Looking at a tech company's recent patent applications is a good way to see where its products may be going and what it fears from its competitors. And there are a lot of those patent applications. For the last 10 years, Internet, finance and software companies have been on a patent binge thanks to a Federal Circuit decision that made it possible to patent "business methods," which includes Internet transactions as simple asOne-Click. This week, a new precedent was set by a landmark case known as In re Bilski, and the decision will virtually eliminate the entire class of methods patents — drastically altering the technology landscape.
The case involves a method of hedging trades in the commodities markets, which the Court of Appeals for the Federal Circuit upheld en banc Thursday in a decision that deemed the Bilski method unworthy of a patent. While the Bilski case itself might pertain to trading, the new precedent will immediately change the way hundreds of millions of dollars in patent applications are approved or denied, and will even put existing software and Internet patents at risk of challenge.
Business methods patents protect processes that have little to do with tangible products. Take a patent filed bythis month, for example, which would give them ownership of "personal area networks... and methods for use thereof." It describes a method for managing a personal network of devices, say, between your iPod, wristwatch, shoes, and mobile phone, which could all talk to each other via short-range technology like Bluetooth and WiFi, and communicate back to a cloud server by interfacing with your mobile phone.
Apple's patent filing gives a real-world example of the personal area network in use: "A user may place or take a telephone call using the host device by wirelessly communicating with the long range communications device via the short-range communications protocol." In other words, your wristwatch, or headphones could be used to answer a phone call, or your sneakers could tell your iPod when to play a queue up a certain playlist. All your accoutrements and gizmos would be in constant communication using radio frequency signals — a great method of networking that Apple may never exclusively own, thanks to the Bilski case.
Another Apple patent filed this month is meant to protect the performance and efficiency of its new version of OS X, version 10.6, which is dubbed "Snow Leopard." The three patent applications describe techniques for executing code on multiple processors, each of which have several cores, such asCore 2 Duo chips, but don't apply to any tangible hardware.
As one of the Apple filings explains, "Traditionally, GPUs and CPUs are configured through separate programming environments not compatible with each other. Most GPUs require dedicated programs, which are vendor-specific." Apple's innovative process would allow graphics processors and central processors to work together to streamline computing, cutting down on the bottlenecks that currently hamstring multi-processor computers. Their potential ownership of that process, too, is now in jeopardy.
Determining whether the effect of the Bilski decision will be positive or negative for the tech industry is difficult, in part because it means analyzing the delicate market equilibrium between competition and ownership that patents are meant to protect. Pavan Agarwal, a partner at the Chicago-based law firm Foley & Lardner and the chair of the firm's electronics practice, has been watching the case carefully. "On one hand, patents attained with such breadth could be damaging to competitive markets," he told me recently by phone. "On the other hand, if we want innovation in an information age, we need to be able to patent this stuff. It comes down to a question of determining the right standard of eligibility." For many tech companies, he says, meeting that new standard might now require tying processes to specific machines or tangibles.
This week's Bilski decision is far from the last word on the patentability of "business methods," however; a further three-judge panel will be left to sort out the details, as will other federal district court decisions. If appealed further, the case may even be heard by the Supreme Court. Whatever its legacy, it will change the technology industry landscape for patent protection and litigation as the industry now knows it.