Three Significant Patent Cases in the News in 2010

Wealth of Ideas Newsletter, December 2010

With 2010 mostly "in the bag," we look back at the big IP stories of the year (notably, the Supreme Court's ruling on Bilski) and look ahead at a patent case that is expected to make big news in 2011.

Myriad Genetics: Should Gene Patents Exist?

Do gene patents provide incentive to scientists and researchers to invent diagnostic tests that help detect and prevent disease, or do such patents discourage innovation and create monopolies to the detriment of patients? That’s the question underlying the Myriad Genetics case.

The controversy centers on whether Myriad’s patent on the BRCA1 and BRCA2 genes allowed the patent holder to establish a monopoly in the United States on genetic testing to diagnose breast or ovarian cancer. The Department of Justice filed an amicus curiae (“friend of the court”) brief on October 29 before the Court of Appeals for the Federal Circuit (CAFC), arguing that unmodified human genomic DNA is not a man-made invention and is, thus, not patentable under the patent code (35 U.S.C. §101).

The American Civil Liberties Union (ACLU) also joined the discussion. Their argument, and those of other detractors, is that if genes can be patented, then corporations and other patent holders can limit the number of sites that offer genetic testing and/or make diagnostic tests prohibitively expensive. Thus, patenting genes doesn’t benefit humankind as much as it could. And anyway, genetic sequences aren’t something invented, but rather discovered — albeit through much time, research and the use of expensive equipment.

Proponents of allowing the patenting of genes argue that without the incentive that the patent offers, the researcher might not spend time and money trying to discover something that would benefit mankind but do nothing (financially speaking, anyway) for the researcher, university, institution or corporation. As the Association of University Technology Transfer Managers (AUTM) and the Biotechnology Industry Organization (BIO) stated in their joint amicus brief, “The biotechnology industry depends heavily on patent protection to encourage the investment of time and capital necessary to develop inventions — including those discovered industrially or in-licensed from world-class universities in support of further academic research — into real-life products.”

Myriad’s own argument is that the act of isolating the DNA from the body transforms it, and it is, therefore, patentable. And precedent would seem to be on Myriad’s side: In the past 29 years, the Patent Office has issued over 50,000 patents related to genes — human, plant and animal.

The Myriad Genetics case is Association for Molecular Pathology, et al. v. United States Patent and Trademark Office, et al., No. 09-Civ-4515 (S.D.N.Y.). The appeal is expected to be heard by the CAFC (and depending on the outcome, possibly the Supreme Court as well) in 2011 — making this a landmark case in both this year and next.

Bilski v. Kappos: Landmark, but NOT Precedent-Setting?

Without a doubt, 2010’s most eagerly anticipated court ruling in a patent-related case was the Supreme Court’s decision on Bilski v. Kappos. But when the verdict came after several months of deliberation, it did little to elucidate what is patentable and what is not.

Without going too far into the background of the case, Bernard Bilski and Rand Warsaw had attempted to patent a business method — specifically, a method of hedging risks in commodities trading. The patent examiner rejected all of the patent’s claims because “the invention is not implemented on a specific apparatus and merely manipulates [an] abstract idea and solves a purely mathematical problem without any limitation to a practical application, therefore, the invention is not directed to the technological arts.”

Bilski and Warsaw appealed to the Board of Patent Appeals and Interferences (BPAI), which affirmed the rejection. The inventors then took their appeal to the CAFC, which also upheld the rejection and reiterated that the machine-or-transformation test (otherwise known as MORT) should be used to determine patentability.

The Supreme Court — after months of making inventors and patent attorneys squirm, and enticing bloggers to prognosticate the outcome — finally affirmed the rejection of Bilski’s patent application because the invention was neither 1) tied to a specific computer nor 2) one that transformed an article from one state to another. However, the SCOTUS did not clarify further what is patentable. (For more on the issue of patentability and Bilski’s effect on other cases, see our blog post “MORT Is Alive and Well.”)

The good news is that this ruling left the door open for software patents and some business method patents to remain valid; the bad news is that the ruling was so narrow (it only addressed the Bilski case in particular) that it will be difficult to use as a yardstick for the patentability of similar business methods.

i4i v. Microsoft: Should Patents Be Easier to Invalidate?

From the big news of 2010, we move to a story that will be one to watch in 2011: The ongoing battle between i4i and Microsoft. Microsoft has been steadily losing throughout the legal fight.

  • August 2009: A federal judge found that Microsoft had infringed i4i’s patents, awarded close to $300 million to i4i, and ordered Microsoft to either remove from its Word software the ability to process custom XML code, or face an injunction on the software.
  • December 2009: Microsoft lost its appeal before the CAFC, and made history as i4i’s award was the largest ever upheld by an appeals court in a patent case.
  • April 2010: The CAFC declined a larger review of Microsoft’s appeal.
  • July 2010: The USPTO officially affirmed i4i’s patents as valid.

That brings us to November of this year, when the US Supreme Court agreed to hear Microsoft’s appeal.

What’s at stake? Microsoft (and other big tech companies that support it in its appeal, such as Google and Apple) argues that the CAFC makes it too difficult to invalidate “questionable” patents — including those of i4i, despite the USPTO’s affirmation of validity in July.

Kevin Kutz, Microsoft's director of public affairs, said in a statement, “Our petition to the Supreme Court focuses on proper standards of proof to determine the validity of a patent, which is a crucial issue for the proper functioning of the patent system. The Federal Circuit Court of Appeals' ruling in our case departs not only from Supreme Court precedent, but from the rulings of all the other appellate courts, and we are asking the Supreme Court to resolve this conflict.”

i4i and its backers argue that Microsoft and other tech giants are attempting to undermine the long-standing presumption that patents issued by the Patent Office are valid. The CAFC’s ruling said Microsoft needed to offer “clear and convincing evidence” to overcome that presumption.

If Microsoft prevails at the SCOTUS, “it’s going to result in…tremendous uncertainty for anyone who owns a patent,” said Loudon Owen, i4i’s chairman. “It would be a sea change in the operations of the patent office and would be a dramatic body blow to the health of the U.S. patent industry and the value of patents.”

The Supreme Court is expected to hear the case in the first half of 2011. It is Microsoft v. I4i Limited Partnership, 10-290. As the story develops, you can read about it — and other news from the IP world — in our Wealth of Ideas Blog.