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Relief as patent process left intact

High court ruling could have altered software firms’ rights

By D.C. Denison
Globe Staff / June 29, 2010

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The phone started ringing around mid-morning yesterday in the law office of Robert Plotkin, a patent attorney in Burlington who represents a number of software companies.

“Most of my clients were relieved,’’ Plotkin said.

The reason: The Supreme Court had just issued a narrow ruling in a patent case, instead of significantly changing the way the way patents are awarded. The case was closely watched because the ruling could have redefined what can be patented in the United States.

Instead, the court’s decision did not address the question of whether a “business process,’’ a collection of actions, is eligible for a patent.

“Largely, the ruling means that nothing has changed,’’ Plotkin said. “This is a very narrow ruling, based on specific facts of the case.’’

The case before the Supreme Court involved Bernard Bilski and Rand Warsaw, who tried to patent a hedging method to lock in prices when buying energy.

The US patent office rejected the patent application, and the US Court of Appeals for the Federal Circuit upheld the rejection. It also ruled that business methods can be patented only if they involve a machine, or result in the transformation of a material substance.

Yesterday the high court unanimously agreed with a lower court ruling that threw out Bilski and Warsaw’s patent, but said the lower court erred regarding the limits on what business methods can be patented.

“The court basically said the machine or transformation test was too narrow,’’ said Reza Mollaaghababa, an intellectual property lawyer at the Boston law firm of Nutter McClennen and Fish. “But at the same time, they didn’t come up with a hard and fast test of what makes an idea patentable.’’

The decision yesterday could have been disruptive if the court had taken a hard line against inventions that were less tangible — like some functions of software products — saying they did not deserve patent protection. That could have had wide repercussions in fields like software design, medical diagnosis, and financial management, where inventions don’t necessarily involve machines or physical transformations.

Yesterday’s narrow ruling was not that dramatic.

Instead, the court agreed with the denial of the Bilski patent application specifically, because it amounted to an abstract idea. Broad, abstract ideas, like, for example, “buy low, sell high,’’ are not eligible for patents. But the court did not categorically say that all business processes were ineligible for patents.

Mollaaghababa said the ruling was good news for his clients in the software industry, who were worried that a machine or transformation test would be so strict that many software patents would no longer apply.

At the same time, he said, because the court didn’t propose a new test, “we are almost back where we started.’’

For those holding business process patents, yesterday’s ruling was good news. “It would be very unlikely that any existing patents would become invalid as a result of this ruling,’’ Plotkin said.

The bad news, Plotkin added, is that “by not changing the law, the Supreme Court didn’t clarify the law, either.’’

D.C. Denison can be reached at denison@globe.com.