US Supreme Court resisted to grant patent to Business Method

The federal appeals court decision under review said that business methods must have either a connection to a machine or the power to transform an item into a different state. The appeals court said Bernard L. Bilski and Rand A. Warsaw weren’t entitled to a patent on their hedging method. Bilski and Warsaw’s lawyer, Michael Jakes, argued that business methods were patentable so long as they had some “practical application.”

In an hour-long argument that featured questions about speed-dating and techniques to keep law students awake, a majority of the court’s justices challenged a lawyer for two men seeking a patent for a method of hedging weather-related risks when buying and selling energy. Chief Justice John Roberts said the method was “classic commodity hedging that’s been going on for centuries.

Justice John Paul Stevenson told the lawyer that “none of our cases has ever approved a rule such as you advocate.” The court’s ruling, likely to affect billions of dollars in patent rights, will be its first since 1981 on what types of innovations qualify for legal protection. In addition to Roberts and Stevens, and other justices all voiced a desire to limit the scope of U.S. patent laws to inventions that have some physical component.

The seeming consensus on the court that the hedging method isn’t patentable may let the justices avoiding an extended discussion of what types of innovations qualify for patent protection. Justice Ruth Bader Ginsberg said the case “could be decided without making any bold step.”

The Obama administration is advocating a tougher standard for granting method patents, as is Bloomberg LP, the New York-based parent company of Bloomberg News.The fight is splitting industries, dividing companies that rely on their own intellectual property from those aiming to head off expensive infringement lawsuits. The justices have received 68 briefs from outsiders, a record for a business case. Microsoft Inc, Google Corp. Novartis Corp. Bank of America Inc, American Express Com, Morgan Stanley and Accenture LLP are all pressing arguments in the case. Justice Sotomayor asked whether a new form of speed-dating would be patentable, while Scalia asked about Dale Carnegie’s 1936 book, “How to Win Friends and Influence People.”

Kennedy said that, under Jakes’s approach, the first insurers could have received a patent for compiling actuarial tables and applying them to risk. “It’s difficult for me to think Congress would have wanted to give only one person the capacity to issue insurance,” Kennedy said.

Justice Department lawyer Malcolm Stewart urged the court to uphold the lower court ruling, saying it was a limited ruling under which “most of the hard question remain unresolved.”

Applications for so-called business method patents have soared over the past decade, from 974 in fiscal 1997 to a peak of 14,364 in 2008, according to the U.S. Patent and Trademark Office.

Those companies urging restrictions on method patents include Microsoft, Bank of America, Google,Hartfold services , J.C. Paney Co. and Morgan Stanley. On the other side, arguing that the lower court standard is too restrictive, are American Express, Medtronic Inc. Novartis, Palm Inc. Accenture. Small software, financial services and electronic commerce companies are also backing broad patent rights.

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