Legal News

Ct Reverses Position on Biz Methods Patents ? Which Industries Hurt?

By Jennifer Forsyth

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 won’t 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. (Here’s the breaking news story by Ashby Jones. The LB wrote about the Bilski case here and here.)

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, by granting protection to a system for managing mutual fund accounts. The decision, according to its detractors — which included several members of the Supreme Court — had led to the issuance of weak patents and exposed financial services companies to high-dollar litigation over business method patents.

“This is a pretty clear disavowal of State Street,” Daniel Crowe, a patent litigator at Bryan Cave who wasn’t involved in the case, told us. “It’s a ruling against the financial services industry.” Crowe said he didn’t know what would happen to the business-method patents validated within the last 10 years. “That’s definitely an open question.”

Randy Lipsitz, a patent specialist at Kramer Levin in New York says the ruling is likely to hit certain industries, namely insurance, banking, accounting and software, particularly hard. “You’re going to see fewer applications from these industries,” he says.

And what about the likelihood of the case rising to the Supremes? The experts seem torn. Lipsitz says that given the case’s importance — he calls the case one of the most significant ever to be decided by the Federal Circuit — and the High Court’s recent fondness for patent cases, he suspects it will go up. But Bradley Wright, a partner at Banner & Witcoff in Washington, thinks the Federal Circuit has tailored the decision to avoid reversal from above, and therefore any need for the Supremes to take it. “The Federal Circuit went out of its way to mention Supreme Court precedent,” he says. “I’d be surprised if cert is granted on this.”

Correction: An earlier version of this post incorrectly identified the Board of Patent Appeals and Interferences.

Full post as published by Law Blog - WSJ.com on October 30, 2008 (boomark / email).