Last year, we published his article, The Devil in the Details: A Critique of KSR’s Unwarranted Reinterpretation of “Person Having Ordinary Skill”.  It has since been selected for inclusion in the Patent Law Review, an annual anthology published by West, as one of the best patent articles published in the last year.

Congratulations Professor Dzeguze!

As Core Business Fades, TiVo is Turning to IP Licensing

People love their DVRs.  More specifically, they love their TiVo DVRs.  TiVo was one of the first DVR providers (RIP Replay TV and one-click commercial skipping) and holds broad pioneer patents.  It’s a practicing plaintiff, not a naked patent troll.  And despite some gripes, its products have consistently won accolades for usability, especially compared to competitors’ DVRs.

TiVo was the first company to deliver on the promise of easy-to-use time-shifted television.  But TiVo has been a victim of the success of its own technology.  It has languished for the last decade as cable and satellite companies deployed their own (usually mediocre, occasionally execrable) set-top box DVR recorders to a captive customer base.  TiVo’s subscriber base is way off its highs.  Its third quarter 2009 revenues were an anemic $56.9 million.  And TiVo’s share price has been flat for a decade, hovering around $1 billion market cap.

But while TiVo’s own products and services founder, its IP posture is increasingly puissant.  TiVo has partnerships with DirecTV, Comcast, Cox, and Virgin Media, and has patent licensing agreements with Pioneer, Sony, and Toshiba.  In its second incarnation as an IP holding company, TiVo wants to get patent licensing rents from all of the players in the DVR/set-top box market.  However, those revenue streams aren’t as profitable as having a larger base of customers: TiVo averages 93¢ a month from licensed subscribers and $7.65 from its own customers.  To survive, it needs to bend the DVR market to its will and get all of the major players to join its harem of captive patent licensees.

TiVo Does Patent Trolling Right

TiVo is in a uniquely sympathetic position as a practicing pioneer facing seemingly undeserved losses at the hands of patent infringers.  As a result, TiVo has been spectacularly successful in a grueling six-year patent fight with EchoStar and Dish Network.

TiVo’s legal Death Star is U.S Patent No. 6,233,389 (“Multimedia time warping system”), issued on May 15, 2001.  The ‘389 patent covers fundamental DVR technologies for recording video from TV.  TiVo scored an initial $73.9 million win and permanent injunction against EchoStar for infringement of the ‘389 patent by EchoStar’s Dish Network DVR.  On appeal at the Federal Circuit, the case was argued by appellate heavyweights Seth Waxman and Donald Dunner, and the lower court verdict was upheld.  Then, TiVo got $200 million more in damages, contempt sanctions, and attorney fees for violation of the injunction when EchoStar unsuccessfully attempted to design around the patent.  TiVo pegs the total litigation revenues from EchoStar at $400 million plus attorney fees.

The ‘389 patent has also been upheld on ex parte re-examination by the PTO, and is now on its second re-examination.  Although the PTO has preliminarily rejected two important claims in an office action, TiVo characterizes the rejection as simply a procedural matter pending full re-examination; indeed, in the prior reexamination, claims were initially held invalid and then ultimately upheld.

If TiVo comes out of the second reexamination with the ‘389 patent mostly intact, it will have a gold-plated patent that has been repeatedly validated in District Court, the Federal Circuit, and the PTO.  The patent will be a license for TiVo to print money, and will form the keystone of TiVo’s strategy to extract licensing revenues from the entire DVR industry.

A Challenger Appears

Perhaps sensing blood, TiVo opened a new litigation front by suing AT&T and Verizon in the Eastern District of Texas on August 26, 2009, alleging that AT&T’s U-verse service infringed on TiVo’s DVR patents.  This dragged Microsoft into the DVR wars: AT&T uses Microsoft’s Mediaroom system in its U-Verse TV service.  If TiVo were able to crush AT&T like it whelmed EchoStar, the U-Verse venture could be in jeopardy – a permanent injunction is still a normal remedy in patent litigation for practicing plaintiffs, even post-eBay v. MercExchange.

Microsoft intervened in the case and separately sued TiVo on January 19, 2010, for infringing a different set of DVR patents.  Microsoft’s complaint alleges infringement of U.S. Patents No. 6,008,803 (“System for displaying programming information”) and 6,055,314 (“System and method for secure purchase and delivery of video content programs”).  Microsoft admits it is asserting these two patents to force a settlement with a cross-licensing agreement: “We remain open to resolving this situation through an intellectual property licensing agreement, and we have initiated discussions to engage TiVo in negotiations”.

Should TiVo be concerned about Microsoft’s patents?  Are they enough to force TiVo to the table?

From an admittedly cursory look, they are about as threatening as a limp noodle.  Neither of the patents has been tested in court.  The PTO patent application system is ex parte; patents issue without being tested adversarially.  Although there is a presumption of patent validity once issued, the presumption may be overcome in court in a variety of ways.

The ‘803 Patent

The ‘803 patent (“System for displaying programming information”) was filed on August 7, 1998 and issued December 28, 1999.

It immediately loses brownie points for mentioning the “information superhighway” in a non-ironic manner in the specification.  It also misspells “information” “informaton” in Claim 1.  We’re not off to a very good start!

Claims 1-21, 23, and 25-32 cover sundry variations on two- or three-pane information displays, all clearly anticipated in the prior art by myriad computer displays dating from the dawn of windowing systems (or even from text displays).

Claims 22 and 24 are where the meat is.  Claim 22 claims a “system” with an “information display” and a “category display.”    Claim 24 claims “[t]he system recited in claim 22, wherein each of the information tiles comprises at least a program name, program date and start time, and program channel.”  Claim 24 is the only claim mentioning TV programming data.  As there are innumerable prior art information displays with generic data in a format that would anticipate the other claims, Claim 24 is the only claim that could realistically be asserted against TiVo.

Even if there is no prior art with TV programming data displayed in a format like Claim 24 (doubtful), the ‘803 patent faces other enforcement obstacles.  An exact prior art reference will invalidate a patent for lack of novelty.  But even if there is no exact single prior art reference that practices the claim, two or more prior art references may be combined to void a patent for obviousness.  Here, a prior art reference teaching the compilation and organization of TV programming data (e.g. TV Guide magazine) can be combined with the prior art screen data formats to show that Claim 24 was obvious and therefore not patentable.

Even if the ‘803 patent survives what will surely be a searching obviousness inquiry, it may encounter an issue of patentable subject matter under the currently-valid (pending a Supreme Court decision expected in Spring 2010) machine-or-transformation test articulated by the Federal Circuit in In re Bilski.

§ 101 of the Patent Act enumerates four types of statutory (that is, eligible) subject matter: processes, machines, manufactures, and compositions of matter.  Claims are supposed to indicate in their preamble what category they fall under.  Generally, “system” is susceptible to interpretation as a machine or as a process.  If the claimed system doesn’t clearly describe a machine or apparatus, then it may be interpreted as a process claim.  A process must be implemented with a particular machine or transform an article from one thing or state to another.  Clearly, there is no transformation happening in Claim 24.  Is there a particular machine?  The claim language may be too vague – there is no context for “category display” or “information display.”  Furthermore, reference to a generic computer or set-top box may be insufficient.

The ‘314 Patent

The ‘314 patent (“System and method for secure purchase and delivery of video content programs”) was filed on March 22, 1996, and issued April 25, 2000.

On its face, the ‘314 patent appears to be on much more solid ground than the ‘803 patent.  It’s bigger: 74 claims.  It actually appears to deal with technology!  There are method, device, and several varieties of system claims: “video content delivery system,” “interactive entertainment network system,” “system for purchasing video content programs,” etc.  Overall, the patent covers video decryption technologies for set-top boxes.  It has a bit tacked on at the end concerning the use of the encrypted network to purchase video-on-demand.  Without having more technical knowledge of TiVo’s encryption setup it’s hard to get a feel for how well the claims map to TiVo’s devices.  The analysis is on shakier ground here due to the increased complexity of the ‘314 patent.  However, a few issues do stand out.

Claims 27-33, covering an “integrated circuit card for use in decryption of video content programs” or “a video decryption device” arguably cover the now-standard cable TV decryption standard CableCARD.  The CableCARD decryption approach for digital cable was a product of the Telecommunications Act of 1996, and has been blessed by the FCC.  TiVo DVRs use it.  To the extent that TiVo infringes because it implements support for CableCARD, it may have a claim that the CableCARD system pre-empts the ‘314 patent – not because CableCARD is prior art, but because it is a specific technological industry mandate from a regulatory agency and should therefore not become a vector for a patent infringement suit.

Claims 34-41 are method (process) claims.  Claim 34 is the only independent claim.  The rest are dependent on 34.  Unfortunately for Microsoft, Claim 34 (“method for delivering video content programs”) appears to violate the rule of BMC v. Paymentech: a single entity must directly or vicariously (i.e. by ordering a minion) carry out all of the steps of a process claim in order to infringe.  Claim 34 describes a series of operations involving encrypted video streams, including 1) encrypting and decrypting a program key, 2) encrypting and decrypting the video stream, and 3) transmission of an encrypted video stream.  But TiVo doesn’t transmit video from the cable company: the cable company does.  And consumers typically lease their CableCARD from the cable company; any decryption that the card performed couldn’t be attributed to TiVo.  On the other hand, if TiVo stores data encrypted on hard disk and uses a non-CableCARD means of decrypting it prior to viewing, it may arguably infringe.

Claims 43-53, covering the purchase of  video streams, again run into the Paymentech issue because the claim steps purport to cover both the actions of the video purchaser (i.e. the viewer) and the “video merchant” (e.g. Amazon, Netflix, etc.).

A few, more broadly written claims (e.g. Claim 42 and 54-58) appear to recognize this limitation.  These claims only cover decryption of a video data stream.  However, their extremely wide claim scope may run into prior art novelty anticipation from other TV decryption technologies – of which there are many.

Is Microsoft’s Suit Credible?

The ‘803 patent is clearly a non-starter, but it’s much harder to evaluate the ‘314 patent.  Neither patent has been tested in court, so they’ll initially have discounted bargaining weight compared to the battle-tested, blood-spattered ‘389 patent.  If the ‘314 patent proves valid, it may be enough to parry TiVo’s attack on U-Verse, which, with barely 2 million subscribers, is nowhere near the mother lode that EchoStar was.  This wouldn’t affect TiVo’s ability to take on other targets (Time Warner may be especially tempting), but it may blunt the strong momentum that TiVo has built up with its string of EchoStar victories.

• Twitter is a source of evidence for a murder charge, reports the New York Daily News.  But could those tweets be copyrighted?  Law.com’s Law Technology News weighs in.

• The Electronic Frontier Foundation provides a good, link-heavy analysis of the unanswered questions surrounding Google’s decision to stop censoring their Chinese services.

• For some reason, Psystar keeps fighting Apple, posts Gizmodo.

• Custom and Border Protection’s laptop searches may have gone too far, as revealed in a series of Freedom of Information Act requests for documents, reports Gizmodo.  EFF is looking for potential plaintiffs.

• The Wall Street Journal Law Blog analyzes how advances in medical science have impacted the rights of surrogate mothers.

• IBM gets the more U.S. patents than any other company for the 17th consecutive year, says MSN’s Moneycentral.  But Microsoft’s much smaller patent portfolio is worth more, reports The 271 Patent Blog.

• The Prior Art offers a fascinating look into the jury’s decision in i4i v Microsoft, complete with juror interviews.

• Chief U.S. District Judge Vaughn Walker in San Francisco decided to allow showing the trial challenging California’s Proposition 8 on YouTube, reports the San Francisco Chronicle.  The Wall Street Journal Law Blog questions whether that’s a good thing.

• Patent Librarian notes that Wikipedia citations in patent applications are up 59%, but Patently-O puts that increase in perspective.

• A report commissioned by the French government recommends taxing Google on their online advertising revenues in France to help fund legal outlets to buy media hurt by online piracy, reports the Mercury News.  President Sarkozy supports the measure, says PC World.

• The Wall Street Journal reports that Philip K. Dick’s estate claims Google infringed on its intellectual property by using the name “Nexus One” for the new Google-branded phone.  It brings to mind this recent post by Seth Godin.

• The Electronic Frontier Foundation responds to Bono’s recent New York Times Op-Ed, in which the musician / global icon lamented media piracy and suggested digital tracking be used to help criminal enforcement.

• Law.com provides an insightful guide to mining web 2.0 as a source of evidence.

• The Colorado Department of Transportation created an iPhone app to tell users if they’re too drunk to drive, the latest in a series of state efforts “to reach out to the Twitter-iPhone-Facebook generation,” according to the Wall Street Journal.

• The Ninth Circuit Court of Appeals affirmed [decision, pdf] a district court ruling that tasers should only be used in limited circumstances, as they pose a greater threat to their targets than other non-lethal police weapons.  The San Jose Mercury News reports on the suit that originated from a city police officer using a stun gun on a San Jose State student.

• Broadcom agreed to settle the securities fraud class action against it, says the Wall Street Journal Law Blog.

• The L.A. Times reports that the California Science Center has been sued for canceling a showing of film attacking Darwinian evolution and promoting intelligent design.

• Blizzard helps police make a drug arrest of a suspect tracked by his World of Warcraft account, posts kokomo perspective.

TXED: Favored Home of Patent Claimants

The Eastern District of Texas is unique among the 94 federal district courts.  Over the past decade the district, 200 miles east of Dallas, has become an epicenter of patent litigation in the United States.  The rise of the Eastern District under the guidance of Judge John Ward has been well-documented, and is not a coincidence: Judge Ward very intentionally built his district’s reputation as being trial friendly—or, to listen to his critics, plaintiff and patent-troll friendly.  By expediting trials and deferring to plaintiff-favoring juries, among other factors, the judges of the Eastern District made their court a favorite destination of forum-shopping plaintiffs with patent claims.

The forum shopping has not been unwelcome—the flood of patent cases filed in Marshall has brought added prestige to the four E.D. Tex. judges and has been an economic boon to the community.  For patent attorneys and parties to suits brought there, the judges’ familiarity with and expertise in patent law has made litigation more predictable.  The result has been analogous to Delaware’s rise in the area of corporate law, with a similar mix of criticism and praise.

Now, however, the Federal Circuit has threatened the primacy of the Eastern District of Texas for patent litigation.  The Federal Circuit’s writ of mandamus on Thursday was its third this year directing the Eastern District to vacate a decision denying venue change and transfer venue to the district requested by the defendant.  As in In Re Genentech and In Re Hoffmann-La Roche (the latter decided just three weeks ago), the C.A.F.C. in In Re Nintendo said it was “clear and indisputable” that the Eastern District misapplied the Fifth Circuit’s framework for considering venue change under 28 U.S.C. § 1404(a) and abused its discretion by refusing the requested transfer motion.

Venue Change after TS Tech

All three cases follow from the C.A.F.C.’s decision in In Re TS Tech.  That case was appealed from Lear Corp. v. TS Tech, in which TS Tech moved for transfer for venue from EDTX to the Southern District of Ohio.  TS Tech argued that OHSD was the more appropriate venue because the physical and documentary evidence was mainly located in Ohio and the key witnesses all lived in Ohio, Michigan, and Canada.  TS Tech’s only alleged connection to Texas was that it sold some of its products there, as it did nationwide.  Judge Ward denied the motion for transfer, giving significant deference to the plaintiff’s choice of venue and saying that the sale of TS Tech’s products in the district gave the local citizens a “substantial interest” in the litigation.

The Federal Circuit disagreed.  In a landmark decision that cited no substantive patent law, the court decided the matter on largely procedural grounds.  In the Fifth Circuit, a motion for venue change should be granted when the proposed venue would be “clearly more convenient” than the venue chosen by the plaintiff, a determination made by weighing the eight “public” and “private” forum non conveniens factors from In re Volkswagen.  The Federal Circuit said Judge Ward’s misapplication of the factors was so great as to produce a “patently erroneously result”—the standard for a writ of mandamus.

The Federal Circuit identified four “key errors” made by the Eastern District.  First, the district court gave too much weight to the plaintiff’s choice of venue—Judge Ward treated the plaintiff’s choice as a ninth forum non conveniens factor to be weighed in the Volkswagen analysis.  The plaintiff’s choice actually only shifts the burden onto the moving party to prove, using the eight factors, that its proposed venue is “clearly more convenient” than the original venue—the plaintiff’s preference should not be given any weight in itself.  Second, the district court “completely disregarded” precedent in assessing the cost of attendance for witnesses.  The cost and inconvenience of having key witnesses travel over 100 miles to a venue should be considered, and “the factor of inconvenience to witnesses increases in direct relationship to the additional distance to be traveled.”  Even though all the key witnesses would have had to travel approximately 900 miles further with the case in Texas, the district court said it “was not persuaded to give great weight” to the inconvenience.  The Federal Circuit said this was clearly erroneous, and found this factor to weigh significantly for transfer.

Third, the district court purposefully discounted the relevance of all the physical and documentary evidence being much closer to the proposed venue, and none of the evidence being in Texas.  Judge Ward’s decision said that “the increased ease or storage and transportation” makes the factor assessing relative ease of access to sources of proof “much less significant.”  The Federal Circuit noted that this interpretation was directly contrary to Fifth Circuit precedent, which indicates that modern ability to store, transport, and electronically view evidence does not neutralize this FNC factor.  Finally, the district court disregarded Fifth Circuit precedent as to “the public interest in having localized interests decided at home,” finding a local interest in the outcome of the case because some of the defendant’s products had been sold within the borders of the Eastern District.  The Federal Circuit said the district court’s application of this factor had been “unequivocally rejected” by the Fifth Circuit.  This factor only weighs against transfer when there is a local connection to the case that is greater than in the proposed venue—here, because the defendant’s products were sold nationwide, there was no more connection to the case in Marshall, Texas than there was in any other federal district.

In Re Nintendo

Much of the Federal Circuit’s analysis in Nintendo was identical to its analysis in TS Tech, Genentech, and Hoffmann-La Roche.  The court said a “stark contrast in relevance, convenience, and fairness between the two venues” existed in Nintendo “as in” those other three cases, and the court “has held and holds again in this instance that in a case featuring most witnesses and evidence closer to the transferee venue with few or no convenience factors favoring the venue chosen by the plaintiff, the trial court should grant a motion to transfer” (emphasis added).

The Federal Circuit identified the same four errors in FNC-factor analysis in Nintendo as it did in TS Tech, reiterating that the plaintiff preference is not a factor to be considered, and restating the importance of the cost and inconvenience of additional travel to get to Texas for witnesses, the physical location of evidence, and the lack of local connection to the case.  The Federal Circuit was also unimpressed by an argument by the district court that because key witnesses were located in Japan, Washington, and New York, the Eastern District could serve as a “centralized location” for the case.  The Federal Circuit rejected that claim (as it had in Genentech), and noted that to even make this “hypothesized” argument the district court included minor satellite offices of the parties in its analysis that probably should not have been considered.  Accordingly, the court ruled that “the district court clearly abused its discretion in denying transfer from a venue with no meaningful ties to the case.”

Future application

The factors motivating the Federal Circuit’s conclusion could easily apply to a significant number of cases brought in the Marshall courthouse.  The Eastern District of Texas’ centrality to the world of patent litigation has been questioned precisely because it is rarely convenient for witnesses to get there, the source of the case’s evidence, or locally connected to the issue at trial.  In TS Tech, Genentech, Hoffmann-La Roche, and now Nintendo, the Federal Circuit has made clear that in such cases, the district court should grant venue-transfer motions to more convenient districts.  Often, the only stated reason to have the trial in the Marshall courthouse is the plaintiff’s preference or possibly its neutral, central location between the actual places witnesses or evidence are to be found.  The Federal Circuit has made clear that these considerations are categorically insufficient to outweigh the three problem factors.  A forum-shopping plaintiff—or an EDTX judge protecting the relevance of the district—has significantly less ground on which to defend a denial of motion transfer after Nintendo.

Though the quartet of mandamus cases could represent a dramatic blow to the EDTX’s plaintiff-friendly reputation, it’s yet to be seen if TS Tech will result in a “wave of transfers of actions” from the Texas district.  One reason to believe the change will be moderate is In Re Telular Corp., in which a motion for a writ of mandamus on the same bases as the defendants in TS Tech and Nintendo was denied by the Federal Circuit.  Judge Moore emphasized that even if the Federal Circuit disagreed with the district court ruling, for a writ of mandamus he must defer to the lower court unless “it is clear that the facts and circumstances are without any basis for a judgment of discretion.”  The decision noted that unlike in those cases where the Federal Circuit had recently granted writs for transfer, the venue proposed by Telular was not clearly more convenient than the Eastern District.  In the other cases, the key witnesses and evidence were unequivocally closer to the proposed venue; here, two key witnesses would potentially be more inconvenienced traveling to the proposed venue, and some evidence would potentially be more costly to send to the proposed venue.  Additionally, Telular waited five months after the district court’s denial of transfer to motion for the writ; Judge Moore noted that although “remedy by mandamus is at law, its allowance is controlled by equitable principles,” so Telular’s delay weighed against granting the writ.  Together, these two aspects of Telular led to the Federal Circuit’s conclusion that mandamus was not appropriate.

Game over?

The conclusion for patent litigators on the defense side should be one of cautious optimism.  The four writs of mandamus coming from the Federal Circuit since December 2008 gives defendants hoping to avoid the plaintiff-friendly district a last resort assurance against the clearest cases of forum-shopping.  Moreover, the language of the decisions indicates that the Federal Circuit might be sending a message to the Texas judges to scale back their efforts to boost the importance of their district.  On the other hand, Telular shows that the Federal Circuit still gives deference to the district courts to make rational decisions regarding change of venue motions.

The issue going forward will be how the judges of TXED react to the Federal Circuit’s five mandamus rulings.  Will they continue to guard the district’s importance and err on the side of rejecting transfer motions?  Or will they hedge against further mandamus writs or reversals on appeal by more willingly transferring cases out of the district—and send with them the district’s unique position?  Future analysts might look back to December 2009 and see that Nintendo marked the end of the game for the Eastern District of Texas.

By Rajiv Batra.

• Patent Docs reviews Senator Patrick Leahy’s proposals for patent reform.

• Third Circuit gives “Spam filter ate my filing notice” excuse a second chance, from the Technology & Marketing Blog.

• EFF sues to find out how the government spies on us using social networks; Indiana University students makes a Freedom of Information request to find out much the big telcos charge the government to spy on their networks, says Wired.

• The New York Times opines in favor of the Empire State’s decision to collect sales tax on online purchases from out-of-state retailers delivered in New York.

• Lazy IP enforcement leads to prosecution of the wrong guy, who makes a big deal out of it, says Ars Technica.

• FTC isn’t done with Intel yet, now looking into anticompetitive behavior with regard to Nvidia, reports BusinessWeek.

• Google to end free access to subscription news, blogs Gizmodo.

• And for an international perspective: BioTechBlog reports on IP and the biotech industry in India.

Are Genes Patentable?

Naturally occurring things, even if newly discovered, may not be patented.  The ACLU asserts that the isolated genes in Myriad’s patents are no different from the genes that occur in nature.  The ACLU’s lawsuit seeks to invalidate Myriad’s patents.  They also argue that the patent covers basic human knowledge or thought (more specifically, the process of comparing the mutated gene to the normal one) and is therefore a violation of the First Amendment.  If the court accepts this reasoning, genes will no longer be patentable material under § 101.

Why It Matters: The BRCA Genes and Cancer

The BRCA-1 and BRCA-2 genes are linked to hereditary breast and ovarian cancer.  Women with mutations in these genes have a 40-85% chance of developing breast cancer, and suffer an increased risk for ovarian cancer as well.  Diagnostic tests can reveal these mutations, allowing women to better assess their risk.  Many women who have the mutated genes can undergo screening for the cancers earlier and more frequently than usual; some may even elect to have prophylactic surgeries.  Results can also serve to alert female relatives that they are more likely to have the mutation.  However, since Myriad holds patents on BRCA-1 and BRCA-2, it currently possesses a right to exclude others from performing these diagnostic tests.

The ACLU’s complaint points out that Myriad has failed to license its patent widely, which carries with it important implications.  Given that there are no alternatives, Myriad may freely price their diagnostics; many argue that the current rate ($3000 per test) is too expensive for many of the women who need to be tested.  Additionally, without other laboratories conducting similar tests, women are unable to secure second opinions.

The Big Picture

About 20% of human genes are patented.  Patent holders can prevent a researcher from studying or testing a particular gene.  Many of these genes, like BRCA-1 and BRCA-2, are associated with serious illness, including Alzheimer’s, muscular dystrophy, and colon cancer.  The ability to screen for genetic predispositions to these and similar diseases represents a great advance in personalized and predictive care.  There is concern, however, that allowing gene patents might slow development in this area.  The ACLU claims that, with gene patents, there is no opportunity to invent around the patent or to build upon and improve it.  They argue that this produces a disincentive to innovate.

As the court wrote in its opinion denying Myriad’s motion to dismiss, “the resolution of these issues will have far-reaching implications, not only for gene-based health care . . .  but also for the future course of biomedical research.”

For additional reading: Medical News Today, GEN

The ACLU’s complaint is available here.

By Claire Devine and Kyle de Neve.

Overall, the Justices pushed both sides to advance a reasonable standard for evaluating the types of applications that should be patented.  Most Justices were skeptical on granting patents to business methods.  Justice Ginsburg, for example, expressed concern that granting business method patents would also open the door to patenting “an estate plan, tax avoidance, how to resist a corporate takeover, [and] how to choose a jury”.  At the same time, however, some Justices were dissatisfied with the narrow “machine or transformation test” issued by the Federal Circuit (according to which methods must be either tied to a particular machine or transform specific subject matter in order to be patentable). It appeared that the Justices were aware that stating too strict a standard may very likely have negative implications for industries such as computer technology and biomedicine.  Regardless, judging from the criticism voiced by the Justices regarding the patentability of the business method claims in Bilski’s application, it appears likely that the Court will rule against Bilski’s claims.

The oral argument began with Jakes arguing that the Court should adopt a flexible standard as opposed to the rigid and narrow test adopted by the Federal Circuit.  In particular, Jakes argued that the test should be whether there is a “practical application of a useful result” that involves “physical steps”.  The Justices (including Justice Breyer and Justice Sotomayor) continuously questioned Jakes regarding what he thought would be a reasonable standard.  In particular, Justice Sotomayor suggested that a proper standard should be one that is tied to something, such as inventions, technology, sciences, or the useful arts.  Justice Ginsburg pushed for a standard that would base patentability on science or technology, which she argued is a standard that is used successfully in Europe and other countries.

Criticisms were expressed regarding Bilski’s claims.  In particular, Justice Roberts said that he failed to see any physical steps in the patent claim at issue.  In addition, Justice Kennedy was concerned that Bilski didn’t involve something that was tangible, and that the claims failed to show how the “substance” was different before the process and after the process.

When Stewart took the podium, the Justices bombarded him with questions about the “machine or transformation test”.  In particular, Justice Roberts stated that the test would seemingly allow even the most tangential and insignificant use of a machine to be patentable.  In addition, Justice Breyer stated his concern that a new machine test allowing a patentable process simply because the process is running on an old machine would be too broad.  Justice Stevens suggests that the question should instead be whether the new process is patentable apart from the machine.  Seeming to acknowledge this difficulty, Stewart responded that this case was probably not the best case to push for a broad standard on evaluating patentable subject matter (e.g., claims involving software innovations or medical diagnostics techniques).  He stated that he would rather the Court rule only on the narrow issue of whether these particular claims are patentable and leave the other issues unresolved.

It is interesting to note that at one point during the arguments, Justice Sotomayor explicitly stated that the ruling in this case would be limited to statutory limitation of “process” and thus would not overrule State Street (which was limited to machines).

Based on the Justices’ questions, it seems likely that the Court will restrict future patents on business methods.  The Court may also issue a rather strict standard on future software patents.  However, there seems to be enough hesitancy from most of the Justices to suggest that the standard adopted will most likely not be as strict as the one issued by the Federal Circuit.
A complete transcript of the oral argument can be found here.

By Jane Wu and Brian Harley.