Supreme Court Patent Ruling Avoids Tough Issues

Upholding an appeals court ruling in the closely watched Bilski v. Kappos case, the U.S. Supreme Court denied patent protection to a specific business method for energy trading. But the Supreme Court chose not to clarify the lines that define patentable subject matter.

The disallowed patent claim describes a series of steps for hedging against the risk of price changes in the energy commodities market. It was rejected by a patent examiner because it was an abstract formula not implemented on a specific device.

Even as it upheld prior rulings supporting the patent examiner's initial determination, the Supreme Court said the Federal Circuit Court erred in concluding that the exclusive test for determining whether a business process can be patented involves implementation on a machine or transformative action.

But the Supreme Court did not present a bright-line test that more clearly defines the kinds of business processes and ideas that can be patented. In short, it declined to rock the boat. Software and business methods continue to be eligible for patent protection, provided the claim can be justified under current legal criteria.

Scott Bain, litigation counsel of the Software & Information Industry Association, a technology industry association that filed a brief in support of maintaining the status quo, said he was pleased by the decision.

"If people were looking for a landmark decision, this was the wrong case," he said in a phone interview.

"I honestly would characterize the ruling as kind of a punt," he said. "The difficult questions still remain."

The difficult questions go beyond defining what is and isn't patentable to include: the appropriateness of granting patents for 20 years when different industries have different market cycles and innovation time-lines; the appropriateness of allowing ideas to be patented at all; defining universally appropriate patent infringement penalties and legal remedies like injunctions; assuring patent examiners understand the patent applications they review and have adequate resources; and approaches for dealing with abusive patent litigation.

These issues have been debated for years in Congress, at the behest of stakeholders and their lobbyists. But substantive change continues to be elusive.

Eben Moglen, chairman of the Software Freedom Law Center, a group that provides law services to developers of free, open-source software, also characterized the Supreme Court's decision as a vote for the status quo, though he's not enthusiastic about the ruling.

"The Supreme Court has launched us into the same miasma of uncertainty that we were in," he said in a phone interview. "This absurdly over-broad granting of monopolies on ideas is an acute difficulty in the world of information technology."

Moglen points to the success of free, open-source software and idea sharing in the tech community and argues that the success of the IT industry and open-source software over the past two decades demonstrates that there's an alternative the costly patent legal regime.

"We have shown over 20 years that the use of IT knowledge that's freely available to everyone creates a far better system that the patent system," he said.

He attributes the current patent reform impasse to differences between the tech industry and the pharmaceutical industry. The pharmaceutical industry, he said, "owns a lot of senators," making reform difficult.

"We have a system which the IT industry no longer derives any benefit from," he said. "The time has come for the IT industry to try to do everything it can to get itself out of the patent system."