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

BOSTON, MA, Jul 23 (MARKET WIRE) --
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:
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

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