Bilski lives on… well, in spirit anyway…

Last week the US Supreme Court issued a ruling that, well, basically did nothing. It left the question as to what can be patented up in the air, pushing the decision-making process back to the lower courts. This was relief to many companies that hold “process” patents, and a blow to the Electronic Frontier Foundation and other advocacy groups who want to see a curtailment of the rampant patenting process and resulting patent wars. By extension, software patents fall into the same tar pit in which we find ourselves.

In the Bilski v. Kappos case, the Supreme Court actually ruled against Bilski, citing that its “method” for managing financial risk wasn’t patentable. But it didn’t answer the question of what is and what is not patentable when it comes to business methods and processes. Opponents of method/process patents say that their broad nature stifle innovation since anyone with a new business method or process may be in violation one or more patents. For example, Amazon.com, Yahoo!, Facebook, Friendster (now owned by MOL) and Reid Hoffman (founder of Linkedin) and Mark Pincus (founder of Zynga) have filed or hold patents that cover multiple aspects of “social networking”. And this doesn’t even include aspects of mobile social networking, which has a whole other set of patents.

Until now the “big boys” have managed to play together fairly well, keeping their patents tucked safely away in their lawyers’ offices. But that’s not to say we won’t see the angst that is being created in the mobile phone market spill over to the social networking work, where the boundaries are not quite as clearly defined. Of course there are the obscure outliers such as Tele-Publishing, Inc. and Mikki who have decided to cash in on the success of Facebook and others.

As the Supreme Court left it, some business methods can be patented, unless they are too abstract. This was their ruling on Bilski – it was too abstract. Unfortunately the Court didn’t define “too abstract”. Essentially the Court said that the “machine-or-transformation test” wasn’t the only consideration in determining if something can be patented, but if you do pass that test then you’re “good to go”. Thus you will see future patents emphasizing this test. But for those that can’t make that direct correlation there’s still lots of wiggle room. The ruling pretty much leaves every business or process potentially “patentable” under the ruling. And it protects the thousands of patents already in place – including those mentioned above.

Today, the Court once again declines to impose limitations on the Patent Act that are inconsistent with the Act’s text. The patent application here can be rejected under our precedents on the unpatentability of abstract ideas. The Court, therefore, need not define further what consti-tutes a patentable “process,” beyond pointing to the definition of that term provided in §100(b) and looking to the guideposts in Benson, Flook, and Diehr. US Supreme Court ruling, Bilski, et al v. Kappos

SummaLogic’s take…

Like the recent hoopla about the FCC’s reclassification of information services, this ruling sets the stage for continued, long-term and costly litigation. Regardless of which side of this argument you support, it is clear that everybody would have been happier if a clearer line had been drawn in the sand. While it did put Bilski to rest, it left the door open for continued confusion, uncertainty and misunderstanding of what can and cannot be patented. The net result is that innovation will be stifled, patent trolls will continue to thrive and eventually one or more of the big boys will decide to play the patent card. It is doubtful that any major social networking service or software company will fail as a result, but there is the potential for major damage to reputation and the bottom line – just ask Research in Motion (RIM)…

Our recommendation two-fold. First, hire a tech-savvy patent attorney. The legal and economic systems cannot keep up with the pace of technology evolution, and relying on legal counsel that does not understand the implications and nuances of software (including open source), business methods and business processes can be extremely dangerous. Second, educate your entire executive staff on the issues and implications of copyrights, patents, digital rights management, etc. In fact, extend the education to your entire corporate family. Given that every employee now has the ability to easily incorporate (knowingly or otherwise) derivative works in your products, it’s a good chance that you are exposed to, if not already in violation of, intellectual property rights infringement. Now is the time to protect yourself.