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US Supreme Court Issues Key Patent Ruling

by Glen Shapiro, LawAndTax-News.com, New York

01 July 2010


In a key ruling on June 28, the United States Supreme Court suggested that a wider interpretation of what can be patented is needed given recent advances in technology, although the court's ruling may merely serve to muddy the waters further in this area.

In one of the most important decisions affecting US patent case law for many years, the Supreme Court Justices unanimously rejected an appeal by two men, Bernard Bilski and Rand Warsaw, who had their patent application for a method of hedging risk based on weather predictions, designed for use by power companies, turned down by the US Patent and Trademark Office and subsequently in the courts. In doing so, the Justices upheld a 2008 US Court of Appeals for the Federal Circuit ruling that Bilski's and Warsaw's system was an unpatentable abstract idea.

The lower court had held that the 'machine and transformation' test, as enshrined in US patent law, should be the sole test for determining what can be patented. Under this narrow interpretation of the law, only ideas leading to any "new and useful process, machine, manufacture, or composition of matter" are patenable. By definition, this would appear to exclude many new innovations in disciplines such as bioscience and software development which rely on intangible processes, an issue which the Supreme Court Justices took into consideration.

"This age puts the possibility of innovation in the hands of more people and raises new difficulties for patent law," Justice Anthony M. Kennedy wrote in the court's opinion.

"The patent law faces a great challenge in striking the balance between protecting inventors and not granting monopolies over procedures that others would discover by independent, creative application of general principles."

The Supreme Court stopped short, however, of defining what tests should now be used to determine patentability, something it has delegated to lower courts to decide. "Nothing in this opinion should be read to take a position on where that balance ought to be struck," Justice Kennedy's opinion added.

While the decision has been welcomed in some quarters as perhaps a major step towards bringing patent law into the 21st century, others are concerned that the lack of clarification by the Supreme Court may only lead to more confusion as to whether business methods are patenable.

"Without a bright-line test, the Supreme Court’s decision in Bilski will only encourage more debate," wrote law firm Proskauer Rose LLP in a client note. "While the entire court agreed that Bilski was not entitled to a patent here, the Court’s opinion requires the lower courts to decide the issue of patentability on a case-by-case basis. The decision makes clear that the machine-or-transformation test is not the only test for deciding whether an invention is a patent-eligible 'process'."

In response to the ruling, the USPTO announced that it was reviewing the Supreme Court's decision with a view to issuing new guidance.

"Significantly, the Court ruled that the 'machine or transformation' test is not the sole determinant of patent eligible subject matter for process claims, but is nevertheless an important 'investigative tool' for evaluating their patent eligibility. The Court also indicated that a business method is, at least in some circumstances, eligible for patenting under Section 101," the USPTO noted.

“The USPTO will be issuing guidance further interpreting the decision as soon as possible. The USPTO is distributing interim guidance for the examining corps.”

Finnegan Partner J. Michael Jakes, who argued the case before the Court stated: “We are disappointed by today’s decision because we believed the Bilski/Warsaw claims should be patentable under the broad language of the Patent Act. We are pleased, however, that the Court rejected the Federal Circuit’s very limiting “machine-or-transformation” test and confirmed that business methods are not excluded from patenting. In reaffirming that section 101 of the Patent Act should be interpreted broadly, the Court’s decision will encourage continued innovation in today’s information economy."

TAGS: court | business | patents | commerce | law | intellectual property | banking | financial services | internet | e-commerce | legislation | United States | services

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