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Latha Jishnu: Method mania

A US Supreme Court case on the patenting of business methods draws pharma and software giants into the battle

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No other patent application has drawn the kind of interest worldwide as the Bilski case has. And no other patent suit has drawn into the debate, various industry interests, academia, the legal fraternity and the open source community. Filed 12 years, the Bilski case has put under the scanner the flood of business method patents issued in the US in the past decade, and as the case found its way to the Supreme Court, websites and the blogsphere has become cluttered with a plethora of opinions on the merits of the patentability business methods or processes. An indication of the high interest in the Bilski outcome was the long line of people wanting to attend the public hearing — it turned out to be a brief 30-minute session ultimately — in the Supreme Court last Monday.

What is the Bilski case and why is it so critical for a host of interests? The case centres on the US Patent and Trademark Office’s rejection of Bilski’s 1997 application for a computer-assisted method of hedging risk in the energy sector. The application was made by and who worked at a natural gas utility in Pittsburgh. The two came up with a way to hedge transactions against weather patterns so that a middleman could offer uniform prices to consumers and providers alike. What they devised were mathematical formulas for managing the risks on both sides, and filed a patent application describing a business method built around those formulas.

Warsaw was quoted in a news report as saying that theoretically the formula could be worked out mentally or with pencil and paper, but that in practice it requires a computer to crunch enough numbers to make it a viable business. United States Patent and Trademark Office (USPTO), however, rejected the application on the ground that the ‘invention’ “merely manipulates an abstract idea and solves a purely mathematical problem”. In October last year (see ‘Bilski and the madness of methods’, November 12, 2008), the Federal Circuit, a specialised tribunal that hears patent appeals, upheld that patent office decision and held that to get a patent, a process must be “tied to a particular machine or apparatus” or transform “a particular article into a different state or thing”.

The other question before the apex court is whether the Federal Circuit’s two conditions for patent eligibility contravene the Congressional intent to provide patent protection to “methods of doing or conducting business”. Opinion has been pouring in and a host of companies — four dozen according to one compilation — from Yahoo, IBM and Red Hat to Novartis and smaller biotech firms have filed amicus briefs on this ticklish issue of patents for business methods. There is much at stake here since the court’s decision will have wide implications. For one, the validity of many of the business patents could be called into question. For another, it would force high-tech firms and banks to rework strategies for protecting their intellectual property.

While Yahoo has come up with a curious brief — it doesn’t want Bilski and Warsaw to get the patent because it has to do with hedging but says the Federal Circuit’s conditions about machines and transformations don’t leave enough room for Internet companies to patent innovative ideas — the open source software community is pretty clear on its stand.

Eben Moglen, director of the Software Freedom Law Centre is emphatic that business process patents should never have been allowed in the first place. Patent law, he says, cannot award ownership of facts of nature, or mere mental activities, or algorithms because the Supreme Court has been unambiguous on that point for more than 150 years. However, for the last 20 years, the and its supervising appellate court have been liberal with patents for inventions consisting of software or business methods enabled by software.

It is not surprising that the USPTO and the courts have now decided to rein in the absurd patents that were granted in the past decades. Among these are Amazon.com’s one-click to buy goods on the Internet (this was quashed later), prompting industry giants such as IBM and Sun Microsystems to call a halt to the madness. Bilski and Warsaw were just late at the window.

For SFLC, a not-for-profit legal services organisation that provides legal representation and other law-related services to protect and advance free software, the Supreme Court decision is of utmost interest. As its amicus brief points out the court’s ruling will have a significant effect on the rights of the free software developers and users. Similarly, Red Hat’s interest in the outcome is also based on its experience in the software industry and its commitment to the free and open source software community.

The case will have resonance in India, too, since the controversy of software patents is yet to be resolved. An alliance of free software groups maintains that patents are being granted to the big players although the law forbids it. The Bilski verdict will be watched closely by the industry here also.

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