Your Cheat Sheet to the Bilski IP Supreme Court Case

Earlier this week we took a look at the impact of the Supreme Court’s decision in Bilski v. Kappos on the technology sector.  Today I had the privilege to listen in to a conference with several experts on the field of intellectual property law and learned several invaluable lessons about the implications for investors in light of the Courts decision in Bilski v. Kappo.

The panels’ moderator, John Duffy, the Moderator of the panel and a Professor of IP Law at George Washington Law School asserted that this is already “the leading case on patentable subject matter.”

Here is a guide to help investors prepare for some of this decision’s future consequences:

  • The entirety of the panel agreed that Bilski breeds far more uncertainty than it does clarity.  Most unclear is how precisely to define an “abstract idea” which is now the key limiting principle when it comes to the patentability of processes.  The court basically suggested that this will be met on a case-by-case basis (for all those future lawyers out there reading this blog, take note and RUN towards IP law!).
  • There could be increased activity in secondary markets for some patents now that there is certainty to the fact that business methods are not categorically excluded from the patent process.
  • With the present construct of the court, it is plausible that in the not too distant future there could be consensus to fully get rid of the patentability of business methods, or at the very minimum, consensus amongst the court to exclude a certain subset of methods from patentability.
  • Generally speaking, when the US Patent and Trademark Office grants a patent, there is a presumption of validity.  In light of this case, the experts agree that there will in fact be some granted patents that are ruled invalid in the future, and in the process, defeating the presumption of validity.
  • While the machine-or-transformation test was deemed an invalid rule for the patentability of a process, the experts agree that it will still play some sort of role moving forward.  At minimum it will serve as a clue to patentability.  The door is not effectively shut on the machine-or-transformation test despite the Court’s ruling otherwise.
  • This decision opens the door for patent trolls to continue attempting to earn money via litigation now that there is some clarity that business methods are in fact patentable.
  • It ultimately remains to be seen what impact this case will have on innovation.  On the one hand, the case does not categorically exclude business methods, on the other it is completely lacking in clarity and leaves much room for future litigation and inconsistent interpretation.  How are innovators and investors in innovation to know precisely what rights they have?  And how are open source innovators to know whether they are building their own ideas on top of patentable or unpatentable subject matter?
  • As an interesting aside, Mr. Duffy suggested that the increase of patent applications in using the machine-to-transformation test for processes is a result of the expansion of engineering into other fields, including finance.  He cited the fact that engineering departments now have finance subdivisions, amongst other areas, as leading to a more engineering oriented approach to innovation in other areas.  This sheds some light on an important trend in the technological and financial space.

Panelists included Charles Kwalwasser, In-house Counsel at Barclays Capital (NYSE:BCS), Michael Sandonato, Partner at Fitzpatrick Cella, Stephen Schreiner, Partner at Goodwin Procter, and Charles Macedo, Parter at Amster, Rothstein & Ebenstein.