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Supreme Court Bilski Ruling Keeps Patent Law Vague

• By Natasha Watkins
• 06/30/2010

The Supreme Court this week issued its Bilski v. Kappos decision but chose not to weigh in on much debated issues that affect software patents.

In its decision, the Supreme Court maintained the status quo and affirmed the possibility of business-method patents. However, it rejected the two inventors' requests to patent a computerized business process for hedging energy trades.

The case has long been viewed as one of the main legal vehicles to thwart the proliferation of software patents. Organizations such as the Free Software Foundation and its legal arm, the Software Freedom Law Center, expressed disappointment in the court's decision.

"The Court's rejection of Bilski's patent application got rid of a symptom of the disease, but failed to treat the real cause by reconfirming that thought and thought processes are not patentable," said Daniel B. Ravicher, the SFLC's legal director, in a prepared statement.

The dispute involved Bernard Bilski and Rand Warsaw, founders of a Pittsburgh company that sells customized consumer energy products. Their patent request was rejected throughout the legal process, starting with the patent examiner. There seemed little doubt that it also would be rejected by the Supreme Court.

The issue, the petitioners were told repeatedly, was that their patent application covered an abstract idea, which was not eligible for patent protection, under §101 of the Patent Act.

The high court indicated that it was not necessary to make broad sweeping decisions about patents to dispose of the case.

"The patent application here can be rejected under our precedents on the unpatentability of abstract ideas," Justice Anthony Kennedy wrote for the Court (PDF). "The court, therefore, need not define further what constitutes a patentable process."

The decision was unanimous, although the justices divided 5-4 in their reasoning. The view of the majority was that there needed to be a flexible test for emerging technologies.

In previous cases, the Supreme Court has said that abstract ideas, natural phenomena and laws of nature cannot be patented. In this case, the U.S. Court of Appeals for the Federal Circuit added that a process cannot be patented unless it is "tied to a particular machine or apparatus" or if it "transforms a particular article into a different state or thing."

Kennedy wrote that the Court was not endorsing that idea.

"There are reasons to doubt whether the test should be the sole criterion for determining the patentability of inventions in the Information Age," he wrote. "In the course of applying the machine-or-transformation test to emerging technologies, courts may pose questions of such intricacy and refinement that they risk obscuring the larger object of securing patents for valuable inventions without transgressing the public domain."

Justice John Paul Stevens wrote that the Court's approach to "process" in a contemporary meaning was "a deeply flawed approach to a statute that relies on complex terms of art developed against a particular historical background." He added that "a process for training a dog, a series of dance steps, a method of shooting a basketball, maybe even words, stories, or songs if framed as the steps of typing letters or uttering sounds -- all would be patent eligible," Stevens wrote. "I am confident that the term 'process' in §101 is not nearly so capacious."

Dozens of companies filed briefs in the case, including Microsoft and Google, which appealed for court-defined clarity on what is, and what is not, a patentable idea.

The Computer & Communications Industry Association, a trade group that represents both Microsoft and Google, issued a statement critical of the ruling. "Ultimately, today's decision benefits few except patent lawyers," said Edward Black, president of the CCIA, in a statement. "Absent action by Congress, the patent lottery will inhibit business and create no jobs -- except for within the patent bar."

Black noted that the decision would worsen the uncertainty of companies that are targets of patent lawsuits.

Brian Kahin, CCIA senior fellow and a principal author of CCIA's amicus brief, said in the statement that by not giving fixed meaning to terms like 'process' and 'business method,' the Court has recreated at a systemic level the problem of uncertain boundaries for patents in abstract areas.

"By concluding that the hedging technique was no more than an abstract idea, the Court breathes new life into the abstract idea exclusion, but does not offer new guidance on just what that is," Kahin said.

The Electronic Frontier Foundation, which also joined an amicus brief (PDF), argued that patents should only be granted for technological processes. In a statement issued this week, the EFF wrote that it was regrettable that the Supreme Court failed to provide guidance about business method patents.

"Suppose a patent claim is not clearly unpatentable as just an abstract idea, but it does fail the now-optional 'machine-or-transformation' test. When will such a claim be patentable?" the EFF asked in the statement. "The Court did not answer that question, or provide details about how to apply its 'abstract idea' test."

Craig Hemenway, a partner at Dorsey & Whitney in Denver, suggested in a phone interview that the Supreme Court's ambiguity was appropriate.

"When you read the opinion, there is some recognition and acknowledgment that software should be patented," Hemenway said. "They were split, and rather than articulate a poor test, they decided to put it off…. They are trying to leave this up to the federal circuit and patent office."

Hemenway, who has represented Apple and EchoStar in patent litigation, noted that Microsoft is a prime example of a company that is on both sides of the issue -- with a patent portfolio of its own, but also facing lawsuits for patent infringement.

"If those software type [patent] suits went away, they wouldn't have that liability," Hemenway said. Still, he added, Microsoft should be arguing for software patents, rather than against them. "In the long term, the value of a good software patent has to be greater than the damages they pay," he said.