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Saturday, Feb. 27, 2010

PITTSFIELD 

Berkshire Eagle

In 1997, a partner of the patent law firm I worked for in Washington D.C. asked me to write a law review article on whether there was a " business method exception" for things that were subject matter eligible to be patented. It was a hot subject as software patents were just coming into the forefront. While copyrights gave protection to the literal code so you could not illegally copy it, they were not optimal in protecting the underlying abstract processes of software - the flow charts of logic behind the code.

What can be patented has been the subject of considerable controversy from the inception of patent law. At one time, one could not even obtain a patent on a better method of producing a product because a "process" or "method" was not a "vendible substance." Today, the federal statute regarding patent eligibility reads, "Whoever invents or discovers any new and useful process, machine, manufacture, or composition of matter, or any new and useful improvement thereof, may obtain a patent " While this sounds straightforward enough, the practical application of the statue has proved complicated.

For instance, in 1980, the U.S. Supreme Court had to decide whether a genetically engineered bacterium capable of breaking down crude oil could be patented. The inventor argued that the bacteria possessed a property which is possessed by no naturally occurring bacteria, and thus could be patented.

A five- justice majority agreed (with four dissenters) and ruled that even a living thing, so long as it was not naturally occurring, could be patented. Quoting legislatures that drafted the 1952 Patent Act, they observed "Congress intended statutory subject matter to "include anything under the sun that is made by man."

All software ultimately must be reduced to an electrical digital system of 1's and 0's to be useful. As software operates, a very real process occurs, the transformation of those 1's and 0's to produce a useful output. The difficult question is whether computer software is patent eligible subject matter because it is a thing or process, or whether it is an unpatentable "abstract idea" like Einstein's theory of relativity. It is a question over whether billions of dollars of software are eligible for patent protection.

Those that tend to believe patents stimulate inventive activity and maximize productivity, particularly software development, are wont to believe that software patents protect legitimate "things" and " processes." Those that believe patents take ideas that should be in the public domain and hinder competition while doing little to stimulate invention tend to believe software patents cover unpatentable abstract ideas.

As I wrote my law review article, a case called State Street Bank v. Signature Financial was soon to be heard by the Federal Circuit, the only appeals court authorized to hear the appeal of patent cases. State Street Bank, a case destined to be one of the most famous patent cases ever, was to decide whether there indeed was a business method exception to patent eligible subject matter. It concerned a software patent regarding a more efficient way to manage financial services. A Massachusetts District Court had already ruled that the system was not eligible for patent protection.

The partner declined being a coauthor after reading my law article. Not only that, he very gently, but solemnly, warned me that if I tried to get the article published, I would most likely be creating a professional embarrassment that would haunt me for the rest of my life. He had reason. The most respected treatises on patent law had accepted the business method exception as a legal fact. By arguing otherwise, I was thinking just a little too "outside the box."

With knots in my stomach, I had my law review article "Are ' Methods of Doing Business' Finally Out of Business as a Statutory Rejection?" published. Citing my article, the State Street court ruled that the software patent for financial services was subject matter eligible. Eventually, books were to be written on business methods patents and billions of dollars of software were eligible for protection.

As fate would have it, the seminal State Street Bank opinion in 1998 was eventually called seriously into question by In Re Bilski, a 2008 decision of the federal circuit currently being reviewed by the Supreme Court, which is expected to rule in July. The patent related to "a method for managing the consumption risk costs of a commodity sold by a commodity provider" but as claimed appeared to be truly divorced from any software.

Critically, the federal circuit majority held that any process that does not transform physical matter or require performance by a machine is not within the definition of "process" of the Patent Act. While this sounds highly technical, it could represent a major economic blow to the protection of American innovation as many once protected inventions are no longer eligible for patent protection.

As stated in the dissent in Re Bilski at the federal circuit, "The court [ majority] thus excludes many of the kinds of inventions that apply today's electronic and photonic technologies, as well as other processes that handle data and information in novel ways. Such processes have long been patent eligible, and contribute to the vigor and variety of today's Information Age. . . The innovations of the 'knowledge economy' - of 'digital prosperity' - have been dominant contributors to today's economic growth and societal change."

The new test would essentially eliminate all business method software patents. A poorly drafted opinion In Re Bilksi by the Supreme Court could wreak havoc on an important part of the American economy, while seemingly aimed at making sure one cannot simply patent a better way of having a dating service.

The author is a local attorney who columns have appeared in newspapers across the country.