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Mayo v. Prometheus: An Update

The Supreme Court will hear arguments in this case on December 8, 2011.  This case is about whether Prometheus’ patents (6,355,623 & 6,680,302) claim patent eligible material under 35 USC 101.  Section101 is a bit obscure, but logically anything that is not found in nature (separate from man) and that solves an objective problem is an invention.  Ultimately, section 101 is a threshold question of whether the subject of the patent is an invention. The novelty requirement, section 102, is not asking whether the subject of the patent is an invention, but whether the applicant is the inventor.  The nonobviousness requirement, section 103, is really the outgrowth of judicial activism (see Non-Obviousness: A Case Study in Judicial Activism).  The only logical basis for the nonobviousness requirement is that you have to be more than just the inventor to deserve a patent.  This is a violation of the Constitution, Article 1, Section 8, Clause 8, but I digress.  Section 112 of the statute is about whether the applicant fulfilled their part of the social contract.  The only question before the Court is whether the patents are directed to an invention.

The patents claim methods for determining the optimal dosage of thiopurine drugs used to treat gastrointestinal and non-gastrointestinal autoimmune diseases.  Thus, the questions in this case are whether determining optimal dosages of thiopurine drugs to treat autoimmune diseases exists in nature separate from man and whether this solves an objective problem?  Clearly, determining optimal dosages does not exist in nature for any drug and the patent solves the objective problem of determining the optimal dosages of thiopurine drugs for autoimmune diseases.  CASE DISMISSEDThis case is straight forward and should never have been granted certiorari by the Supreme Court. I have previously written about this case at Mayo v. Prometheus – Supreme Court Grants Cert (Again).

I consider it bad news that the Supreme Court granted certiorari in this case, because they have gotten so many patent cases wrong in the last five years.  Their understanding of patent issues would make a first year patent associate blush.  However, the last patent case they decided, Stanford University v. Roche Molecular Systems, showed some signs for hope.

Mayo has attempted to obscure the issues, by blurring the differences between section 101 & sections 102 & 103.  For instance “Mayo argues that the claims’ physical steps should be disregarded because they are old in the art.” (p. 1 Prometheus Brief)  Whether these steps are new or old is totally irrelevant to the 101 question.  This question is only relevant to the question of novelty and non-obviousness.  But even with respect to the question of novelty and non-obviousness this statement is non-sense.  It is a violation of both logic and legal precedent.  Every invention ever created is a combination of known elements (steps) because of conservation of matter and energy – you cannot create something from nothing.  From a legal precedent point of view, this is an attempt to reinstitute the point of novelty test, which was always nonsense because it violates conservation of matter and energy.

Mayo also attempts to argue that Prometheus has patented a law of nature.  This is absurd – the optimal dosage for an individual human being of thiopurine drugs, is a law of nature?  Admittedly, I am not an expert in pharmacology but there is no way that determining an individual dosage for a specific person is a law of nature.  Mayo knows this is non-sense, so they attempt to make the argument respectable by again disregarding parts of the claims.  A law of nature would be something like the absorption rate of a drug into a cell is based on certain factors.  An application of that law of nature, for instance to tailor a drug so it has a faster or slow absorption rate is an invention.

Mayo then puts forth the fraudulent argument that every patent should be evaluated by the courts as to whether it “promotes science and the useful arts.”  First, of all the preamble to Article 1, Section 8, Clause 8 is not limiting and never was meant to be limiting.  It is standard knowledge to every patent attorney that preambles are not meant to be limiting.  The Constitutional clause uses the word “RIGHT” and by right the Founding Fathers meant “natural rights”, which are not subject to some utilitarian purpose. The right to Life, Liberty, and the Pursuit of happiness are not subject to some utilitarian goal, they are unalienable – inherent in being a human being.  The fraudulent nature of this argument can be seen in the fact that its proponents never suggest that every trashy novel, movie, or painting should not receive copyright protection because it does not advance science and the useful arts.

Mayo then puts forth another argument made by every parasite – namely that patents are a monopoly.  This is just nonsense.  Patents are a property right not a monopoly. The statute defines patents as a personal property right and patents meet all the tests of a property right.  Namely, 1) Does the right arise because the person created something?  Creation is the basis of all property rights.  The law is just recognizing the reality that the person is the creator and without that person the creation would not exist.  This is consistent with Locke’s Natural Rights and Ayn Rand’s Objectivism. 2) If someone else was the creator would they have received the right in the creation? This ensures that the right does not arise from political favoritism. 3) Is the right freely alienable?  Freely alienable means that right can be sold, transferred, divided, leased, etc.  This is a key feature of property rights. Patents fit all three criteria and are property rights.

Mayo then puts forth the PATENTABLY absurd argument that the patent system could be replaced by government funding of inventions.  The absurdity of this argument can be summed up in one word – SOLYNDRA. First of all, the Supreme Court does not have the authority to make the decision to scrap the patent system and replace it with government funding.  This argument by Mayo borders on delusional.  Even Congress does not have the right under the Constitution to eliminate patents that would require a Constitutional Amendment.

Mayo has neither the facts or the law on its side so its approach is to purposely confuse the issues and to outright lie.  Mayo should be ashamed to have its name associated with the parasitic attempt to rob the invention of others.

 

 
BILSKI: the Good, the Bad, and the Ugly

First, the decision that Bilski’s claims were not considered to be patentable subject matter is not surprising.  The Supreme Court’s hostility to the Bilski patent was evident in oral argument.

THE GOOD

It is not surprising that the most patent friendly Justice (based on the opinions in this case) is Justice Kennedy.  President Ronald Reagan, who was the last president to understand the importance of patents to economic growth, appointed him.  For more information see National Inventor’s Day.  The so-called “conservative” justices on the court could learn a lot by reviewing Reagan’s understanding of patents and how they fit into his economic program.

No categorical rule was proclaimed against business method patents.

Section 101 similarly precludes the broad contention that the term “process” categorically excludes business methods. The term “method,” which is within §100(b)’s definition of “process,” at least as a textual matter and before consulting other limitations in the Patent Act and this Court’s precedents, may include at least some methods of doing business. p. 10.

The Court acknowledges that the “machine or transformation test” might inhibit patents on software.

The machine-or-transformation test may well provide a sufficient basis for evaluating processes similar to those in the Industrial Age—for example, inventions grounded in a physical or other tangible form. However, there are reasons to doubt whether the test should be the sole criterion for determining the patentability of inventions in the Information Age.  As numerous amicus briefs argue, the machine-or-transformation test would create uncertainty as to the patentability of software, advanced diagnostic medicine techniques, and inventions based on linear programming, data compression, and the manipulation of digital signals. p. 9.

The Court acknowledges, (Kennedy), that there is no good definition of a business method patent.  I have made a similar observation in Bilski, Software Patents and Business Method Patents.

The following passage provides a ray of hope that the Court may someday reach a proper analysis of section 101:

that the term “process” categorically excludes business methods. The term “method,” which is within §100(b)’s definition of “process,” at least as a textual matter and before consulting other limitations in the Patent Act and this Court’s precedents, may include at least some methods of doing business. See, e.g., Webster’s New International Dictionary 1548 (2d ed. 1954) (defining “method” as“[a]n orderly procedure or process . . . regular way or manner of doing anything; hence, a set form of procedure adopted in investigation or instruction”). The Court is unaware of any argument that the “‘ordinary, contemporary, common meaning,’” Diehr, supra, at 182, of “method” excludes business methods. Nor is it clear how far a prohibition on business method patents would reach, and whether it would exclude technologies for conducting a business more efficiently. p. 10.

THE BAD

The concurring opinions (Stevens, Ginsburg, Breyer, Sotomayor) (Breyer, Scalia) show that most of the Justices want a categorical rule against business method patents.  However, they fail to provide a definition of a business method patent.  Because the Justices refuse to provide a definition, it is likely that different Justices mean different things by a business method patent.  The only clue as to what they mean by a business method patent is either a way of organizing people or a patent related to finance or money.  I explain why excluding finance and money from patentable subject matter is flawed at Is Money and Abstract Idea.

The Opinion leaves behind a confused set of Jurisprudence on Section 101.  Steve Kunin’s AIPLA presentation is excellent at pointing out the nonsense of the Court’s previous opinions on point.

The Opinion seems to overturn State Street, which was the most intelligent statement of section 101 by our Courts.

THE UGLY

The Court confuses statutory subject matter 101 with Novelty 102 and Non-Obviousness 103.  For instance, Justice Kennedy writes:

In light of these precedents, it is clear that petitioners’ application is not a patentable “process. Claims 1 and 4 in petitioners’ application explain the basic concept of hedging, or protecting against risk: Hedging is a fundamental economic practice long prevalent in our system of commerce and taught in any introductory finance class. p. 15.

Whether Bilski claims a well known economic practice is irrelevant to a 101 analysis.  Confusing and blending the different sections of the patent statute is a consistent problem of the Supreme Court,  and first year patent law associates.

The Court again proves that they do not understand that every invention is a combination of known elements and that pointing out that one of the elements is known provides no insight about a patent.  Specifically the Court writes,

These claims attempt to patent the use of the abstract idea of hedging risk in the energy market and then instruct the use of well-known random analysis techniques to help establish some of the inputs into the equation.

For more information see   Non-Obviousness: A Case Study in Judicial Activism.

All of the opinions of the Court embrace the myth that a patent is a monopoly.  A patent is a property right.  Just as individuals have property rights in land or automobiles.  Property rights are derived from Locke’s theory of Natural Rights. This is completely consistent with patents.  For more information, please refer to, The Myth that Patents are a Monopoly: and Scarcity – Does it Prove Intellectual Property is Unjustified? .  The Court would be wise to consult the preeminent  philosopher on Capitalism: see Ayn Rand on Intellectual Property.

The Court repeats the familiar myth about the Preamble to the Patent and Copyright clause of the Constitution.  We know this is a red herring, because the Court and other proponents of this theory never discuss that a trashy novel which does not “promote the Progress of Science and useful Arts” should not receive Copyright protection.  In addition, the same argument is made with respect to the second amendment and the Court clearly rejected this interpretation.  It is Intellectual Fraud to suggest that the Preamble is meant to limit the “rights” of inventors and authors.  For more information see  Levine & Boldrin Argue the U.S. Should End the Patent System .

The Court repeats well known myths about the economics of patents.  For instance, the Court writes patents

can discourage research by impeding the free exchange of information, for example, by forcing people to avoid the use of potentially patented ideas, by leading them to conduct costly and time-consuming searches of existing or pending patents, by requiring complex licensing arrangements, and by raising the costs of using the patented methods. Although [e]very patent is the grant of a privilege of exacting tolls from the public. p. 43.

The Court does not understand that inventions are the only method of increasing real per capita income and are property rights not monopolies. By forcing people to invent instead of copy or perform redundant research we increase our wealth and protect property rights.  For more information see Source of Economic Growth.

SCARY

Nonetheless, not every new invention or discovery may be patented. Certain things are free for all to use. “Bonito Boats, Inc. v. Thunder Craft Boats, Inc.

Really, the Constitution states that Congress is to secure “for limited Times to Authors and Inventors the exclusive Right to their respective Writings and Discoveries.”  What part of “Right” do the Justices not understand? The Constitution does not allow Congress or the Supreme Court to decide which inventions ought to receive patent protection.  This complete disregard for the Constitution shows that this Supreme Court is hostile to patents and has no intention of doing their Constitutional duty of securing the Rights of inventors.

 
Why Investors Need to Pay Attention to the Bilski Decision

A significant portion of the value of stocks is represented by intangible assets.  According to Ocean Tomo, Patent Attribution to Equity Returns , 75% of the value of the S&P 500 is intangible assets.  The Bilski case in front of the Supreme Court could significantly affect the value of these intangible assets.

Bilski is a case about whether certain types of technology are patentable subject matter.  The patent in this case was directed to a financial system for hedging commodities risk.  However, the Supreme Court may use this case to undermine patents related to software and business methods.  If the Court does significantly limit the patentability of software based inventions, the value of the intangible assets of many of these companies will be significantly reduced.  (For more information on the Bilski case see, Bilski, Financial Patents, and the Financial Crisis , and Bilski, Software Patents and Business Method Patents .

The most important intangible asset of most companies is their patents.  The nadir in this country’s legal atmosphere for patents occurred in the 1970s.  It is not surprising that the chart above shows 1975 as the year when companies had the lowest percentage of their value represented by intangible assets.   According to the book, The Invisible Edge , the FTC & DOJ used antitrust law to force US companies to give away the technology associated with over 50,000 patents.  The result was the U.S. transferred its cutting edge technology to Japan and many U.S. companies found themselves unable to compete with the Japanese.  The book cites a MITI study that substantiates that most Japanese companies took advantage of this traitorous policy by the U.S. government to catch up with U.S. companies technologically.  This policy also resulted in reduced research and development spending. 

 
KSR: Supreme Ignorance by Supreme Court

Under the KSR decision (KSR Int’l Co. v. Teleflex Inc., 550 U.S. 398, 416 (2007)) by the Supreme Court nothing is patentable under the sun, unless you believe in black magic.  The Supreme Court in the Bilski (http://hallingblog.com/2009/11/10/bilski-case-reveals-supremes-ignorance/) oral arguments proved that the justices do not have the competence of a first year patent law associate.  KSR shows that the justices do not understand basic physics. 

See if you can spot the errors in physics in the following statements.  “The combination of familiar elements according to known methods is likely to be obvious when it does no more than yield predictable results.” KSR Int’l Co. v. Teleflex Inc., 550 U.S. 398, 416 (2007).  “A court must ask whether the improvement is more than the predictable use of prior art elements according to their established functions.” Id. at 417.  While the Supreme Court’s writing is not the model of clarity, the Court thinks these statements are equivalent.  The Court is saying that a patent for an invention made of known elements (prior art elements, familiar elements) and connections (according to known methods) is likely to not be patentable. 

Every real invention is a combination of known elements, unless you can violate the conservation of matter and energy – black magic.  The fact that the Supreme Court does not know this basic application of the laws of physics demonstrates that it is incompetent to rule on patent matters.  Another flaw in their logic is that if an inventor filed for a patent with an element that was completely new, then the Patent Office would reject the application, appropriately, as failing to clearly and distinctly claim their invention under 35 USC 112, second paragraph.  The fact that the Supreme Court does not understand the legal contradictions of their opinion, demonstrates that they do not understand the basics of patent law. 

 

Is Sarbox Constitutional?

The Supreme Court is reviewing whether the Public Company Accounting Oversight Board created by Sarbanes Oxley is Constitutional.

According to Yahoo Finance,

“A small Nevada accounting firm and an anti-tax group brought the challenge to the 2002 Sarbanes-Oxley law, arguing that the board created by the law violates the Constitution’s separation of powers mandate because the president cannot appoint or remove its members.”

“The board wields too much, unchecked power, Michael Carvin, the challengers’ lawyer told the court.”

I have discussed the untold damage Sarbanes Oxley has caused to U.S. innovation.  For more information see Sarbanes Oxley – the Medicine is Worse than the Disease and Sarbanes Oxley – the Medicine is Worse than the Disease-2 .

The Supreme Court in recent history has rarely found that there has been an unconstitutional delegation of power.  It is possible that Board may violate the Administrative Procedure Act, but I do not believe that this is the issue before the Supreme Court.  Even if the Supreme Court were to rule that the Board is unconstitutional, this is unlikely to significantly reduce the damage caused by Sarbox.  The good news is that Sarbox seems to be under attack on a number of different fronts.

 

Based on the reports in the post “Bilski Case Provokes Skepticism from Justices” it is clear that the Supremes do not understand patent laws or innovation economics.

It is unfortunate that the Supreme Court justices are so ignorant of patent law and innovation economics.  Justice Sotomayor’s comment that patents in fact “limit the free flow of information” is complete nonsense.  First, the information in the patent would not exist if the inventor had not created it.  Second, patents trade the disclosure of information for a limited term property right.  As a result, patents foster the creation and dissemination of information.  Justice Breyer’s comment if everything that “helps a businessman succeed” is patent-eligible, it would “stop the wheels of progress” shows a complete ignorance of the history of patents and technological progress.  Before the advent of the modern patent system in the US, technological progress was so slow that per capita incomes had not changed in over 2000 years.  Since the advent of the modern patent system, we have had an unprecedented explosion in technological innovation.

 

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