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This spring, a decision from the Supreme Court could overhaul our nation’s patent system in a way that discourages, rather than promotes the spirit of invention this country was founded upon. A decision in Bilski v. Kappos is expected to set forth exactly what inventions qualify as a patentable “process.” The ruling in this case may impact the current ability to patent processes such as software and methods of doing business, which, since the late 1990’s, have been two of the most active areas for patent applications due to the rapid growth and expansion of the Internet and computer-related technologies. Consequently, the outcome of Bilski could have severe economic repercussions in the tech industry.
Bilski, though, is just the latest attack on the patent system, and particularly, against individual inventors and start-up companies. Over the last 10 years, various assaults have been launched from within all three branches of government, usually under the benign guise of “patent reform.” The goal of these so-called reforms, rather than to make the system better, seems to be to impair the Constitutionally-guaranteed right to obtain a patent for one’s novel invention.
In 2001, for example, a proposal to raise the filing fees for certain patent applications from roughly $1,000 to over $100,000 was close to passage until 9/11 occurred. Since then and until the change of administrations, 50% of the fees raised by the Patent Office were continuously diverted to the military or other government agencies. This resulted in more than a doubling of the backlog to the now four to five years to process patent applications, which is significant because patents are not enforceable until they are processed and granted. There were also attempts to remove “small entity status” by which small companies and individual inventors pay 50% reduced fees to the Patent Office.
The Bilski case examines whether a process of leveraging commodity trades that reduce slosses from market price fluctuations is patentable. The Court’s decision, anticipated shortly, will extend beyond Bilski’s particular application and is expected to definitively establish whether a process that is implemented on a computer is itself patentable at all.
Section 101 of the Patent Laws define the elementary requirements for patentable subject matter, stating simply that whoever invents “a new and useful process, machine, manufacture, or composition of matter, or any new and useful improvement thereof, may obtain a patent…” The Supremes are specifically pondering whether “process” has any special requirements attached to it, although obviously none appear in the quoted statute itself.
The conservative majority on the bench seems intent on incorporating their interpretation of 18th century British common law into the basic requirements for patenting processes now in the U.S. In particular, they suggest that patented processes need to be tied to specific machines as the British arguably required at that time. They assert this is justifiable since that is the time and the system on which our patent system was initially established, regardless of the fact that our system was overhauled in 1952. They also seem inclined to rule that a specific machine must be something other than “a general purpose computer,” since software instructions alone allegedly do not provide any meaningful physical difference between machines.
If the Court were to rule along these conservatives lines, it could spell the end of software and business method patenting. While some would cheer this result, one should first consider whether Priceline.com, for example, would be a $9 billion company today if it didn’t have patents that protected its method for selling over the Internet from the outset? All of its major established competitors attempted to copy Priceline’s offering in one way or another during its fledgling stages.
So, what will it mean to future individuals and start-ups if this important type of protection is permanently eroded by the outcome of Bilski? In truth, when the patent system is allowed to function properly, it is largely the only hope a newcomer has against their products or services being copied and dominated by established heavyweights in a marketplace. That was recognized by the founding fathers as a primary function of a healthy patent system. However, the conservative majority seems more willing to side with King George than George Washington. If they end up being the majority in the Bilski decision, the Court’s impact on future American innovation will be something far less than Revolutionary.