SCOTUS to Federal Circuit: Think harder about what’s patentable

May 23, 2012

In March, when the U.S. Supreme Court ruled unanimously that Prometheus Laboratories was not entitled to a patent on a diagnostic process because it’s a law of nature, On the Case (and many others) predicted the justices would subsequently call for reconsideration of Myriad Genetics’ patents on breast cancer genes, since genes are, of course, also natural phenomena. Within a week we were all proven right. But the second case the Supreme Court has remanded to the Federal Circuit Court of Appeals in light of the Mayo ruling – which involves a patent on viewing copyrighted content on the Internet – suggests the justices want greater scrutiny of a wide array of patents, not just biotech IP.

Mayo addressed Section 101 of the Patent Act, which holds that “laws of nature, natural phenomena, and abstract ideas” are not patentable. That seems simple, but in interpretation it’s not. If patent seekers can show their invention involves a unique application of an abstract idea or law of nature, they’re entitled to a patent, so analysis of Section 101 patentability has focused on what constitutes an application. In Mayo, the justices unanimously agreed that a diagnostic test based on how patients respond to autoimmune drugs is not a patentable process under Section 101. But the cases the Supreme Court cited to reach that conclusion involved patents far removed from the human body: a process for molding rubber and a process for monitoring the catalytic conversion of hydrocarbons. Both processes relied on math and science formulas, which aren’t patentable. The rubber molding system, however, transformed a non-patentable law of nature into a patentable process, while the alarm system for catalytic converters did not.

That reasoning leaves plenty of room for cases that have nothing to do with diagnostic procedures to be re-evaluated under Section 101. “The basic analysis the Supreme Court lays out isn’t limited by subject matter,” said Gregory Garre of Latham & Watkins, who represents an online game company called WildTangent in the case the Supreme Court remanded to the Federal Circuit on Monday. WildTangent was one of three defendants sued by a company called Ultramercial, which holds a patent on a process for distributing copyrighted material on the Internet. Hulu and YouTube settled out of the patent infringement litigation in federal court in Los Angeles. But WildTangent continued, through both U.S. District Judge Gary Klausner‘s finding that Ultramercial’s patent was impermissibly abstract and the Federal Circuit’s restoration of the case last September. A three-judge appellate panel headed by Chief Judge Randall Rader held that Ultramercial’s patent – which calls for online viewers to watch an ad before being permitted access to copyrighted content – was not excluded by Section 101 because it described “the application of an abstract idea to a ‘new and useful end,'” which the Federal Circuit said was “the type of invention that the Supreme Court has described as deserving of patent protection.”

The Federal Circuit’s Ultramercial ruling got a lot of attention because it seemed to undermine Section 101’s power to screen patents, so long as patent applicants said their processes applied on the Internet. Coming after the Supreme Court’s refusal to set a hard line for business-method patents in its 2010 ruling in Bilski v. Kappos, Ultramercial was regarded as a boon for tech patent applicants.

WildTangent and its lawyers at Latham requested en banc review and then, after the Federal Circuit declined, asked the Supreme Court to decide whether Ultramercial’s patent was barred by Section 101. The company’s petition for certiorari was filed before the Supreme Court decided the Mayo case, but Latham asked the justices to hold the petition until they issued that ruling. In a supplemental brief after the Mayo decision came down, WildTangent argued that the Supreme Court ruling underscored Section 101’s purpose as a patent screen – and asserted that Ultramercial’s patent fails to get through that screen.

Ultramercial’s lawyers at McKool Smith Hennigan countered in an opposition brief that Mayo “did not concern patent-eligible subject matter in the context of computer-related inventions and did not address the issue of potentially abstract subject matter.” Bilski was the more appropriate standard, according to Ultramercial, and the Federal Circuit had already considered Bilski in finding Ultramercial’s process to be patent eligible.

The Supreme Court order remanding the case for reconsideration vacates the previous Federal Circuit decision, so the justices clearly disagreed with Ultramercial’s assertion that Mayo doesn’t apply. WildTangent counsel Garre said Ultramercial’s “very generalized” patent should be deemed too abstract to get past Section 101’s screen. Ultramercial counsel Lawrence Hadley said it’s a mistake to read much into the high court’s remand order since the justices are just asking for reconsideration in light of Mayo. “It’s not all that surprising,” he told me. “It’s the same thing the Supreme Court did [when it decided] Bilski.”

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