Prometheus: Natural Laws Can't Be Patented

The Supreme Court of the United States has re-affirmed the long-standing principle that laws of nature can not be patented, via its March 20 decision, Prometheus Laboratories v. Mayo Collaborative Services.

You can find the decision with one click.

I last had something to say about the underlying litigation in this blog a little over a year ago, when the Federal Circuit held in favor of Prometheus Labs,

Coming on top of the June 2010 decision in Bilski this is a new piece of evidence that this court believes patent laws have become too restrictive, that the domain of truly common knowledge, accessible to all, needs to be widened.,

In Bilski, you may remember, the Supreme Court reinvigorated a similar principle, one that disallows the patenting of abstract ideas. If carried to its logical conclusion, the argument that you can't patent abstractions would dis-allow all software patents, since "software" is by definition an abstraction. It isn't at all clear how logical the Court is willing to be, but what is clear is that in general it has decided to trim the bush of patentability.

On Monday, March 26, the Supreme Court sent a similar case, Myriad Genetics, back to the Federal Circuit for reconsideration in light of its new Prometheus ruling.  Myriad Genetics isn't exactly on all fours, I would caution the patent-dove side of that case against over-confidence at this point. But SCOTUS does seem to be dropping hints that its work of reforming patent law is not yet complete, and that it would apreciate reinforcements.

I'll just offer one brief quote from the Prometheus decision for now. In its unanimous decision, by Justice Breyer, the Supreme Court cited an amici brief by an important line-up of friends, "The American Medical Association, the American College of Medical Genetics, the American Hospital Association, the American Society of Human Genetics, the Association of American Medical Colleges,the Association for Molecular Pathology, and other medical organizations" who together said that if "claims to exclusive rights over the body’s natural responses to illness and medical treatment are permitted to stand, the result will be a vast thicket of exclusive rights over the use of critical scientific data that must remain widely available if physicians areto provide sound medical care."

So they are trimming a "thicket" (as above) rather than a bush.  I stand corrected.

I think it's the right move, whatever vegetative metaphor is to be employed.

Quote from Vanderbilt

"It is said that I am always in opposition, and that the same spirit of resistance which has often hitherto governed my action has influenced it now ....I have only to say, that this is the same spirit which founded this great Republic, and which is now drawing the commerce of the world to our shores. It was the same spirit which unchained the fetters which legislation ... once fastened upon the Hudson. Repress it if you dare....The share of prosperity which has fallen to my lot is the direct result of unfettered trade and unrestrained competition."

NEW YORK TRIBUNE, March 8, 1855.

Vanderbilt, as a young man, had played a supporting role in the facts that led to the great Supreme Court decision as to steamboats on the Hudson, and the burdening of interstate commerce, GIBBONS v. OGDEN (1824), and that is one of his allusions above.

Conclusion of a Discussion of a Supreme Court Term

Kennedy's opinion makes the following points:

• He rejects the notion that mere dry "data" is not speech, that it is merely a commodity. "Facts, after all, are the beginning point for much of the speech that is most essential to advance human knowledge and to conduct human affairs."
• Vermont apparently had said at argument that even if data in general is speech, there should be an exception in the case of prescriptions, where the raw data should be regarded as non-speech for policy reasons. Kennedy doesn't actually reject that argument but he renders it irrelevant, because
• The speech of the detailers in their contacts with doctors is indisputably speech, and Vermont's restrictions on data are designed to burden that speech, imposing a speaker and content-based burden on protected expression "and that circumstance is sufficient to justify application of heightened scrutiny." So even if the prescriber-identifying information itself is a "mere commodity," this law fails on first amendment grounds.
• One of Vermont's offered justifications for the law is that it protects doctors from "harassing sales behaviors." Kennedy isn't buying into that one. A physician has the same right to refuse to communicate with a detailer that a homeowner has to refuse to discuss faith with a Jehovah's Witness. This law is not necessary to make that so.

Justice Breyer writes in dissent for himself, Justice Ginsburg, and Justice Kagan. He claims that the statute "meets the First Amendment standard this Court has applied when the government seeks to regulate commercial speech," i.e. the government's interest in restricting the speech is substantial (the protection of public health), the regulation in question directly serves that interest (in the explicit judgment of the legislature), and the regulation is narrowly tailored to that end, in that it "permits doctors who wish to permit use of their prescribing practices to do so.")

I'm not a big fan of "intermediate tiers," and thus not a fan at all of the Central Hudson language on which Breyer is drawing here.

The dissent doesn't make any case that the detailers were misusing their speech by, say, lying to the doctors about what their companies' drug can do.  Further, if the detailers are lying, a response should be tailored to that.  How would it be a "narrowly" tailored when the idea is to make it more difficult for the detailers to get accurate information useful in such a pitch? 

What the government fears here, and what the dissenters join them in fearing, is not falsehood-spouting detailerts, but persuasive ones.  And I join Justice Kennedy in seeing that as pernicious.

Meanwhile, I've looked at it from a portfolio-management point of view here.

(I'm not crazy about the headline, which sounds unnecessarily censorious -- but you learn when you do these things that you aren't in charge of the headline.)

Supreme Court term, continued

Sorrell v. IMS Health is the most fascinating decision of the term just past.

The underlying law and facts take us to Vermont, which in 2007 enacted a law adverse to a practice that has become known as prescription data mining.  The data miners (like IMS Health) collect data from pharmacies about which prescriptions they have been filling from which doctors.  They aggregate this to develop a data base that says, for example, that Dr. John Smith writes a lot of prescriptions for generic arthritis pain killers.  They then sell this information to pharma companies.

The big pharma companies are happy to buy this information because they feed it to their sales force, called "detailers" in the trade.  The job of the detailers is to persuade doctors, usually in one-on-one conversations Willy Loman style , that the brand name drug can do things for their patient the generic can't.

Of course, if the detailers are right, then shutting them down, or making their work difficult, threatens the quality of medicine in Vermont. 

The legislation expressed the legislature's belief that the detailers are wrong, that the brand names are simply more expensive.  By cracking down on data mining they hoped to create a state-wide shift to generics and lower the cost of health care. 

When the matter came before the Supreme Court it involved two consolidated lawsuits: one brought by the data miners and the other brought by an association of pharmaceutical manufacturers.  The Second Circuit Court of Appeals ruled in their favor, striking down Vermont's law.  The state appealed to the Supreme Court.

The case drew a lot of attention, and several news organizations -- concerned that this would encourage states to restrict their own data gathering abilities -- filed a friend of the court brief.  The news organizations, (Bloomberg, the McGraw-Hill Companies, Hearst Corp., ProPublica, and The Associated Press) were represented before the court by Henry R. Kaufman.  We might add at this point that Hearst is the parent corporation of First DataBank Inc., itself a leading publisher of drug information.

The Supreme Court upheld the Second Circuit in striking the law.  Justice Kennedy wrote the opinion for the six Justices in the majority, including C.J. Roberts, Scalia, Thomas, Alito, and Sotomayor.

Breyer wrote a dissent, joined by Ginsberg and Kagan.

It is tempting to see that line-up in left-right terms.  But Sotomayor seems on the 'wrong' side if we give in to that temptation.  Further, free speech is one of the few areas in which this court's decisions even in politically polarized areas are not  "conservative" in a stereotypical, cantral-casting sense.  Consider the ruling that allowed picketers at military funerals, or the more recent greenlight to the marketing of violent video games to minors on first amendment grounds.

Or stick to this case about data mining.  One of the claims that the lawyers for the state made at the various stages of this litigation is that "speech" isn't involved.  Data mining isn't speech, it is conduct.  The amici news organizations were troubled by that claim.  In their brief they noted for example that the Sarasota Herald Tribune has recently undertaken "an ambitious, data-intensive, one-year project that involved gathering and reviewingnearly 19 million Florida real estate transactions.  The resulting expose of the high costs of fraud in such transactions was a 2010 Pulitzer Prize finalist for investigative reporting."

    
This is running long.  I'll complete my thoughts on the subject of Sorrell in tomorrow's entry in this blog.

Beginning a Discussion of the Supreme Court Term

Another term of the U.S. Supreme Court has come and gone.  Again, the court has issued a lot of decisions that are, in their own several ways, fascinating.  There is one that leaps out at me this year as THE decision of the term, in relation to my own usual net of obsessions, and I'll discuss that tomorrow.  Today, I'll do a round-up of others of this term's cases, in no particular order. 

I'll say nothing more about cases I've discussed in earlier blog entries, such as STANFORD v. ROCHE, the patent-law case I discussed on June 17.

1) Flores-Villar v. U.S.:  This is a sex discrimination case (the sort that Justice Ruth Bader Ginsburg made her reputation litigating in the 1970s) in an immigration context.  It came out as a 4-4 decision, because Justice Kagan recused herself.   For these particular litigants, that means that the decision of the 9th Circuit Court of Appeals remains the law.

The case turned on a quirk in US law regarding citizenship.  A child born out of the US, to a mother who is a US citizen, is a U.S. citizen, regardless of such matters as her marital status or the father's citizenship etc.  What then of a child born out of the U.S.,  to a mother who is not a US citizen, but with a father (acknowledged paternity) who is a U.S. citizen, in circumstances in which the parents are not married?

Under the law, this child is not a citizen of the US unless his citizen father had resided in the U.S. for at least 5 years after his 14th birthday. Thus, by obvious arithmetic, no one can become a US citizen in this way whose father is not at least 19 at the time of the child's birth.

Why are there different rules for citizen fathers than for citizen mothers?  Does that violate the equal protection clause of the 14th amendment?  This was the contested question -- contested under a body of law known as the "intermediate tier" doctrine, regarding sex discrimination.  Such a distinction is seen as suspect, but as somewhat less suspect than racial discrimination.  The appellate court upheld the law, and SCOTUS didn't muster the votes to change that. 

2) Bond v. United States.  This was the federalism case of the term, arising out of a bizaare mis-application of an anti-terrorism statute.   Sex-in-the-suburbs.  In this case the suburbs of Philadelphia.  Carol Anne Bond of Landsdale, PA was ticked off that her husband had impregnated a neighbor, and struck back by placing caustic substances on various surfaces she knew the Jezebel in question was likely to touch, including Jezebel's car door and mailbox.

Bond was convicted of a federal crime, violating the Chemical Weapons Convention Implementation Act of 1998.  You can almost hear her introducing herself to the other inmates.  "I'm Bond.  Carol Bond."

The decision, by Justice Kennedy, used some sweeping pro-10th-amendment language, explicitly giving the right to "vindicate" 10th amendment interests to individuals.  "Her rights in this regard do not belong to a state."

It is possible that the Court expects that next term it will overturn Obamacare or crucial parts of it on federalism grounds, and it saw this case as a helpful set-up to that decision.

3) Skinner v., Switzer.  A petition for a Texas inmate on death row.  Always dramatic.  In this case, it was Justice Ginsburg who wrote a 6 to 3 opinion that said that convicted inmates seeking access to DNA evidence in an effort to prove their innocence may use a federal civil-rights lawsuit in order to do so.

4)  Boeing v. United States.  The court somewhat limited the range of the "state secrets" doctrine in the course of contract disputes.  Further, hearteningly (for those of us who are not lovers of "state secrets" in general) it did so unanimously, in an opinion by Justice Scalia.

It is a rare case involving a defense-industry contracts dispute that draws such a range of amicus briefs, including a brief from the Al-Haramain Islamic Foundation Inc., "in support of neither party," in which the Foundation's lawyers maintained that the court should inquire into the foundations of the state secrets doctrine itself, and should characterize it as a "common-law evidentiary rule of nonconstitutional provenance."   

I don't see any place in the opinion where Scalia takes them up on that.  He sticks to his knitting, in an opinion that declines to enforce a contract against private parties in a situation in which the invocation of the state-secret doctrine has precluded a prima facie valid defense to the governments claims.

5)  Brown v. Entertainment Merchants Assn.  Sale of video games to minors comes under the protection of the first amendment.

The cool thing about this case is that earlier in the proceedings it was known as Schwarzenegger v. Entertainment Merchants.  Given subsequent revelations, the puns there write themselves.
The really big case of the term ... tomorrow.

Roche Beats Stanford

On Monday, June 6, the U.S. Supreme Court issued a fascinating patent-law decision, STANFORD UNIVERSITY v. ROCHE, in which it held that title to the intellectual property in a federally-funded invention does not necessarily vest in the institution receiving those federal funds.

In so doing, the Court limited the scope of some of the language of the University and Small Business Patent Procedures Act of 1980, also known as the Bayh-Dole Act.

The IP in question is to a diagnostic test for HIV involving a polymerase chain reaction (PCR), developed by a Stanford research fellow named Mark Holodniy. Under the Bayh-Dole Act, in a provision that was designed precisely to encourage federally-funded universities to engage in cutting-edge research, the rights to the PCR diagnostic would have been Stanford's, but for a contract Holodniy signed with Cetus, a company where he was a visiting scientist, in which he said he does "hereby assign" his rights to Cetus.

The great thing about PCR is that it does more than simply discover the presence of HIV. It measures the amount of the virus in a patient's blood stream, thus determining whether and to what degree he is benefitting from therapy.

In 1991 Cetus was acquired by, and its rights passed to, Roche.

In 2005, Stanford brought a lawsuit contending that Roche was illegally selling HIV test kits that infringed on Stanford's patents. Roche responded that it was a co-owner of the procedure. The matter went to the Supreme Court, with Stanford claiming that Holoniy had no right to assign to Cetus/Roche, because the right belonged by law to Stanford, so the document in which he purports to make that assignation is void.

U.S. patent law gives the initial IP right to the inventor. The inventor can then assign it away, to one party or another or no one, as he deems best. Indeed, the Constitution gives Congress the authority to secure "to Authors and Inventors the exclusive Right to their respective Writings and Discoveries." It does not give the Congress the authority to secure that exclusive right to an institution employing the authors and inventors. The rather stark individualistic language refers to the authors and inventors themselves.

This decision was not in a strict sense a constitutional decision. It interpreted the language in Bayh-Dodd in such a way as to avoid any conflict with the relevant clause of the constitution. But it certainly did invoke the policy that the majority sees the document's language as endorsing.

Institutions such as Stanford will not suffer any great wound from this decision. They simply have to tighten up the language of their own employment contracts for their postdocs and others to make sure they have the assignation rights from the Holodniys of the world before anyone else puts a well-drafted document in front of any of them. Yet a principle is affirmed, by virtue of the fact that Stanford takes this loss and has to rework its contracts, the principle that the choice, in the first instance, must lie with the Holodniys.

Commodities and Their Derivatives

You'll remember that my March 12 blog entry consisted of a discussion of what is to become the fourth chapter of my proposed book as represented in the table of contents I provided in this blog on December 10, 2010. Now I move to the fifth chapter, about commodities and their derivatives.

This will make five points.

1. definition of terms

A commodity in the sense significant for this book is a physical (and usually a fungible) item of commerce. It is distinct from intangible goods such as patent rights, or a share of equity in a company. It is also usually distinct from any complicated manufactured item, such as a custom-built hot rod. Foods, metals, and natural fibers are all commodities.


2. Brief history of the derivatives exchanges

Commodity futures are the paradigmatic "derivatives." Birth of the Chicago Board of Trade. The CME and a cross-time rivalry. Imitators and developments.

3. Federal regulation up to 1974

Federal regulation of futures contracts began with the Futures Trading Act of 1921. Declared unconstitutional by SCOTUS later that year. How this decision was circumvented and the regulatory system established. Why it took another 50 years for the system to crystallize into the CFTC.

4. the OTC derivatives market and its challenge to the exchanges

One distinction between OTC and exchange trading involves the margin requirements of the latter: performance bonds that market participants must post, in amounts that vary in a way based on the risk and volatility of the product. In the OTC market there have long been no rules, so the parties negotiate their own collateral arrangements. Dodd-Frank. What happens next?

5. It is time now to deal with the spectre of speculation.

Speculation is not gambling. Why not? Because gambling creates its own risk for the sake of the game. A gambler puts money on how a pair of dice will land. Nobody would even bother rolling those dice unless somebody was putting money on them.

What about sports gambling? The game exists independent of the risk. We might suppose that basketball games will continue to take place even in a (hypothetical) world in which gambling on basketball comes to a quick and complete end. But the game itself is not a risk for the folks in Vegas putting their money on the line. It becomes a risk when they decide to accept that risk, both for the chance of profit and for the thrill.

How is that different from financial and commodity speculation? Consider orange juice futures, the subject of a memorable Eddie Murphy and Dan Ackroyd collaboration. These risks are not optional. Anyone investing in an orange grove, in the expectation of selling the fruit of his labors to the OJ market is taking enormous risks. The “dice” are meteorology on the one hand and fickle breakfasting-consumer preferences on the other. The producers can only hedge these risks to the extent that speculators are willing to take it from them.

6. Our first look at the CBOT/CME merger of 2007. We'll come back to this.

Prometheus, Continued

I'll continue my discussion from yesterday without a lot of overlap.

It seems that the Federal Circuit, via its decision in Prometheus Labs, is suggesting that the doctrinal limit on the patenting of "physical phenomena" doesn't actually limit very much.

The above link will take you to Holman's Biotech IP Blog, which has a very extensive discussion of this case. Unfortunately Holman, like many of the blogosphere's commentators on IP matters, is a patent hawk. He believes the stronger is the legal protection for patent hoilders, the better. I, on the other hand, am a dogged patent dove, or maybe a dovish patent dog (allegorical zoos become confusing): so on my anarcho-cap bias alone I would have been happy to see this case go the other way.

It still might, because SCOTUS could yet get it. The Bilski decision indicates they want to do something about this field of law, and they obviously didn't think that decision was a proper vehicle for doing anything bold. Maybe this one will be more to their liking.

As to the "physical phenomena" limit in particular, I'll note that back in 1948 the court said that the characteristics of certain bacteria, "like the heat of the sun, or electricity, or the qualities of metals, are part of the storehouse of knowledge of all men. They are manifestations of the laws of nature, free to all men and reserved exclusively to none." Here's a link to that decision, by William O. Douglas.

Love that oracular Douglasite prose.

Federal Circuit: Prometheus

In December the Federal Circuit issued a ruling in Prometheus Laboratories v. Mayo Collaborative Services, an important test of where the patent-law winds might blow next, in the wake of last summer's Bilski decision from the Supreme Court.

You'll recall that in June 2010 the Supreme Court rejected the notion that Bernard Bilski was entitled to a patent on certain abstract ideas for hedging against energy commodity price increases. Although four of the Justices wanted a bright-line rule against "business method" patents in general, that fell short of a majority, and did not represent the judgment of the court, which as expressed in Justice Kennedy's decision was a rather ad hoc this-case-only sort of thing.

In the Prometheus case, the lab named after the god chained to a rock claims a right to a method of determining the proper dosage of a particular drug for a particular patient. The drugs in question are known as 6-MP and AZA, both of which turn into certain metabolites within the human body. The method, then, is to monitor the patient, determine the level of these metabolites, and keep increasing the dosage until those metabolites get into the desired range. If they are present in an amount above the desired range, decrease the dosage!

Mayo Collaborative argued that the way the body metabolizes 6-MO anbd AZA is a natural phenomenon, that natural phenomena are just as unpatentable as are abstract ideas, and that thus under Bilski this patent should be disallowed.

Even before the resolution of Bilski, this argument was successful before the district court. But the appeals court, the first time it heard this case, before the Supreme Court had decided Bilski, held for Prometheus. After Bilski, SCOTUS sent Prometheus back to the Federal Circuit for reconsideration.

The news then is that the circuit court judges have now taken the position: we have reconsidered it, only to conclude that we were right the first time around.

More thoughts on this case tomorrow.

This Supreme Court Term

The U.S. Supreme Court has wrapped up another term -- John Paul Stevens' last.

There were several remarkable decisions this year, and I'll pass them in quick review, in no particular order.

JONES v. HARRIS ASSOCIATES concerns mutual funds, and the fees they can charge without violating their fiduciary obligation to their investors. Nobody is sure how it will affect actual mutual fund operations, but there is a general consensus that it is important.

In terms of the standard to be applied, the respondent and the petitioner in the case before SCOTUS agreed. They both wanted the court to endorse for the first time a standard laid down by the second circuit in 1982, in Gartenberg v. Merrill Lynch. The standard since then has been that to be guilty of a breach of fiduciary obligation "the adviser-manager must charge a fee that is so disproportionately large that it bears no reasonable relationship to the services rendered and could not have been the product of arm’s length bargaining.”

The matter got to SCOTUS this year because the seventh circuit disagreed with Gartenberg. The seventh circuit then (despite a dissent by Judge Posner) refused to rehear the case en banc.

The original panel's justification for blocking Gartenberg lawsuits was that allowing trial courts to second-guess market rates is a bad idea, and that mutual fund managers can only be said to have violated their duty if it can be shown that they had lied to their directors. Posner's own inclinations are laissez-faire, so I find it impressive that he thought this wrong, that some sort of objective reasonableness standard, as with Gartenberg, is appropriate.

SCOTUS agreed with Posner and embraced Gartenberg rather than the Seventh Circuit approach, and it remanded for further proceedings. Still, it is not clear how big a difference this will prove to make. Will it encourage some disgruntled investors to sue their managers to get their fees back, now that it is clear they can at least get their foot inside the courthouse door? Yes, probably.

Should we be worried about that? I don't believe so. There has after all been no flood of mutual fee related lawsuits over the decades since Gartenberg, even in the 2d Circuit where that decision has been binding.

DOE v. REED denied a request by an organization, "Protect Marriage Washington," to keep the personal information of the signers of a petition private, affirming the constitutionality of a law in that state that requires disclosure in most cases (though allowing for ad hoc exemptions).

It was not a "clean win" for transparency, though. The decision allows PMW to ask the district court in Washington for an exemption from public disclosure.

The lead counsel for PMW said in a statement, "While we wish the Court had agreed with us and found that petition signers speaking on any issue should be protected from having personal information disclosed to the public, we are looking forward to returning to Washington and showing the Court that supporters of traditional marriage should have their personal information protected from disclosure."

SCOTUS voted for this result 8-1, with only Justice Thomas dissenting. Thomas would have held that "compelled disclosure of signed referendum and initiative petitions" is unconstitutional because it chills citizen participation in democratic assembly and speech.

I have no sympathy for the whole protect-traditional-marriage cause, but Thomas' decision seems right to me. I am cynical enough to wonder whether he would have written just this decision had it been a gay rights group on the other side of this issue that was asking for anonymity.

CITIZENS UNITED v. FEDERAL ELECTION COMM'N struck down decisions on what various affected parties, including for-profit corporations, may say during the course of a campaign. Much has been said and written on this subject. I won't add a lot to it.

I will note that this was the decision that provoked President Obama to criticize the Justices during the State of the Union address. The presence of the Justices at the SOTU speech has long been considered a non-controversial formal gesture, which allows for the presence of the top level of all three branches of our federal government in the same room at the same time. But Obama chose to make it an opportunity for face-to-face confrontation.

Justice Alito responded to that by mouthing the words "not true."

Stuffy people have bemoaned that exchange. I think both men acted appropriately. Let's be less stuffy and more honestly confrontational in our politics! It may help us learn to get beyond politics, and beyond the myth of sovereignty -- though I'm sure that idea was far from both of their minds at that YouTube-able moment.

BERGHUIS v. THOMPKINS is the latest example of SCOTUS' long entanglement in the specifics of police interrogation rules. Specifically, two officers of the state police of Michigan interrogated suspect Thompkins, after informing him of his Miranda rights.

For three hours he remained silent, although he did not first say "I invoke my right to remain silent" or "I want a lawyer" or anything of that sort. After 2 hours and three quarters, the police did manage to get him to speak, in a highly incriminating way.

By a 5-4 vote, SCOTUS allowed the statement. "Police are not required to rewarn suspects from time to time. Thompkins’s answer to Helgert’s question about praying to God for forgiveness for shooting the victim was sufficient to show a course of conduct indicating waiver," says Justice Kennedy.

I think Sotomayor, writing for the four dissenters, has the better of the argument, though, and will give her the last word here.

"I cannot agree with the Court’s much broader ruling that a suspect must clearly invoke his right to silence by speaking. Taken together with the Court’s reformulation of the prosecution’s burden of proof as to waiver, today’s novel clear-statement rule for invocation invites police to question a suspect at length—notwithstanding his persistent refusal to answer questions—in the hope of eventually obtaining a single inculpatory response which will suffice to prove waiver of rights. Such a result bears little semblance to the “fully effective” prophylaxis, 384 U. S., at 444, that Miranda requires."

SKILLING v. UNITED STATES granted a partial victory to former Enron CEO Jeffrey Skilling. More important, it trimmed back the overly luxuriant prosecutorial interpretations of the "honest services" statute.

I've discussed this one at length on my other blog, and I'll just link you to that.

Here's another discussion of the case.

BILSKI v. KAPPOS is the much-anticipated decision on "business method" patents and on the machine-or-transformation test of what is or isn't patentable.

Here, too, I have said much on the subject on my other blog, so I will say very little on this one. The good guys won.

To grant this opinion would give Bilski and his partner, Rand Warsaw, a license to file patent-infringement lawsuits in a wide variety of cases of routine commodity hedging, simply because they have reduced to paper a sort of algorithm for that common process. It is a bit like describing the flapping of wings in the hope of suing the birds -- businesses have been hedging their commodity price exposure for as long as anyone can remember.

Still, it is not clear what the court is saying about business method patents as a rule.

I do think Elena Kagan, as our solicitor general, submitted a fine brief in defense of the patent office's refusal to grant Bilski and Warsaw their requested monopoly. Those who are complaining that her experience does not qualify her as a Supreme Courty Justice might want to consider how vastly sup[erior that brief is in its reasoning to any of the three opinions the litigation produced (authored by Justices Kennedy, Breyer, and Stevens.)

The biotech crop case

One of the ongoing concerns of this blog is the question of intellectual property.

I have learned that those disputants who believe in the vigorous enforcement of patent rights, and who believe that the courts and legislators are overly soft on encroachers, are sometimes known as "patent hawks."

On the implicit analogy, I expect that I'm a patent dove. The courts err far too much at present on the side of enforcement, and the preservation of privilege it implies. Beyond a certain point -- hard to identify, but surely behind us -- the act of rewarding the previous generations' innovations becomes an impediment to the innovative work of the present and future, because innovators always have to build upon what has gone before.

It is wrong to stigmatize education as theft.

All this comes to mind today because on Tuesday of this week the U.S. Supreme Court heard arguments on a groundbreaking biotech crop case. It isn't being litigated as a patent case at all, but as an application of the National Environmental Policy Act. Still, it does seem to show what we have gotten ourselves into as a country by allowing companies to patent living things.

Monsanto sells weed killer, Accordingly,. Monsanto now wants to sell a brand of alfafa seeds genetically designed to resist its own weed killer. Monsanto wants to be on both sides of an arms spiral of offense and defense.

Maybe this situation will compel the court to go back and revisit the IP issues.

You splice to-may-toes and I splice to-mah-toes.

Let's call the whole thing off.

Third Tier Trash?

I would not be aware of the term "Third Tier Trash," or the initials TTT for same, had Justice Clarence Thomas not used both in the course of defending his law clerks from charges of unspecified bloggers, in remarks to students at the University of Florida.

There is a marked bias in favor of Ivy League law schools in the hiring of law clerks at SCOTUS. One of the Gators remarked about this in a Q-and-A session with the Justice, and Thomas didn't deny it: "Eight of the nine of us [justices] are from the Ivy leagues, so it’s natural that you go back to the Ivy Leagues… I don’t believe they have a monopoly on intelligence. I also don’t believe they have a monopoly on the best kids to clerk." Thomas himself graduated from Yale Law.

You can see and listen to the whole exchange here. Go to about the 37:50 mark of that clip to listen to the part of the proceedings that I have in mind.

Anyway, Thomas was saying that sometimes he goes along with this general preference for Ivy League clerks ("we've let that happen to ourselves"), but that in some years he hasn't. And that in years when he has had non-Ivy clerks, he has been attacked for hiring TTTs. Unfortunate if true. The reason I mention it, though, is that the incident says something about the difficulties of defending one's self from charges made on the blogosphere. To non-blogosphere folks I'm sure this had not penetrated. Indeed, even among bloggers who have a background in the law (like Yours Truly) there are many who had never heard the expression TTT and wouldn't have known what it meant had not Thomas thought it merited such a public rejoinder.

Ah, life.

SCOTUS first amendment ruling

Every since Buckley v. Valeo , (1976), the US Supreme Court has gotten progressively more intrusive in the area of campaign finance law. Frankly, I'm quite happy with this. Congress' efforts to regulate how campaigns are conducted are almost by definition pro-incumbent, and this is the sort of thing for which we need judicial review.

The latest decision in this line is a lot to wrap one's mind around, all 183 pages of it. Weren't we just going through a collective national paroxysm about how many pages there are in some of the health care bills and nobdoy can be expected to read these things? Its easier to read through such legislation than these opinions, IMHO.

Here's the gist of it if you're impatient.

Here's a set of reactions. They react, so you don't have to.

The President is unhappy.

So, as it happens, is his erstwhile opponent, Senator John McCain, whose name is on the law under evisceration here.

One more link, because I'm on a link-farming roll: what will it all do to the midterm election campaign? Click there for some informed guessing.

And here, in a spirit of nostalgia, is a link to what I said about a June 2008 decision by SCOTUS in the same line of post-Buckley cases.

Top Financial Stories 2009

I generally ask myself at this time of year what were the biggest stories of the past twelve months, in business/financial news.

By "stories," I don't mean themes, such as "Doubts about efficacy of SEC regulation" or "US/EU relations." I mean stories, such as one might have seen in a particular newspaper on some specific day. Of course, I choose the ones I do largely because they illustrate an important theme. But the theme itself isn't the story.

Further, I don't rank them, as in a top ten list. For the first couple of years that I did this I simply gave one "top" story from each of the twelve months of the year now ending. Last year was so wild, especially in its second half that I couldn't stick to the one-a-month presentation. I ended up with a list of 18 big stories, two per month starting with July.

This year, for the sake of balance I suppose, I have produced another list of 18 stories, twice a month this time for the first six months, then just one a month from July.

All that understood: Here we go! The list is dominated this year by a meta-theme. We might call it: the triumph of experience over hope.

January. (a) The inauguration of a new President of the United States, and Barack Obama's choice of Timothy Geithner to head Treasury. Geithner's presence in the new administration is not a sign of change, but one of continuity. During most of the Bush years, Geithner was the very visible President of the Federal Reserve Bank of New York.

(b) Financial crisis in Iceland brings street protests, shake-up in government there. Iceland, on the one hand, has long been a free market economy, with taxes lower than those of most other OECD countries. On the other hand, it has maintained a Nordic welfare system, including universal health care and post-secondary education. Whatever may be true of Las Vegas: what happens in Iceland, is widely watched elsewhere.

February. (a) Obama signs the stimulus act, a/k/a the American Recovery and Reinvestment Act (ARRA). The full title seems better to convey the almost cartoonish Keynesianism involved: "An act making supplemental appropriations for job preservation and creation, infrastructure investment, energy efficiency and science, assistance to the unemployed, and State and local fiscal stabilization, for the fiscal year ending September 30, 2009, and for other purposes."

(b) Zimbabwe asks African states for $2 billion in aid -- Mugabe vows to continue brilliant policies. I'll simply offer a link here.

March. (a) Bernie Madoff pleads guilty without a plea deal, claims to have acted alone. Of course, he did not act alone, but by taking the fall and keeping mum on confederates, he appears to have earned some necessary prison cred.

(b) UK Financial Services Authority adopts new rules on derivatives. In London as in Washington, complicated and insufficiently regulated derivatives are widely blamed for the crisis of 2008. That diagnosis is jejune, but is to be expected. The particular derivatives that draw fire in the UK are known as "contracts for difference."

April. (a) Dow Chemical finally closes on its Rohm & Haas deal. The idea of this merger was to craete a "leading specialty chemicals and advanced materials company." Its logic would have been more powerful, and the deal would have gone through smoothly, had the timing been a bit better.

(b) Chrysler files for bankruptcy This is the first of three headline events on our list of 18 that may stand in for a single momentous theme -- the frog-marched restructuring of the US automotive industry in general. And we won't bother listing separately that GM too passed through a bankruptcy court proceeding.

May. (a) China-Brazil oil/loan deal The Brazilian oil company Petrobras finalized a deal with the People's Republic of China. Petrobras got a (US)$10 billion loan and PRC got a long-term supply of 'black gold.' This is a straw in a lot of different winds -- the rise of China to global prominence on the back of its huge dollar reserves is one of them.

(b) Obama announces new CAFE/ emissions standards. This is our second auto industry headline of the year. The program is projected to reduce oil consumption over the period from the 2012 to the 2016 model years by approximately 1.8 billion barrels. (As you probably would expect, dear reader, I think such projections warrant skepticism.)

June. (a)US Supreme Court decides Traveler's Indemnity v. Bailey. Asbestos is one of the big "mass tort" issues that have rocked our civil legal system in recent decades. Travelers thought it had a deal that limited its exposure via a settlement trust established by order of the federal district court in Manhattan back in 1986. Unfortunately for them, state law claims and "collateral attacks" made that trickier than they had expected.

(b) Elections to Euro parliament strengthen the center-right parties. For purposes of the italicized statement, anyway, we may understand the term "right" to mean the group of parties or factions that are suspicious about the role of the Parliament they are joining, either on behalf of separate sovereign nationalisms or on behalf of EU-regulated global commercial concerns or both. The "left," which lost this round, consists of those that see a need for a more activist EU.

From here on we are presenting just one headline per month.

July. Cash-for-clunkers program in the US. This is our final US-auto-industry headline. There was always an ambiguity to the plan. Was it designed chiefly to stimulate the auto industry, or to improve fuel efficiency? The goals aren't obviously in harmony. Still, any critique of its efficacy in one respect could be deflected by pointing to the other.

August. Settlement of US/Swiss Dispute over UBS Confidential Client Information. The relationship between Switzerland and the US seems to have grown closer in a number of respects over the last year.

September. Target Corp. declassifies its board Reform has come to the field of corporate governance, though what over-all impact such reforms may end up having it is hard to say.

October. Ireland votes in favor of Lisbon Treaty, effectively secures the new continent-wide government It is difficult to tell where Europe is headed. The Lisbon Treaty would certainly seem to be a step toward closer political integration. But the European Parliamentary elections, as noted above, were won by parties skeptical thereof, and there are a lot of centrifugal forces at work.

November. What is patentable? SCOTUS hears arguments. My own expectation is as follows: (a) the Justices will uphold the court below in its finding that Bilski's 'process' is really an abstract idea and thus not patentable; and (b) they will work harder than the court did below in order to define what is or isn't an abstract idea.

December. Two crucial bills advance through the Houses of the US Congress -- the health care reforms and the financial-regulatory system overhaul.
It seems very likely that something will be enacted into law in both of these areas sometime early next year. But I could be wrong even about that.

A Heart in the Silver Case

I have of late been skimming about in, not really reading, a book by Cliff Sloan and David McKean about the Supreme Court's decision in MARBURY v. MADISON. The book is titled, appropriately enough, The Great Decision.

Anyway, I have happened upon this bit. After describing Chief Justice John Marshall's devotion to his wife, Polly Marshall, nee Ambler, the authors write of one possible exception to a life of fidelity.

"In his stay in Paris during the XYZ Affair, Marshall lodged with the Marquise de Villette, who had been raised by Voltaire and who kept Voltaire's heart in a silver case in her sitting room. Marshall was thoroughly enthralled with the Marquise, leading to speculation that they may have had an affair ...."

Ewww. She kept a heart (never bloody well mind whose!) in a silver case in her sitting room? Well, we should at least be glad she didn't have it in a bronze case. That would just be weird.

The XYZ Affair had its own fascinations, no doubt but I don't see how Marshall could have kept up with the intrigue if he was lodging in a home with a dead guy's heart lying around.

By the way, yes I'm aware that The New York Times has sacked Ben Stein. I'll save my discussion of this much-deserved firing for Thursday. Watch for it.

Perry Mason and Sotomayor

As anyone even half-following the Sotomayor confirmation process has realized by now, the nominee credits the old Perry Mason books and television show with inspiringher to get into law -- and, more oddly, to become a prosecutor -- apparently because the prosecutor in the Mason TV show (Hamilton Burger, played by William Talman) was such a good sport about losing nearly every case.

He said he was happy to lose when it meant an innocent man was cleared because "my job is to do justice."

Anyway, many of you have probably also seen the clip of the new (very new) senator from Minnesota, Al Franken, bonding with Judge Sotomayor over this. He asked her if she could name the episode in which Mason lost a case. She couldn't. A varety of bloggers have now picked up the slack, informing the world that there were actually two such episodes.

There's The Case of the Terrified Typist and The Case of the Deadly Verdict.

Which leads me to wonder this: How important would that be for a real Perry Mason fan? Has Sotomayor come up with the whole "I used to watch Perry Mason" meme because she or somebody else advising her thought it would show she has the common touch, she's not an Ivory Tower type ... or is this a genuine fan?

After all, suppose some judicial nominee had talked about the formative influence upon his life of the Beatles' music, but was then tripped up by the question, "which Beatle was widely rumored to be dead in late 1969?"?

Would we conclude that the Beatles-fandom thing was part of the spin machine?

I'm not at all naive about the machinations of judicial noninations and confirmations, by the way. (I'm the author of a book on the subject.) I wouldn't especially blame Sotomayor for this sort of spinning. But I do like to know what is spin and what isn't.

Justices to review Wardrobe Malfunction?

The US Supreme Court is now deliberating over whether the Federal Comm. Commission violated the pertinent statute when it fined broadcasters for the use of "fleeting expletives," especially in the contxt of awards shows, which by tradition are live broadcasts.

In the midst of this deliberation, the FCC last week threw visual imagery into the mix, asking that the high court review an appellate court’s decision to revoke its fine in connection with the "wardrobe malfunction" that exposed one of Janet Jackson's nipples during the 2004 Super Bowl halftime show.

It was specifically the Third Circuit that threw out the $550,000 fine against CBS for airing Janet's breast ("Ms Jackson if you're nasty").

The Third Circuit said that the fine was based on an “arbitrary and capricious” change in policy. This was the same reasoning employed by the Secod Circuit in the Fox case over prohibited verbiage.

Accordingly, the FCC wants the issue of fleetingness -- for words and imagery –- disposed of by SCOTUS in one shot.

I think it is safe to presume that the FCC is making this argumnent because it has judged from the oral arguments in the Fox case that it has the votes at the SCOTUS level to re-assert its authority against the interference of these unruly appeals court judges.

I certainly hope that they are wrong in that judgment, and erroneous vote counting on the basis of oral arguments does occur.

I'll be hoping for the right decision, though bracing for the wrong, in the months to come, whether the two cases are combined or not.

Millionaire's Loophole

The US Supreme Court, on Wednesday, issued two important opinions. In one, it affirmed the right of an individual to "keep and bear arms" independent of membership in any militia. I'll leave this subject aside from now, because it's already received a lot of attention.

So much attention, in fact, that it has overshadowed another opinion that in other circumstances might have been the day's headliner. The Supreme Court voided a piece of the McCain-Feingold campaign reform act, one of the signature acts of one of the men now running for President.

This case is known as Jack Davis v. Federal Election Commission.

Davis, the appellant, is a millionaire and a member of the Democratic Party who resides in upstate New York. He is now in his third campaign to represent the 26th congressional district in the House. He lost each of the first two campaigns to Thomas Reynolds.

Federal law limits the amount of money that a candidate for the House of Representatives can accept from individuals. Under normal circumstances, the same restrictions apply to all the competitors for a seat. But under the loophole, sect. 319(a), the rules change somewhat when one of the candidiates is wealthy and self-financing. The test for this is pretty complicated, and I'll skip it at the moment. But if a self-financing millionaire is in the race, the law (in an effort presumably to level the playing field a bit for non-millionaire candidates) eases the restrictions on the millionaire's opponent.

This is what made Mr. Davis unhappy. In his last two campaigns, he was running against an incumbent. He probably figured that he had to spend his own money in millionaire style just to even that playing field, and that making Rep. Reynold's life easier as a result of Mr. Davis' willingness to spend his own money was to tilt the field again, not to level it.

I use the metaphor of "level playing fields" because it is often employed, but the truth is it's endlessly manipulable. Anything that "levels the field" from one point of view will tilt it unfairly from another, and vice versa.

Anyway, one odd nomenclatural fact about the provision SCOTUS has now voided is surely that it is referred to as the "Millionaire's loophole." It might better have been called the Anti-millionaire's loophole, since it is designed to hamper the Davis' of the world.

At any rate, it has passed into history now.

The Patent-Blog 'Outing'

Yes, there is a corner of the blogosphere devoted to the debates over patent and copyright law. It includes, for example, blogs like this one.

Such blogs split into two opposing camps.

There are those, like "Patent Hawk," who think that IP is a crucial means of rewarding innovation, that some sneaky corporate interests are always trying to piggy-back off of other people's innovative ideas, and that accordingly patent rights need to be strengthened (the public domain narrowed) pro bono publico. Greed is good.

Then there are those (we might as well call them "patent doves"!) who believe that intellectual-property claims have gone much too far, that "trolls" are using patent claims to disadvantage productive businesses, and that a lot of the ideas now claimed as someone's property belong more properly in the public domain.

One of the more prominent of the patent doves has called himself Patent Troll Tracker, and for a long time kept his 'real' identitya secret. But he has been outed as a California lawyer named Rich Frenkel.

The 'outing' exercise itself is inside-baseball, but the intellectual complexities of the underlying debate are fascinating.

Consider the meaning of the word "obvious." A simple enough word, of transparent (self-referential!) significance, right? Maybe not. The U.S. Supreme Court wrestled with this last year, in KSR v. Teleflex.

The pertinent statute says that no patent shall issue when "the differences between the subject matter sought to be patented and the prior art are such that the subject matter as a whole would have been obvious at the time the invention was made to a person having ordinary skill in the art to which said subject matter pertains."

That seems to require the courts to engage in an exercise of hindsight. "It was obvious that peanut butter would mix well with jelly between two pieces of bread, wasn't it?"

Anyway, I'm just glad I can enjoy a PB&J sandwich now and then without paying whoever made the first one. That'll conclude my IP cogitating for now.