The End of Bright-Line Tests in Patent Litigation

In Bilski v. Kappos, the United Supreme Court is deciding whether a patentable “process” must be tied to a particular machine or apparatus or transfer an article into a different state or thing. The Court’s ruling in this case portends possible dramatic changes to the world of software and internet patents, most of which are process-based and operate on general-purpose computing platforms. Supreme Court watchers forecast a ruling in Bilski that may substantially limit the practice of granting a process-based patent application unless the patent is tied to a physical “machine.”

Such a ruling would overturn a broad scope of process patenting that has been recognized since the Federal Circuit’s ruling in the seminal business-methods patenting case, State Street Bank & Trust Co. v. Signature Financial Group (Fed.Cir.1998). Such a ruling would also call into question the validity of many internet and software patents, virtually none of which is tied to a specific physical machine. The key question to be answered by the Supreme Court is, of course, whether a physical machine (needed to support a methods-based patent) can also include a general-purpose computer.

The signature of this Supreme Court in the past 12 years of patent decisions has been to end the various “bright-line” tests for patentability established by the Federal Circuit Court of Appeals, in favor of “functional” tests that can only be determined in a courtroom, after input from expert witnesses on both sides of the patentability test. This, of course, is a particularly expensive and risky exercise. The presumption of validity and various bright-line tests had allowed small companies to litigate a patent with fewer hurdles to patentability. But the practical effect of these recent US Supreme Court cases has been to tip the scales of justice away from small-company patentees who depended on “bright-line” patentability tests, and in favor of big company defendants who depend on numerous hurdles to patentability in defending patent cases.

This tendency away from bright-line tests was most recently highlighted in the US Supreme Court’s 2007 ruling in KSR v. Teleflex. Under pre-KSR law, a patent was presumed valid unless written prior art existed that explicitly taught an element of the patent. KSR changed that test by ruling that (a) even implicit knowledge possessed by one of ordinary skill in the art could make an element of the patent “obvious” and (b) that obviousness would be found if the element was “obvious to try” to a person of ordinary skill in the art. In effect, the US Supreme Court erased an important bright-line test for patent validity that had been controlling Federal Circuit law for 23 years.

With this significant shift in analysis away from a “bright line” test to a “functional” test, many, if not most, software patents have been put at risk, even though few commentators have been willing to acknowledge that fact publicly. Because software patents normally cover incremental increases in the knowledge in any particular area, it is usually easy for defendants to argue that a particular software patent was obvious to others of ordinary skill, and that a particular subroutine would be “obvious to try.”

In at least five other major patent cases decided by the Supreme Court since 1997, an overriding theme has been to narrow the scope of patentable inventions and eliminate various bright-line tests by the Federal Circuit in one area or another of patent law:

• Medimmune v. Genentech, 127 S.Ct. 764 (2007) eliminated the bright-line test for protection against a declaratory judgment action by a prospective patent licensee;
• eBay, Inc. v. Mercexchange, LLC., 126 S.Ct. 1837 (2006) stopped the practice of granting an automatic permanent injunction after a successful trial verdict;
• Festo Corp. v. Shoketsu Kinzoku Kogyo Kabushiki Co., 535 US 722 (2002) narrowed patentability by ruling that prosecution history estoppel arises from any amendment that narrows the patent claims;
• Pfaff v. Wells Electronics, Inc,, 525 US 55 (1998) narrowed patentability by construing the “on-sale bar” to patentability to be measured from the first commercial offer for sale of an inventive product, even where the invention has not yet been reduced to practice; and
• Warner-Jenkinson Company, Inc. v. Hilton Davis Chemical Co., 520 US 17 (1997) eliminated a bright-line test in evaluating prosecution history estoppel.

The net effect of these US Supreme Court rulings has been to place so many hurdles in the way of small-company patentees that litigation against large-company patent violators is impractical in all but the most clear-cut cases. The Court’s ruling in Bilski v. Tappos may well provide another high hurdle to most small-company patent litigation if software and internet patents are subjected to yet an additional murky legal test for patentability.