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November 9, 2009 7:34 PM

Supreme Skepticism Over Bilski Claims Puts Method Patents on Shaky Ground

Posted by Andrew Goldberg

From IP Law & Business

For the first time in almost 30 years, the U.S. Supreme Court on Monday considered the issue of what types of technology should be eligible for patent protection when it heard oral arguments in Bilski v. Kappos.

Across the board, the justices indicated a deep skepticism toward the invention described in the patent application at issue, which was rejected by the U.S. Patent and Trademark Office and describes a method for trading commodities. Some of the justices went even further--expressing both a fair amount of disdain for the idea of granting broad "method" patents and a concern that ruling in favor of the petitioners would lead to patent grants on fundamental ways of conducting business or organizing human behavior.  (Click here for a related story by the National Law Journal's Supreme Court correspondent, Tony Mauro.)

>Based on the justices' attitude during the arguments, it not only seems extremely unlikely that Bernard Bilski will ever get the patent at issue, it also seems clear that the court is poised to establish a new, and most likely stricter, test of what is patent eligible.

One after another, the justices prodded Bilski's lawyer, Michael Jakes of Finnegan, Henderson, Farabow, Garrett & Dunner, in search of some idea about where to draw the line. The thrust of the questions: Does absolutely everything fall within the domain of the U.S. patent system?

"So, an estate plan?" asked Justice Ruth Bader Ginsburg. "A tax avoidance method? How to resist a corporate takeover? All of these are patentable?"

"They are eligible for patenting under section 101," replied Jakes, referring to the section of the 1952 patent statute that governs what is patent-eligible subject matter.

Justice Stephen Breyer was among the most vocal justices during the argument--and perhaps the most skeptical of Jakes's wide-ranging claims.

"Your argument is that anything that helps business succeed is patentable," Breyer said. Would the framers of the Constitution, he asked, really have wanted everyone with a new idea to run to Washington to get a patent, in the process enabling them to "stop the wheels of progress" unless competitors got permission?

"Why not patent a method of speed dating?" Justice Sonia Sotomayor asked.

There are a few, limited areas, Jakes said, where patent protection isn't available; he pointed to the fine arts as one example. Otherwise, he argued, patents encourage people to innovate, and it is via the patent system that they disclose their new creations to the public.

Chief Justice John Roberts directly attacked the Bilski patent, reading part of claim one aloud and asking: "How is that not an abstract idea? It's a series of transactions." The chief justice then posited his own idea for a business-method patent: "I buy low and sell high--that's my patent for maximizing wealth," said Roberts. "I don't see how that's different from your claim number one," he added, referring to the central claim in the Bilski patent, which supposedly covers a method for trading energy that hedges weather-related risk.

Justice Sotomayor took issue with Jakes's suggestion that patents are always a manifestation of innovation.

"A patent limits the free flow of information," she said. "It requires licensing. You can't argue your position is enhancing the free flow of information."

Jakes replied: "It does, because of the disclosure requirement."

"Even though the public can't use [the patented invention]," noted Scalia.

"That's our system," said Jakes. "We do grant exclusive rights in exchange for disclosure."

Time and again, Jakes refused to draw a line that ruled anything off-limits to the patent regime. His position left the justices questioning whether he was advocating the "ownership" of basic human activities.

"Let's take training horses," said Justice Antonin Scalia. "Don't you think that some people, horse whisperers or others, had some ... insights into the best way to train horses? Why didn't anybody patent those things?"

"I think our economy was based on industrial processes," responded Jakes.

"It was based on horses, for Pete's sake!" said Scalia.  "I would really have thought somebody would have patented that."

Jakes argued that the the "machine-or-transformation" test adopted by the Court of Appeals for the Federal Circuit in its Bilski decision, which requires that a process patent must either be tied to a particular machine or must transform something into another state in order to be patent-eligible, was a rigid, narrow test that would preclude a wide range of new technologies from enjoying patent protection.

The machine-or-transformation test, Jakes said, "would exclude some valuable inventions that I think everyone would agree are technological under any test, such as data compression, such as FM radio."

Justice Anthony Kennedy and Chief Justice Roberts then asked about what part of the Morse code--arguably an alphabet transformed into electric signals--would be patentable under this test.

"You think you can patent an alphabet because it is a process of forming words," said Chief Justice Roberts.

"It could be, yes," Jakes answered. But, he added, applicants for such a patent would have to prove their tests were, among other things,  novel and non-obvious.

Deputy Solicitor General Malcolm Stewart, meanwhile, argued in defense of the "machine-or-transformation" test. The justices pressed him for some idea about what kind of test might be more useful.

Stewart made clear the government was looking for a way to kick out "pure" business method patents such as the Bilski claims. "Innovations as to new techniques of public speaking, new techniques of negotiation... they may be valuable. They may be innovative. They are not patent eligible because they don't deal in the realm of the physical."

At the same time, Stewart didn't express support for rolling back patentability in a way that would threaten software patents or coming out in favor of a blanket ban on "business-method" patents. Such a ban could be seen as eliminating certain types of patents tied to machines, he said. And Stewart said the Federal Circuit's test wasn't "rigid or inflexible," as his opponent had argued.

Chief Justice Roberts pushed back on an inconsistency in Stewart's briefing of the case. On the one hand, he said, the government claims Bilski's method just describes a way of doing business, and therefore isn't patentable—but then posits that a computer with an "interactive website" doing the same thing might be. "That's like saying if you use a typewriter to type out the process, then it's patentable," said Roberts.

If the website scheme was part of a computer program, Stewart said, "the computer would be at the heart of the innovation."

"No, no," said Roberts. "That's just saying instead of looking in the Yellow Pages, you look on a computer."

Stewart urged the court not to use the Bilski case as a vehicle for determining what kind of patents are allowed in important technology sectors like software and medical-diagnostic technology. He also made clear that the government isn't seeking a reversal of the State Street Bank and Trust, which is generally seen as the Federal Circuit case that opened the door to the widespread patenting of software. (Several of the more than 70 amicus briefs filed in the Bilski case asked the court to take a clear position on software patents--some in favor, others against.)

Stewart acknowledged that the Federal Circuit's Bilski opinion "didn't answer all of the hard questions," such as the precise level of machine involvement needed to pass the test.

Justice Breyer agreed, saying the Federal Circuit had left "much unresolved."

After the arguments concluded, Michael Jakes answered a barrage of reporters' questions about the court's apparently hostile attitude towards the Bilski patent application specifically and business method patents generally.

Standing on the plaza outside the court, Jakes put on a confident face, noting that the Supreme Court "has said rigid and inflexible tests are not the way to go. We want the patent system to be open to all methods."

Then reporters were also treated to an appearance by inventor Rand Warsaw, who described the fixed-billing method offered by his company, WeatherWise. Warsaw was followed by an appearance by the elusive Bilski himself, who hasn't spoken publicly about his high-profile case before.

"I was completely awed and impressed by the whole process," Bilski said. "I couldn't tell you what the outcome will be. But not getting this patent made it very difficult to get this service out to many customers."

When reporters asked Bilski, who departed from WeatherWise in 2003, what his occupation is today, he responded, "At present I'm an employee of the federal government." In what capacity? "Not in the patent office," he said with a smile. And with that, he walked away.

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