The Bilski Tea Leaves: Which Way Will They Go?

1. TJSTEL Symposium March 19, 2010 The Bilski Tea Leaves: Which Way Will They Go? Ahmed J. Davis Fish & Richardson, P.C. www.fr.com

2. What Is All the Fuss? • If commercially viable technology (computer-based, machine-based and transforming methods) is patentable – who cares about the Bilski results?

3. Software, Internet and Computer Industries • Standard – Process claims directed to software must satisfy the machine-or-transformation test and the guidelines • Claims directed to software directed to the operating system are likely tied sufficiently to a “machine” • Claims directed to rendering data in a visual depiction of a physical object should be sufficiently tied to “transforming” • Gray areas: • Claim involving a general-purpose computer or • Claims tied to a computer only for data-gathering steps, mathematical calculations or the display of results

4. Biotech and Pharma Industries • Same standard – Process claims directed to a research method, medical procedure or diagnostic testing must satisfy the machine-or-transformation test • Claims directed to observing blood levels of amino acid and deciding whether there is a vitamin deficiency – (maybe) valid process – Metabolite (2006) • Claims directed to method for selecting appropriate immunization schedules – invalid process – Classen v. Biogen (Fed. Cir. 2008) • Claims directed to methods of inhibiting gene expression – invalid under § 112 – Ariad v. Lilly (Fed. Cir. 2009) • Claims directed to optimizing pharmaceutical therapeutic efficacy – valid process – Prometheus v. Mayo (Fed. Cir. 2009)

5. IP Associations, Professors, etc. • “Machine or transformation” test is too limiting – what about the next “flux capacitor”? • No reason to limit advancements to “machines” or physical “transformations” • “Usefulness” is the touchstone -“To promote the progress of science and useful arts, by securing for limited times to authors and inventors the exclusive right to their respective writings and discoveries.” • - U. S. Const. Art. 1, § 8, clause 8.

6. Bilski Risks Disrupting Settled Expectations • In her dissent, Judge Newman (Fed. Cir.) observed: “The court today acts en banc to impose a new and far-reaching restriction on the kinds of inventions that are eligible to participate in the patent system. . . . Its impact on the future, as well as on the thousands of patents already granted, is unknown. . . . Uncertainty is the enemy of innovation. These new uncertainties not only diminish the incentives available to new enterprise, but disrupt the settled expectations of those who relied on the law as it existed.’” Bilski, 545 F.3d at 976 (Newman, J. dissenting)

7. Supreme Court Oral Argument:What Happened To Stable Rules? • JUSTICE SOTOMAYOR: How about if we say something as simple as patent law doesn’t cover business matters… • JUSTICE SCALIA: Also you could say business methods apart from machines are not patentable. How about that? • JUSTICE GINSBURG: Isn’t that the basis on which the patent law rests in Europe, in other countries? They do not permit business method patents. It has to be tied to technology, to science or technology. So if other systems are able to work with the notion of technology-based, why not ours? • No Supreme Court Justice echoed Judge Newman’s concern for the settled expectations of IP owners

8. Supreme Court Oral Argument:What Happened To Stable Rules? • JUSTICE SOTOMAYOR: Do you think that there is some benefit to society from patenting a method to cure someone that involves just human activity, as opposed to some machine, substance or other apparatus to help that process? • JUSTICE GINSBURG: If you read Judge Mayer’s opinion, it has a simplicity to it. It says, if it’s technology, then its within the realm of patent, and if its not technology, it isn’t. If it’s based on science or technology, and that seems to be what is used in other places? • JUSTICE SOTOMAYOR: So help us with a test that doesn’t go to the extreme that the Federal Circuit did, which is to preclude any other items, something we held open explicitly in two other cases, so we would have to backtrack and say now we are ruling that we were wrong, and still get at something like this? • Supreme Court Justice echoed Judge Newman’s concern for the settled expectations of IP owners

9. Horse whisperers – really? JUSTICE SCALIA: You know, you mention that there are all … these new areas that didn't exist in the past because of modern business and what-not, but there are also areas that existed in the past that don't exist today. Let's take training horses. Don't you think that -- that some people, horse whisperers or others, had … some insights into the best way to train horses? And that should have been patentable on your theory. MR. JAKES: They might have, yes. JUSTICE SCALIA: Well, why didn't anybody patent those things? MR. JAKES: I think our economy was based on industrial process. JUSTICE SCALIA: It was based on horses, for Pete's sake. You -- I would really have thought somebody would have patented that.

10. Are You On the Wrong Side of First Street? • JUSTICE BREYER: Well, if you leave something out, Congress can put it back in, tailoring the protection to what they feel is necessary…

11. Congress has never acted to limit earlier “everything under the sun made by man” jurisprudence despite the Supreme Court’s invitation to do so in Chakrabarty and Flook: IP Owners Are Entitled To RelyOn Congressional Silence “The choice we are urged to make is a matter of high policy for resolution within the legislative process after the kind of investigation, examination, and study that legislative bodies can provide and courts cannot.” Chakrabarty, 447 U.S. at 317 “Difficult questions of policy concerning the kinds of programs that may be appropriate for patent protection and the form and duration of such protection can be answered by Congress on the basis of current empirical data not equally available to this tribunal.” Parker v. Flook, 437 US 584, 595 (1978).

12. IP Owners Are Entitled to Rely OnCongressional Endorsement Of Business Methods • What the Federal Circuit said in 1998: “We take this opportunity to lay [the] ill-conceived [business method] exception to rest.” State Street Bank & Trust Co. v. Signature Financial Group, Inc., 149 F.3d 1368, 1373 (Fed. Cir. 1998) • In response, Congress specifically contemplated that there existed a class of “business method” patents and chose not to outlaw them but instead to provide additional defenses to infringement for such patents. • In 1999, Congress specifically added Section 273 – a personal “prior user” defense to infringement – (when the use is not also invalidating prior art) • This defense applies ONLY to method claims where the term “method” means “a method of doing or conducting business” • Petitioner raised this point in oral argument, but it received no traction with the Justices

13. End of Presentation