Blawgletter®

Bolts of Business Insight May Flash in Pan at Supreme Court; Bilski the Hedger (Update2)

2009-11-09T10:34:14-06:00

Flyswatter by Rube Goldberg.

You've heard about the genius whose incandescent idea for a new contraption wakes him in the hours before sunup. You'll also recall Edison's cutesy statement that "[g]enius is one percent inspiration, ninety-nine percent perspiration."

Both the burning thought that disturbs the inventor's slumber and the drudgery that produces the pre-dawn bolt have entered the folklore about what our U.S. Constitution calls "Discoveries" that "promote the Progress of Science and useful Arts". We like those people and don't mind if they prosper, even if their royalties cost us more for the stuff we buy.

Which brings us to Bilski v. Kappos, No. 08-964 (U.S.), a case that explores the edges of what sorts of things the geniuses and drudges can get a patent for. The Court heard argument in Bilski today.

Bilski turns on how far Congress went in allowing business "method" or "process" patents. The inventors, who lost below, say patent low permits patenting so long as the inventions don't simply capture "laws of nature, physical phenomena, and abstract ideas" under Diamond v. Diehr, 450 U.S. 175, 185 (1981), but go on to make some "practical application" of such laws, phenomena, and ideas. And they say their method for hedging against the risk of swings in the price of gas and other commodities.

The Federal Circuit in Bilski set a "machine-or-transformation" test for patentability, holding that the Bilski inventors didn't satisfy it. As the WSJ explains, the test requires that a business method/process "must be 'tied to a particular machine or apparatus' or transform 'a particular article into a different state or thing.'"

The fight comes down to a flexible v. rigid standard. The "practical application" test sounds good to Blawgletter's ear. The Federal Circuit's "machine-or-transformation" formulation, on the other hand, makes us think of Rube Goldberg.

But the Supremes seem at times to hear music when our ears perceive racket. A 6-3 majority, for example, liked the fuzzy "plausibility" test of Twombly, while we groaned at Twombly's tightening of the federal case filter.

We'll post the hearing transcript when the Court makes it available. We'll take special interest in questions implying worry that the number of business process patent applications jumped from fewer than 1,000 a decade ago to almost 14,000 in 2008. Justices who focus on that may take the leap from the surge in applications to the conclusion that patent trolls will soon bring commerce to a halt by enforcing patents that cover things like typing a blog post. Yikes.

UPDATE: SCOTUSblog.com offers this:

The largest question left unanswered when the one-hour argument was over was whether the Court would go forward and issue a major new ruling interpreting patent law, when the practical result here seemed so evident. Lawyers and judges have invested major resources in the Bilskicase, and it does raise a fundamental question that may well need answering. But, when there may well be no formulation of patent law that would salvage the Bilski-Warsaw creation, why bother?

UPDATE 2: The Court has put the transcript up.

Bilski jumped the shark no later than this exchange:

JUSTICE BREYER: . . . . You know, I have a great, wonderful, really original method of teaching antitrust law, and it kept 80 percent of the students awake. They learned things -

(Laughter.)

JUSTICE BREYER: It was fabulous. And I could probably have reduced it to a set of steps and other teachers could have followed it. That you are going to say is patentable, too?

MR. JAKES: Potentially.

Ignoring the fact that that would increase productivity.

Quote of the Day: Samuel Johnson

2009-11-08T13:03:59-06:00

Samuel Johnson (1709-1784) thought writing hard.

All censure of a man's self is oblique praise. It is in order to show how much he can spare.

James Boswell, The Life of Samuel Johnson (1791) (quoting Samuel Johnson in entry for Apr. 14, 1778).

Ten Years Ago, a Brave Judge Did a Good Thing

2009-11-05T20:11:41-06:00

On November 5, 1999, United States District Judge Thomas Penfield Jackson issued an order, spanning 412 paragraphs, that constituted his findings of fact in United States v. Microsoft Corp., 98-1232 (D.D.C. Nov. 5, 1999). In the final paragraph, His Honor wrote:

Most harmful of all is the message that Microsoft's actions have conveyed to every enterprise with the potential to innovate in the computer industry. Through its conduct toward Netscape, IBM, Compaq, Intel, and others, Microsoft has demonstrated that it will use its prodigious market power and immense profits to harm any firm that insists on pursuing initiatives that could intensify competition against one of Microsoft's core products. Microsoft's past success in hurting such companies and stifling innovation deters investment in technologies and businesses that exhibit the potential to threaten Microsoft. The ultimate result is that some innovations that would truly benefit consumers never occur for the sole reason that they do not coincide with Microsoft's self-interest.

The D.C. Court of Appeals largely affirmed Judge Jackson, as it should have. Further Blawgletter sayeth not.

Power to Veto Doesn't Equal Power to Pick Under PSLRA, Ninth Circuit Says

2009-11-05T17:32:33-06:00

The case involved NVIDIA stock, which didn't do too well.

The Ninth Circuit chided a district court today for usurping a right that the panel held belongs to the "lead plaintiff" in cases under the Private Securities Litigation Reform Act of 1995 -- the right to choose counsel for the putative class.

The PSLRA, as you'll recall, all but directs district courts to award the lead plaintiff crown to the one that lost the most on his, her, or its securities investment due to the fraud. The court may demur but only for excellent reasons -- as where the biggest loser has gone stark raving mad or lives in a prison cell due to his own financial shenanigans.

The statute also gives courts power to veto the lead plaintiff's choice of counsel for the class.

The district court in Cohen v. United States District Court, No. 09-70378 (9th Cir. Nov. 5, 2009), forgot that a veto doesn't divest the chooser of the right to select. His Honor named two co-lead plaintiffs as well as two co-lead law firms. Which seems fine. But one of the co-lead plaintiffs objected on the ground that the court ignored his pick and appointed as one of the co-lead counsel a law firm he didn't want. The court rejected his gripe.

The Ninth Circuit disagreed. It held, on co-lead plaintiff Roberto Cohen's mandamus petition, that the district court lacked power to install its own choice of class counsel:

Although it cannot be contested that the district court had the authority to reject Cohen's choice of lead counsel, it does not follow that having done so it had the authority to select lead counsel of its own choosing. This argument misses the fundamental point that the PSLRA unambiguously assigns this authority to the lead plaintiff.

Id., slip op. at 14917.

Blawgletter wishes to point out a bonus footnote in the court's opinion. There the panel poked at an issue that "none of the parties raise" -- the question of whether the PSLRA allows more than one lead plaintiff. "While the PSLRA allows a group to serve as lead plaintiff, it also consistentlly refers to the lead plaintiff and most adequate plaintiff in the singular, suggesting that the district court should appoint only one lead plaintiff, whether an individual or a group." Id. at 14921 n.4. Mmmmm. Dicta.

Our feed picked a peck of pickled peppers.

Quote of the Day: David E. Mills

2009-11-05T08:54:57-06:00

A man and his lawyer stand outside a building that looks like a courthouse:

Client: What's wrong? Why aren't we in court anymore?

Lawyer: I just got Twombleyed in the Iqbals.

David E. Mills, Courtoons, Oct. 23, 2009.

Sad but true.