Supreme Court to Review Patent Case Regarding Business Method and Software Patents

The fate of business method patents may be decided very soon since the US Supreme Court has decided to take on Bilski v. Doll. The case will set a significant precedent that will impact the validity of business method and even software patents. The Supreme Court will review the US Court of Appeals for the Federal Circuit’s decision of Bilski which upheld a rejection of a patent application of a method for managing risk in commodities trading.

As of now, there is much debate as to the patentability of business methods and software, like in the Bilski case. Typically the issue is whether these types of patents are just too broad and/or abstract. The Federal Circuit narrowed the standard by stating patent law only protects inventive processes that involve a “particular machine” or “transform an article from one state to another.” The result of this decision would lead to greater scrutiny of business method and software patents. This is a departure from the prior standard of Section 101 which states “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…”

So what’s at stake? Typically the software, finance, and pharmaceutical industries want less scrutiny and broader patent eligibility because they rely heavily on these types of patents. Many companies in these industries could lose existing and future patents rights if the stricter machine/transformation test above stands. Will this lead to an increase of Section 101 challenges to a patent’s validity in patent litigation? Probably if the Supreme Court allows Bilski to stand.

Interestingly, remember my prior blog about Sonia Sotomayor and her background in IP law? If the timing is right, she may be involved in reviewing Bilski. Hopefully, the decision will be a thoughtful one given her expertise in IP litigation.

Sonia Sotomayor an Intellectual Property Attorney?

It turns out President Obama’s nominee to the Supreme Court was a partner at a firm that handled intellectual property litigation. In fact she ruled on an important copyright case, Tasini vs. New York Times, while she served as a federal judge for the U.S. District Court of the Southern District of New York. However, the case was later reversed by the appellate court and was then appealed again by the U.S. Supreme Court, in New York Times Co v. Tasini 533 U.S. 483 (2001). The case involved a claim of copyright infringement brought by freelance journalists against the New York Times and other news organizations (the “publishers”), when the publishers distributed articles written by the journalist to Lexis/Nexis, a legal database, without the permission of the journalist. The publishers claimed a privilege accorded collective work copyright owners by §201(c) of the Copyright Act.

At the District Court level, Sotomayor ruled in favor of the publishers, claiming that they were entitled to reproduce the articles within Lexis/Nexis under the protection of the collective work copyright. (The collective copyright entitles the copyright owner rights to the collection as whole, but not to the individual authored works which are separately copyrighted works). However, both the appellate court and the U.S. Supreme Court reversed Sotomayor’s decision ruling in favor of the freelance journalists.

The Supreme Court reasoned that as the articles appear in Lexis/Nexis, they do not appear as a collective work, rather “[w]hen the user conducts a search, each article appears as a separate item within the search result.” The Court further stated “the Database does not reproduce and distribute the article ‘as part of’ either the original edition or a ‘revision’ of that edition."