not interfere with the exercise of human intellect by granting a monopoly on processes in which thinking is central.

Numerous corporations from banking to the internet also seek to have the Supreme Court rule against the patentability of accounting methods, tax mitigation techniques, financial instruments (like Bilski’s), among other methods.

We await with great interest, on behalf of our clients, the Supreme Court’s decision on this important issue.

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