Yesterday's Court of Appeals of the Federal Circuit (CAFC) decision on In re Bilski continues to keep in the air the future of business method patents. It doesn't automatically eliminate them, as many reports have erroneously suggested, but, if upheld in a likely appeal to the Supreme Court, will likely invalidate many and require some major strategic and tactical changes in virtually every industry. To get a little more insight, we spoke with C. Edward Polk, senior counsel at Foley & Lardner and a former associate solicitor of the United States Patent and Trademark Office, where he represented the USPTO in appeals before the Federal Circuit as well as wrote amicus briefs for the USPTO.
BNET: The court in its review of Bilski didn't say that business method patents were by their nature invalid. Instead, it said that the proper test for patentability was whether the method "transformed" something or was tied to a machine. What problem does that create for many businesses? C. Edward Polk: A lot of companies relied on the language from the [CAFC] State Street decision and other opinions. Once State Street gave the seal of approval, you had this explosion of applications. Now companies have invested in patents that may now be questionable under the Bilski decision.
BNET: But big changes in patent law aren't unheard of. The KSR decision last year significantly changed the interpretation of when an invention was considered obvious. CEP: [Dissenting CAFC] Judge Newman said it's the not the role of the courts to redefine the law again and again. If you want to make wholesale changes in the law, you leave that for Congress. It's not that this hasn't happened before, but the question is whether it's something that should continue to happen.
BNET: So why did the court take this step? CEP: Some of the patents that the Patent Office has issued have gotten out of line. Judge Mayer in his dissent said they have gotten "absurd." Some of these were not the [type of] patents that the system was intended to promote. That's the problem everyone wants to address. If you look at the recent AIPLA [American Intellectual Property Law Association] statistics on what it costs to defend yourself [in a patent suit], the amounts can range from a little less of a million dollars to just over $15 million. Having to defend yourself is a significant issue in the marketplace.
The question is how do you address it? Is it a strict reading that may rule out future technologies? Or can you look at [patent law sections] 102, 103, and 112 and make those stricter? Then you're letting more people in the door but putting the reins on the problem at the back end rather than the front end. One of the bigger problems is that you've got to give some level of guidance to the patent examiners here.
BNET: A company can clearly change the way it writes patent applications going forward, using this stricter standard which would also hold under the approached used in State Street. But what do you do about patents already granted? CEP: You've got to look at your existing portfolio and gauge whether the patents you have still pass muster under the test announced in Bilski. You also have to reevaluate your strategy going forward, assuming that Bilski stands and isn't overturned.
BNET: It seems like even going forward has to be confusing. CEP: As the court said, is [the method] tied [to the machine] in some meaningful way? Are you throwing it in to pass the test, or is it an intrinsic part of the invention? Is that computer tied to it somehow adding some meaning? If you run the equation F=M*A on the computer, you're not doing anything other than calculating the numbers. But if it prevents automobile accidents through airbag, maybe you tied it to the computer in a meaningful way. A word processor would be transformative. What if application that helps you go through legacy data faster? Access the data quicker? Maybe now you've got something that you can actually patent.
These are the debates we have in litigation all the time. Section 101 usually isn't a huge issue when it comes to patent litigation. Maybe now it becomes a bigger issue. The biggest problem is that grey area of new technology. The courts saying may need to refine the tests for the gray area, but if you're in that gray area, that's where the uncertainty is.