In State Street Bank & Trust v. Signature Financial Group,the patent in question was U.S. Patent No. 5,193,056, which issued to Signature Financial Group on March 9, 1993. The ‘056 patent was generally directed to a data processing system for implementing an investment structure which was developed for use in Signature’s business as an administrator and accounting agent for mutual funds. In essence, the system, identified by the proprietary name Hub and Spoke®, facilitates a structure whereby mutual funds (Spokes) pool their assets in an investment portfolio (Hub) organized as a partnership. State Street was in talks with Signature Financial to acquire a license, and when talks broke down they brought a declaratory judgment action to have the ‘056 patent claims declared invalid.
There were several critical issues in play in State Street. First was the so-called mathematical algorithm exception to patentable subject matter, and the other was the business method exception to patentable subject matter.
While the Supreme Court has done away with the “useful, concrete and tangible result” test from State Street Bank v. Signature Financial, in Bilski v. Kappos, 8 out of 9 Justices (i.e., everyone except Justice Scalia) signed onto an opinion that recognized that the patent claims in State Street displayed patent eligible subject matter. Indeed, the dissenters in Bilski specifically acknowledged that the claims at issue in State Street did not deal with processes, but dealt with machines. See Footnote 40 of the Steven’s dissent.
The import of this is that machines are specifically patent eligible subject matter, so if the claims of State Street are to machines then claims that are similarly configured would also be directed to machines and therefore patent eligible. So if the systems claims at issue in CLS Bank v. Alice Corp. are configured similarly to those that now stand invalid that would mean that Judges Lourie, Dyk, Prost, Reyna and Wallach have ignored the Supreme Court. Any fair comparison of the claims, as shown below, demonstrates this rather conclusively.
Similarly, the United States Supreme Court famously ruled in Diamond v. Diehr, that the United States Patent and Trademark Office inappropriately rejected claims to a computerized process for molding raw, uncured synthetic rubber into cured precision products. Ultimately, thanks to the decision of the Supreme Court the inventors, Diehr and Lutton, received U.S. Patent No. 4,344,142. If the claims in Diamond v. Diehrare similar to those that now stand invalid that would be further proof the Federal Circuit as a whole has ignored the Supreme Court.
Although much remains unclear after the U.S. Supreme Court’s decision in Bilski v. Kappos, one thing is certain: software remains patent-eligible in the U.S. This result may not be entirely clear from a quick read of the opinions in the case. Therefore, I present the following pieces of evidence that the Supreme Court in Bilski effectively re-affirmed the patent-eligibility of software (listed, for the sake of simplicity, in the order in which they appear in the decision).
After days, weeks, and months of anxious waiting, the U.S. Supreme Court (finally) issued its ruling in Bilski v. Kappos. Not surprisingly (and as many predicted, including me), the Federal Circuit’s “machine or transformation” test was relegated to “second class” status as too inflexible, much like the “teaching, suggestion and motivation” (TSM) test in KSR International v. Teleflex. Also not surprising (and as predicted), the U.S. Supreme Court affirmed the PTO ruling that Bilski’s claimed method for hedging risks was not “patent-eligible” under 35 U.S.C. § 101 because it was an “abstract idea,” as was suggested by Judge (now Chief Judge) Rader’s dissent in Bilski.
So much for the easy (and predictable) part of Justice Kennedy’s opinion for the Supreme Court in Bilski. Where this decision takes on a surreal quality is how the various Justices viewed the impact of 35 U.S.C. § 273 in determining whether “business methods” (which Bilski’s claimed method was characterized as) are patent-eligible. (After all, Bilski, asked this very question in his petition for certiorari.) In my view, Justice Kennedy and 4 other Justices (Roberts, Alito, Thomas, as well as Scalia by implication) were very CORRECT that 35 U.S.C. § 273 is an implicit, if not explicit, recognition and acceptance by Congress that “business methods” (however you characterize them) ARE patent-eligible subject matter under 35 U.S.C. § 101. Conversely, Justice Stevens and 3 other Justices (Ginsburg, Breyer and Sotomayor) are completely WRONG in treating 35 U.S.C. § 273 as if this statute doesn’t exist.
An article I published yesterday – Praying the Supremes Get Bilski Right in 2010 – has already started quite a stir, bringing out the anti-software patent advocates. These folks always claim to be innovators and as innovators they know best and they state with an obviously flawed confidence that as innovators they can state with certainty that innovators despise software patents. Of course, this is utter and complete nonsense. Those who are anti-software patent are simply pro copying. They don’t want software patents because then they cannot copy the work of others freely and without fear of being sued. Those in the software industry who are not interested in software patents are not innovators, they are copiers. They steal the work of others. They also claim to have a sophisticated understanding of constitutional law and patent law, but reading what they say makes it apparent to anyone who is knowledgeable that they don’t know the first thing about law in general, let alone constitutional law or patent law in particular. It serves no purpose to retroactively kill patents and applications that could have satisfied the standard announced in In re Bilski, but were written to satisfy the now defunct State Street test. That is changing the rules in mid-stream and violates all ideals of fundamental fairness and due process.
Unlike Gene I did not really plan very well. I did not have credentials and am not (yet) a member of the Court. So, I was in line with the public. A patent centric public, but the public none-the-less. My fellow line standers included: Law students headed to taking the patent bar; a Finnegan partner (made me feel a little better about my failure to plan), and other patent world folks. The highlights: for this argument, the general admission line formed before midnight on Sunday! Only the 1st 40-50 of the 300+ people in line were admitted. The rest of the seats were taken by press, court members, and those with reservations. So, it was, even in the world of the Supreme Court, a big case. The line for admission became the 5 minute (sightseeing/tourist) line in short order. We were shuffled through, some re-cycling themselves in line so as to hear as much of the argument as they could. Real dedication here. Outside, tourists had asked what was so important that had all the people lined up; when told it was a patent case, universally none could understand why that would matter, and generate such a line!