The Bilski Case and Software Patents

December 1, 2009

Something happened in the second week of November that could forever change the face of the software industry. (No, I’m not referring to the release of Go Lang.)

On November 9th, the Supreme Court heard oral arguments in re Bilski. (In re Bilski means “in the matter of Bilski.” I looked it up for you.)

The outcome of this case determines the future of software patents.

What’s a “Bilski”?

Back in 1997, Bilski and Warsaw filed a patent for managing risk in commodities trading through hedging. Using their process, for example, an oil company would be able to offer a locked-in rate to customers, and do some fancy purchasing behind the scenes to cover their asses so that if oil prices spiked, they would still turn a reasonable profit.

The US Patent Office (USPTO) denied the patent because it did not pass the “machine-or-transformation” test. This test says that for a business process to be patentable, it must either be implemented with a particular machine designed or adapted to carry out the process, OR it must transform/reduce an article into a different state.

The problem with the USPTO’s decision is that it contradicted precedent set by the Federal Circuit Court.

“Ruh Roh”

Ruh Roh indeed, Scoob. The Federal Circuit Court previously held in State Street, that an invention is patentable if “it produces a useful, concrete and tangible result” and applies to a specific application, tests that Bilski’s patent should have passed.

The Bilski team appealed to the Board of Patent Appeals, with no luck. So they appealed again to the Federal Circuit Court, who you would think would quickly overrule the Board’s decision, citing State Street. The Circuit Court, however, agreed with the USPTO, saying in effect that they were wrong before, that the State Street ruling no longer applied, and that the machine-or-transformation test is now the one true test.

Interestingly, the Circuit Court included language in the decision stating more or less “holy crap guys, ever since the State Street decision we’ve been overwhelmed with business process patents, these damn patents are getting more and more abstract, and we need to streamline this process lest we get buried in paperwork.”

When all else fails, talk to “Los Jefes”

Bilski appealed again, to the Supreme Court, which granted certiorari in June. (Certiorari means that they would hear the case. Again, I looked it up for you.) The surprisingly readable oral arguments occurred on November 9th, which brings us to the present day.

(See a timeline of these events.)

So, how does this relate to software?

Software was seen as patentable as a business process because it produced a useful, concrete and tangible result. By discarding the State Street precedent, the Federal Circuit Court questioned the foundation upon which business process patents, and thus software patents, are built.

If the Supreme Court upholds the Federal Circuit Court’s decision, it means that all existing US software patents will be very, very suspect, and RMS will be a happy, happy man.

If the Supreme Court completely overrules the Federal Circuit Court’s decision, it will mean we keep the status quo, a continuation of the muddy quagmire that surrounds software patents today.

This is a black-and-white summary of the outcomes, of course. It is likely that the Supreme Court will shoot for the gray area in between.

Don’t Forget The Economy

As exciting as it may be, the Supreme Court won’t shake things up too much. Technology is one of the few industries in the United States that hasn’t been gutted by the recession. At best, sweeping away software patents will plant some serious concerns in the minds of investors. At worst, their concerns will be justified. I suspect that of all of the factors the Supreme Court considers, the health of the economy will be what guides them the most.

It’s Broke, Fix It

Rather than rehash all of the arguments for and against software patents, I’ll provide you with a Google search for software patent debate.

To be honest, I’m still not sure which side I support on the issue. I do know that software patents–in their current form–are broken, because:

Can’t wait to hear what the Supreme Court decides.


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