Business (Methods) As Usual: Bilski v. Kappos

The Supreme Court recently decided Bilski v. Kappos, a case that revisited the question of whether business methods are – or should be – patentable subject matter. In a 5-4 majority ruling, the Supreme Court affirmed the patentability of business methods, but rejected Bilski's patent claims as "attempts to patent abstract ideas."1

Business Method Patents
Protecting inventive processes with a method patent is unquestionably acceptable under U.S. patent law.2 The question with business method patents, such as e-commerce methods, banking methods, etc., has historically been whether they would provide patent rights to mere ideas. However, since 1998, business methods have been considered patentable so long as they produce a "useful, concrete and tangible result."3

“Business method patents are favored by startup companies, for whom such patents may form the initial core of their value, thus allowing them to acquire funding,” says Boyle Fredrickson shareholder Mollie Newcomb. As such, business method patents can be considered critical to incentivizing entrepreneurship, thus fulfilling the constitutional goal of U.S. patent law: "To promote the Progress of Science…by securing for limited Times to…Inventors the exclusive Right to their…Discoveries."4

However, many large companies, and especially established online businesses, such as L.L. Bean and Overstock.com, argue that the existence of business method patents gives rise to a multitude of claims that these companies at least partially infringe the rights of parties holding patents to various internet-related technologies.

Newcomb continues, “These parties are often ‘non-practicing entities’ – sometimes known as ‘patent trolls’ – who acquire patent rights but do not actually use the patented methods, instead seeking revenue from nuisance license fees and costly litigation.”

Bilski Decision

The test for determining whether a method patent claim rises above the level of mere abstraction has been the "machine or transformation" test, which inquires whether the method requires the use of a machine or has some transformative effect. The Supreme Court has not abandoned that test, and in fact agreed that it provides "a useful and important clue" to patent eligibility.5 However, the majority opinion also found that the machine or transformation test" is not the sole test for deciding whether an invention is a patent-eligible 'process'."6

Implications for Inventors

The United States Patent and Trademark Office reacted to the Bilski decision immediately, sending a memo to the patent examining corps with general guidance on how to examine business method claims in compliance with the decision.

“Essentially, the USPTO will continue to use the machine or transformation test to ensure patent eligibility and reject method claims that fail the test,” says Newcomb. “However, failure to meet that test will not be considered the final word. Rather, the applicant will have the opportunity to argue that the claims are not simply directed to an abstract idea.”

When applying for a patent on broad concepts that might be considered abstract, inventors and attorneys will need to consider the tests that will be applied during examination, and often, the manner in which the process will actually be implemented and be sure to claim the physical or technological components required.

Newcomb concludes “Our recent experience tells us that business method claims that are directed to a computer implemented method – one reciting computer hardware in the body of the claim and producing output of some sort – are not being rejected for lack of patentable subject matter.”

Be sure to consult your Boyle Fredrickson attorney for additional insight into Bilski v. Kappos and ask how the court’s latest ruling regarding business method patents may impact your business.

 

1Bilski et al. v. Kappos, 561 U. S. ____, ____ (2010) (slip op., at 13).
2"Whoever invents or discovers any new and useful process…may obtain a patent therefor…" 35 U.S.C. § 101.
3State Street Bank v. Signature Financial Group, 149 F.3d 1368, 1375 (Fed. Cir. 1998).
4U.S. Const. art. VIII, cl. 8.
5561 U.S. ____, ____ (2010) (slip op. at 8).
6Id.

In the June 26 edition of the Milwaukee Journal-Sentinel, Raymond Mercado argues against amending the Patent Reform Act to include a provision allowing for public challenges to the validity of new patents. Mercado is a doctoral student and author of “The Use and Abuse of Patent Reexamination: Sham Petitioning Before the USPTO.”

In his article, “Stop endless second-guessing; inventors need to know the government will protect them,” Mercado questions the Commerce Department’s claim that adding another layer of examination of newly-issued patents brought forth by the public would ensure only valid patents remain in existence, thus encouraging “industry to pay fair royalties for emerging technologies, while sparing it the expense of having to contend with frivolous patent lawsuits.”

According to Mercado, such re-examinations would be redundant and open the door to “additional fraud and abuse by those wishing to use intellectual property for free.” Mercado relates the hardships that inventors face when forced to wait for pending USPTO decisions regarding their re-examined patents. He states tying up competing patents in the re-examination process is a tactic used by those wishing to use patented technology without paying for them.

“Mercado shares an opinion held by many patent law enthusiasts,” comments Boyle Fredrickson shareholder James Boyle. “His contention that standards for re-examination need to be reevaluated, or at the very least enforced as they are currently written, is an argument that is gaining steam. Both sides of the re-examination argument believe their ideas of reform can help curtail the increasing patent backlog and ultimately spur innovation. However, with disparate opinions on how to best proceed with reform, it remains to be seen what changes come to fruition, at least in the short-term.”

For more information about the USPTO and the latest news in patent reform, contact your Boyle Fredrickson attorney.

Businesses Need to Develop and Adhere to Document Retention Policies

According to Boyle Fredrickson attorney Erin Fay, the vast majority of most companies’ business-related information is stored electronically, yet document retention and deletion policies are failing to fully account for most organizations’ documents.

“Recent data suggests more than 93 percent of all commercial documents are produced and stored on computers and never printed,” explains Fay. “Yet, only 62 percent of companies have a document retention policy in place, with only a third of those enforcing the policy.”

When a corporation, or individual, is faced with litigation, the law asserts a duty upon that entity to keep any and all relevant documents and data. Failure to properly preserve evidence can subject a party to extreme penalties, including dismissal of a lawsuit (if a plaintiff destroys evidence) or default judgment against a defendant. Other restrictive penalties can severely handicap a company’s ability to argue its case in the courtroom. It is important companies know and comply with the rules.

Knowing when to delete historical documents is as important as knowing when to retain documents. A strong document retention policy can help minimize litigation costs and lessen a company’s exposure of its business secrets.

“Creating and enforcing a document management policy that complies with electronic discovery rules will help to avoid costly, labor-intensive and time-consuming searches,” continues Fay. “It is usually more cost-effective to create a policy prior to litigation than search through an entire system in response to every discovery request.”

A comprehensive document retention policy should address:

1. what types of documents need to be retained
2. time when particular types of documents should be destroyed
3. how a company will respond to a “litigation hold” letter to preserve evidence.

Boyle Fredrickson attorneys are able to provide assistance with any questions about preservation, document management or retention policies.

Boyle Fredrickson Adds Costello, Kreger

Kyle Costello and Kevin Kreger have joined Boyle Fredrickson, Wisconsin’s largest intellectual property law firm, as practicing attorneys. With the addition of Costello and Kreger, Boyle Fredrickson now boasts 23 attorneys specializing in a wide range of intellectual property matters. The firm also employs 18 additional staff members that assist in serving the firm’s many clients.

“We have grown steadily since our founding more than 10 years ago, largely because we have attracted some of the best patent lawyers and support staff in Wisconsin,” says Boyle Fredrickson president Peter C. Stomma. “We are excited to welcome Kyle and Kevin, who are already providing good counsel to our clients.”

Year	2000	2005	2010
Employees	12	26	41

Baxter Profiled in Wisconsin Law Journal

Congratulations to Boyle Fredrickson shareholder and Board Member Keith Baxter, recently profiled by the Wisconsin Law Journal. The July 19, 2010 article includes reflections from Baxter on a variety of intellectual property and other legal matters. The article can be found by clicking here: http://www.wislawjournal.com/article.cfm/2010/07/19/IP-law-continues-to-create-challenges .