Patentability of Business Method Subject Matter Divides Federal Circuit


A new level of significance is reached when the Federal Circuit U.S. Court of Appeals decides to address an issue even though it is not in fact at issue in the case before them. On March 2, 2012, the Federal Circuit issued its decision in MySpace, Inc. v. GraphOn Corp. (No. 2011-1149), in which they affirmed the lower court’s decision, finding the case was properly decided under §§ 102 and 103 of the Patent Act and not under § 101.

The significance is that even though the Federal Circuit was deciding on the issue of patent invalidity under §102’s anticipation standard and under § 103’s obviousness standard, the issue of whether or not the underlying subject matter was patentable was still brought up and discussed by the Federal Circuit judges. 

The Recorder discusses the patentability of business method patents and the debate that has emerged on the topic and on the impact of the Federal Circuit’s decision:

Business method patents protect a particular way of doing business, whether it’s a process for conducting market research or a software program. The Federal Circuit opened the door to them in 1998 when it found in State Street Bank & Trust v. Signature Financial Group, 149 F.3d 1368, that processes yielding a useful,

The court rejected a patent in Bilski because it wasn’t tied to a new machine and it didn’t transform anything. But the justices didn’t rule out method patents completely and did not define what could be patented, leading to more confusion.

The Federal Circuit has wrestled unsuccessfully with the issue ever since. “And it all culminates with this case,” said Fenwick’s Meyer. “It’s brought out into the open that there is a tremendously deep divide in the Federal Circuit over these issues. And when you don’t have a common view, it injects uncertainty.”

In its latest ruling, Federal Circuit Judge Haldane Mayer raised the issue of patentability himself in a strongly worded dissent, even though none of the parties had addressed that issue in the case.

Mayer argued that in order to weed out questionable patents, the court should address §101 patentability issues before looking at any other issues. Mayer had also dissented in the Federal Circuit’s en banc ruling in In re Bilski, arguing that business methods should not be patentable under §101.

The majority of the panel, which consisted of Federal Circuit Judges S. Jay Plager and Pauline Newman, disagreed, saying courts should “avoid the swamp of verbiage” of §101 and consider other issues such as novelty or obviousness first.

As the opinion is divided and the arguments for and against patentability of business method patents can’t go far without some guidance from the courts, there is a chance the issue could return to the Federal Circuit for en banc review. However, the Supreme Court of the United States may ultimately be the only source of clarity on the issue considering the Federal Circuit’s history of division on the matter.

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