Yesterday, June 28, 2010, the Supreme Court handed down a much-awaited opinion regarding patent law.  In Bilski v. Kappos, the Supreme Court addressed the issues of 1) whether the “machine-or-transformation test is the sole test for patentability under 35 USC 101 (patents having to do with new and useful “processes”); and 2) whether business method patents, as a subset of “process” patents, should be categorically unpatentable.

By way of background, business method, software, and other “process” patents are hotly contested and debated.  In an increasingly online and technologically-shaped environment, many new ideas and inventions are either embodied in software or methodological algorithms or at least integrally tied to such algorithms.  The difficulty for patentability purposes is that patent law does not allow for patent protection over laws of nature, abstract ideas, or pure mathematical formulas.  To do so would unfairly grant a monopoly to a certain patent-holder and chill creativity and innovation.  On the flip side, patent law is designed to reward innovation and creativity with granting exclusive rights to use an invention.  If the inventor has designed a new software that is innovative and of value, that inventor will want a patent for her hard work.  In fact, the promise of a patent might have been an impetus to create the software in the first place.  We see an obvious conflict of policies in this area of law.

Throughout the years, the courts have promulgated different tests for helping to determine whether such “processes” are patentable.  For instance, the Federal Circuit Court of Appeals in 1998 held that a process is patentable if it produces a “useful, concrete, and tangible result.”  State Street v. Signature Financial, 149 F.3d 1368.  Since that time, courts have also used the “machine-or-transformation” test, which states that a process can be patented if “(1) it is tied to a particular machine or apparatus, or (2) it transforms a particular article into a different state or thing.”  See Bilski.  How these tests get applied as to different inventions can be very complicated, but the important point is that there has been a need for guidance from the Supremes as to how lower courts and the USPTO should examine these inventions for patentability.

Turning to the Supreme Court’s opinion in Bilski, the court held that the “machine-or-transformation” test is NOT the exclusive test for patentability of processes, and held that there is NO categorical exclusion for business method patents.  The claimed invention in this case was a method of hedging risks in financial markets.  The Supreme Court, explicitly eschewing the adoption of any categorical rules, decided the case narrowly, on the basis that the claimed invention here was simply an abstract idea that could not be patented.

The important take-away point here is that the Supreme Court’s opinion did not affect a sea-change in patent law that potentially could have called into doubt existing patents.  Had the Supreme Court stated that there was one exclusive test or that business methods were not patentable, we would have a litigation nightmare on our hands.  It, rather, signaled that examiners should continue to use the machine-or-transformation test, but as a “clue” for patentability, and not as the exclusive test.

In a section of the opinion that is not legally binding as precedent (because it did not receive a majority), Justice Kennedy stated that as technology develops, so too might the test for patentability.  He suggested that “new technologies may call for new inquiries.”  This “dictum” is not binding, but it is a welcome sign to inventors that patent law, if properly guided, has the ability to adapt to ever-changing technologies.

If you have any questions or want to learn more, please do not hestitate to contact our law office at info@chicolawfirm.com!

            The basic legal right you have in your trademark is to prevent others from using the same or a confusingly similar mark to identify the source of their goods or services where this would cause confusion in the mind of consumers.  Acquiring trademark rights is relatively simple: all you must do is begin using your mark in commerce.  This makes sense because trademark law protects those marks that identify the source of the goods or services in the mind of consumers.  The mark must be used in commerce in order for consumers to be aware of it and to make the connection between the mark and your goods or services.

            The first user of a mark is usually given priority of rights.  For instance, if you federally register your mark and your competitor did not, your competitor might still be able to sue you for trademark infringement if your competitor began using the mark first.  If, however, a foreign company is the first to use a mark exclusively outside the U.S., our trademark law will generally not give that company trademark rights over a later user of a similar mark in the U.S.

A) State Law

            Trademark law consists of both state law (often comprised of “common law”) and federal law.  Under state law, use of a mark confers trademark rights.  These rights extend to the geographic area where the mark is used and where the reputation of the mark extends.  Some states extend the geographic reach of trademark protection under the “Zone of Expansion” doctrine, which recognizes that a business will likely enter into broader geographic areas in the future, and thereby presently extends trademark protection to such areas.

            You can enforce your trademark rights using your state’s unfair competition laws.  These laws give you the right to sue for infringement (or “passing off”) or dilution.  Infringement occurs when a competitor uses a mark that will likely cause confusion in the mind of the consumers as to the source of the goods or services.  For example, if you began selling “Crestor” brand toothpaste, this would infringe on the trademark for “Crest” brand toothpaste because such a similar name would cause confusion in the minds of the consumers.

            Dilution, on the other hand, takes on two forms: blurring and tarnishment.  For either form, a dilution action is only available for those marks that have become sufficiently “famous.”

            Blurring occurs when a competitor’s mark weakens the association in the mind of the consumers between your mark and the source of your goods or services.  For example, if someone began selling “Viagra” brand tennis rackets, the association between “Viagra” and the little, blue pill would become weakened in the minds of the consumers.

            Tarnishment occurs when a competitor’s mark creates a negative association in the minds of the consumers between your mark and the source of your goods or services.  For example, if someone began selling “Sony” brand personal enemas, a negative association would form in the minds of consumers regarding the mark “Sony.”

            Based on the examples above, you can see that dilution usually occurs when the two products in question are very different.  The crucial thing to remember is that with dilution, consumers are not confused about the source of the goods or services, like with infringement.  For instance, consumers would not be confused into thinking that Pfizer started making “Viagra” brand tennis shoes.  Instead, the quick association of a famous mark with its product is attenuated.  Another difference between dilution and infringement is that a dilution claim usually requires proof of the actual impact on the mind of consumers; whereas, an infringement claim usually requires proof of mere likelihood of confusion.

            B) Federal Law

            Federal trademark law is codified in the Lanham Act at 15 USC §§ 1051–1128.  Much like state law, federal law gives you the right to prevent competitors from using your mark or a similar mark, so long as you can prove that their mark is likely to cause confusion in the mind of the consumers.  Because these cases turn on “likelihood of confusion,” federal case law has established several areas of inquiry that will aid a court’s analysis of this issue:

            1) The similarity of marks;

            2) The respective “channels of trade” of the parties;

            3) The similarity of the goods or services;

            4) The sophistication of the relevant consumers;

            5) Evidence of actual confusion;

            6) The alleged infringer’s intent; and

            7) The strength of the plaintiff’s mark.

See AMF, Inc. v. Sleekcraft Boats, 599 F.2d 341 (9th Cir. 1979).

            Like state law, federal law also gives trademark holders the right to pursue a dilution action.  See the Federal Trademark Dilution Revision Act at 15 USC § 1125(c).  A plaintiff in a federal dilution action must prove that 1) the plaintiff’s mark is “famous,” 2) the defendant used its mark in commerce after the plaintiff’s mark became famous, and 3) the defendant’s use of its mark has caused dilution by blurring or tarnishment.  Federal dilution protection extends only to “famous” marks, which makes sense because only well-known marks have the potential to be diluted in the mind of the consumers.  Federal law also provides an injunction remedy.

            For more information on your state and federal trademark rights, please contact my law offices at info@chicolawfirm.com!