District Court Judge’s Observations On Business Method Patents After Bilski

by Brian Fletcher on April 5, 2009

Back on March 27, we discussed where Bilski was applied in a recent case in the U.S. District Court for the Northern District of California to invalidate a patent held by CyberSource Corp. for a system to detect fraud in online credit card transactions.  The Harvard Journal of Law & Technology’s Jolt Digest also has a nice summary of the case.


Also worth mentioning is that while the opinion could have easily ended at the top of page 15, Judge Patel decided to continue with what some might call incredibly gratuitous comments, reproduced below, about business method patents.  The internal citations have been removed:


In analyzing Bilski, one is led to ponder whether the end has arrived for business method patents, whose numbers swelled following the decision in State Street.  Without expressly overruling State Street, the Bilski majority struck down its underpinnings.  This caused one dissenter, Judge Newman, to write that State Street “is left hanging,” while another dissenter, Judge Meyer, registered “an emphatic ‘yes’” to rejecting State Street, and a third, Judge Rader, queried whether the court was willing to decide that the entire field of business patents is “undeserving of incentives for invention.”  Although the majority declined say so explicitly, Bilski’s holding suggests a perilous future for most business method patents.


The observations of several Justices suggest that this issue may be expected to receive serious consideration by the Supreme Court.  See eBay Inc. v. MercExhcange (Kennedy, J., concurring) (noting the “potential vagueness” and “suspect validity” of some business method patents); Lab. Corp. of Am. v. Metabolite Labs.  (Breyer, J., dissenting from denial of certiorari)  (questioning State Street’s adherence to Supreme Court precedent and observing, “Patent law seeks to avoid the dangers of overprotection just as surely as it seeks to avoid the diminished incentive to invent that underprotection can threaten.  One way in which patent law seeks to sail between these opposing and risky shoals is through rules that bring certain types of invention and discovery within the scope of patentability while excluding others.”).  The closing bell may be ringing for business method patents, and their patentees may find they have become bagholders.



Anyone care to hazard a guess what Judge Patel was thinking by including the above in the opinion?  At a minimum, the Bilski opinion included the following on page 21 of the slip opinion:


We further reject calls for categorical exclusions beyond those for fundamental principles already identified by the Supreme Court.  We rejected just such an exclusion in State Street, noting that the so-called “business method exception” was unlawful and that business method claims (and indeed all process claims) are “subject to the same legal requirements for patentability as applied to any other process or method.”  We reaffirm this conclusion.


The complete CyberSource opinion is available here.

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