Will SCOTUS Break Patent Law With Bilski Case?

Patent law is broken.

Attention People of Earth:

Patent law is currently broken. Especially software patent law. A pending Supreme Court case (Google Bilski for more info) may fix it or make further break it. In short, you can expect to pay more for, wait longer for, and get less from your patents than you would have 5 or 10 years ago.

  • Cost – At my IP law firm, the average cost to file a patent is $11.5K. This represents about half of the overall cost of getting a patent. File it for $11.5K, finish it up in a few years for another $11.5K, total cost $23K. (There is a large standard deviation. Two thirds of our patents are filed for between $7K and $17K, so you are unlikely to pay less than $14K or more than $34K.)
  • Time – Your patent will be pending for years, 5-6 years for software patents. Your patent will likely be pending before you need to make the decisions about filing foreign patents. In most cases, your patent will be pending long after the product (that is the subject of the patent) has reached the end of its lifetime in the marketplace. In some cases, the patent will be pending long after the company (that owns the patent rights) has been sold or has gone out of business.
  • Rights – Less than 50% of filed patents will issue, so your chances of getting a patent, starting out, are less than getting heads in a coin flip. If your patent is a combination of previously existing elements, then the chances are closer to five percent that a patent will issue (Google KSR for more info). Is your invention above average? Are you an above average driver? Note that 80% of people surveyed answer “yes” to the second question, but 37.5% of them are wrong.

In many cases, filing a patent application is not worth it. Especially for startups. Your money and time would be better spent hiring programmers, marketers, and a sales force.

If you must spend your IP budget on something, then do this:

  • Trademarks – Trademarks last as long as they are used. Search the USPTO’s trademark database to see which of your trademarks (company names, products, services, taglines, slogans) need to be registered. Then register them.
  • Domain Names – Domains last forever (as long as you pay the trivial annual renewal fee). Use the DomainTools domain typo search tool to see which of your domain names have been registered by cybersquatters. If you haven’t registered all of your trademarks (and all common misspellings thereof) as domain names, then do it now. Then regain control of the domains that are currently out of your control (via UDRP or otherwise).
  • Usernames – Usernames, on social networking sites (such as LinkedIn, Facebook, and Twitter) and the like, last as long as those companies last. Or until the companies are acquired by a clueless monopoly. If your brands have been Twittersquatted, then try to get them back. Use claim.io, namechk.com, and/or usernamez.com to search for the availability of your username on multiple social networks.

If you’ve read all of this and still want to proceed with patents, then go for it. Clock Tower Law Group is not the right law firm for every company, but it is the right firm for companies who appreciate that we tell it like it is.

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Erik J. Heels writes about technology, law, baseball, and rock ‘n’ roll. He is @ErikJHeels on Twitter, where he tells it like it is.

10 Replies to “Will SCOTUS Break Patent Law With Bilski Case?”

  1. As law as patent law exists, there will be patent applications. And we will file them in the right circumstances. But all applicants need to know the reality of the situation going in.

  2. I’m not saying that it doesn’t make sense to patent stuff that is patentable. As long as patent laws exists, it makes sense for smart businesses to take advantage of the laws. Just like it makes sense to take advantage of tax laws, immigration laws, zoning laws, etc.

    For example, for tangible products, design patents provide quick, affordable, and real protection against knock-offs.

    For startups, patenting defensively makes sense in some cases. But the current state of patent law suggests that you must have a “nugget of newness” (my term) in your invention in order for it to be patentable…. See More

    But the old days of patent law are gone. Chronologically, here is how patent law broke, and here are my current recommendations for prospective patent applicants:

    The 07/23/98 State Street Bank v. Signature Financial Group CAFC decision (http://en.wikipedia.org/wiki/State_Street_Bank_v._Signature_Financial_Group) opened the door (some would say “floodgates”) to business method patents. The current backlog at the USPTO is directly tied to the State Street decision.

    The 04/30/07 KSR v. Teleflex Supreme Court decision (http://en.wikipedia.org/wiki/KSR_v._Teleflex) made it easier for the USPTO to reject patents for being obvious (i.e. not new enough).

    The 10/30/08 In re Bilski CAFC decision (http://en.wikipedia.org/wiki/In_re_Bilski) means that it will be more difficult for companies to secure business method or software patents.

    As of 04/02/10, Bilski is on appeal at the US Supreme Court. The Supreme Court’s ruling, which is expected any day, may fix the situation or make further break it.

    What KSR and Bilski do is give the USPTO – which is already predisposed to rejecting patent applications – more ammunition to make rejections. Regardless of how you interpret these cases, the USPTO has a track record of publishing “guidelines” for how examiners should interpret and apply the law. These guidelines are rarely favorable to applicants. On 10/10/07, the USPTO published guidelines about how to apply KSR (http://www.uspto.gov/web/offices/com/sol/notices/72fr57526.pdf), and they may do the same after Bilski.

    As a result of these cases, I am recommending that software-related patents be filed as provisionals, which (1) gives you one extra year of patent pending and (2) gives the law a chance to settle down.

    In light of KSR, if your invention consists of combinations of elements that exist in the prior art (either literally or equivalently), then I believe it will be extremely difficult – if not impossible – to secure a patent. Conversely, if your invention has the “nugget of newness” not found in the prior art, then it has a better chance of being patented.

  3. dont forget , only 29% of patent litigation favors the patent holder. It costs millions to sue and you open yourself up to all sorts of counter suits. Even then… you have a 70% chance of loosing.

    Patents are for the big dogs, not the little startup.

  4. Erik – I think your post is somewhat extreme but I acknowledge the problem. The PTO has now apparently moved to a stop-all-software patents mentality so we are seeing more and more ridiculous behavior which is driving up costs substantially. A typical case in points: file, get first office action, respond with an amendment. Get second OA. File appeal. Examiner pulls case from appeal, now wants to re-open prosecution based on some “new” reference. Repeat again and then…again. The idea I think is to discourage applicants by making the cost of fighting so high that people will just stop trying. All of the 103 rejections I see now are of the same formula: “A can be combined with B; a person skilled in the art would have done so because (fill in the blank with some new invented reason)” Since they no longer have to rely on a reference, but, instead, just their imagination, the substance and style of 103 rejections has become a farce.

  5. As of 11/22/11, Facebook’s blog-to-Notes feature is going away, so I’m deleting all of my old Notes (i.e. imported blog posts). You can find the originals on my blog (www.erikjheels.com). Story here: http://www.allfacebook.com/facebook-notes-blog-timeline-2011-11

    These comments originally appeared on Facebook:

    Matt Earley Dislike.
    April 2, 2010 at 1:23am · Like

    Erik J. Heels As law as patent law exists, there will be patent applications. And we will file them in the right circumstances. But all applicants need to know the reality of the situation going in.
    April 2, 2010 at 7:40am · Like

    Tom Hartnett Well put, Erik. But one argument I’ve heard consistently from IP pros is to patent as a defensive play against the broken system (so when you get sued, you have options). Is this still valid?
    April 2, 2010 at 9:46am · Like

    Erik J. Heels
    I’m not saying that it doesn’t make sense to patent stuff that is patentable. As long as patent laws exists, it makes sense for smart businesses to take advantage of the laws. Just like it makes sense to take advantage of tax laws, immigration laws, zoning laws, etc.

    For example, for tangible products, design patents provide quick, affordable, and real protection against knock-offs.

    For startups, patenting defensively makes sense in some cases. But the current state of patent law suggests that you must have a “nugget of newness” (my term) in your invention in order for it to be patentable.

    But the old days of patent law are gone. Chronologically, here is how patent law broke, and here are my current recommendations for prospective patent applicants:

    The 07/23/98 State Street Bank v. Signature Financial Group CAFC decision (http://en.wikipedia.org/wiki/State_Street_Bank_v._Signature_Financial_Group) opened the door (some would say “floodgates”) to business method patents. The current backlog at the USPTO is directly tied to the State Street decision.

    The 04/30/07 KSR v. Teleflex Supreme Court decision (http://en.wikipedia.org/wiki/KSR_v._Teleflex) made it easier for the USPTO to reject patents for being obvious (i.e. not new enough).

    The 10/30/08 In re Bilski CAFC decision (http://en.wikipedia.org/wiki/In_re_Bilski) means that it will be more difficult for companies to secure business method or software patents.

    As of 04/02/10, Bilski is on appeal at the US Supreme Court. The Supreme Court’s ruling, which is expected any day, may fix the situation or make further break it.

    What KSR and Bilski do is give the USPTO – which is already predisposed to rejecting patent applications – more ammunition to make rejections. Regardless of how you interpret these cases, the USPTO has a track record of publishing “guidelines” for how examiners should interpret and apply the law. These guidelines are rarely favorable to applicants. On 10/10/07, the USPTO published guidelines about how to apply KSR (http://www.uspto.gov/web/offices/com/sol/notices/72fr57526.pdf), and they may do the same after Bilski.

    As a result of these cases, I am recommending that software-related patents be filed as provisionals, which (1) gives you one extra year of patent pending and (2) gives the law a chance to settle down.

    In light of KSR, if your invention consists of combinations of elements that exist in the prior art (either literally or equivalently), then I believe it will be extremely difficult – if not impossible – to secure a patent. Conversely, if your invention has the “nugget of newness” not found in the prior art, then it has a better chance of being patented.
    April 2, 2010 at 10:38am · Like

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