Monday, June 28, 2010
Bilski is at best a mixed bag for those who think tax strategies should be patentable. It gives little help and does allow business method patents, albeit somewhat begrudgingly. It demonstrates that for those who believe that tax strategies should not be patented, legislation is needed.
As expected, all the Justices agreed that patent protection did not extend to Bilksi’s hedging strategy process claims because it involved only an abstract idea. All agreed as well that the Federal Circuit’s machine-or-transformation test was not the sole test for patentability of a process, although it was a useful test in many, even most cases. All rejected the “useful, concrete and tangible result” approach to patentability articulated in the State Street decision. That is, the members of the Court reject all of the Federal Circuit’s attempt to date to give some guidance to this area of patent law.
The majority of the Justices, in an opinion written by Justice Kennedy, however, hold that the term process did not “categorically exclude business methods.” In particular, according to the majority, section 273, a statutory provision permitting a special defense of prior use to a claimed infringement of a business method, acknowledged some business method patents, although “it does not suggest broad patentability of such claimed inventions.”
The Court refuses to offer “categorical rules that might have wide-ranging and unforeseen impacts.” Yet, at the end of its opinion, it pleads with the Federal Circuit to do what it declined to do itself - develop some other test for limiting business method patents. It speculates that the Court of Appeals turned to exclusive use of the machine-or-transformation test “because it case law had not adequately identified less extreme means of restricting business method patents. . . In disapproving an exclusive machine-or-transformation test, we by no means foreclose the Federal Circuit’s development of other limiting criteria that further the purpose of the Patent Act and are not inconsistent with its text.”
Four Justices concur in the result, in an opinion by Justice Stevens. They would have held that business method are not patentable. The concurring opinion bases its conclusion on the history and purpose of American patent law, including the legislative history of section 273.
Yet even the concurring opinion accepted the result in State Street because it addressed whether a piece of software, a machine, could be patented. And tax method patents, like that in State Street, generally do or could involve software.
Thus, Bilski, I believe, leaves us in a greater state of uncertainly than that which existed before it was decided. It asks us to return to the basics of the Supreme Court precedents of Benson, Flook and Diehr. But it gives us no guidance as to how these precedents should apply to business method patents generally. It asks the Federal Circuit to undertake this task instead, even though the Supreme Court has rejected every attempt by the Federal Circuit to do so. The inability or unwillingness of the Supreme Court to address these difficult issues underscores that, for those who believe that tax strategies should not be patentable, legislation is needed.
Update: Linda M. Beale (Wayne State), The Supreme Court's Decision in In re Bilski: Does It Allow Tax Patents or Not?:
The AICPA, which has spearheaded the tax practitioner and accountant community's lobbying against tax strategy patents, issued a release on Monday that noted the continuing uncertainty about patentability of tax strategies. It called on Congress to enact a clear ban to resolve the issue once and for all. AICPA Renews Call for Congressional Action to Ban Tax Patents, PRNewswire, June 28, 2010.
Congress should act, but one suspects that the health and financial battles make enactment of the major Patent Reform Bill practically untenable for now. That means that the most likely possibility for a ban on tax strategy patents would be through a dedicated bill dealing solely with that issue. But you can bet that the IP bar will fight such a bill tooth and nail, as a toe in the door towards narrowing of patent law (and their turf), under the banner of "innovation" and "public disclosure." Innovation is not an inherent good in finance or tax, and there is little merit to the public disclosure of tax strategies for helping people avoid even more taxes than they already do. Meantime, we will remain in suspense as the Patent Office and Federal Circuit work through the Supreme Court's opinion.