Yesterday oral argument took place in the Supreme Court in what could be the most pivotal patent ruling of our time. The case revolves around Bilski’s patent application for a method of hedging the risk of fuel price fluctuations associated with bad weather.
Back in 1998, the Supreme Court ruled in State Street that a computer programmed with novel software is patentable even if the output is merely numbers. The State Street ruling led to a deluge of business method patent applications. Not having any previous business method patents against which to vet the new applications, the United States Patent and Trademark Office (USPTO) granted business method applications which covered many things already in the prior art. The USPTO then retracted, delaying the processing of business method patents for years before eventually rejecting them. Bilski’s was one of the patents rejected. He appealed the USPTO’s decision to the Court of Appeals for the Federal Circuit (CAFC).
Machine or Transformation Test
The Federal Circuit affirmed the USPTO’s decision, creating the “machine or transformation” (MoT) test. In a nutshell, the MoT test states that to be eligible for patent protection under 35 U.S.C. § 101, a “process” must be tied to a particular machine or apparatus, or transform a particular article into a different state or thing. Bilski appealed the decision to the United States Supreme Court. The Supreme Court granted certiorari in what may be a watershed moment in patent law.
Bilski argues that the CAFC’s MoT test violates the congressional intent embodied in the broad language of 35 U.S.C. §101 and unduly restricts protection of emerging technologies in the information age. Additionally, in response to State Street, Congress enacted 35 U.S.C. §273. §273 insulates entities from patent infringement liability if they were practicing a third party’s patented business method at least one year before the effective filing date of the patent. Bilski argues that since Congress specifically recognized business method patent protection in 35 U.S.C. §273, Congress must have intended 35 U.S.C. §101 to include business methods as patentable subject matter. Finally, Bilski argues that the MoT test would disrupt public policy and settled expectations. Trillions of dollars of property expectations hinge on the ruling.
Bilski’s Oral Argument
J. Michael Jakes represented Bilski and Malcolm L. Stewart represented David Kappos, Director of the USPTO. Minutes into Mr. Jake’s argument, Justice Scalia questioned Mr. Jakes why invention cannot be defined to be machines and inventions. Justice Scalia used the creations of Lorenzo Jones and Dale Carnegie as examples of what the USPTO defines as patentable and non-patentable subject matter. Apparently, Lorenzo Jones was a character in a radio show which aired 1937-1955. Jones, an auto mechanic, was constantly inventing wild mechanical devices. Later in the argument, Mr. Jakes noted “But today the raw materials are just as likely to be information or electronic signals, and to simply root us in the industrial era because that’s what we knew I think would be wrong and contrary to the forward-looking aspect of patent law.”
The Justices presented Mr. Jakes with many hypotheticals. From Justice Ginsberg’s method of picking a jury to Justice Sotomayor’s speed dating to Justice Breyer’s “fabulous” method of teaching antitrust law, Mr. Jakes responded that while many of the hypotheticals met the test of patentable subject matter under 35 U.S.C. §101, they would likely be invalid as obvious under 35 U.S.C. §101. The vetting of those inventions argued Mr. Jakes, should take place at the the threshold of obviousness, not patentability. While Justice Sotomayor definitely stated no ruling in Bilski would change the State Street case, many of the Justices felt uneasy with the concept of converting a method from patent intelligible to patent eligible simply by throwing it on a computer.
Government’s Oral Argument
Chief Justice Roberts questioned Mr. Stewart on the written brief. The Chief Justice asked why a single footnote in government’s brief did not undermine the previous 53 pages of argument. The footnote stated that while the Bilski process was unpatentable, it may be patentable if executed on a computer. The Chief Justice analogized this to a process being unpatenable until you typed it out on a typewriter. One particularly troubling statement came from Chief Justice Roberts in which he said “if you punched in in [sic] your search station, you know, give me all the bakers in Washington, that would make it patentable?” I assume the Chief Justice was referring to a search “engine.” While my own limitations make me the last pundit on verbal missteps, I do not think I would ever make this particular mistake. If the Chief Justice was indeed referring to a search engine, the use of “station” instead would seem to indicate an unfamiliarity with current technology. Admittedly, I am a geek, but I suspect neither my mother, nor my daughter would make this mistake either.
While it is good to know Bilski will not be overruling State Street, some of the other comments made by the Justices during oral argument are a little concerning. The fate of future technology development rests in the hands of decision makers whose frame of reference is radio characters from the 50′s, typewriters and search “stations.” I realize the Supreme Court Justices are some of the keenest minds on the planet. I just hope that they are keen enough to elicit input from advisers not only knowledgeable about Xbox, Google, eBay and the iPhone, but how these technologies and technologies like them will, or will not, shape our future, depending upon the ultimate decision in Bilski.
A ruling is not expected until 2010.