Monday, June 28, 2010

Viva La Business Method Patent (sort of)?

While I know I don't usually write about patent issues, this one is too big to pass up. Today, the United States Supreme Court issued a long awaited patent decision on which the viability of business method patents hung in the balance. While there was technically no dissenting opinion, the decision was far from unanimous. In fact, the only thing that they all agreed on was that Mr. Bilski's invention was not patentable. Bilski v. Kapos, 561 U.S. ____ (2010).

Here are a few key holdings from the "opinion of the court:"

1. The term "process" under the Patent Act may include some methods of doing business.

2. The "machine-or-transformation" test is not the sole test for patentability. In other words, a process is patentable even if it is not tied to a machine and even it if doesn't transform something into something else.

3. Computer programs are not categorically unpatentable.

4. Abstract ideas are not patentable. Certain whole categories or classes of instructions on how to conduct business may be merely abstract ideas and not patentable.

Items 3 and 4 come from a portion of the opinion in which Justice Scalia did not join. So the weight of these portions of the opinion is on much less solid footing.

The absolutely key question raised by the case going forward is; "how do we determine what is an unpatentable abstract idea and what is a patentable process?" I suspect that this is a topic about which myriad scholars and pundits will write volumes for years to come. To some degree, the majority seems to have taken the "we know it when we see it" approach to determining whether the claimed invention in this case was merely an unpatentable abstract idea. In fact, they expressly declined to provide guide lines that would be helpful in distinguishing unpatentable abstract ideas from patentable processes. They simply said that based on three prior cases, the claimed invention looked like an abstract idea to them (apparently each and every member of the court agreed on this point) and so, therefore, it was not patentable. And there you have it.

So ... what we have for guidance are the three prior cases (referred to as Benson, Flook and Diehrand) and now, the Bilski case. According to the majority, then, here is the guidance that the business world has to go on.

Benson - mathematical algorithms are most likely (if not categorically) not patentable.

Flook - a invention which would not be patentable otherwise, is not made patentable merely because the patentability claim is limited to use within a particular technological environment.

Diehr - the application of a law of nature or mathematical formula (or an abstract idea, perhaps?) to a known structure or process may be patentable.

Bilski - mathematical formulas for hedging risk are non-patentable abstract ideas and claims applying them to a particular industry or market do not make them patentable.

Got it? I hope this clears everything up for everybody. :-> (sarcastic smile).

It is interesting (one might even go so far as to say moderately "helpful") that the court seemed to go out of its way to expressly address computer programs (i.e., software). The "opinion of the court" expressly says that computer programs may be patentable processes. Unfortunately, this portion of the majority opinion was not joined in by Justice Scalia and so, may actually represent only a minority view on the issue.

Now here is where it gets dicey. So far, I've been careful to couch what I've said by referring to the "opinion of the court." This is a term of art. While it generally refers to the majority opinion (and thus, the law of the land), in this case it is hard to tell, especially when it comes to the viability of the business method patent. Here is why.

As everyone knows, there are 9 justice on the US Supreme Court. In this case, the "opinion of the court" was joined in by 5 justices (with Justice Scalia declining to join in two key parts). There are also two other "concurring" opinions the first of which is joined by the remaining 4 justices (Breyer wrote an additional concurring opinion although he joined in the first concurring opinion). The main reason why the concurring opinions are "concurring" is because they all agree that Mr. Bilski's invention is not patentable. Where the concurring justices deviate from the majority justices is on the very issue that makes this case so important. Namely, the concurring justices disagree with the majority on the patentability of business methods. In fact, the "concurring" opinion expressly finds that business methods are not patentable. So, here's what we've got.

Roberts, Thomas, Kennedy & Alito (the "opinion of the court") - business methods are not categorically unpatentable and, thus, are potentially patentable.

Stevens, Ginsburg, Breyer & Sotomayor (the "concurring" opinion) - business methods are categorically unpatentable.

Scalia - Agrees generally with the opinion of the court, but declines to join in the portions that contemplate that:

(1) the law on patentability of inventions must evolve with technology;
(2) categorically denying patentability to business methods because they were not historically contemplated by the statute is problematic; and
(3) the unpatentability of abstract ideas is a useful tool in determining patentability.

Essentially, while this is a unanimous decision on the unpatentability of Mr. Bilski's invention, it is, at best, a 5-4 decision on the patentability of business methods. Query whether Justice Scalia could have been (or could be in the future) swayed over to the side of the concurring justices. If so, the decision (and the patent world) could have been completely different.

Now, as the world knows, Justice Stevens has announced that he is retiring. It will be interesting to see if this issue finds its way into the confirmation hearings for Supreme Court nominee, Elena Kagan. If Kagan is confirmed and if she believes that business methods should not be patentable, then it is more likely that another case will be brought on the same issue to see if Justice Scalia can be swayed.

Stay tuned. It ain't over yet.