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Supreme Court patent decision affects Minnesota firms

A recent U.S. Supreme Court decision declaring that certain “business processes” cannot be patented will reverberate across Minnesota companies’ patent portfolios, from medical diagnostic procedures to awarding credit scores, according to prominent intellectual property attorney Steve Lundberg.

The impact will flow both from what was decided and what the court chose to leave ambiguous for future courts to determine, Lundberg, a partner at Schwegman, Lundberg & Woessner, believes.

The case, known as Bilski v Kappos, saw all nine justices uphold a U.S. Patent Office ruling denying a patent for hedging energy trading risks.

The patent application was turned down because the process was “an abstract idea” which is not patentable under the law. In addition, the court found that the hedging process was not tied to a specific apparatus or machine, also a key test under patent law.

Steve Lundberg
Steve Lundberg

“Up until five years ago … almost everything people tried to patent [related to business processes] was computer implementation of business process,” Lundberg explained. The landmark case in the field upheld a patent on the software that ‘sweeps’ individual bank accounts and allocates funds automatically.

But the landscape is changing as patent applications have been filed in recent years attempting to push the boundaries to include business inventions not tied to specific software or hardware. As a result, patent attorneys and the courts have struggled to determine what constitutes a protected business process.

While the actual Bilski decision was not a surprise to most observers, one lingering problem Lundberg sees is that the decision does not resolve the question of what is or is not a “business process” eligible for patent protection, leaving the interpretation open to future litigation.

 “I think the patent office and courts will start applying the Bilski rule [and will be] more emboldened. We’ll start to see patent claims thrown out in that middle ground,” he predicted.

As an example, Lundberg points to the first action the Supreme Court took following the decision, returning another patent litigation case, Prometheus v Mayo, to the lower courts to apply the Bilski ruling. In that case, the Mayo Clinic is being sued for patent infringement involving a medical diagnostic procedure.

Now, the lower court the court must decide whether administering a drug that changes a patient’s metabolism and results in diagnostic information constitutes a “transformation” that is covered under patent law or whether the procedure is “an unpatentable claim … abstract mental steps you do in your head, looking at test results to decide if a patient had disease,” Lundberg explained.

He predicted that the Prometheus decision will be the first fallout from Bilski. Minnesota health care and medical device companies are closely watching how the lower court rules on whether the diagnostic test can be protected. “Industry wants tests to be patented … wants to monetize them,” he said.

Lundberg predicted that Minneapolis-based FICO (formerly Fair Isaac) and other credit-scoring companies will feel the impact. “Certainly they’ll be affected by the Bilski decision to one degree or another. Credit scoring is business process.”

A spokesman for FICO said the company “has no comment regarding that case [Bilski].”

Once an inventor files for a patent, it is not automatically granted. The application is reviewed to make sure it does not copy existing patents and that the claims are eligible for protection. An approved patent grants the innovator protection against others copying the invention and enables the patent holder to sell or license rights to use of the invention.

Writing in his law blog patents4software, Lundberg summed up the uncertainty left by the Supreme Court and continuing future litigation:

“In the end, it was probably the great difficulty in defining what is or isn’t a ‘business method’ that led the majority away from a rule that required such a definition. It is much easier to label a particular business method as an abstract idea than it is to define the universe of prohibited business methods.  Fortunately or unfortunately, depending on how you look at it, the Court has invited the Federal Circuit to attempt to provide such a definition.”

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