Patent law usually remains an esoteric and fairly quiet corner of the legal system. It is the province of specialized technicians and policy wonks, who speak their own language of "prior art" and "composition of matter."
From time to time, however, patent issues erupt as the focus of vocal and highly public debates. This is one such time, with heated disagreement over the implications of the recent decision by the U.S. Court of Appeals for the Federal Circuit in In re Bilski , now known famously to the patent world as Bilski . The Bilski party has now filed a petition of certiorari for review by the Supreme Court (with its decision expected by June). We can only hope the Court takes this case, and the appeal succeeds.
The Bilski controversy centers upon the patentability of business processes. As the modern economy has moved away from the physical transformation of matter — such as chemical reactions or the operations of machinery — toward information and services-based innovations, legal thinking hasn't always kept pace.
In its decision on Bilski in October 2008, the Federal Circuit introduced a new and narrower rule for the patentability of such processes (and, in reality, a strikingly wide swath of other inventions). From now on, only those methods that involve "specific machines" or transformation of "articles" from "one state to another" can qualify for patent protection. Many of the tremendous contributions of industrial engineering, focused on making workplaces more humane and more productive, might no longer qualify. Neither, under the court's ruling, may many other recent advances in information technology, services and finance.
Of course, the timing of the decision is ironic. Just as the U.S. economy copes with an extraordinarily severe downturn — with much of our manufacturing and heavy industry already shifted to lower-cost parts of the world — the Federal Circuit has upended traditional interpretations of patent law and established its own industrial policy, one that makes it more, rather than less, difficult for the engines of the "new economy" to grow.
WHAT HAPPENED TO 'STATE STREET'?Just 10 years ago, the Federal Circuit had firmly stated just the opposite of Bilski — that Section 101 of the patent code means what it says: "Whoever invents or discovers any new and useful process…may obtain a patent." In its State Street Bank v. Signature Financial Group decision, the Federal Circuit held that, as long as a process produced a "useful, concrete and tangible" result, was not just a mere abstract idea or mathematical formula, and satisfied the other patent requirements, it should be patentable — whether or not there was a "machine" involved. The State Street Bank court went to great lengths demonstrating how prior Supreme Court decisions had firmly upheld the wide scope of patentability: "Indeed, the Supreme Court has acknowledged that Congress intended § 101 to extend to 'anything under the sun that is made by man,' " citing Diamond v. Chakrabarty , 447 U.S. 303, 309 (1980).
Congress has consistently drafted our patent legislation without technological exclusions, recognizing the need for flexibility and an inclusive approach to what is patentable. The courts have usually applied the patent statute accordingly to accommodate unforeseeable (and often unbelievable) advances in technology.
That is why the Bilski decision is such a step backward. There is no need for a structural limitation on patent subject matter. The modern innovations that power our economy increasingly have little to do with "machines" and depend more on the creative use of data and information.
TWO ERRORS IN 'BILSKI'The Bilski ruling errs for two main reasons. First, the Federal Circuit simply ignores repeated Supreme Court admonitions against exactly the "new" rule now mandated by the Federal Circuit. And, second, Congress itself, in the heated aftermath of the State Street Bank decision, far from legislating business methods out of the patent statute (which it could easily have done) instead provided a prior-user right for those who failed to protect their own innovative processes, since "the [so-called] business method exception had been improperly applied to a wide variety of processes." In fact, Congress noted approvingly that patents could apply to a wide array of useful products and processes "whether in the form of physical products, or in the form of services, or in the form of some other useful results; for example, results produced through the manipulation of data or other inputs to produce a useful result." Joint Legislative History of the American Inventor Protection Act of 1999. The Bilski d ecision simply ignores congressional intent.
The effect of Bilski has been felt almost immediately at the U.S. Patent and Trademark Office (PTO), where applications for business method patents are down and rejections are up. The PTO — perpetually underfunded and faced with a steadily increasing backlog of unexamined patent applications in all areas of invention, not just business methods — has been scrambling for ways to cope with increased volume and limited resources.
With critics describing the PTO as "broken," it now appears to be wielding the new Bilski test as a one-size-fits-all blunderbuss, rejecting patent applications left and right, even for software and computer hardware inventions, arguing they are simply business processes or abstract methods attached to general-purpose computers (which now, in the Alice in Wonderland lens of the PTO, simply don't count as "specific machines").
PTO NOW USING AN OUTDATED TESTNow companies and patent owners across wide swaths of our economy are waking up to how the PTO, deploying a "test" more relevant to the carriage makers or leather dyers of the 19th century than to the finance-, Internet- and services-based economy of the 21st century, is undermining the very nature of what our patent system was meant to encompass.
The United States needs every possible advantage to remain competitive in a linked global economy that is increasingly service- and information-driven. Bilski is a classic case of judicial overreach, with the potential to damage that competitiveness at a crucial time. We can only hope the Supreme Court sees it that way, as well.
Wayne P. Sobon is associate general counsel and the director of the intellectual property legal group at Accenture Ltd. in San Jose, Calif.
