Courts - Supreme Court U.S. high court to rule on patent eligibility Decision on 'business method' patents could have wide implications

By Christina Pazzanese

The Daily Record Newswire

A forthcoming decision by the U.S. Supreme Court on the eligibility of so-called "business method" patents threatens to shut the door on a widespread practice used by companies to protect proprietary business processes, say attorneys who have been following the case.

The court, which heard oral arguments in Bilski v. Kappos last November, is expected to rule soon on the issue of whether such processes like the commodities trading method employed by inventor Bernard L. Bilski and his colleague, Rand A. Warshaw, to predict fluctuations in energy prices based on weather episodes rightly warrant the protection of a patent.

Intellectual property attorneys say the case could very well be game-changing in the field of patent law and have devastating effects on many industries, particularly financial services and accounting where business method patents are common.

"This is the most important patent decision handed down by the court in years and for many years to come," said John R. Bauer of Robinson & Cole in Boston. "It will very likely render most business method patents not patentable."

According to John A. Dragseth of Fish & Richardson's Minneapolis office, Bilski could "shut out a whole class of patents and invalidate thousands of patents already out there."

'A very big question'

Bauer said based on tough questioning from the justices during oral arguments, including Ruth Bader Ginsburg, John G. Roberts and Antonin Scalia, consensus among court watchers is that it is likely to uphold the federal court's ruling that the specific business method used by Bilski is not patentable.

In recent years, more companies have sought to take an aggressive and lucrative approach to protecting proprietary ideas by seeking and receiving patents. Unlike a trade secret, which can be leaked or stumbled upon by a competitor and then used without penalty, patents allow the holder to create a monopoly by preventing its use by copycats in perpetuity.

"The risk of business method patents is there's no innovation. They're not creating anything; it's really ideas," Bauer said. "And historically, we don't patent ideas."

Attorneys say the manner in which the court views Bilski in a broader context will have significant ramifications.

"The biggest question is ... if the court takes this as an opportunity to directly address the question of patent eligibility subject matter," Bauer said. "That's a very big question."

Bauer said it is likely the court will try to draw some line, recognizing it could be increasingly difficult over time to distinguish between inventions and ideas. "It's just how broad they're going to go to get the principles that govern patentability."

Victor H. Polk, an IP litigator at Greenberg Traurig in Boston, said he expects "a broad opinion."

"The court has shown a huge skepticism toward business method patents" in prior opinions, including Lab Corp v. Metabolite, Polk said. "The court has been of the mindset that the patent system has been anti-innovative rather than what it's meant to do, which is spur innovation."

Polk speculated that the Supreme Court will try to cut off patents in those areas, "but people in the financial services area will see that as a good thing. Most people don't rely on [patents] for the things they do."

Dragseth said he expects the court will issue multiple opinions around the "battle issue" of whether something is a legitimate piece of technology or simply "paper pushing."

"Some of it's the sense that you don't get patents on stuff like this," said Dragseth, characterizing what he sees as the court's general attitude toward business method patents as a whole. "It's just not technology. Certain things are meant to be part of business competition," he said.

'A dangerous area'

Of critical importance, attorneys say, is how the court chooses to identify a benchmark for determining future patent eligibility.

"It's really a question of whether the court is going to endorse the test by the federal court or do something different," Bauer said.

Polk said he believes the Supreme Court will veer away from the federal court's notion that a machine or transformative test is best used to determine what is patent eligible and to conclude that a subject matter test is the most appropriate measure.

But a subject matter test -- rather than a novelty test -- is almost certain to cloud the landscape over what is patentable and will "absolutely" lead to more legal challenges in the future because of how difficult it will be to craft an unambiguous test, said Polk.

"Everyone's grappling with where you draw that line," he said.

Lawyers say while the court appears reticent to weigh in on whether software or products in other fields such as biotechnology and medicine should be patentable, it will be difficult to avoid the subject entirely given the prevalence of such patents and their apparent conflict with the federal court's "machine test" standard.

"Clearly, software patents don't appear to satisfy that test," Bauer said.

Given the complexity and the potential for damage to the economy, Dragseth said he believes the court is unlikely to use Bilski to try and make a sweeping statement on that thorny aspect of patent eligibility.

"They know they're in a dangerous area here," he said. "I don't think they're going to take it on right now."

Instead, Dragseth believes the court will opt to rule in a series of two or three cases that, when taken as a whole, will fully address patentability in all these areas.

"Together, it will be major," he said.

Published: Fri, Jun 25, 2010

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