There’s not much love in legal circles for the so-called “business method” patent, an exclusive intellectual property right over a novel way of doing business. Critics of such patents – think Amazon “One Click” or Priceline’s “name your own price” patents – argue that they clog up the United States Patent and Trademark Office, lead to excessive litigation and have little connection to real, physical invention.
Now the patent law community is closely watching one case in particular and speculating that federal judges could invalidate business method patents sometime this year. The case, generally known as re Bilski, involves a method for managing the risk of bad weather to crops by making hedged trades in the commodities markets. The 12 judges of the United States Court of Appeals for the Federal Circuit have agreed to hear the case en banc, or in a single joint session in May, and have suggested that they might reconsider the ruling on State Street Bank & Trust Co. v. Signature Financial Group Inc., which helped to inaugurate the age of business method patents a decade ago.
“Bilski will be a closely followed appeal, as the Federal Circuit may be looking to overturn past precedent,” says patent litigator Alan Fisch of Kaye Scholer, a law firm in Washington. “This case has the potential to end business method patents as we know them today.”
Another patent expert, Kevin Rivette, the former vice president for intellectual property strategy at I.B.M., thinks Bilski could wind up before the Supreme Court, which has recently shown a willingness to correct the excesses of an overburdened patent office. “I think this is the unraveling of business method patents, yes. I think there is a process we are going to go through to get there and the Supreme Court is going to be the one that decides it,” he said.
The death of business method patents could be felt strongest in Silicon Valley, where a first step of many entrepreneurs is to retreat with lawyers to start patenting defensible business ideas. It could also affect patent acquisition firms such as Intellectual Ventures, a firm financed by major technology companies like Microsoft, Google, Intel, Apple and Nokia, that is aggressively accumulating patent portfolios.
Other recent coverage of Bilski and its potential impact can be found here and here.
But not everyone agrees business method patents are doomed. Greg Aharonian, editor of the Internet Patent News Service, reels off a number of reasons that judges may reject the claims in Bilski without damaging the patent class as a whole, including a law passed by Congress that protects prior use rights for business methods.
But perhaps his best argument is this one: “Definitions of business method patents always end up being circular,” he said. “You can’t really ban something unless you can define it and no one is offering a definition we can use.”
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