A number of industries, including financial services firms and internet retailers, have anticipated a ruling from the U.S. Court of Appeals for the Federal Circuit on the patenting of business methods. Well, today they got the answer and many of them probably wont like it.
In a 9-3 decision, the court upheld a ruling made by the Board of Patent Appeals and Interferences that denied a patent for a method of hedging in commodities trading developed by Bernard Bilski and Rand Warsaw.
The ruling in the case, called In re Bilski, largely disavowed the controversial State Street Bank case of 1998. There, the Federal Circuit opened the door to business method patents, which had until then been excluded from patent protection ... The decision, according to its detractors which included several members of the Supreme Court had led to the issuance of weak patents.
I don't say this often, but it looks like the Court of Appeals for the Federal Circuit (CAFC) -- or "the patent court" -- got a big one mostly right ... bringing the rules way back towards what they were years ago, and effectively rolling back some of the earlier, dreadful, CAFC decisions that opened the barn doors towards tons and tons of software and business method patents.
The summary is that the court has said that there's a two-pronged test to determine whether a software of business method process patent is valid: (1) it is tied to a particular machine or apparatus, or (2) it transforms a particular article into a different state or thing.
In other words, pure software or business method patents that are neither tied to a specific machine nor change something into a different state are not patentable. That means a significant number of software and business method patents are about to disappear, freeing up many industries to be much more innovative -- at a time when that's desperately needed.
Pop some champagne! The Appeals Court decision is in on Bilski ... one thing is clear: it's a win!
I want to thank Red Hat most particularly for its wonderful amicus brief that it filed in this case, for representing the community's interests and getting certain issues on the court's radar.
The Federal Circuit's rejection of Bilksi's application is especially striking because in the quarter century the court has been in existence, it has been a consistent supporter of broader and stronger patent rights.
While evidence has been mounting for a decade that software and business method problems were creating problems, courts are always reluctant to reverse their own precedents ... We didn't think the Federal Circuit would have the stomach to make major changes. It seems we were too pessimistic.
[This] will almost certainly translate into increased scrutiny of software patents as well..
I disagree with this completely. The opinion clearly provides that if some machine exists and a well-defined data structure is manipulated, 101 will be satisfied. The large majority of software patents will be just fine ... The CAFC clearly stated that State Street remains good law (i.e., nothing was overturned).
The anti-software patent crowd ... may want to read the opinion a little more closely before popping their champagne corks.
In one fell swoop much of the Microsoft patent portfolio has gone up in smoke.
Software patents are no longer available as they have come to be available over the last 10 to 15 years ... The entire point of Judge Rich's decision in the State Street case was to recognize that a process can be patent worthy even if there is no physical transformation. He was 100% correct and this Court has undercut the decision in its entirety ... overruled, evicerated, disregarded or whatever you would like to call it.
This decision is not only intellectually dishonest, but it is also straight-up stupid. At a time when our economy is on the brink of a collapse that none of us have ever witnessed during our lifetime an activist court ought not to be legislating from the bench, far overstepping any legitimate boundaries of appellate practice and rendering a decision that will cost US companies billions of dollars.
As a software developer, I have always despised patents on business models. They are a ridiculous waste of time, and hamper innovation. A method of buying something online is no more patentable than a new method of tying your shoes, and yet over 1300 of such patents have been issued. Well, fortunately that is no more.
Of course, those with now-useless pieces of paper will not go quietly into that good night, but I expect that this case will be upheld on appeal. Now other software developers can also use such innovations as the 1-click purchase, and naming your own price.
Brace yourselves for what amounts to overnight deregulation of online business practices ... [a] cannibalistic feeding frenzy. Companies once stagnated by the morass of online business method patents will now begin an era of expansion not seen since the the dot com boom of the last century.
Congress decided not to fund the USPTO and allow it to fund itself through application fees, processing fees, and all whatever other fees the USPTO wants to charge. So, the more patents they review and grant, the more money they make.
It suddenly became in the Patent and Trademark Office's best interests to allow and grant as many patents as possible ... leave it up to the courts sort out whether or not a patent on a method of removing snot from a nose with a finger is a valid patent or not.