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As I reported yesterday, the Supreme Court has issued its ruling in the Bilski v. Kappos patent law case. While both sides in the case made their arguments before the Court back in November 2009, my posts on the Bilski case have provoked arguments a little closer to home. A friend, and former boss, of mine (let’s call him Jack) has taken me to task on the role of patents, patent attorneys, the Bilski decision and how, as he puts it, ”the effect on small companies will be devastating.” The exchange has gone something (the posts have been slightly edited to protect the innocent!) like this:

Jack

Nice article. I guess the reason I’d like to see patents for “business processes” is that the next time some Wall Street douchebag figures out another derivative scheme that wrecks the economy, we could sue him on the grounds that it was his idiotic idea.

Seriously though, can you imagine the can of worms in the Patent Office as they try to sort through that mess?

Rob Thanks, Jack. My point in the article is just that I don’t want to see the Federal Circuit narrow the threshold of patentable subject matter. Let the other patentability criteria separate the wheat from the chaff.

Jack So you don’t like my idea of suing the b@$T@RD$ with stupid financial ideas? And I thought you gave a very objective analysis there. As a guy that develops products for a living, I like a definitive test of patentability. No offense to you but I’m not sure I trust the average examiner to make these kinds of analyses and decisions. I think this would be a HUGE boon to lawyers and would be very damaging to business. IMHO

Rob The issue at stake here is not whether Bilski’s claims are patentable… I think they are not. The issue is “where do they fail”. If SCOTUS narrows the threshold to patentability, then I believe that THAT would be far more damaging to business and innovation. As I mentioned in the article, the patenting process needs to be viewed like a funnel…but let’s make sure that the entry of the funnel is very wide… and the exit is very narrow. That is how you protect innovation and give businesses patent protections that actually are worth the paper they are printed on.

Jack Fundamentally I agree but I think that means EVERY patent goes through the courts. That will encourage trade secrets and discourage patents. (I look at it from a management perspective.)

Rob then again, the Supremes could just botch the whole thing and go the other direction entirely! Maybe we’ll find out tomorrow…. maybe!

Jack I’d settle for them doing a rendition of “Midnight Train to Georgia”

Jack Good for lawyers but IP just got way more expensive for businesses. Now the USPTO will be flooded with crap patent applications and the courts will be full of challenges. I agree the old test was too restrictive but I think the ruling was a bad thing. I’m sure our glorious Congress will fix it…

Rob The Court noted that business methods cannot be categorically eliminated from the scope of patentable subject matter, as 35 U. S. C. §273(b)(1) specifically contemplates their existence.

But notice that the Supreme Court also noted that failure to set a high enough threshold for the patentability of business methods would create a flood of patent claims on the United States Patent and Trademark Office, “that would put a chill on creative endeavor and dynamic change.” This is what I think your argument is. Just because a particular business method constitutes a “process” under 35 U. S. C. §101, does not mean that a patent claim on the method should be granted. The business method must still meet the requirements of 35 U. S. C. §102 (novelty), 35 U. S. C. §103 (nonobviousness) and 35 U. S. C. §112 (full and particular description).

Jack Exactly. If IP is essentially processed in the courts then we’ll have nothing but problems. The effect on small companies will be devastating. [...]it’s become impossible to budget for IP Legal expenses. Every single application goes through at least three cycles at the PTO because the Examiner has no clue what you’re talking about and then you fight the challenges after the bloody things issue. When I was at [large tech company] 12 years ago the average patent cost us $50K. The last one I was involved with was granted after 5 years of work and the company has spent over $300K enforcing, defending, etc. It’s hard to sit in a management meeting and suggest pursuing more IP!

Rob If the “examiner has no clue” about what you’re talking about and you issued claims are constantly challenged, then it sounds like you need a better patent attorney. Seriously, if you are spending 5 yrs and $300K putting together a legal document that doesn’t hold water… I would be looking at the drafter, not blaming the system. (but that’s not to say that the examiner corps don’t need a lot of hand holding. they do! but that’s where a good patent attorney vs a not-so-good one makes a difference.)

Jack All excellent points. Trouble is, once you hitch up the horse and get down the trail, it can sometimes be difficult to go get yourself another horse or another trail.

Well, that’s all she wrote, folks! This morning the Supreme Court issued its decision in Bilski v. Kappos.  Bilski is the patent law case that asked whether business methods should be considered patentable subject matter. (You can get a quick background on the case here or learn more about business methods and patentable subject matter here.)

You can read the opinion here (pdf) ==> Bilski_v_Kappos_08-964

I’ll be reading the opinion carefully and dissecting what it means for inventors and attorneys alike, but in a nutshell:

• the Court was unanimous in finding that the claims in the Bilski patent application were unpatentable because “they are attempts to patent abstract ideas.”
• the Machine or Transformation test is not the sole test for patentability.
• business methods are patentable processes: “The Court, therefore, need not define further what constitutes a patentable “process,” beyond pointing to the definition of that term provided in §100(b) and looking to the guideposts in Benson, Flook, and Diehr.”
• no additional test was given: “In disapproving an exclusive machine-or-transformation test, we by no means foreclose the Federal Circuit’s development of other limiting criteria that further the purposes of the Patent Act and are not inconsistent with its text.”

The patent world waits for the Supreme Court’s decision in Bilski v. Kappos with bated breath, while the rest of the world wonders, “What’s a Bilski, anyway?” If you need a primer on the Bilski case, and a little background on why it is so important to the patent world, click on over to IP Watchdog. IP Watchdog, one of the most respected law blogs in the area of intellectual property has published an excerpt from my article, “Business Methods and Patent-Eligible Subject Matter in Light of Bilski v. Kappos“.  I’m very excited that IP Watchdog published my article and I look forward to guest-blogging more there in the future.

Like the rest of us patent wonks, I’ll be keeping an eye out for the SCOTUS decision and I will be writing up an analysis as soon as the opinion is published.