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Supreme Court relaxes limits on innovations that can be patented

By Peter Whoriskey
Washington Post Staff Writer
Tuesday, June 29, 2010; A07

The Supreme Court on Monday loosened the limits on the kinds of inventions that are eligible for patent protection in a case that was closely watched for its impacts on innovation.

At issue was a bid by two inventors to patent a business method for hedging risk in buying energy. The high court unanimously rejected the inventors' claim, deeming their innovation too abstract to qualify for patent protection. But in doing so, it also rejected a lower court's reasoning that only inventions involving machinery or physical "transformations" are eligible for patents.

Some experts hailed the decision as a move that could bring patent law out of the industrial era, when inventions were more likely to be machines, into the information age, where they are often are less tangible.

Federal law dictates that patentable inventions include "any new and useful process, machine, manufacture, or composition of matter." But applying that definition has become more complicated with the prevalence of computing and digitization.

Arguments in the case had drawn considerable interest from those in fields such as software, medical diagnostics and finance, where advances often come in the form of strategies that might not be eligible for patents because they do not involve machinery or the "transformation" of anything physical.

"I'm disappointed for our client," said J. Michael Jakes, the attorney for Bernard L. Bilski and Rand A. Warsaw, the gas company executives who started their own firm to commercialize their idea. "But more broadly it's a very good ruling for the patent system. [It] should encourage people that our patent system remains open to all types of inventions."

Limiting patents to machines or transformations, the court said, would create uncertainty over the patentability of software, advanced diagnostic medical techniques and the manipulation of digital signals. But the justices stopped short of laying out categorical rules for what kinds of inventions should be patented.

"This age puts the possibility of innovation in the hands of more people and raises new difficulties for patent law," Justice Anthony M. Kennedy wrote in the court's opinion. "The patent law faces a great challenge in striking the balance between protecting inventors and not granting monopolies over procedures that others would discover by independent, creative application of general principles. Nothing in this opinion should be read to take a position on where that balance ought to be struck."

Indeed, the justices were divided over setting broad principles that might replace the lower court's "machine or transformation" test. Although the court was unanimous in rejecting the claims of the inventors in the case, the justices differed over why, issuing three separate opinions that sparred over what types of inventions should be eligible for patent protection.

"The Court, in sum, never provides a satisfying account of what constitutes an unpatentable abstract idea," Justice John Paul Stevens wrote in a concurring opinion. "This mode of analysis [or lack thereof] may have led to the correct outcome in the case, but it also means that the Court's musings on this issue stand for very little."

Given the disagreements, the court relied on another aspect of the law, one that excludes abstract ideas such as natural laws from patents, to reject the inventors' claim.

"It wasn't the roof-shaking decision that people expected," said Harold C. Wegner, a patent law expert and the author of a newsletter on patent topics. "It leaves open a lot of questions over the extent to which business methods are patent eligible."

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