10 Years After State Street Decision That Transformed Patents, Appeals Court May Reverse Field

BOSTON, MA--(Marketwire - July 23, 2008) - On July 23, 1998, a landmark federal appeals court ruling upheld patents for software-implemented inventions and methods of doing business. Ten years and thousands of business-method patent applications later, the United States Court of Appeals for the Federal Circuit is considering whether to undo that decision in part or completely.

In State Street Bank & Trust Co. vs. Signature Financial Group Inc., the Federal Circuit -- the nation's top patent court -- ruled in favor of Signature, upholding its patent for a data processing system for mutual funds. The ruling opened the gate for business-method patents -- most for serious inventions, but a few for things that seem silly.

Now the Federal Circuit is considering the Bilski case, which involves a rejected patent application for a method of managing weather-related risk in commodities through hedging.

While some expect the decision will invalidate business-method patents, Steven J. Henry of Wolf, Greenfield & Sacks, P.C., one of the lead attorneys for Signature in 1998, believes that the Federal Circuit -- and ultimately the Supreme Court -- won't toss out the State Street precedent entirely.

"Most likely they'll refine the approach, but I don't think there will be a huge swing," he says. "The Federal Circuit stated in no uncertain terms in 1998 that it was wrong thinking in the past to have excluded business-method patents, and State Street corrected that. I don't foresee a complete reversal of direction at this point -- just a mid-course correction."

Thirty briefs have been filed by various parties with the Federal Circuit regarding Bilski. Henry expects the 12 judges will strive to craft an opinion with the fewest dissents that makes a clear statement.

And whichever way the decision goes, it's virtually certain to end up in the Supreme Court, he says.

The Constitution gives Congress the power to promote the progress of the "useful arts" by giving inventors and authors exclusive rights.

"The central legal issue is that the term 'useful arts' has never been construed by the Supreme Court," Henry says. "Ultimately, someone has to resolve the constitutional limits of the patent system. The current Supreme Court has taken a great interest in putting its stamp on the patent system, so I strongly suspect the Federal Circuit decision will attract its interest."

By rewarding inventors and investors, business-method patents foster innovation in an economy that increasingly depends on information and financial services, Henry says.

"Denying protection in software, financial services and other service areas might put the brakes on the growth we've experienced in the last decade at precisely the wrong time," he says.

"Ironically, China and India have built patent systems that are becoming more viable and more heavily used every day. They seem to have learned the importance of patents in encouraging investment in innovation. If we don't provide protection for US investors, why shouldn't they invest in places like India and China instead?"

Henry adds: "There have been some egregious examples, but it is usually not good policy to base general rules on preventing infrequent 'lapses.' We may need to protect against the Patent Office being a bit lax in applying the rules and letting some bad patents issue, but that does not mean we need to change the rules. A strong and broadly accessible patent system contributed significantly to our economic growth over the past decade or two. Fine tuning is appropriate, not a giant step backward."

About Wolf Greenfield

Wolf Greenfield, the largest law firm in New England devoted exclusively to intellectual property law, serves companies that make everything from pharmaceuticals to software to electronics to snowboards, as well as representing academic research centers. The firm counsels clients in the areas of patents, trademarks, copyrights, designs, trade secrets, and related licensing and litigation. Web: www.wolfgreenfield.com

Contact Information: Contact: Henry Stimpson Stimpson Communications 508-647-0705 HStimpson@StimpsonCommunications.com Sara Crocker Wolf Greenfield 617-646-8231 scrocker@wolfgreenfield.com Morgan Feldman Wolf Greenfield 617-646-8378 mfeldman@wolfgreenfield.com