Archive for the ‘Supreme Court’ Category

 The U.S. Supreme Court recently heard arguments in the case of Bilski v. Kappos No. 08-964 (Supreme Court 2009). This decision could help determine whether software can be patented. The question in the lower court was whether a process can be patented. The lower court expanded its inquiry to whether or not software can be patented. Although this Federal Court did not rule that software cannot be patented, it apparently overruled the State Street decision. In State Street Bank & Trust v. Signature Financial Group, 149 F.3d 1368 (1998), the court determined that software programs that “transform data” are patentable subject matter even when there is no physical transformation of an article. The State Street court held that software or other processes that yield a “useful, concrete and tangible result” should be considered patentable and this rule has been followed, more or less, by the Patent Office ever since.

In Bilski the lower court indicated that the “useful, concrete and tangible result” inquiry should no longer be used to determine whether a process can be patented. Because this was the inquiry used to grant many software patents in the past, the Federal Court’s decision has called into question the validity of these existing software patents. The new test stated for determining that a process is patentable is if “(1) it is tied to a particular machine or apparatus, or (2) it transforms a particular article into a different state or thing.”  The lower court ruling did not explain whether a software process operating on a computer is considered to be tied to a “particular machine or apparatus.”  If a computer is not deemed to be a particular machine, then many existing software process patent claims could be in jeopardy.  

The Supreme Court also took up the question of whether the lower court’s new “machine-or-transformation” test for patent eligibility, which eliminates patent protection for many business methods, including software, contradicts the clear Congressional intent that patents protect “method[s] of doing or conducting business” in 35 U.S.C. § 273. During the arguments some of the Justices seemed to imply that siding with Bilski could open the door too wide for further patent applications, while other Justices felt the new test was too limiting. Regardless of how the decision comes out, at some point either the courts or the legislature need to clear up the confusion surrounding the ability to patent business process and computer software.

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I have to admit, I wasn’t really following this case until I read a very articulate editorial by Drew Brees, a Quarterback for the New Orleans Saints and former Austinite, in the Austin American Statesman (1-11-10 – page A7). Apparently the Supreme Court will be hearing American Needle v. NFL, Supreme Court Docket No. 08-661; an antitrust case brought by an Illinois manufacturer of hats who lost its antitrust claim in the Federal Court of Appeals in Illinois (7th Circuit). The antitrust claim arose from the NFL’s granting an exclusive license to Reebok to manufacture NFL fan products such as hats, jackets and the like. As the Illinois company, American Needle, pointed out, the effective monopoly has in fact increased prices for such fan gear since Reebok was awarded the contract in 2001, and has prevented smaller companies from getting into the market. The Supreme Court will decide if the NFL should be considered one entity (in which case there is no monopoly because you can’t have a monopoly with yourself) or 32 separate entities (in which case they could be found to be conspiring to restrain trade in the fan product area). What Mr. Brees pointed out was that this ruling could also affect the NFL’s ability to monopolize other areas. Apparently the NFL made the unusual request to the Supreme Court that it rule the NFL is one entity for purposes other than just fan gear. The result which Mr. Brees fears is that such a ruling could effectively overrule the 1993 decision in McNeil v. NFL, 790 F. Supp. 871, 896-97 (D.Minn. 1992), a previous antitrust lawsuit against the NFL, which paved the way for free agency among football players. Depending on how far the Supreme Court goes, the decision in the American Needle case could have ramifications for free agency, ticket prices, and, of course, fan gear, in other sports as well.

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On December 11, 2009, a Motion to Reargue Appeal was filed in the New York Court of Appeals (highest court in New York – like a Supreme Court in other states) in the case of Goldstein v. New York State Urban Development Corporation, No. 178 (November 24, 2009) which decision had upheld the condemnation of a number of residential and commercial properties in order to make way for a private corporation to develop the land for high-end residential purposes as well as the building of a sports stadium. The condemned property was claimed to be “blighted” in a study introduced as evidence in the case (which label the residents and business owners who live there would most certainly take issue). The court indicated that the condemnation was permitted under New York law under the guise of economic development. You will remember that the 5th Amendment of the U.S. Constitution states that private property cannot be taken by the government for public use without just compensation. The 14th Amendment expands this limitation to state and local governments. Typically, this power of condemnation may only be exercised through delegation from the appropriate legislature to either an agency (for public parks, etc.) or a private corporation (for purposes of providing a public service, such as utilities or transportation).  What worries me, besides the very poorly worded opinion in Goldstein, is that the New York Court of Appeals seems to be taking the much-maligned approach in Kelo v. City of New London, 545 U.S. 469 (2005) a step further away from the Constitution.

In Kelo, a U.S. Supreme Court case, a bare majority of 5 Justices — Stevens, Kennedy, Souter, Ginsberg, and Breyer, ruled that private property could be taken for redevelopment by a private corporation when new jobs and taxes are created.  O’Connor, Rehnquist, Scalia, and Thomas dissented.  Kelo had further expanded the holdings in two previous cases, Berman v. Parker, 348 U.S. 26 (1954) and Hawaii Housing Authority v. Midkiff, 467 U.S. 229 (1984), which allowed condemnation to eliminate “blight.”  The pathetic end to this matter outside of the court is that in November 2009, Pfizer, the private corporation whose promises prompted the condemnation action, announced that not only would it not be developing the property, but that it would be closing the existing New London facility.  Thus, the promised jobs and taxes that were the stated reason for people being removed from their land will never come about anyway.  Talk about adding insult to injury.

In response to Kelo, in 2006, an executive order was issued limiting the federal government’s use of condemnation proceedings  …for the purpose of benefiting the general public and not merely for the purpose of advancing the economic interest of private parties to be given ownership or use of the property taken.”  Although this only applied to federal proceedings, many states did change their condemnation laws to follow more closely the Executive Order than the Kelo Supreme Court ruling.  Obviously, New York was not one of them.

If this Goldstein case does make its way to the U.S. Supreme Court, what would be interesting to see is whether Souter’s replacement, Sotomayor, sides with the previous dissent making way for an effective reversal of Kelo?  I have no doubt that the framers of the “takings” clause of the Constitution did not intend it to be used to force landowners off their land for the benefit of private corporations.  What will Sotomayor do if given the chance?

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