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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.

The USPTO issued the following statement in reaction to today’s Supreme Court ruling in Bilski v. Kappos:

“The Supreme Court today affirmed the USPTO’s decision that Mr. Bilski’s invention was not patentable subject matter as his claims were drawn to an abstract idea.  Significantly, the Court ruled that the “machine or transformation” test is not the sole determinant of patent eligible subject matter for process claims, but is nevertheless an important “investigative tool” for evaluating their patent eligibility.  The Court also indicated that a business method is, at least in some circumstances, eligible for patenting under Section 101.”

“The USPTO will be issuing guidance further interpreting the decision as soon as possible.  The USPTO is distributing interim guidance for the examining corps today.”

The opinion can be found on the Supreme Court Web site at: http://www.supremecourt.gov/opinions/09pdf/08-964.pdf.

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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 Supreme Court just wrapped up another session of releasing opinions (you can get caught up over on SCOTUSblog) and still no decision on Bilski v. Kappos.  Of the four decisions remaining, Chief Justice Roberts noted that they will all be released on Monday. Patent Attorneys will release a collective sigh of relief immediately thereafter.

Here are some bits from SCOTUSblog’s live coverage this morning:

“The Court has voted unanimously to drive patent lawyers crazy.”

“The Court actually took a break for coffee to make patent lawyers wait and hope longer for Bilski. (kidding)”

“Bilski is not a record for the longest pending case, but it is among the most amusing.”

“Monday will be guns and Bilski.”

“JPS almost certainly has Bilski, which suggests a narrow approach to permitting business method patents but probably not a extremely detailed test.”

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.

As you consider the value of patenting your invention, take a look at some of these patent related blogs, they’re great resources:

• Patently-O
• IP Watchdog
• Patent Baristas
• Peter Zura’s 271 Patent Blog

As in all areas of Law, Patent Law evolves over time and is molded by cases decided in the Supreme Court and the Federal Circuit Courts.  According to “Patent Law and Practice, Sixth Edition” by Herbert F. Schwartz and Robert J. Goldman, here are the major cases currently impacting patent law:

• In re Bilski (2008, Fed. Cir. en banc), in which the Federal Circuit established a new standard for the patentability of business method processes and algorithms.
• eBay, Inc. v. MercExchange, LLC (2006,S.Ct.), in which the Supreme Court overturned the test applied by the Federal Circuit relating to the availability of permanent injunctions in patent litigation
• MedImmune, Inc. v. Genentech, Inc. (2007, S.Ct), in which the Supreme Court expanded the availability of declaratory judgment jurisdiction for companies seeking to challenge the patent of another
• KSR Int’l v. Teleflex, Inc., (2007, S.Ct), in which the Supreme Court revisited the law of invalidity for obviousness for the first time in a generation, revising the standard applied by the Federal Circuit since the 1980s
• In re Seagate Tech., LLC (2007, Fed. Cir. en banc), in which the Federal Circuit reversed 24 years of decisions and established a new standard for assessing willful infringement, a precursor to an award of increased damages and attorneys’ fees Critical new issues addressed.

Officially known as the Examination for Registration to Practice in Patent Cases Before the United States Patent and Trademark Office,  the Patent Bar Exam is a 100 question, six-hour long behemoth with a 50% pass rate.  Having passed it, I am now “pending registration” by the USPTO.  Basically, there is an oath and some money that I own them, but in approximately 7 weeks I should receive my registration number, then I can officially represent clients before the USPTO in patent cases.  Since I have not passed a state bar exam yet (pending graduating with my JD around 2011), I will be classified as a Patent Agent.

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Take a look at your employment agreements, covenants not to compete, or non-disclosure agreements. Especially if you work in the tech sector, you can be sure that one, if not all, of these documents (which are typically signed as a condition of employment) include some sort of assignment of ownership of the invention. These assignments are usually of the form that say that anything and everything that the employee invents while employed at the company belongs to the company. Pretty straight forward, right? Maybe…

What do you do when you invent something and your employer thinks it’s theirs? What do you do when your employee invents something and they think it’s theirs?

Let’s say that the employee comes up with an invention during work hours, using company resources, in a field that the company does business in? I think that few would argue that the company has some rights to the invention.

Well, what about something that the employee invents at home on his personal time? What if it is related to the company’s business? What if it is not? Now, the topic gets a little murky. (This is where I’d say, “Please consult an attorney.” – but let’s discuss anyway!)

There is a case that was just decided this past February in the U. S. Court of Appeals for the Federal Circuit. From the opinion:

The ultimate question here is whether the interest of Dr. David Barstow (“Barstow”) in these patents was previously assigned to his former employer, Schlumberger Technology Corporation (“Schlumberger”). Barstow, a computer scientist, worked for Schlumberger from 1980 until 1994. At the start of his employment, Barstow entered into an employment agreement[...]

The bottom line of the ruling was that the CAFC didn’t actually decide who owns the patent… but it didn’t just let the company walk away with it either. Instead they remanded the case back down to the distric court for further discovery.

Because we hold that further jurisdictional discovery was warranted, we do not reach the issue of whether the district court correctly held on the previous record that the patents in suit fell within the scope of Barstow’s employment agreement with Schlumberger.

Whichever way this turns out, one thing is certain: No matter what side you are on… cover your assets!

The combination of familiar elements according to known methods is likely to be obvious when it does no more than yield predictable results.

Arguably, the most recent path of “innovation” has been to take available technologies, combine them in a novel way, and produce something new and useful. Remember the commercial from the 1970’s? Chocolate? Peanut Butter? Chocolate + Peanut Butter! Many patent applications rely on the combination of two or more different subject matter to create something new as the basis for their claims. Times may be changing, however, with a recent opinion from the Supreme Court. “The combination of familiar elements according to known methods is likely to be obvious when it does no more than yield predictable results.” KSR v. Teleflex, 127 S. Ct. 1727, 1739 (2007). This narrowing of the definition of obviousness will certainly lead to a lot more PTO rejections and will probably open up a lot of existing patents to challenges on obviousness. In fact, the Court of Appeals for the Federal Circuit (CAFC) has just appled the obviousness definition from KSR to overturn a patent that, upon de novo review, the court found to be an obvious combination of two familiar elements. Agrizap v. Woodstream Corp (Fed. Cir. 2008). Agrizap lost the obviousness claim because it combined one of its own commercial products with a switch commonly found in the cattle prod industry. The CAFC held that this was akin to 1+1=2 and, therefore, obvious.

What, then, is an inventor/company to do? How will the KSR decision affect future patent applications? I think that we’ll have to keep a watchful eye on this one.