Supreme Court Case Could Have Major Impact On Software and Business-Method Patents

The U.S. Supreme Court this term will consider a case concerning a patented method for diagnosing vitamin deficiencies, opening the door for the court to break more than 20 years of silence on the scope of innovations for which scientists and other inventors can seek patent protection.

While the question presented in Laboratory Corp. of America Holdings v. Metabolite Laboratories, Inc appears at first glance to be fairly narrow, one can not rule out the possibility that the court will brush over two decades worth of lower court precedents and restrict the ability of inventors to protect software products or business methods.

Existing patentees and hopeful inventors alike should therefore monitor the case’s progress closely.

Under 35 U.S.C. Sect. 101, “whoever invents or discovers any new and useful process, machine, manufacture or composition of matter, or any new and useful improvements thereof, may obtain a patent” protecting the invention so long as certain other conditions for patentability are satisfied.

The Supreme Court’s last word on the question of “patentable subject matter” – the scope of the statutory language concerning “process, machine, manufacture, or composition of matter” – was its 1982 decision in Diamond v. Diehr. While emphasizing that “Congress intended statutory subject matter to ‘include anything under the sun that is made by man,'” the court nevertheless recognized that “laws of nature, natural phenomena, and abstract ideas” are not patentable.

The devil, however, is in the details. A five-justice majority in Diamond concluded that a process for molding precision rubber products fell within the �� categories of potentially patentable subject matter, even though several steps of the process relied on the use of a mathematical formula and a programmed digital computer.

Rejecting the idea that the patent applicant was seeking to patent an algorithm, the court relied on the principle that “an application of a law of nature or mathematical formula…may well be deserving of patent protection.”

To that end, the court explained that one must assess a given claim as a whole to determine whether the recited structure or process “is performing a function which the patent laws were designed to protect.” To illustrate such a function, the majority offered the example of “transforming or reducing an article to a different state or thing.”

Subsequent Litigation

The majority of subsequent disputes in the lower courts and the Patent and Trademark Office (“PTO”) have concerned claims on computer software, “business methods,” and other innovations that might seem like nothing more than disembodied mathematical concepts or other unpatentable algorithms.

The results, however, have consistently favored inventors and arguably further expanded the scope of patentable subject matter as drafters have found ways to incorporate other steps, ensuring that the claims “as a whole” involve more than just an algorithm alone.

In State Street Bank and Trust Co. v. Signature Financial Group, for example, the Federal Circuit – the appellate court responsible for essentially all patent appeals – considered a claim concerning a data processing system that allowed mutual funds to pool assets in a single investment portfolio. While the district court had concluded that the plaintiff’s patent was invalid because it failed to claim statutory subject matter, the Federal Circuit reversed.

The panel reasoned that the claim was valid because it constituted a “practical application of a mathematical algorithm” because it produced a “useful, concrete and tangible result” in the form of a final share price that was valid for recording, reporting, and regulatory purposes.

Natural Phenomenon

In Laboratory Corp. of America Holdings v. Metabolite Laboratories, Inc., by contrast, the issue will involve a natural phenomenon rather than a mathematical algorithm.

Metabolite, the respondent, has a license to U.S. Patent No. 4,940,658 (the 658 patent), which the original patentee obtained after researchers discovered a connection between elevated levels of “total homocysteine” – the amino acid homocysteine itself along with various derivatives – and deficiencies in the B vitamins cobalamin and folate.

The claim at issue accordingly concerns a method for detecting cobalamin (commonly known as vitamin B12) or folate deficiencies in any warm-blooded animal, including humans. A person practices the claimed method by (1) “assaying a body fluid for an elevated level of total homocysteine” and (2) “correlating an elevated level of total homocysteine in said body fluid with a deficiency of cobalamin or folate.”

Given the manner in which lower courts have interpreted the requirement in Diehr that one must take claims “as a whole,” Metabolite’s claim would seem to fit fairly comfortably within the scope of patentable subject matter. Indeed, petitioner Laboratory Corp. (doing business as LabCorp) did not even raise the issue prior to preparing its certiorari petition.

Taking a step back, however, the conclusion may appear quite troubling. The process of assaying samples for elevated levels of homocysteine is well known.

Instead, the only novel feature about Metabolite’s claim seemingly lies in the mental step of “correlating” the result of the test and thereby determining whether the patient suffers from a vitamin deficiency – a step that the 658 patent itself does not explicitly describe how to carry out.

LabCorp stressed these ideas when framing the question for review: “Whether a method patent setting forth an indefinite, undescribed, and non-enabling step directing a party simply to ‘correlat[e]’ test results can validly claim a monopoly over a basic scientific relationship used in medical treatment such that any doctor necessarily infringes the patent merely by thinking about the relationship after looking at a test result.”

Surprising Cert

The Supreme Court’s decision even to grant cert came as something as a surprise, particularly after justices had declined the chance to hear cases like State Street Bank that had revolved entirely around questions of patentable subject matter.

As noted above, LabCorp had never previously so much as raised the issue; the issue may well have been an afterthought in the party’s petition. The court nevertheless ignored the other questions that LabCorp had raised and instead invited the Solicitor General to express the views of the United States concerning the patentable subject matter issue alone.

Moreover, the Solicitor General’s office in turn recommended against granting certiorari. While acknowledging that the patent claim at issue appears to “involve” an unpatentable natural phenomenon, the government’s brief relies extensively on Diehr and argues that LabCorp’s failure to contest the issue below has left the record insufficiently developed to decide the question.

In particular, the government asserted that there is no basis to know whether the claim necessarily involves the transformation of matter and does not comprise every substantial practical application of a natural phenomenon.

The brief does acknowledge that affirmative answers to these questions probably would not have sufficed under Parker v. Flook, a pre-Diehr case in which the court did not evaluate claims “as a whole” but instead looked for some novel feature other than the associated algorithm or natural phenomenon.

Citing the PTO’s reliance on the newer approach, however, the Solicitor General’s office argues persuasively that a decision undermining Diehr “could call into question a substantial number of patent claims and undermine the settled expectations of numerous participants in technology-based industries.”

While it is always difficult to forecast a case’s outcome, predictions are particularly difficult under the circumstances. With the recent death of Chief Justice William Rehnquist, Justice John Paul Stevens is the only current member of the bench who had a role in deciding Diehr. Moreover, Stevens authored a lengthy dissent to Rehnquist’s majority opinion. While the dissent nominally reflects a disagreement as to what the inventor was actually claiming, Stevens also argued that the majority had misapplied Flook – a decision that he had authored.

Given this history, one can reasonably expect Justice Stevens to push for a broad decision that calls legions of software and business method claims into question. Whether he can attract four other justices to form a majority remains uncertain, however.

On the one hand, the Solicitor General’s argument concerning “settled expectations” carries significant force. Congress has indeed declined to restrict the scope of patentable subject matter in the years since Diehr. At the same time, however, it is also reasonable to conclude that the four (if not more) justices who voted in favor of certiorari had something more far-reaching on their minds than a reversal based on something like the “written description” requirement under 35 U.S.C. Sect. 112.

While Laboratory Corp. is more likely than not to pass with a whimper, one must also consider the possibility of a veritable earthquake.

Charles Steenburg is an associate at Wolf Greenfield in Boston and is a member of the firm’ litigation practice group. He focuses his practice in the areas of trademark, trade dress, patent, copyright, domain name disputes and Internet cases. He can be reached at [email protected] or (617) 646-8265.