The Patent Eligible Subject Matter Debate Continues

No question in patent law in recent times has been quite as vexing as the scope of patent eligible subject matter, especially as it relates to computer-implemented methods.  The Supreme Court has addressed the issue twice in three years in Bilski and Prometheus Labs, and we still seem no closer to understanding what makes an invention “patent elibible” under 35 U.S.C. 101.   The debate keeps on rolling along with the Federal Circuit's recent decision in CLS Bank Int’l  v. Alice Corporation, 2011-1301.

The claims at issue in CLS were found in three patents that each “cover a computerized trading platform for exchanging obligations in which a trusted third party settles obligations between a first and second party so as to eliminate ‘settlement risk..’”  Opinion at 2.  The claims at issue cover three different statutory classes, with method claims, system claims and article of manufacture claims directed to computer instructions stored on computer readable media.  The district court analyzed the claims in each class separately and found all claims invalid as not defining patent eligible subject matter under 35 U.S.C. 101.

In reversing the district court, the majority provided a lengthy discussion on the history of patent eligibility cases, especially addressing the “abstract idea” and “law of nature” exceptions to patent eligibility.  Opinion 11-21.  (Since the first paragraph of the ten page analysis includes the quote 'Congress intended statutory subject matter to "include anything under the sun that is made by man,"' [citations omitted] you quickly get a sense where the majority is headed).  At the end of its 10 page discussion, the majority sets forth a somewhat remarkable holding: “this court holds that when -- after taking all of the claim recitations into consideration — it is not manifestly evident that claim is directed to a patent ineligible abstract idea, that claim must not be deemed for that reason to be inadequate  under 101.”  Opinion at 20.  I for one, am lost by this statement.  A patent is presumed valid and a party seeking to invalidate a patent claim must do so by clear and convincing evidence.  It was my impression that this same standard applies to defenses under 35 U.S.C. 101.  I am not sure what “manifestly evident” is, but it sounds like a higher burden than clear and convincing evidence.  Perhaps, the defendant’s new burden on this issue is to prove by clear and convincing evidence that it is “manifestly evident that [an asserted] claim is directed to a patent ineligible abstract idea” in order to prevail on this issue?

The case includes a spirited dissent by J. Prost (with barbs and jabs laced throughout both the majority and dissenting opinions) that argues that “[t]he majority has failed to follow the Supreme Court’s instructions—not just in its holding, but more importantly in its approach.”  Dissent at 3.

Much more could be said about this 27 page opinion and 11 page dissent.  But, since the petition for rehearing en banc is likely already being drafted (and in my opinion will likely be granted), we might as well wait for the en banc opinion to delve deeper into this case.  

Its a Law...of Nature: Mayo Collaborative Services v. Prometheus Labs.

The Supreme Court has again wrestled with the topic of patent eligible subject matter.  Mayo Collaborative Services v. Prometheus Laboratories.  The bad news - I am too busy with my real work to write about this case.  The good news - some others in my firm were able to write a short article to help us all understand this issue better.

Click here to read the article and get some insights on the latest regarding the scope of what can and can't be patented.

Many thanks to Kimpton Eng, Jennifer Lane Spaith, and Elen Wetzel for preparing this to educate us all!

The Supreme Court's Decision in Microsoft v. i4i - No Change

In Microsoft Corp. v. i4i, 10-200, the Supreme Court considered the issue of the appropriate standard of proof that is applicable when a party seeks to invalidate a patent.  The Federal Circuit has consistently held that the presumption of validity imposed a clear and convincing evidence standard.  Moreover, this standard applied even when the prior art relied upon by the defendant was not previously considered by the patent office.  Microsoft argued that the preponderance of evidence standard should apply to invalidity defenses, at least in those cases where a defendant presented evidence that was not considered by the patent office.  The Supreme Court rejected this argument and has unequivically held that the clear and convincing standard applies to assertions of patent invalidity.  In short, the decision can be summed up in two words - No Change.  

And that concludes the patent law Supreme Court Watch for this term.

The Supreme Court Interprets the Bayh-Dole Act as Not Automatically Conveying Inventions to Contractors

Yesterday, the Supreme Court issued its second patent related decision of the term in The Board of Trustees of Leland Stanford Junior University v. Roche Molecular Systems, 09-1159, a case addressing the issue of ownership of inventions made with government research funding. A 7-2 majority of the Court, lead by Chief J. Roberts, held that the Bayh-Dole act does not alter the fundamental proposition that ownership of an invention initially vests with an inventor, and as such, title does not automatically vest in a contractor, such as a university, when an invention is made with the support of federal funding.

This case involved competing agreements with an inventor: an agreement between the inventor and the university in which the inventor “agrees to assign” later made inventions and a second agreement with Roche in which the inventor immediately assigned a specific invention.

The “agree to assign” language did not operate as an immediate conveyance and the Supreme Court held that the "Bayh-Dole act does not automatically vest title to federally funded inventions in federal contractors or authorize contractors to unilaterally take title to such inventions."  As a result, Stanford was out of luck.


One significant take-away from this decision is that recipients of federal research funding cannot rely solely on the Bayh-Dole act and should review the language in employee and research agreements with respect to assignment of future inventions. Language in these agreements that impose an obligation in the future, such as "agrees to assign," should be replaced with affirmative language, such as "hereby does assign."

The Supreme Court Redefines the Knowledge Element of Inducement

The Supreme Court issued its opinion in Global Tech Appliances v. SEB S.A., 10-6 on May 31, 2011. The Global Tech case redefines the standard for the intent element of inducement under 35 U.S. C. 271(b).

Relying primarily on the Court’s longstanding ruling in Aro Mfg. Co. v. Convertible Top Replacement, Co., 377 U.S. 476 (1964)(“Aro II”), which addressed the knowledge requirement for contributory infringement under 35 U.S.C. 271(c), an 8-1 majority held that “induced infringement under 271(b) requires knowledge that the induced acts constitute patent infringement.” Slip Opinion at 10. The Court rejected the Federal Circuit’s “deliberate indifference to a known risk” standard, but affirmed the lower court’s finding of inducement without proof of actual knowledge by the infringer “because the evidence in this case was plainly sufficient to support a finding of Pentalpha’s knowledge under the doctrine of willful blindness.” Id. (emphasis added). Thus, the Supreme Court articulated a knowledge requirement for inducement that can be satisfied with constructive knowledge under the “willful blindness” doctrine.


The Court held further held that willful blindness has

two basic requirements:

(1) the defendant must subjectively believe that there is a high probability that a fact exists and (2) the defendant must take deliberate actions to avoid learning of that fact.

Opinion at 13.

The Court found that Pentalpha, which inter alia, had substantially copied a competitor’s product, and then had its patent attorney conduct a freedom to operate search for this product without informing him that the design was copied from a competitor. From this, the Court concluded that the “evidence was more than sufficient for a jury to find that Pentalpha subjectively believed there was a high probability the SEB’s fryer was patented, that Pentalpha took deliberate steps to avoid knowing that fact, and that it therefore willfully blinded itself to the infringing nature of Sunbeam’s sales.”

Justice Kennedy, the lone dissent, agreed that inducement has a knowledge component, but disagreed that “willful blindness” was an appropriate substitute for actual knowledge.

With the Supreme Court offering a degree of clarity that inducement requires knowledge that the “induced acts constitute patent infringement,” (which is consistent with Federal Circuit precedent since DSU) proving inducement in the course of patent litigation will often prove to be a challenge for patent owners. Moreover, a factually well founded and competent opinion of counsel indicating that the induced acts do not constitute infringement of a valid patent should provide a strong defense to allegations of inducement.

Some Things To Watch For In 2011

With 2010 winding down, it’s a good time to look ahead a bit and see what 2011 may have in store for us folks practicing IP law.




False Marking Cases



In 2010, we saw the surging tide of false marking cases. This cause of action, that was asserted less than a dozen or so times leading up to 2010, was the basis for over 600 cases filed during the year. What could 2011 bring?  Probably, more of the same, but some potential changes may help:



• In In re BP Lubricants USA Inc., BP Lubricants filed a petition for a writ of mandamus to the Federal Circuit seeking to overturn the denial of its motion to dismiss the complaint for failing to sufficiently plead intent. The complaint had allegations that many of us are all too familiar with now, including vague allegations that “’upon information and belief,’ that defendant is a ‘sophisticated company’ which ‘knows, or should know’ that the patent at issue had expired.” (DOJ Brief In Support of Petition at 4.). In a somewhat surprising move, the Department of Justice (“DOJ”) filed an amicus brief in support of BP’s petition. The DOJ's brief urges the Federal Circuit to hold that the intent element of a false marking action needs to satisfy the heightened pleading requirement of Fed. R. Civ. P. 9(b) and that under this standard, the complaint in the BP case is insufficient as a matter of law.



The BP case squarely presents the question of the requirements for pleading a false marking case. If the Federal Circuit adopts the position urged by BP and the DOJ, in 2011 defendants will have valuable precedent to use in seeking early dismissal of a large number of the false marking “troll” cases that are supported by nothing more than bland, generic allegations of what a company “should know” about its expired patents.



• In 2010, several legislative proposals were made that would have effectively ended the majority of false marking cases. These proposals were lumped in with patent reform legislation which stalled in Congress. Will 2011 include a legislative solution to the false marking problem?



Patent Reform Legislation

• In 2010 (as in many years prior), it looked like progress was being made on patent reform legislation and there was some momentum in Congress for a patent reform bill. During IPO’s annual meeting in September, one Congressional staffer even suggested that a vote on the pending bills was possible in 2010. That didn’t happen. Will 2011 be the year that patent reform legislation finally makes it through Congress?



The Supreme Court

• As noted in an earlier post, the Supreme Court has taken up three patent cases for its current term. Clearly, the most significant of these cases is Microsoft v. i4i which has the potential to fundamentally alter patent litigation by changing the standard of proof required to establish patent invalidity. A change from the “clear and convincing” standard to the “preponderance of the evidence” standard would greatly impact all phases of patent litigation, from pre-filing due diligence through trial and appeal. This is clearly poised to be the most significant event in patent law in 2011! Then again, many thought that Bilsky had that same potential, and looking back now, we know that didn’t happen.  Only time will tell.



The stage is set for 2011 to be an interesting year for patent law.

I hope that everyone has a very Happy New Year and that 2011 brings excitement, fun and prosperity to all!

The Supreme Court is Set to Significantly Re-Shape Patent Rights and Litigation

The Court Agrees to Hear Three Patent Cases in 2011

The Supreme Court has agreed to hear three patent cases in its upcoming term. The first case touches upon the standard for establishing intent in the context of inducement of infringement. In October, the Supreme Court granted certiorari in Global-Tech Appliances Inc. v. SEB S.A. on the question of “whether the legal standard for the ‘state of mind’ element of a claim for actively inducing infringement under 35 U.S.C. 271(b) is ‘deliberate indifference of a known risk’ that an infringement may occur or instead ‘purposeful, culpable expression and conduct’ to encourage an infringement.” The difference in these standards, essentially the difference between “known” and “should have known,” will significantly effect the way that businesses deal with third party patents from the point of conducting clearance searches and obtaining opinions all the way through trial.


The second case on the Supreme Court docket is Board of Trustees of the Leland Stanford Junior University v. Roche Molecular Systems. In this case, the Supreme Court will consider ownership rights to inventions that were made with government funding under the Bayh-Dole Act. Although this case addresses a fairly narrow question, it could prove to be a significant case to universities and research institutions which rely heavily on federal research grants to sponsor wide ranging research projects which are the source of many inventions.


The third case, Microsoft v. i4i Ltd. 10-290, could prove to have a fundamental impact on every patent case, as it deals with the core issue of the burden of proof for establishing invalidity of a patent claim.


On November 29, 2010, the Supreme Court granted Microsoft’s petition for a writ of certiorari on the question “did the court of appeals [for the Federal Circuit] err in holding that Microsoft’s invalidity defense must be proved by clear and convincing evidence?”  As noted in a previous posting, Microsoft's petition was supported by numerous amici.

 At trial, Microsoft’s invalidity defense was based on a lack of novelty due to a prior sale of the patentee’s own earlier software. This prior art was not before the patent office during examination and was not considered by the patent examiner. Despite the fact the patent office never had the opportunity to consider this prior art, the patent benefited from the “presumption of validity” and the district court (bound by Federal Circuit precedent) rejected Microsoft’s request for a jury instruction seeking to prove invalidity only by a “preponderance of the evidence." The Federal Circuit affirmed, setting the stage for Microsoft's petition.

The Microsoft case has the potential to significantly change the nature of patent litigation and level the playing field between plaintiffs and defendants. If the Supreme Court reduces the burden of proof for proving invalidity on issues that were not before the patent examiner to a preponderance of evidence, defendants will face a far less daunting task in establishing a successful invalidity defense. Considering the less stringent standard for establishing obviousness under the Supreme Court’s holding in KSR, lowering the burden of proof required to establish an invalidity defense would certainly reduce perceived strength of every issued patent.

Microsoft, and a Large Group of Powerful "Friends," Ask The Supreme Court to Eliminate the Clear and Convincing Evidence Standard for Patent Invalidity

In Microsoft Corp. v. i4i, U.S., No. 10-290, Microsoft is seeking certiorari on the question of whether the "clear and convincing" standard is appropriate in challenging patent validity in civil litigation. For most issues in civil litigation, such as the question of patent infringement, the party asserting the claim only needs to meet the lower “preponderance” standard. The question then, is why should patent validity be treated differently between private litigants, and should this always be the case?  For example, if the presumption of administrative correctness and deference to the USPTO are the justifications for the heightened evidentiary standard, why should the heightened standard apply when the prior art used to challenge a patent’s validity was not considered by the examiner during prosecution? These and other questions are being addressed by a powerful collection of amici that have submitted eleven briefs supporting Microsoft’s bid for high court review of this fundamental question of patent law.


As reported by BNA, the list of amici and their counsel include:

• 36 law, business, and economics professors, filed by Mark A. Lemley of the Stanford Law School;

• Acushnet Co., General Motors LLC, Pregis Corp., and SAP America Inc., by James W. Dabney and John F. Duffy of Fried, Frank, Harris, Shriver & Jacobson, Washington, D.C.;

• Apple Inc., by Deanne E. Maynard of Morrison & Foerster, Washington, D.C.;

• CTIA—The Wireless Association, by Michael K. Kellogg of Kellogg, Huber, Hansen, Todd, Evans & Figel, Washington, D.C.;

• Electronic Frontier Foundation, Public Knowledge, the Computer & Communications Industry Association, and the Apache Software Foundation, by Michael Barclay of the EFF, San Francisco;

• Facebook Inc., Intuit Inc., Netflix Inc., Newegg Inc., Toyota Motor Corp., and Trimble Navigation Ltd., by John D. Vandenberg of Klarquist Sparkman, Portland, Ore.;

• Google Inc., Verizon Communications Inc., Dell Computer Corp., Hewlett-Packard Co., HTC Corp., and Wal-Mart Stores Inc., by Paul D. Clement of King & Spaulding, Washington, D.C.;

• Intel Corp., by Dan L. Bagatell of Perkins Coie Brown & Bain, Phoenix;

• The Securities Industry and Financial Markets Association and the Clearing House Association, by John A. Squires of Chadbourne & Parke, New York;

• Teva Pharmaceuticals USA Inc., the Generic Pharmaceutical Association, and Cisco Systems, by Henry C. Dinger of Goodwin Procter, Boston; and

• Yahoo! Inc., by William C. Rooklidge of the Howrey law firm in Irvine, Calif.


This is clearly an issue that is worthy of attention as the outcome could represent a fundamental change in patent law.  i4i’s responsive brief is due on October 29, 2010, and a second wave of amicus briefs in support of the clear and convincing standard will likely follow.

Bilksi Comes Out With A Wimper, Rather Than With A Bang

After receiving dozens of amicus briefs and pondering the case for close to seven months following oral argument, the Supreme Court has finally released its much anticipated decision in Bilsky. Bilski v. Kappos, 561 U.S. ___(2010).   In short, the Court affirmed the judgment of the en banc Federal Circuit that the claims of the Bilski patent are not directed to patent eligible subject matter. In doing so, however, the Court specifically rejected the Federal Circuit's “machine or transformation test” as the sole test for patent eligibility for process or method claims. Instead, it viewed Bilski’s claims as “abstract ideas” that are outside the scope of patent eligible subject matter.

This result is not too surprising to this commentator.   As I mentioned last June when cert was granted, "[the Supreme Court's] past decisions over the years on the question of patentable subject matter, however, tend to avoid bright line standards and lean towards a more liberal scope of patentable subject matter, but certainly don’t embrace the scope of “anything under the sun made by man” as the Court once suggested.
The following quotations are from the syllabus and/or opinion of the Court and reflect the Court's holding. 

• "The machine-or-transformation test is not the sole test for patent eligibility under §101. The Court’s precedents establish that although that test may be a useful and important clue or investigative tool, it is not the sole test for deciding whether an invention is a patent-eligible “process” under §101."

• "[T]he Federal Circuit incorrectly concluded that this Court has endorsed the machine-or-transformation test as the exclusive test. Recent authorities show that the test was never intended to be exhaustive or exclusive."

• "Section 101 similarly precludes a reading of the term “process” that would categorically exclude business methods. The term “method” within §100(b)’s “process” definition, at least as a textual matter and before other consulting other Patent Act limitations and this Court’s precedents, may include at least some methods of doing business."

• "Section 273 thus clarifies the understanding that a business method is simply one kind of“method” that is, at least in some circumstances, eligible for patenting under §101."

• "This Court’s precedents establish that the machine-or transformation test is a useful and important clue, an investigative tool, for determining whether some claimed inventions are processes under §101. The machine-or-transformation test is not the sole test for deciding whether an invention is a patent-eligible “process.”

• "[I]n deciding whether previously unforeseen inventions qualify as patentable “process[es],” it may not make sense to require courts to confine themselves to asking the questions posed by the machine-or-transformation test."

• "Even though petitioners’ application is not categorically outside of §101 under the two broad and  textual approaches the Court rejects today, that does not mean it is a “process” under §101."

• "Rather than adopting categorical rules that might have wide-ranging and unforeseen impacts, the Court resolves this case narrowly on the basis of this Court’s decisions in Benson, Flook, and Diehr, which show that petitioners’ claims are not patentable processes because they are attempts to patent abstract ideas. Indeed, all members of the Court agree that the patent application at issue here falls outside of §101 because it claims an abstract idea."

• "The concept of hedging, described in claim 1 and reduced to a mathematical formula in claim 4, is an unpatentable abstract idea, just like the algorithms at issue in Benson and Flook. Allowing petitioners to patent risk hedging would preempt use of this approach in all fields, and would effectively grant a monopoly over an abstract idea."

• "Petitioners’ remaining claims are broad examples of how hedging can be used in commodities and energy markets. Flook established that limiting an abstract idea to one field of use or adding token post solution components did not make the concept patentable. That is exactly what the remaining claims in petitioners’ application do."

• "Today, the Court once again declines to impose limitations on the Patent Act that are inconsistent with the Act’s text. The patent application here can be rejected under our precedents on the unpatentability of abstract ideas. The Court, therefore, need not define further what constitutes a patentable “process,” beyond pointing to the definition of that term provided in §100(b) and looking to the guideposts in Benson, Flook, and Diehr."

• "And nothing in today’s opinion should be read as endorsing interpretations of §101 that the Court of Appeals for the Federal Circuit has used in the past."

More to come regarding the concurring opinions of Justice Stevens (joined by Justices Ginsburg, Breyer and Sotomayor) and Justice Breyer (joined by Justice Scalia) in a later post.



[Many thanks to Randall Berman, an associate with Dorsey & Whitney, for his assistance in quickly preparing this post]

Reflections On The Erosion of Method Claims

It wasn’t that long ago that patent practitioners held the view that means-plus-function claims were the broadest and best way to protect an invention. Over time, many learned (the hard way) that this isn’t true anymore. With means-plus-function claims being construed narrowly in view of the specification, it became increasingly popular to include method claims to cover the process taking place in the described apparatus. After all, what could be better than not being limited by any structural limitations? Well, as it turns out, the last couple of years have not been particularly kind to method claims.

Patentable Subject Matter:

Today the Supreme Court is hearing oral argument in Bilsky, a case that many feel will significantly redefine the scope of patentable subject matter for method claims. (And providing motivation for today's musings.) Bilsky is the culmination of at least a two year trend at the Federal Circuit where 35 U.S.C. 101 has been increasingly applied as the basis for denying patent protection for claims directed to methods. The Federal Circuit's now infamous “machine or transformation test,” set forth in Bilsky represents a considerable narrowing of patentable subject matter for methods. Clearly, those post-State Street feel good days for business method patents are behind us for the moment. But, Bilsky and Section 101 is a subject all its own (and the subject to countless other posts and articles), so lets move on to some other issues.

Infringement of Method Claims

Divided Infringement:
Last year, in Muni-Auction v. Thomas, 532 F. 3d 1318 (Fed Cir. 2008) the Federal Circuit addressed the issue of infringement of a method claim when two or more entities were required to act in order to perform all of the steps of a claimed method. In the patent in dispute in Muni-Auction “at least the inputting step of claim 1 is completed by the bidder, whereas at least a majority of the remaining steps are performed by the auctioner’s system.” Id. at 1328. In finding that there was no direct infringement (and therefore no predicate for third party liability based on inducement or contributory infringement) the Federal Circuit looked to the relationship between the bidder and the auctioner. The court held that:

Accordingly, where the actions of multiple parties combine to perform every step of a claimed method, the claim is directly infringed only if one party exercises “control or direction” over the entire process such that every step is attributable to the controlling party, i.e., the “mastermind.” [Citation omitted] At the other end of this multi-party spectrum, mere “arms-length cooperation” will not give rise to direct infringement by any party.

* * *
Under BMC Resources, the control or direction standard is satisfied in situations where the law would traditionally hold the accused direct infringer vicariously liable for the acts committed by another party that are required to complete performance of a claimed method.

Although the holding in Muni-Auction is consistent with earlier cases on the issue of divided infringement, such as BMC Resources v. Paymentech, L.P., 498 F.3d. 1373 (Fed. Cir. 2007), this decision seems to raise the bar regarding the nature of the relationship required in order to find liability under a “divided infringement” theory. Under Muni-Auction, to establish infringement of a method claim under a divided infringement theory, one must not only show that the entities involved perform all of the steps within the scope of the claim, but must also establish a close legal relationship among those entities.

Steps performed Abroad:

In August, an en banc Federal Circuit addressed whether a method claim could be infringed under 35 U.S.C. 271(f). The Court held that “because one cannot supply the step of a method, Section 271(f) cannot apply to method or process patents.” Cardiac Pacemakers v. St. Jude Medical, 2007-1296 (Fed. Cir., August 19, 2009). The court further held that “271(f) does not encompass devices that may be used to practice a patented method.” Id. at 30. Thus, a device built in the United States that is capable of performing a patented method, but does not actually perform that method in the United States, does not infringe a claim to the patented method under 35 U.S.C. 271(a) or (f). Again, without direct infringement, there is no basis for assertions of third party liability based on threats of inducement or contributory infringement.

Going back a few years, in NTP v. Research in Motion, the Federal Circuit held that “a process cannot be used ‘within’ the United States as required by section 271(a) unless each of the steps if performed within this country.” 418 F.3d 1282, 1318 (Fed. Cir. 2005)(en banc)(emphasis added). In contrast, the Court also held that “use of a claimed system under section 271(a) is the place at which the system as a whole is put into service, i.e., the place where control of the system is exercised and beneficial use of the system obtained.” Id. at 1317 (emphasis added). Unlike the method claim, for the system claim, the Federal Circuit upheld the finding of infringement even though one component of the claimed system was not present in the United States.

Conclusion

Whether the Supreme Court limits or expands the scope of patentable subject matter in Bilsky, it is apparent that the scope of method claims have already been limited. For those who thought (or just hoped) that method claims were the next best thing since means-plus-function claims…well, just like with means-plus-function claims, this was a good theory put to rest by subsequent case law. Its now time to adapt again.


Common Sense Practice Note: Things that today are considered "conventional wisdom" may not always have been considered "conventional" in the past, and may not always be considered "wisdom" in the future. For patent practitioners, the best strategy remains timeless - keep applying for claims of varying format, varying subject matter and varying scope, since one never knows what tomorrow may bring.

Bilsky Taken Up By Supreme Court

Will the Scope of Patent Eleigible Subject Matter be Redefined?

In a decision that is viewed as a bit of a surprise to many, the Supreme Court has granted certiorari in Bilsky v. Doll, U.S. No. 08-964, to review the en banc Federal Circuit decision which held that “[a] claimed process is surely patent-eligible under §101 if it is (1) ties to a particular machine or apparatus, or (2) it transforms a particular article into a different state or thing.” (In re Bilsky, 545 F.3d 943 (Fed. Cir. 2008))

The Bilsky decision, which appears to define a bright line test for patent eligible subject matter, fails to provide guidance in some important areas. For example, is a general purpose computer operating with unique software a “particular apparatus”? Also, can the transformation of data alone qualify as “transform[ing] a particular article into a different state or thing"? With these questions unanswered, the impact of Bilsky’s “machine-or-transformation” test has been most significant in the software and business method sectors, with §101 rejections being more common from the USPTO and §101 now being a real and viable defense in patent litigation. Indeed, the court in the Middle District of Florida just recently invalidated an asserted patent under 35 U.S.C. § 101 in the case of Every Penny Counts, Inc. v. Bank of America Corp., 07-CV-0042.

The Supreme Court agreed to hear two questions:

(1) Whether the Federal Circuit erred by holding that a “process” must be tied to a particular machine or apparatus, or transform a particular article into a different state or thing (“machine-or-transformation” test), to be eligible for patenting under 35 U.S.C. §101, despite this Court's precedent declining to limit the broad statutory grant of patent eligibility for “any” new and useful process beyond excluding patents for “laws of nature, physical phenomena, and abstract ideas.”

(2) Whether the Federal Circuit's “machine-or-transformation” test for patent eligibility, which effectively forecloses meaningful patent protection to many business methods, contradicts the clear Congressional intent that patents protect “method[s] of doing or conducting business.” 35 U.S.C. §273.

Where will this lead? Good question. The Supreme Court has not been particularly kind to patent owners and broad patent rights in its recent decisions. Then again, the Supreme Court has not been particularly kind to the Federal Circuit either. Its past decisions over the years on the question of patentable subject matter, however, tend to avoid bright line standards and lean towards a more liberal scope of patentable subject matter, but certainly don’t embrace the scope of “anything under the sun made by man” as the Court once suggested. Merely taking the case, however, means that a definitional moment in the area of patentable subject matter is likely on the horizon. Now, its time for the waiting to begin and for the amici to enter the fray.