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Last week, the U.S. Court of Appeals for the Federal Circuit asked for help in staking out boundaries in the burgeoning area of patent law that deals with methods of doing business rather than nuts-and-bolts inventions. The help never came. By the end of the May 8 arguments in In re Bilski –a case that many hoped would whoosh away a decade of fog surrounding one key test for patentability — the 12-judge court, sitting en banc, appeared to have more questions than answers. Does the Federal Circuit have authority to expand on the Supreme Court’s limitations to patent-eligible subject matter? Does patent coverage require that the invention involve a physical transformation? And what does the Federal Circuit’s own test for business method patentability — that the method produce a “useful, concrete and tangible result” — even mean? “They’re just three adjectives!” said Chief Judge Paul Michel, throwing up his hands at one point. The case flows from a 1997 patent application for a hedging method that manages risks associated with selling commodities. The inventors do not claim that the method requires use of a computer or other machine. The Patent Office rejected the application on the grounds that it failed the adjective-laden test the Federal Circuit created 10 years ago in State Street Bank & Trust Co. v. Signature Financial Group Inc. The Bilski method amounted to abstract thought, the office ruled. The Patent Office also submitted that the application ran counter to the Supreme Court’s 1981 ruling in Diamond v. Diehr, which held that a physical transformation was a “clue” to patent eligibility. David Hanson of the Webb Law Firm in Pittsburgh, who argued on behalf of applicants Bernard Bilski and Rand Warsaw, told the court that “there’s a good argument to be made that information is physical,” depending on how it’s conveyed. In the Bilski case, the activity “outside of the brain,” such as the communication between financial expert and client, rendered the method tangible, Hanson asserted. After pushing Hanson to define “tangible” (“something that exists in the real world”), Michel scoffed that the “useful” portion of the test was redundant. Then he asked, “Well, what does ‘concrete’ add?” “I don’t know,” Hanson said, drawing laughter. “Doesn’t sound like much of a test,” Michel concluded. ‘NOT VERY ILLUMINATING’ State Street legitimized business method patents, and patent lawyers say the decision has been as polarizing as it is murky. In the Bilski case, the Federal Circuit received 44 amicus briefs, and in a rare move, the judges allowed two of the filers 10 minutes each to argue before the court. The legal community is splintered, with the American International Property Law Association and several local IP law associations supporting the inventors. The American Civil Liberties Union, the William Mitchell College of Law’s Intellectual Property Institute, a group of 10 law professors, and others have sided with the Patent Office. The financial-services and high-tech industries are also divided. Bank of America Corp., IBM Corp., Wachovia Corp., and others have backed the Patent Office. Accenture Ltd., American Express Co., and Yahoo Inc. are taking a broader view, nuzzling up to the Bilski plaintiffs. The Federal Circuit decided in Febru­ary to hear the case en banc, without prompting by either party. Michel made it clear at the time that the court saw an opportunity to clean up State Street. “Every court has a responsibility to try to clarify and, when necessary, modify its own precedent,” Michel told Legal Times in February. “In the 10 years since the State Street Bank decision, there hasn’t been much clarification by our court, and the rationale given was so terse as to be not very illuminating.” THROWING CURVEBALLS Last Thursday, in a courtroom packed to capacity with patent examiners and patent lawyers from around the country, Raymond Chen, an attorney with the Patent Office, said the court should not use Bilski to meddle with State Street, though his office’s briefs in the case suggest the earlier ruling was flawed. Instead, Chen said the Bilski method is ineligible because it fails to claim a machine and because it does not involve a physical transformation. “Is a curveball patentable?” asked Judge William Bryson, pointing out that the change in trajectory could constitute a physical transformation. Chen said that assertion was “problematic” because the ball itself never shifted states. Judge Richard Linn, bridging the Bilski case and the baseball metaphor, chimed in: “What if somebody’s throwing a contract in a different way?” John Duffy, a professor at George Washington University Law School, appeared for Regulatory DataCorp, a firm formed by financial-services companies that uses data processes to monitor financial crimes. He said that the court should be “cautious in creating a judicial gloss” to statutory law and that Congress expressly intended patent law to be broad. William Lee, the Boston-based co-managing partner of Wilmer Cutler Pickering Hale and Dorr, argued on behalf of several Wall Street banking firms. He offered the court the most specific direction, advocating a three-pronged test for patentable subject matter: Abstract ideas are prohibited subject matter. If a physical transformation is involved, then the thing is generally patentable. And “nontransformative” processes are acceptable if “tied to a machine in an unconventional way.” Michel said that test would create the same problem the court was reviewing because words like “unconventional” are too vague. James Myers, a partner in the D.C. office of Ropes & Gray, the firm that represented State Street Bank in 1998, predicts that the court will rule narrowly. “Somewhere down the road there will be a decision that does take on these questions,” says Myers, who filed an amicus brief siding with the Patent Office, “but the court’s not ready for it yet.”

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