Doing business on the Internet requires the use of sophisticated software and complicated processes. Many of these innovative products have been patented. Google, Amazon and others hold many hundreds of patents, but the U.S. Supreme Court may be about to greatly restrict the issuance of patents. To help us understand the case at hand and its relevance to software and Internet businesses, we spoke with intellectual property attorney Lawrence M. Hadley, with the firm of Hennigan, Bennett and Dorman in Los Angeles.
Practical eCommerce: The U.S. Supreme Court heard arguments recently on a case that could affect the issuance of patents for software and other Internet processes. Could you explain this case?
Lawrence M. Hadley: “Well, the case you’re referring to is called In re Bilski. It involved a man by the name of Bilski who applied for a patent that covered a method of hedging risks in commodity trading. The claims were primarily directed to a method that would be performed on the Internet or by people using the Internet. The patent office, after several rounds of back and forth between the inventor and the patent examiner, found that the claimed method did not fall within the category of what is called patentable subject matter. In other words, the patent office found that this kind of a method simply was not eligible for being patented. Mr. Bilski appealed that decision. The federal circuit then came down with the decision [that support the lower court]. Mr. Bilski then appealed that decision to the U.S. Supreme Court and, much to the surprise of a lot of people, the Supreme Court agreed to hear the case. The Supreme Court held the oral argument on the Bilski case and I think that most people think that a decision is likely to come from the Supreme Court sometime in the spring.”
PeC: What is the concern for ecommerce merchants?
Hadley: “I think that the concern with the decision from the appellate court is that the machine-or-transformation test is so rigid that it will be more difficult than it is today to patent methods that would pertain to Internet-related commerce. I think it’s fairly widely accepted that a number of existing patents that pertain to different ways of doing business or different Internet-related inventions are now in jeopardy under the test that the federal circuit established and judging from the oral arguments by the Supreme Court, I would say that the Supreme Court, likewise, is very skeptical as to whether those types of inventions really qualify for patents.”
PeC: What about the patents that have been issued based on a business method?
Hadley: “Well, the status of those is that what has been patented is still patented. There is really nothing that happens to those patents, but if an owner of one of those patents were to try to enforce it against an infringer, then the infringer could raise the argument in court that the patent is not valid under the new Bilski test because it covers ineligible subject matter and ask the court to find the patent invalid.”
PeC: If the Bilski case holds, can you think of an Internet-related activity that can be patented?
Hadley: “The patent office is still granting business method patents today under the new test, but what the patent office is doing is focusing on this particular machine test. What you really want to be looking for are method claims that are written almost like a software algorithm to implement the invention. In terms of specific, concrete examples, I could think of perhaps novel ways of handling email that would require specific programming in a computer to perform various steps and it would help also if the email were transformed into different formats. But on the other hand, simple or even complex ways, known ways of doing business, will not be patentable under the new test simply because you take that method and put it on the Internet.”
PeC: Anything else on your mind for ecommerce merchants as it relates to the Bilski case or intellectual property generally?
Hadley: “I would follow the case closely when the new decision comes out for your readers that have existing patents before they decide to take any action on those patents. They would want to carefully consider whatever new tests the Supreme Court adopts and likewise if they are thinking about patenting an idea, they will need to consider the test carefully. On the other hand, those in business who have patents asserted against them in this area are going to want to look at whether the patents that are being asserted can be challenged on the Bilski basis of not covering patentable subject matter.”