The Bilski Business Process Patent Case

The US Patent and Trademark Office website, lists the questions presented in the Bilski Patent case that is pending before the Supreme Court. The case will be argued on November 9, 2009. The Electronic Frontier Foundation also has a nice summary of the issues and the ramifications for the technology community.


QUESTIONS PRESENTED:

Whether the Federal Circuit erred by holding that a "process" must be tied to a particular machine or apparatus, or transform a particular article into a different state or thing ("machine-or-transformation" test), to be eligible for patenting under 35 U.S.C. § 101, despite this Court's precedent declining to limit the broad statutory grant of patent eligibility for "any" new and useful process beyond excluding patents for "laws of nature, physical phenomena, and abstract ideas."

"Whether the Federal Circuit's "machine-or-transformation" test for patent eligibility, which effectively forecloses meaningful patent protection to many business methods, contradicts the clear Congressional intent that patents protect "method[s] of doing or conducting business."

Is Chicago Now the 14th City, Technically Speaking?

Several tech leaders banded together to write a response to Greg Burns' column in the Chicago Tribune, where he states that Chicago falls short in tech leadership and focus.

Burns starts his column with the connotation that the $1.2 billion sale of SPSS to IBM is BAD news. In most markets, a local tech company that is purchased for over $1 billion is a major success story. But here, it's another reason to kick ourselves (or for the Trib to kick the tech community again).

Here's the well worded response, which outlines the many resources available to support and lead the tech community in Chicago.

Turning Regional Strengths Into a Global Technology Powerhouse

When a city is known for its broad shoulders, and when a region is known for its work ethic, the status quo does not go unchallenged. Today public officials, private industry executives and academic centers of excellence leaders are collaborating toward a common goal: to make Chicago, Illinois and the surrounding Midwest one of the top technology and life sciences centers in the world. We are cultivating venture capital firms willing to finance startups, increasing public sector support, and combining talent and resources to drive the region’s growth.

We are confident that our region will improve its ability to translate the amazing quality, breadth, and depth of scientific research conducted here into an even more vibrant technology-based community, including the launching and nurturing of startup companies. Our respective organizations, along with other private and public sector leaders, particularly the past and current directors of the Illinois Department of Commerce and Economic Opportunity (DCEO), will accept nothing less.

Fortunately we are starting from an often-underappreciated position of strength. Our universities and research centers are world-class assets, as are our global information technology, medical device and biopharmaceutical corporations. When local startups mature and either acquire other companies or become acquired themselves, they represent a desired and healthy evolution for our community. It is only through this process that a sustainable technology ecosystem can develop.

With an eye toward future growth in employment and tax revenues, Illinois Governor Pat Quinn last month approved the state's first capital and infrastructure program in a decade. The package directs approximately $300 million to science and technology investments, and provides several hundred million dollars more for university-based construction projects. The capital plan is expected to create or retain 439,000 jobs in Illinois.

How are we contributing to the growth of our region? Here are just a few examples:

• Since its launch in June 2007, iBIO’s PROPEL programs have helped 48 formation-stage and early-stage life sciences companies by providing entrepreneurs with access to specialized resources and expertise. The iBIO Institute helps Illinois high school teachers incorporate biotechnology into their curricula, and encourages students to explore career opportunities in the life sciences.

• The NanoBusiness Alliance is placing our top science, technology, engineering and mathematics (STEM) students in research internships in Chicago-area nanotechnology companies to inspire our best and brightest students to stick with careers in science. It has also relocated its national conference to Chicago, bringing nanotech companies from all over the country to Chicago for local industry to engage.

• The ISTC is fostering public-private partnerships to develop and execute R&D projects, advocating for funding for R&D initiatives, and collaborating with public and private partners to attract and retain R&D resources and talent in Illinois.

• ITA communicates with some 3500 technology companies in Illinois who are engaged in the community, and participates directly in strategy development for many of these companies. The ITA also manages Chicago’s TechNexus, a clubhouse of sorts for the Illinois technology community. Each month, more than 1500 executives interact through the program, and 30 TechNexus companies have attracted more than $27 million in investment capital.

• Celebrating its 10^th anniversary, World Business Chicago has worked in concert with the public/private sector, and alongside our university partners, to foster the attraction or expansion of hundreds of Chicago-area technology-based firms. We navigate the site selection process for businesses by providing economic and industry data, state and local incentive information, and site location assistance to current and prospective Chicago companies. By working with our area’s leaders to aggressively promote and market Chicago’s strengths as a global technology hub, world-class companies from Boeing to NAVTEQ, Orbitz to CareerBuilder, Motorola to US Cellular call Chicago their home.

Illinois residents and business are fortunate to have a first-rate Congressional delegation that works to ensure investment comes home. Thanks to the number of technology-savvy supporters increasing in Springfield and Washington, and with new public-private partnerships forming constantly, Chicago and Illinois will build upon their demonstrated strengths to create new technology-based solutions in industry, medicine and agriculture. In so doing, we will create new jobs and contribute to a stronger economy in the region and nationwide.

Our organizations couldn’t exist without the active support of private businesses and public research centers, but that doesn’t stop us from aggressively pushing them to accept even greater responsibility for helping Illinois earn its rightful place as a global technology leader. As we dedicate our organizations to the vigilant pursuit of excellence, we encourage our friends and colleagues in the media to celebrate the successes occurring in our backyard. Our businesses and tax base would surely benefit if the world regularly heard about the innovations that emanate from Illinois. We also call upon the business community to apply their broad shoulders and renowned work ethic to this critically important objective. Together, we will leave the status quo behind and create a new and exciting future for Illinois, the United States and the world.

Fred Hoch, President

Illinois Technology Association (ITA)

Dan Lyne, Director, Technology Development

World Business Chicago (WBC)

David Miller, President & CEO

Illinois Biotechnology Industry Organization (iBIO)

Sean Murdock, Executive Chairman

NanoBusiness Alliance

Matthew Summy, President & CEO

Illinois Science & Technology Coalition (ISTC)

Best Efforts - Friend or Foe?

I draft a lot of agreements. I like writing and I enjoy working with business people to document the specific terms of a transaction. It's not always easy and can involve a bit of guesswork to get going. However, it is satisfying when, after of few rounds of back and forth, voila, the party's agree on a final version and a new business relationship is launched.

Occasionally, I'm tasked with defining the indefinable. The parties want to document their agreement, but factors are unknown or they honestly can't state with certainty what will happen during the performance of the agreement. This is when our old friend, the "best efforts" clause comes into play. The parties propose using their "best efforts" or “commercially reasonable efforts” to address these unknown future factors.

While the various types of "efforts" clauses can be a convenient stop-gap measure, Lawyers often cringe at using the term. Courts have created a perfect storm of uncertainty by determining that "best efforts" clauses are indefinite, but not so vague as to be unenforceable. Illinois is an exception. Here, the courts have determined that best efforts clauses, without a further definition in the contract, are unenforceable.

According to Kenneth Adams, an expert and author on contract drafting, the conventional wisdom among corporate attorneys and business people is that “best efforts” is the most onerous provision and other “efforts” provision (e.g. “commercially reasonable” or “reasonable” efforts) are less onerous. However, courts have not followed this interpretation when deciding cases.

The case law, in general, has held that “best efforts” do not require a party to make every conceivable effort to fulfill the contractual provision. Rather, “best efforts” requires good faith by the performing party. Some courts have held that the slightly higher standard of diligence applies. Diligence is defined as “the attention and care required by the typical person in a given situation, or industry standard performance, if a business is obligated to perform”. Both of these standards, good faith and diligence, are based on “reasonableness” – what a reasonable person or business would do in a similar situation. Therefore, whether you use the term “best efforts”, “commercially reasonable efforts” or just “reasonable efforts”, the court often applies the same standard.

“Reasonable” is a relative term and applies to that which is appropriate for a particular situation. Under the law, this is a fact-based determination that is best made by a jury. If there is a contract dispute, this means, worst case, expensive litigation and, best case, protracted negotiation of a settlement.

To avoid expensive litigation, protracted settlement negotiations or unenforceability in Illinois, the parties to a contract should include a clear set of guidelines for measuring performance of “best efforts” provisions. For example, a clause could state that the party who is required to perform with its “best efforts” is required to do X, but not required to go as far as Y. In a technology support agreement, a clause might read: “Best efforts requires Tech Company to escalate problems to the highest level within its standard customer support organization, but not does not require Tech Company to send personnel to the customer’s location.”

Best Efforts – friend or foe? A “Best Efforts” clause can be a friend when writing a contract just remember to take the time to incorporate specific parameters for measuring performance or you may end up with an unruly foe to contain if there is a dispute.

Q&A with a Potential Entrepreneur - Intellectual Property

Recently someone who was considering hanging out his consulting shingle after a long career in corporate America contacted me with questions regarding intellectual property protection.

With the economy in the doldrums and unemployment at a such a high rate, I thought a general version of the questions might be useful to anyone else thinking about starting his or her own business.

Q: What does it mean by a $45 filing fee for copyright? Filed with what entity?

A: It is not required to register copyrightable works with the U.S. Copyright Office. You have a copyright in your work at the moment in it created (fixed in a tangible form). There are benefits to registering such as a record of the date of creation of your work and damages that are set by statute (you don't have to prove specific damages) plus the right to attorney's fees if you win your infringement case and the copyright infringement occurs after registration. Copyright registration is easy and only costs $45/work or $35 if you file online.

Q: Can I copyright the business model I created when I worked at with my last employer?

A: Unfortunately, a business method, itself, cannot be protected by copyright. Any presentations, reports or descriptions of the method are copyrightable by your employer.

Q: But my employer did not have me sign any agreement giving them the rights to any Intellectual Property I created while working there. So it is my property, isn’t it?

A: Under copyright law, any copyrightable work that is created and fixed in a tangible form (e.g., written down) during the course of your full-time employment is a "work made for hire" and is owned by your employer. The law is very clear on this point.

Patent law is less clear in an employment situation. Under patent law, the employee-inventor is considered to be the first owner of any patent rights. In theory, an employee must assign his/her invention to an employer for the employer to have any rights in the invention (including the right to obtain a patent). In practice, even in the absence of such an express assignment, an implied assignment is often deemed to exist, where an invention was made "in the course of employment". The courts have interpreted "in the course of employment" on the facts of each case. Some of the factors tending to support an implied assignment include:

* inventor is a director or an officer of the company;
* use of company funds or equipment to do R & D on the invention;
* development (e.g. software) done on company time;
* inventor was hired in research, engineering, or experimental capacity.

So, in most cases, if something was created or invented on the job, your employer owns the rights to it.

However, employers cannot claim ownership in generalized know-how, ideas, and concepts-"residual knowledge"-that evolve during the working relationship and that exist in intangible form mostly in the memories of the employees. You won't violate your formers employer’s rights if you can recreate your business method without copying any work you created during your employment or violating any confidentiality obligations with your former employer (again using "residual knowledge" is OK as long as you're not disclosing specific, confidential information of your former employer).

Q: Should I file for a copyright or a patent? I have business methods or techniques that I would like to provide as part of a consulting business.

A: Business methods can't be protected under copyright and are expensive and difficult to enforce under patent laws in the U.S. The Supreme Court is going to hear a case (the Bilski case) on the patent-ability of business methods next term. This is the first patent case heard by the Supreme Court in over 20 years. The status of business method patents is uncertain because of this case.

Many successful consulting companies don't rely on patent or copyrights laws to protect their "methodologies". They utilize trade secret laws in each state by requiring that each client sign a confidentiality agreement before disclosing any of their methods. You could have trouble enforcing a confidentiality agreement if your methods have been disclosed previously without an obligation of confidentiality. However, any improvements you make to your business method can be treated as a trade secret or confidential information. There is a nice, basic description of trade secrets here.

Finally, any report templates, questionnaires or consulting tools that you create to support your consulting business can be copyrighted and protected as a trade secret. Which leads me back to your first question on copyright registration - you are required to deposit a copy of your work with the copyright office when you register it. You may be able to redact portions of the item when deposited if is confidential. Another option is to forgo registration altogether (and the benefits of registration) if the work contains confidential information. You still have copyrights in the work and can rely on trade secret protection with the use of a confidentiality agreement.

U.S. Supreme Court to Hear Business Methods Patent Case

Scotusblog is reporting today that the U.S. Supreme Court will rule on Bilski v. Doll in its next term starting October 5, 2009. The case involves a patent for "a method of managing risk for a business potentially affected by unpredictable price fluctuations (such as in the purchase of raw materials, or commodities)." This is an important case for the technology community and the outcome of the case will be closely watched by parties on both sides of the issues.

According to Scotusblog:

The Bilski patent case that the Court agreed to hear will give the Justices the option of defining the scope of patent law to take account of the impact of the digital age on developing software that controls human activity, such as making business decisions about how to scope with economic risk. The U.S. Solicitor General had urged the Court to bypass the case, but the Justices did not take that advice. The case has generated hot, and even worldwide, controversy since two inventors in 1997 filed an application for a patent.

This is the first time since 1981 that the Supreme Court will rule on the scope of patent protection.

Corporate Filings - Scam Alert!

It's annual report filing season for Illinois corporations and LLC's. Many company annual reports are due during the first months of the year.

The Illinois Secretary of State has the following warning on its website about a company that is scamming businesses out of $150:

WARNING! A fraudulent company called "Illinois Corporate Compliance" is contacting Illinois businesses with a deceitful solicitation to collect a $150 fee to file corporate meeting minutes. This solicitation is an illegal scam - do not respond to it.

It's a good idea to make sure your corporation has prepared it annual meeting minutes, but the only place the minutes need to be filed are in your minute book!

Another company runs a similar scam by contacting trademark and patent holders with a deceitful solicitation regarding monitoring services. The notice looks very official and infers that the monitoring services are somehow affiliated with the US Patent and Trademark Office. Here's what the USPTO says:

You may receive unsolicited communications from companies requesting fees for trademark related services, such as monitoring and document filing. Although solicitations from these companies frequently display customer-specific information, including USPTO serial number or registration number and owner name, companies who offer these services are not affiliated or associated with the USPTO or any other federal agency. The USPTO does not provide trademark monitoring or any similar services.

Be wary of any correspondence that looks like its from a government agency, but asks for a payment to a private company. When in doubt, do a quick search on the Internet for more information.

The New Pepsi Challenge: Gatorade v. Powerade

PepsiCo, Inc. sued Coca-Cola Co. over Coke's ad campaign touting the superiority of Powerade over Gatorade. Pepsi is claiming that Coke's ads are deceptive. Coke states that its sports drink is superior and Gatorade is "incomplete" because Powerade ION4 contains calcium and magnesium. According to Pepsi, that the amount of the minerals in Powerade ION4 is less than 0.5 percent of their recommended daily allowance and that most tap water contains more minerals.

It reminds me of when the FTC challenged an advertisement by Nestle that claimed Carnation Instant Breakfast has as much mineral nourishment as two slices of bacon. The problem? Bacon has no minerals.

The FTC encourages advertisers to run comparative ads - they're viewed as beneficial to consumers so long as they don't mislead. Coke's statement that Gatorade is incomplete without an insignificant amount of calcium and magnesium isn't a comparative ad - it is a claim and ad claims must be substantiated. Coke will have a tough time substantiating a claim that Gatorade is incomplete without an insignificant amount of minerals.

It looks like Coke might just lose the Pepsi challenge again.

A Real Taste of Chicago Fashion - April 2nd