Chicago IP Attorney & Lawyer : R. David Donoghue : Chicago IP Litigation Blog

This post comes more than a week after the Supreme Court decided Bilski.  Last Monday when the decision came down I was struggling with what value I could add to the many reports that would fill the intellectual property blogosphere, and was leaning towards waiting a few days (which also allowed me to deal with various client commitments and new opportunities).  Then a good friend praised me for being the lone IP blog who had not said a word about Bilski on the day of the decision, after receiving an email of the blog's content for the day.  That comment cemented it for me.  I decided to give myself some time to think about the decision before posting here.  Of course, that means that much of what can be said already has been.  So, links to many excellent commentaries are below. 

At its heart, the Bilski decision continues the Supreme Court's patent law trend moving away from bright line rules and allowing the flexibility to adapt the law to future situations.  The business method in Bilski was struck down, but the Court did not strike down all business methods.  And the justices made clear that the machine-or-transformation test was not the only option for determining patentability, increasing the law's flexibility even more.  Having preserved at least some business methods, the Court obviously left software patents intact as well.  So, Bilski was not the death of business methods or software.  And just as after KSR (obviousness) and eBay (injunction standard), the decision injects uncertainty into the law that will take 18 - 24 months to sort out, first in the district courts and then more slowly in the Federal Circuit.  The one thing you can be sure of is that you will see lots of Bilski-based motions over the next year.  And I am sure I will be writing about Northern District Bilski decisions during that time.

Here is some of the commentary from across the blogosphere:

• 271 Patent Blog; 
   
• Chisum's Notes on Bilski;
   
• Filewrapper (noting that the Supreme Court issued grant, vacate and remand orders in two business method cases assuring we will get some realtively quick Federal Circuit guidance on the outlines of Bilski);
   
• IPWatchdog (arguing, among other things, that even in the post-Bilski world one could write claims that would capture Bilski innovation);
   
• New York Times Bits Blog (looking at the uncertainty the decision injects into litigation);
   
• Patent Docs (looking at Bilski's impact upon biotech patents);
   
• Patently-O (and here, here, here and here); and
   
• WSJ Law Blog.

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Tomorrow, January 12, at noon, I will be participating in a panel discussion of the Bilski case as we await the Supreme Court's decision that could significantly change patentability of business method and potentially software patents.  Here is Northwestern's description of the panel:

Currently pending in the Supreme Court, the Bilski case stands to redefine the boundaries of what is patentable and has captured the attention of major software and technology giants like Microsoft and Google.  Practicing IP attorneys will discuss the potential ramifications of this case on patent law and the issues presented by patenting abstract business practices and innovations.
 

Joining me on the panel will be:
 

• Andrea Augustine from Foley & Lardner; and
   
• Thomas Donovan from Barnes & Thornburg.

The panel is open to the public, so please join us January 12 at noon in Northwestern Law's Room RB140.

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Heading into the long holiday weekend, here are several items that client responsibilities have prevented me from devoting full posts to:

• Next week, on December 28, new trademark rules go into effect that are intended to codify current PTO practice.  Click here for the excellent new Pittsburgh IP Law Blog's take on the new rules.  Welcome to the world of regional IP blogs.  I look forward to reading your local IP analysis.
   
• If you are looking for some top notch CLE or just want a broader view of the Bilski argument, check out Doug Lichtman's IP Colloquium where Lichtman and his UCLA students do a dramatic reading of the argument.  It is a great way to absorb the transcript and is an hour of free CLE.
   
• Congratulations to Mark Herrman of Jones Day and the Drug and Device Law Blog.  Herrman is leaving both the firm and the blog at the end of the month to take a senior litigation position with Aon.  Herrman will be greatly missed in the blogosphere.  Although I do not practice Herrman's area of law, Drug and Device Law is a must read blog for me because of both Herrman and his blogging counterpart Jim Beck of Dechert, who is continuing to write the blog.

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The Supreme Court heard oral argument in the Bilski case Monday afternoon.  Click here for a transcript of the arguments.  Here are a few of the highlights from Bilski's argument:

JUSTICE GINSBURG: But you say you would say tax avoidance methods are covered, just as the process here is covered. So an estate plan, tax avoidance, how to resist a corporate takeover, how to choose a jury, all of those are patentable?

MR. JAKES: They are eligible for patenting as processes, assuming they meet the other statutory requirements.

JUSTICE BREYER: So that would mean that every -- every businessman -- perhaps not every, but every successful businessman typically has something. His firm wouldn't be successful if he didn't have anything that others didn't have. He thinks of a new way to organize. He thinks of a new thing to say on the telephone. He thinks of something. That's how he made his money.

And your view would be -- and it's new, too, and it's useful, made him a fortune -- anything that helps any businessman succeed is patentable because we reduce it to a number of steps, explain it in general terms, file our application, granted?

MR. JAKES: It is potentially patentable, yes.

* * *

JUSTICE BREYER: So you are going to answer this question yes. You know, I have a great, wonderful, really original method of teaching antitrust law, and it kept 80 percent of the students awake. They learned things - (Laughter.)

JUSTICE BREYER: It was fabulous. And I could probably have reduced it to a set of steps and other teachers could have followed it. That you are going to say is patentable, too?

MR. JAKES:  Potentially.

And here are some of the highlights from the government's argument:

JUSTICE SOTOMAYOR: No ruling in this case is going to change State Street. It wasn't looking at process or the meaning of "process." It was looking at something else.

* * *
 

CHIEF JUSTICE ROBERTS: Mr. Stewart, I thought I understood your argument up until the very last footnote in your brief. And you say this is not --simply the method isn't patentable because it doesn't involve a machine. But then you say but it might be if you use a computer to identify the parties that you are setting a price between and if you used a microprocessor to calculate the price. That's like saying if you use a typewriter to type out the -- the process then it is patentable. I -- I -- it -- that takes away everything that you spent 53 pages establishing.

* * *

CHIEF JUSTICE ROBERTS: But if you look at your footnote, that involves the most tangential and insignificant use of a machine. And yet you say that might be enough to take something from patentability to not patentable.

MR. STEWART: And all we've said is that it might be enough; that is, hard questions will arise down the road as to where do you draw the line, to what extent must the machine or the transformation be central --

CHIEF JUSTICE ROBERTS: So you think it's a hard question. If you develop a process that says look to the historical averages of oil consumption over a certain period and divide it by 2, that process would not be patentable. But if you say use a calculator, then it -- then it is?

MR. STEWART: I think if it's simply using a calculator for its preexisting functionality to crunch numbers, very likely that would not be enough. But what we see in some analogous areas is that the computer will be programmed with new software, it will be given functionality it didn't have before in order to allow it to perform a series of calculations, and that gets closer to the line. And again --
 

CHIEF JUSTICE ROBERTS: Well, your footnote -- I don't mean to dwell on it -- it says to identify counterparties to the transactions. So that if what you're trying to get is the -- the baker who sells bread, because you are going to hook him up with the grocer who sells, you know, in the grocery store, if you punched in in your search station, you know, give me all the bakers in Washington, that would make it patentable?

MR. STEWART: Again, we are -- we are not saying it would be patent eligible. We would have to review those facts, and the PTO would have to review those facts in the context of an actual application.

I guess the point I'm trying to make is simply that we don't want the Court, for instance, in the area of software innovations or medical diagnostic techniques to be trying to use this case as the vehicle for identifying the circumstances in which innovations of that sort would and would not be patent eligible, because the case really doesn't present any -- any question regarding those technologies. And therefore, we --

If those highlights, left you wanting more, check out the following posts that give some additional context to the cold transcript or read the tea leaves, as we all wait for a decision, likely this spring:

• 271 Patent Blog
   
• IPWatchdog (and here)
   
• Patent Docs
   
• Patently-O (and here)
   
• The Prior Art
   
• WSJ Law Blog

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The Supreme Court hears oral argument today in Bilski v. Kappos.  The Court will decide the proper test for Section 101 patentability and will either decide or at least significantly impact the patentability of software and business method patents.  Here are the questions presented:

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.

For more on the history of both the Bilski case, check out my recent article with my colleague Mike Grill in the Northwestern Journal of Technology and Intellectual Property.  Patently-O has compiled the amicus briefs -- click here for the briefs supporting Bilski or neither party, and here for the briefs supporting the government.  The briefs supporting the government include a brief by a group of Internet Retailers that, I am proud to say, cites my law review article arguing for an even application of the Twombly pleading standard as to both patent plaintiffs and patent defendants -- click here for the amicus brief and here for my article from the John Marshall Review of Intellectual Property Law.

Click here for the SCOTUSBlog's preview of the argument.  For post-argument CLE options, click here for a list of courses compiled by Patent Docs and here for information on a CLE from IPWatchdog's Gene Quinn, who plans to attend oral arguments.

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Here are a few stories from the blogosphere that I did not have time to fully cover this week because of pressing client matters and some new opportunities:

• The Federalist Society is offering an excellent podcast discussing Bilski from almost every possible angle.  The podcast features West Virginia University Law Professor Michael Risch and American University Law Professor Joshua Sarnoff, who filed competing amicus briefs.  The podcast is a half-hour well spent for  anyone involved in patent law.  Click here to listen to the podcast.  Hat tip to Duncan Bucknell at the IP Think Tank Blog for pointing out the podcast.
   
• Doug Lichtman's IP Colloquium takes a thorough look at the copyright issue of the year thus far, Shepard Fairey's iconic Obama image, and Lichtman offers free CLE credit for listening.  Click here for that edition and here for the IP Colloquium's archives.
   
• Michael Atkins has identified the top five trademark cases of the last year at the Seattle Trademark Lawyer.  Number 4 is the Seventh Circuit's decision in AutoZone v. Strick.  Click here for more on the district court decisions in the case from the Blog's archives.  This is what Atkins had to say about the Seventh Circuit's decision:

[G]ood likelihood of confusion analysis in reversal of hard-fought trademark infringement case, which also was one of the first dilution cases under the [Trademark Dilution Revision Act].

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Here are several stories to start your Monday morning with that I was not able to get to last week because of client commitments and some new business opportunities:

• The first round of Bilski briefing has been filed  with the Supreme Court.  Click here for links to the various amici briefs at Patently-O, and here for an analysis of Bilski's opening brief at BlawgIT.
   
• Victoria Pynchon has an important warning for IP litigators about understanding a client's insurance coverage at her IP ADR Blog -- click here to read the story and here to check out Pynchon's husband's new Catastrophic Insurance Coverage Blog.  The blog appears to be a good read, but more importantly IP litigators should make sure that they investigate client's insurance policies early in a case.
   
• William Patry has a new copyright-related blog, Moral Panics and the Copyright Wars.  It is a companion to his book of the same name, which is excellent.  I had the privilege of receiving an advance copy, which I loved.  I will post a review soon.  For now though, click here for Patry's first post on the new blog.
   
• Finally, last Friday, as they were headed into the August recess the Senate confirmed David Kappos as the next Director of the PTO -- click here for the PTO's press release.

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The patent blogosphere loves a cert grant in a patent case.  A patent case pending before the Supreme Court gives months of blog material and lots to debate, not to mention months of law review articles like the one I have slated for publication later this summer.  So, it is no surprise to see some strong commentary lighting up the patent blogs.  Here are two of the most thorough and interesting:

• Patent Docs (predicting that the Supreme Court moves away from the Federal Circuit's "bright line" machine-or-transformation test and questioning whether the Court will address the patentability of diagnostic method claims as raised in Justice Breyer's dissent from the Court's dismissal of Cert in Labcorp v. Metabolite); and
   
• The Prior Art (handicapping the Supreme Court's eventual decision, including a brief look at  appointee Judge Sotomayor's potential impact on the decision).

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Earlier today, the Supreme Court granted cert in Bilski, the Federal Circuit's en banc decision limiting the patentability of business method and software patents.  Many commentators are predicting that the Supreme Court will further restrict business method and software claims through the machine or transformation test, although it is hard to imagine that either type of claim will be completely eliminated.  Of course, the Supreme Court could also move the law back toward the  State Street decision allowing business methods and software to be patented more freely.  The questions presented are:

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.”

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.

For more takes on the cert decision and its implications, check out:

• 271 Patent Blog;
   
• IPWatchdog;
   
• Patently-O;
   
• SCOTUS Blog; and
   
• WSJ Law Blog.

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The legal blogosphere is full of analysis and commentary regarding the Patent Reform Act, here is more of the best:

• FileWrapper;
   
• Patent Baristas (surveying industry responses to the Act);
   
• Patent Docs (discussing the witness list for Patent Reform Act hearings);
   
• Patently-O (damages provisions analysis), and here and here;
   
• Washington State Patent Law Blog.

And the Bilski amicus briefs began coming into the Supreme Court today.  Click here for Dennis Crouch's post with links to many of the amicus briefs.  And here for Crouch's post discussing the PTO's Bilski guidance to Examiners.

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Please join me this Friday, March 6 for the Northwestern Journal of Technology & Intellectual Property's annual symposium.  I will be moderating a debate over whether business methods should be patentable in light of the recent Bilski decision.  McDonnell Boehnen's Bob Irvine will argue for business methods and Knobbe Martens' Lauren Katzenellenbogen will argue against.  If that debate is not enough to get you to the Symposium, here is a sampling of the other excellent presentations:

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Last fall, the Federal Circuit issued an en banc decision in In re Bilski, holding that the “machine-or-transformation test” was the only test for determining whether a claimed process was eligible for patenting pursuant to § 101. The decision required that a process either:  1) be tied to a particular machine or apparatus; or 2) transform an article into a different state or thing.  The Federal Circuit affirmed the PTO's rejection of Bilski's claimed method of hedging the risk of bad weather through commodities trading as lacking patentable subject matter.  The Federal Circuit held that the method failed the machine-or-transformation test.  Click here for the Federal Circuit decision.

Earlier this week, Bilski petitioned the Supreme Court for a writ of certiorari to consider the following two issues:

 

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 … 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.”

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.

Click here to read the petition.  Pursuant to Supreme Court procedural rules, amici briefs are due at the end of February, although the PTO can seek an extension.

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Making good on his promise to turn his IP Colloquium into National Public Radio for IP law, Doug Lichtman's newest offering is an extended interview with Federal Circuit Chief Judge Michel.  Click here to listen to Licthman's interview, you can even apply for New York or California CLE credit after listening.  Here are some of Judge Michel's more interesting observations:

• Petitions for rehearing are too often "shallow and weak."
   
• Votes denying en banc rehearings are often close, making the poor petitions for rehearing especially surprising and disappointing. 
   
• Parties interested in supporting cases with amicus briefs should consider filing briefs supporting rehearing petitions.  An amicus brief that was both well researched and well written could play an important role in strengthening a case's en banc potential and tipping close votes for rehearing. 
   
• In re Bilski did not answer all of the 101 questions because not all of the questions were raised in the case or ripe for consideration.  It will take a series of 101 cases to flesh out the post-Bilski state of the law.
   
• Judge Michel is hopeful that the new patent jury instructions -- click here to read the Blog's post about them -- will help bring some clarity and continuity to, among other things, damages and obviousness instructions, although at the time of the interview it appeared that he had not seen the instructions yet.
   
• The Doctrine of Equivalents has almost "dried up."

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This week's Blawg Review #185 is up at Duncan Bucknell's IP Think Tank -- click here to read it.  It will be no surprise to Bucknell's readers (including me) that his theme is global intellectual property.  Of course, Bucknell focuses on the Bilski decision -- for example, IP Blawg and IP Spotlight.  Bucknell also looks at some posts regarding how the changing administration will impact IP law, including two posts from Patent Docs (click here and here) and the IAM Blog.

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The Bilski analyzers are moving away from the opinion itself, and toward the practical impacts of the decision and the unanswered questions it left, as opinions always do.  Here are several of the best:

• 271 Patent Blog (asking whether a method for swinging on a swing meets the Bilski standard);
   
• FileWrapper;
   
• Maryland IP Law;
   
• Patently-O (and here and here and here and here); and
   
• The Prior Art.

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In re Bilski, __ F.3d __ (Fed. Cir. 2008) (en banc).*

Chief Judge Michel, writing for a nine judge majority, affirmed the Board of Patent Appeals and Interferences' finding that Bilski's invention -- a commodities trading method for hedging risks -- did not meet the 35 U.S.C. § 101 patentable subject matter requirement.  The Federal Circuit held that State Street's "useful, concrete, and tangible result" test was insufficient to determine patentability -- disagreements have already started regarding whether State Street was narrowed or overturned.  The Federal Circuit held that the Supreme Court's "machine-or-transformation" test was the only test for determining patentability:

A claimed process is surely patent-eligible under § 101 if: (1) it is tied to a particular machine or apparatus, or (2) it transforms a particular article into a different state or thing.

I found Judge Dyk's concurrence tracing the history of the "machine-or-transformation" test back to the Patent Act of 1793 especially interesting:

In fact, the unpatentability of processes not involving manufactures, machines, or compositions of matter has been firmly embedded in the statute since the time of the Patent Act of 1793, ch. 11, 1 Stat. 318 (1793).

As with any major appellate decision, we will need eighteen to twenty four months of district court and Federal Circuit decisions to flesh out and fully understand Bilski's implications.  While we argue those cases and await the decisions, there will be plenty of law review and blog analysis.  Here are some of the first (I will update with additional posts as they come):**

• 271 Patent Blog (glad to see Peter Zura back in the blogosphere);
   
• IP ADR Blog;
  
  
• Likelihood of Confusion;
  
  
• Patent Baristas;
   
• Patently-O (with Crouch's usual, in-depth analysis);
   
• The University of Chicago Law Faculty Blog (Randy Picker has an exceptionally detailed take on the opinion); and
   
• WSJ Law Blog (saying experts are torn as to whether Bilski will make it to the Supreme Court).

*  Click here for the opinion.

**  I have updated the list of Bilski blog posts with some new ones.

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