If you recall, the Federal Circuit (a court that issues most key patent law rulings) released an important decision, In re Bilski, last October. Initially, many commentators erroneously opined that the decision invalidated software patents. It didn’t. While Bilski curtailed “pure” business method patents (e.g., a method for preparing a tax return), it had very little impact on the ability of an innovator to obtain a patent on software through a careful patent attorney. Indeed, I’ve even seen some office actions in which the examiner himself offered changes to claim language to make the software patent-oriented claim conform to Bilski.

Yesterday, the Supreme Court “granted cert.” This means the Supreme Court wants to review the decision, and it likely also means the Supreme Court was dissatisfied with Bilski.

Indeed, the Wall Street Journal Law Blog quoted Laurence Rogers, an E.E. patent lawyer at Ropes and Gray as saying, “The Supreme Court doesn’t get involved in patent cases unless it sees something it doesn’t like.”

In addition, Joe Mullin at The Prior Art quotes Mark Lemley—intellectual property law glitterati and Stanford law professor—as saying, “They either looked at the Bilski legal test and said it’s an unworkable test, or they looked at their own precedent and decided they didn’t like that.” Prof. Lemley goes on to say, “If you look at other Supreme Court patent cases in recent years, they show no compunction about overturning settled wisdom in the Federal Circuit and courts of appeals.”

Thus, I’m predicting that the Supreme’s Court’s willingness to hear Bilski may be just that—an indicator they’ll overturn it.

In Every Penny Counts, the district court uses Bilski as Judge Newman predicted in her Bilski dissent: “each trial court… will have a blank slate on which to uphold or invalidate claims based on whether there are sufficient ‘meaningful limits’” imposed on the claim by the use of a particular machine.

In Every Penny Counts, the district court analogizes the claimed system to that of Gottschalk v. Benson, 409 U.S. 63, 64-66 (1972), in which a method of programming a digital computer to convert signals from binary-coded decimal to pure binary form was found to be unpatentable. In Gottschalk, the Supreme Court reasoned that because converting binary-coded decimal to pure binary form had no use outside a computer, allowing the patent to stand would “wholly preempt the mathematical formula and, in practical effect, would be a patent of the algorithm itself.”

In Every Penny Counts, the district court quotes Gottschalk, stating, in a conclusory manner, that the system at issue “‘has no substantial practical application except in connection with’ computers, cash registers, and networks….”

However, this reasoning misses the mark because unlike Gottschalk’s binary conversion algorithm, many of the claimed elements could certainly have practical application outside a computer. For example, a computer is not practically required to “determin[e] an excess payment on the basis of the determinant established by the payor,” nor is a computer practically required to “apportion[] at least a part of the excess payment amount said accounts on the basis of the excess determined.”

On this point, at least, Gottschalk seems distinguishable. In Gottschalk, the Supreme Court implicitly recognized that entities other than digital computers by and large have little need to engage in a binary decimal conversion process. For example, few of us humans routinely deal with raw binary representations of numbers or other data. However, human beings do routinely perform such accounting tasks as those performed by the claimed computing means in Every Penny Counts. Thus, unlike the claims at issue in Gottschalk, the claims at issue here would arguably not be in practical effect a patent of the algorithm itself.

Admittedly, in a credit card system as large as Bank of America’s, it may not be cost-effective to have a human perform the claimed elements. Accordingly, the claims at issue may indeed cover most commercially feasible implementations of a process, but that still seems to be a far cry from Gottschalk, in which the claims would have completely preempted a mathematical formula.

In the end, maybe the district court reached the right outcome, and maybe it did not. However, the claims at issue seem distinguishable from those of Gottschalk, and if the district court had not employed this faulty analogy, it is not clear that it could have reached the same outcome.

In Crown Packaging, the plaintiff (the patent holder), in brief, did not mark its products with a patent number as required by 35 U.S.C. § 287(a) for most patented products. You’ve seen these markings on, for example, a Starbucks coffee sleeve (Pat. Nos. 5,205,473 and 6,863,644, to be precise).

Nevertheless, the court, consistent with precedent, allowed the patent holder to enforce its method claims. Method claims are used extensively in patents on software products, so this is good news for many of our clients.

For more about the decision, I’d refer you to Patently-O’s post on the case here.