Friday, August 29, 2008

Inside Software

Can anything under the sun be patented?

When the modern patent statute was enacted in 1952, Congress was of the view that “anything under the sun that is made by man” can be patented. Can that really be true? Can you get a patent on a peanut butter and jelly sandwich? Can you get a patent on a new chiropractic technique?

Well, certainly our prescription drugs are patented, and so are the electronic gadgets that we cannot seem to stop playing with. But look around some more. You will find patent numbers plastered on everything. Check out your hand sanitizer, your toothbrush, the frozen dinner in your freezer. Patented! There are limits, though. The U.S. Supreme Court has said that laws of nature are not patentable. If you had discovered Einstein’s theory of gravity, you would not have been able to get a patent on that discovery. You also can not get a patent on a mathematical formula, which means that “a2 + b2 = c2,” per the Supreme Court,  is an “abstract idea,” which is also off limits.

Okay. How about a software program that uses a mathematical formula? Is that patentable? The Supreme Court has said that software programs containing mathematical formulas are patentable so long as the mathematical formula is but a single step in a larger method or process that, as a whole, is a practical application of the formula with a useful result. Per the Supreme Court, if the program has practical effect, it is not an “abstract idea” and is, therefore, eligible for patent protection.

The U.S. Patent & Trademark Office is currently trying to test just how far that rule can be pushed. In a case called “In re Bilski,” which is pending before the U.S. Court of Appeals for the Federal Circuit (the court that hears all patent appeals), the patent office is taking the position that innovative methods must be implemented on a computer in order to be eligible for patent protection. In other words, the patent office is of the view that a method of conducting business is not eligible for patent protection unless the method is performed on a computer.

In the case, Bernard Bilski invented a method of hedging commodity costs, involving setting different commodity rates for different risk groups and initiating various transactions to balance the risks. Nothing in the patent requires the method to be implemented on a computer. The patent office is therefore taking the position that Bilski’s invention is not eligible for patent protection. The inventing community, including financial institutions and consulting firms, are taking the opposite position, namely that patents on business methods should be eligible for protection without regard to whether they are implemented on a computer.

To be sure, nothing can be patented unless it is truly inventive. That is, inventions must be new and not obvious from anything that has been made before, for them to be patentable. But the patent office ’s complaint about Bilski’s novel hedging method is not that it is not new or that it is obvious. The patent office simply believes that Bilski’s invention is not the type of invention that the patent laws are intended to protect.

Many expect that the Supreme Court will ultimately consider the patentability of Bilski’s invention. Because of the possibility that the court may declare inventions like his not patentable, many companies are watching closely. More importantly, many companies are digging into their pockets to help Bilski by writing “friends of the court” briefs in support of Bilski’s claim. After all, their own massive patent portfolios are on the line too.

All of the lawyers argued their respective positions before the U.S. Court of Appeals for the Federal Circuit in May. The case is so important that every judge from the court was robed and on the bench. Is a computer required for a business method to be patentable? Can a chiropractic technique be patented? Any day now, the Federal Circuit will give us all of the answers. The patent community is watching intently.

Denise DeFranco is a partner in Finnegan, Henderson, Farabow, Garrett & Dunner LLP’s Cambridge office. She can be reached at denise.defranco@finnegan.com.