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Which innovations deserve patents? Supreme Court gives scant direction.

In a decision Monday about patent protections, the Supreme Court failed to give specific guidance about which innovations qualify and which don't.

By Staff writer / June 28, 2010



Washington

In a closely watched case with implications for the American economy, the US Supreme Court on Monday declined to sharply limit patent protection to inventions tied to machines and transformative processes.

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Instead, the justices pushed aside a restrictive test established by a federal appeals court, but failed to follow up with the kind of specific guidance many industry experts have long desired.

With this action, the high court restored the status quo, and along with it, a continued level of uncertainty among innovators.

“Today, the court once again declines to impose limitations on the Patent Act that are inconsistent with the act’s text,” Justice Anthony Kennedy wrote for the court. He made the statement as the court rejected a specific patent application for a business process, but for a different reason than cited by the lower court.

Many analysts had hoped that the court would use the case to precisely define which innovations deserve the protection of a patent and which do not. Speculation about the case was driven in part because the opinion had been pending for so long. The case, Bilski v. Kappos, was argued on Nov. 9.

Monday’s decision stems from the failed attempt of Bernard Bilski and Rand Warsaw to obtain a patent for an innovation they called Energy Risk Management Method.

The two men devised a strategy that would enable large-volume energy commodity consumers and the producers of those commodities to hedge against sharp swings in the commodity price. The Bilski-Warsaw method used a mathematics formula to calculate midlevel price ranges between buyers and sellers that would cushion price increases or decreases.

The US Patent and Trademark Office rejected Mr. Bilski’s patent application. The innovation was not tied to a particular machine, the patent examiner concluded. Instead, it was more akin to an abstract idea because it involved solving a mathematical problem. Abstract ideas do not warrant patent protection, the examiner said.

On appeal, the full US Court of Appeals for the Federal Circuit ruled 9-to-3 that Bilski should not be awarded a patent. The court ruled that patent protection should be awarded only if the claimed innovation can satisfy a “machine-or-transformation” test.

The Federal Circuit said a patent applicant must be able to show that his or her innovation is tied to a particular machine or that the innovation transforms an article into a different state.

The ruling triggered substantial protest within the patent and trademark community and those innovators who rely on the protection. Critics said it would undercut advances in software design and biotechnology.

Section 101 says in part: “Whoever invents or discovers any new and useful process … may obtain a patent … subject to the conditions and requirements of this title.”

In 1981, the Supreme Court read that authorization broadly to embrace a wide range of innovations and discoveries.

The federal circuit court’s decision, in contrast, adopted a significantly narrower view of the scope of patent protection.

The Supreme Court sidestepped that approach. “Rather than adopting categorical rules that might have wide-ranging and unforeseen impacts, the court resolves this case narrowly,” Justice Kennedy wrote. He said the Bilski process was not worthy of patent protection because it amounted to an attempt to patent abstract ideas.

“All members of the court agree that the patent application at issue here falls outside [patent law] because it claims an abstract idea,” he said.

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