Patent Ruling May Undercut Intellectual Property Rights

Article excerpt

The loss of a patent case by a Pittsburgh company before the U.S. Court of Appeals could have huge negative consequences for hundreds of intellectual property patents, attorneys believe.

The 9-3 ruling by the appeals court in Washington against former Equitable Gas Co. executives and WeatherWise USA Inc. founders Rand Warsaw and Bernard Bilski is the latest setback in a saga dating back to the partner's original patent application for a mathematical way to manage bad weather risk by making hedged trades in the commodities market. The original patent was filed in April 1997.

"The situation is just atrocious," said a disgruntled Warsaw, who took over as president of the South Side-based company when Bilski left in 2003.

WeatherWise USA uses computerized modeling to develop products and services for energy providers, along with commercial companies and consumers. The company uses hedging principles, techniques designed to reduce or eliminate financial risk, such as taking two positions that will offset each other if prices change.

The appeals court based its October rejection of the Warsaw- Bilski appeal on a simplified test based on U.S. Supreme Court decisions dating back at least a quarter-century. It ruled there was no machine or transformation of a substance involved in their patent. In effect, their patent application didn't involve what the court called "the machine or transformation test."

The problem with the ruling is that about a year after the partners' initial patent application, the Court of Appeals approved a patent in the so-called State Street case involving what's today known as a "business method," opening the floodgates for similar patent applications, including Warsaw and Bilski's, according to their attorney David Hanson.

In the State Street case, the appeals court approved a patent applied for by Boston-based investment firm State Street Corp. for a way of pooling mutual-fund assets. That approval produced an explosion in business-method patent filings.

"There were a lot of patents filed and a lot of (business method) patents issued in the last 10 years," said Hanson, with The Webb Law Firm, Downtown. …