Originally published January 19, 2006

For patent lawyers, 2006 appears poised to be a benchmark year. A group of important cases challenging fundamental issues of patent law are on the US Supreme Court docket. At issue are basic questions such as "what can be patented?" and "what remedies can be imposed by courts for plaintiffs in patent cases?" The outcome of these cases are of concern far beyond the US Patent Bar. Financial services providers and industry groups, among many others, have sought to have their voices heard in these disputes.

In Laboratory Corp. of America Holdings v. Metabolite Laboratories, the US Supreme Court will chart the frontiers of patentability and consider whether the correlation of a result of a blood test with a vitamin deficiency diagnosis can be patented. And eBay v. MercExchange concerns whether a court can issue a permanent injunction on behalf of a patentee that is not conducting business under the patent. Both cases will be heard in the wake of a recent "business method" patent ruling of the US Patent and Trademark Office Board of Appeals and Interferences, In re Lundgren. In Lundgren, the Board of Appeals reversed rejection of a patent application on a method of determining executive compensation, holding that it is not necessary that an invention involve "technology" in order to receive patent protection.

White & Case’s Scott Weingaertner, counsel in the Intellectual Property practice in White & Case’s New York office, recently discussed the issues.

Q: Let’s start with Lab Corp. What’s at stake in this case? Why is it so important that the Supreme Court has agreed to review it?

Weingaertner: Although Lab Corp. is a case about a patent on a medical diagnostic method, it has been seen by some as an opportunity to roll back patent protection of "business methods," and to do so through the courts, rather than through legislation. Lab Corp has become a test case because the patent it involves is directed not at a device, but essentially to the act of observing a correlation-- between a protein found in the human blood stream and a certain vitamin deficiency. So, the patent strikes some critics as involving a claim to an abstract idea or scientific principle that should be off-limits under the US patent laws. The Supreme Court can now be expected to probe, and possibly reduce, the boundaries of patentability in the US.

Q: How is the court expected to rule?

Weingaertner: It’s always difficult to predict the outcome of Supreme Court cases, but the court’s decision could fundamentally change the patent protection available not only in regard to medical diagnostics, but also for business and financial methods that currently are patentable. In the past, the courts have seen challenges to the patentability of emerging technologies, such as telecommunications, genetic engineering, and software. All of these challenges were unsuccessful. In fact, in one case, the Supreme Court, in finding genetically engineered bacteria patentable, reasoned that the patent statute encompasses "anything under the sun made by man." Whatever the Supreme Court decides – and, again, the outcome is far from clear– it will likely have a significant impact on technology and patent strategy for many industries and for US technology policy in general.

Q: Which parties are filing briefs in the Lab Corp. case, and what ramifications are they concerned about?

Weingaertner: Certain financial services providers and industry groups, among others, have argued that if the Supreme Court affirms the federal appellate court’s decision, and the diagnostic patent remains valid, it will undermine their competitive environment. While Lab Corp. is not a "business method" patent case per se, a ruling on the diagnostic method it involves is believed by some to have the potential either to bless or eliminate patents on what some patent critics call "abstract ideas."

This question of defining the boundary of patentability with respect to business methods was, by the way, recently decided in the Patent Office Board of Appeals in a case called In re Lundgren.

Q: What were the issues in Lundgren?

Weingaertner: Lundgren involved a patent application directed to a method of setting salary levels for executives. The Patent Office rejected the application as failing to meet a technology threshold for patentability. On appeal, the Board of Appeals reversed. The Board rejected the notion of a technology litmus test for patentability.

Q: Can decisions of the Patent Office’s Board of Appeals and Interferences decisions be appealed?

Weingaertner: Yes, an applicant dissatisfied with the decision in an appeal may appeal to the US Court of Appeals for the Federal Circuit, which hears all appeals of patent cases from the US district courts as well as the Patent Office. But an appeal to the Federal Circuit is an expensive and time-consuming process, so it is undertaken only rarely and when a great deal is at stake. No appeal should occur in this case, since the applicant won and is presumably satisfied. The Board, though it lost, is not entitled to appeal.

Q: What constitutes a patentable business process, according to the Federal Circuit?

Weingaertner: In the late ‘90’s, the Federal Circuit ruled in one case that the patentability of business methods involves the same considerations that apply to any invention. That is, it must be new, non-obvious, and be a useful method or apparatus -- one that produces a concrete and tangible result. The court held that transformation of data representing dollar amounts to produce a share price satisfied this test. Even if the Supreme Court, in Lab Corp. were to hold that patent invalid, that holding is unlikely to be broad enough to overrule this Federal Circuit precedent.

Q: Is the issue of the patentability of business methods one that had been addressed in other countries? How does the US approach compare?

Weingaertner: Far more protection is available for inventions in the U.S. than in other jurisdictions. Most, if not all, foreign countries have a technology requirement rejected in the Lundgren case and few business methods can pass that test, as applied by foreign patent offices.

Q: Let’s discuss the eBay case. Why is the Supreme Court considering it?

Weingaertner: In a patent case brought against eBay by MercExchange, the Supreme Court has been asked to consider who is entitled to a permanent injunction in patent cases and under what circumstances. Entitlement to a permanent injunction has long been considered by many to be one of the most fundamental of the rights conferred by a U.S. patent. But recent victories by companies like MercExchange, which own patents but don’t practice them, has led some companies to the view that permanent injunctions should be granted only after the court analyzes the equities, much as they are required to do on motion for a preliminary injunction.

In the eBay case, MercExchange successfully claimed that eBay had infringed its "Buy it Now" payment process, and a court ruled in its favor and ordered $25 million damages. The plaintiff sought a permanent injunction against eBay. The injunction was denied, but the denial was overturned on appeal. Now, the Supreme Court is going to undertake to resolve the issue of whether such an injunction can be issued. A similar situation faces R.I.M., the purveyor of the Blackberry wireless email service.

Q: And this will have an impact beyond eBay…

Weingaertner: Yes, a ruling in the eBay case will either embolden patent owners, or it will reduce the potency of their patents and likely lower the royalties that alleged infringers would need to pay to eliminate the risk of suffering an injunction.

So, with the eBay case, the Lab Corp. case and others this year, the patent landscape may be on the verge of tectonic shifts. Not only are the courts reconsidering core patent law precepts, but the Patent Office itself recently surprised the Patent Bar with proposed rulemaking that would fundamentally change the way it processes and charges for patent applications. Patentees and businesses alike have good reason to stay tuned.

Scott Weingaertner concentrates in intellectual property matters, including patent litigation and interferences, and ex parte proceedings before the United States Patent and Trademark Office. A registered patent attorney, he regularly counsels clients on the development, enforcement and commercialization of their patent portfolios and with respect to the patent positions of their competitors. In addition, he advises client companies on the intellectual property aspects of business acquisitions, licenses and divestitures.

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