Litigation

Business method patents redux: The Federal Circuit speaks

By James Stewart

Messers. Bilski and Warsaw and their patent attorneys are scratching their heads now that the Court of Appeals for the Federal Circuit (CAFC) has tossed out their business method patent applications.  Bilski and Warsaw are inventors of a commodities trading risk hedging process requiring three distinct steps including "initiating a series of transactions between said commodity provider and said market participants at a second fixed rate such that said series of market participant transactions balances the risk position of said series of consumer transactions."  Last week the CAFC, sitting en banc, affirmed the decision of the Board of Patent Appeals and Interferences (BPAI) to reject the patent applications as failing to be directed to patent-eligible subject matter under 35 USC 101.  (See our earlier post about case, In re Bilski, here.)

The 12-judge panel was split:  Nine judges affirmed the BPAI decision, two of them filing concurring opinions, and three judges filed strongly-worded dissents.  The end result of the 130-plus page ruling seems to be that business method patents are not per se invalid (although dissenting judge Mayer would so hold), but the majority opinion certainly changes the decisional framework for allowing business method patents - and thus throws into doubt the validity of many existing patents.

The upshot in this blogger's view is that the CAFC judges are trying to find a way to reduce the number, and increase the strength, of patents in this area.  But they are uncertain whether the so-called "problem patents" are better rooted out by ruling certain things unpatentable or by applying the tried-and-tested novelty, non-obviousness, and definiteness rules of 35 USC 102, 103 and 112.

Cautious patent practitioners in this area already have been minimizing their risk by drafting business method and software patents to ensure that the differently articulated tests for patentability most likely will be met.  For now, Bilsky and Warsaw, your claims must first meet the statutory subject matter test by tying a method step to an apparatus or by reciting an article-transformative or -reductive step.  In short, do not define your invention so abstractly.

There is nothing wrong with business method or software patents that, in accordance with statute, fall within the intentionally broad statutory subject matter category and meet other patentability requirements of novelty, non-obviousness, and definiteness.

The U.S. Supreme Court should now weigh in on the CAFC's unjustified and unprecedented narrowing of the statutory process patent subject matter, not to mention the court's tortuous logic, re-interpretation of precedent, and donning of industrial age blinders in the information age.   

Full post as published by Northwest Business Litigation Blog on November 03, 2008 (boomark / email).