Why the Sun is Setting on Software & Business Method Patents
Posted on Friday, October 1, 2010
by Daniel Gross, NAIP Patent Engineer
In the almost anticlimactic wake of the Supreme Court's decision on the Bilski vs Kappos case, there seems to be little general consensus in the IP community as to what is patentable. One camp happily believes that by throwing out the machine-or-transformation (MOT) test as being definitive, the Court has further embraced the apparent 1952 Congressional intent of patentability of "anything under the sun that is made by man". Another camp views the results differently, thinking that the Court was actually contracting current scope of the statute and in fact merely added that it is not inconceivable for some future innovation to fail the MOT test and still be patentable. The Court, unfortunately, gave no examples of such an invention.
With this kind of legal ambiguity over what is patentable, many IP attorneys are gleefully lining their pockets, while, in an age of multi-multi-million dollar infringement lawsuits, the industries are scrambling to fortify against that suddenly-larger expense in product development and ownership known as uncertainty. Without such a clear example of what is patentable, even the USPTO appears hesitant to stray far from the MOT test, but I think they may be missing the Court's ultimate point. The way I interpret the decision, things might be a mess right now, but the writing is on the wall. The Supreme Court is carefully but surely slamming the door on the patentability of most software and business method patents as we know them by suggesting that they always have been, and still should be rejected as abstract ideas. Having no definitive MOT test just makes rejecting these "inventions" much easier.
In the Bilski decision, the Court threw out another bright-line test only to widen the concept of abstract ideas. With Bilski being the first, the Court also gave us a second example of the widened concept shortly afterwards when they vacated the Federal Circuit Court's decision in another patent case. The Lower Court had ruled in Prometheus Laboratories, Inc. v. Mayo Collaborative Services (Fed. Cir. 2010) that the claimed medical procedure was statutory because a drug induced modification of a patient's blood chemistry met the transformation fork of the MOT test. However, the Supreme Court directed the Lower Court to reconsider the case in light of the Bilski decision, suggesting that even meeting the MOT test is not enough to make a method statutory.
Most software and business method patents seen today would have been considered unstatutory material before the Federal Circuit's 1998 State Street decision, the case usually considered as opening the door for business method patents. Although ruled narrowly on the facts, the Bilski decision specifically singled out this same State Street decision as not being endorsed. "Nothing in today's opinion should be read as endorsing the Federal Circuit's past interpretations of §101. See, e.g., State Street, 49 F. 3d, at 1373."
Thus while many believe that the Justices were giving their de facto blessing to business method and software patents, the Court was actually doing exactly the reverse, implying that they were abstract ideas. Before Bilski, if a method passed the MOT test, it was automatically statutory material. After Bilski, this no longer proves to be the case. Why is a paper copy of software code not patentable, yet running the exact same software code on a computer suddenly turn an old machine into a new patentable machine? The Justices are asking the same kind of questions. Similarly, business methods can also be viewed as simply algorithms that use old machines, such as computers, phones, or websites to pass the MOT test, but still be abstract ideas at their core.
At the end of the decision, the opinion also included this line:
"In disapproving an exclusive machine-or-transformation test, this Court by no means desires to preclude the Federal Circuit's development of other limiting criteria that further the Patent Act's purposes and are not inconsistent with its text.”This is spoken by a Court that wishes to contract rather than expand the scope of §101.
In response to the prodding by the Supreme Court in this decision, the Lower Court may take a different approach to developing the requested "limiting criteria" for patent eligibility. Perhaps instead of tackling the difficult job of defining what is patentable without running afoul of the law, it would be easier for the Lower Court to use what has already been long settled as statutory limits and merely define certain classes of subject material as "abstract ideas". To be sure, there would be countless court battles over whether a specific process falls into one of those classes, but there is no statutory problem with rejection of abstract ideas.
Defining classes of ideas as "abstract" could be relatively easy. For software: that which does not cause a "further technical effect" and which does not go beyond the inherent technical interactions between hardware and software. Similarly, for any process or method: that which does not cause a "further technical effect" and which does not go beyond the inherent technical interactions between the process and a machine. This basically is how Europe does it and universal symmetry of patent eligibility may go a long way toward easing some of the uncertainties of product development and ownership so prevalent today.
Unfortunately, US patent law lacks a specific "technical effect" requirement like that which is present in European patent law, so a "technical effect" requirement in the US might suffer the same fate as the MOT test (ruled as being inconsistent with the text of patent law). Nevertheless, the act of defining certain classes of ideas as abstract is not inconsistent with the Patent Act. It would merely be a generalization of historical interpretations of patentable subject matter and Supreme Court precedents such as Benson, Flook, and Diehr. In contrast, the recent push to expand patentability to software and business methods, however well intended, is in violation of the same historical precedents.
In the end, the key point is that the Supreme Court's rejection of Bilski's claims had nothing to do with the MOT test, and instead was specifically based on the rule that claims "can be rejected under the Court’s precedents on the unpatentability of abstract ideas". The Court even gave us a second example of the same rationale in the Prometheus case. The Lower Court was then basically challenged to find "limiting criteria" for patent eligibility. Again, the key point is "abstract ideas should be rejected".
While it is quite unlikely that the Congressional intent of patentability of "anything under the sun that is made by man" will be changed by this ruling, therein may be the solution. People "have" ideas, but "make" products--even digital ones. It may soon be up to applicants to prove that their software or business methods "made" something instead of being abstract ideas they "had" and then just written down or codified.
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