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Lawmaker asks General Assembly to study creation of state patent law

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An Indiana lawmaker wants to explore whether the state should create its own patent law, focusing on specific business method processes that aren’t covered by the federal patent system. The idea addresses long-standing uncertainty about patent coverage for the inner workings of a product or service that a business might want to create, and for Indiana it applies to both existing and emerging industries where these methods become more important. Those who want to explore a state statute say it could resemble the approach taken by jurisdictions on trademarks and other intellectual property issues that aren’t specifically regulated by the federal patent law, but within the Indiana legal community opinions differ on whether this would even be possible.

What’s clear about the debate is that Indiana may be one of the first states to begin addressing a controversial issue that even the nation’s highest court has refused to offer guidance on, creating uncertainty for attorneys and judges who must address these patent questions.

In January, Sen. James Merritt, R-Indianapolis, authored Senate Resolution 10 that urges the state’s legislative council to establish an interim study committee during the General Assembly’s off-months that would explore the creation of state patent law. That resolution isn’t binding, but asks the legislative leadership to consider that idea later in the year. The resolution was assigned to the Senate Judiciary Committee but did not receive a hearing.

The idea surfaced when Indianapolis patent attorney Dan Lueders with Woodard Emhardt Moriarty McNett & Henry, approached Merritt and asked him to start the legislative discussion. He’d been contemplating this patent law possibility for some time, but a June 2010 ruling from the Supreme Court of the United States pushed him to get the discussion going.

That ruling came in Bilski v. Kappos, 561 U.S. ___ (2010), in which the justices rejected a patent for a type of business process that a Pittsburgh consumer energy product company wanted to patent – the method for how it hedged energy trade. But at issue was whether its process for doing that was patent-eligible through Section 101 of the U.S. Patent Act, which details four categories of inventions eligible for patents – processes, machines, manufacturers, and compositions of matter. This case questioned what legal criteria a process must meet in order for it to be patentable.

The Federal Circuit Court of Appeals held in October 2008 that the process for predicting and hedging risk in commodities markets didn’t deserve a patent because it wasn’t tied to a machine or did not result in any physical transformation. In affirming the patent claims rejection, the federal appellate court also reiterated the “machine-or-transformation test” that had been long used as a standard in these cases.

Leading up to the decision, IP attorneys, businesses, and inventors worried that the court could have upheld the ruling in a broad way that would have invalidated hundreds of software business patents already secured; or that it would have restricted or shifted the standard for how those types of patents are obtained in the future.

The justices decided it wasn’t necessary to make broad sweeping decisions about patents to dispose of the case, but they instead relied on existing precedent to make a decision. The court chose not to further define what constitutes a patentable process.

“With even more people trying to innovate and thus seeking patent protections for their inventions, the patent law faces a great challenge in striking the balance between protecting inventors and not granting monopolies over procedures that others would discover by independent, creative application of general principles,” Justice Anthony Kennedy wrote. “Nothing in this opinion should be read to take a position on where that balance ought to be struck.”

Lueders said that the Bilski ruling “galvanized his developing thought” on state patent law creation.

“As patent lawyers, you read the concurring justices’ opinions that demonstrated a lot of hostility to the federal business patents,” he said. “That’s telegraphing the future of federal patent law into an area that will be unprotected.”

That is what makes it important for Indiana to delve into this area, according to Lueders and Merritt. Both said they haven’t heard of this happening elsewhere.

“I’ve reached out to other IP lawyers, and like anytime you get a bunch of lawyers together there are different views,” Lueders said. “But we’re collecting good input and this is gaining some interest.”

Merritt said his challenge in the General Assembly is to convince his colleagues that this is an interesting idea, and that it could be an economic development tool if businesses know they can come to Indiana to protect these business processes in a way that isn’t offered anywhere else. Both recognize that could be a challenge open to interpretation.

“You could envision some scenarios where people might not see it that way, and this might go against business,” Lueders said. “But I’m a pro business capitalist without apology, and I believe you create a market or those business rights if you encourage innovation like this does.”

A draft concept that legislators could study includes language that would allow state statute to focus on areas where federal preemption isn’t an issue, according to Lueders. A starting framework calls for “protectable business methods” not being protectable, and that would entail anything within the meaning of the Patent Act’s sections 101, 103, and 112, as well as one or more of any “idea, procedure, process, system, method of operation, concept, principle, or discovery” within Section 102.

Additionally, the language quotes the landmark ruling Bonito Boats v. Thunder Craft Boats, 489 U.S. 141 (1989) that is considered a guiding principle on patent protections to say that states are only prohibited from offering any form of patent protection to articles or processes that fall within the meaning of the broad scope of patentable subject matter.

This state law would apply to those non-protected areas. States are currently able to have statutes regarding topics such as trademarks and right of publicity. Though the areas might overlap with what’s offered with copyrights federally, they aren’t necessarily preempted by federal law.

“We’re talking stuff that is not protected by federal statutes, like books or music or software,” Lueders said. “By recognizing federal supremacy, you can avoid federal preemption. Beyond my initial framework, though, it’s not my place to decide how broad or narrow a law might be. That’s the Legislature’s job.”

But not everyone sees this as a topic the state should be examining. IP attorneys and those in academia see insurmountable issues regarding federal preemption. Just because a “process” might not be patentable through federal law, it doesn’t mean a state is able to bypass that process, they say. Some also wonder whether a state patent office would have to be created to review these types of patent questions and what administrative costs that would create for the state.

Indianapolis attorney Bob Null with Baker & Daniels doesn’t believe that even this proposed structure could sidestep preemption concerns. That would prevent Indiana from crafting its own patent protections on ineligible patent subject matter.

Quoting from the same precedent that Lueders cited, Null looked to a passage that reflects states are not free to offer equivalent protections to ideas that Congress had determined should belong to all.

“I’ve never really given this any thought, and can’t see any benefit to having a state patent law,” he said. “Among other things, it seems that it would only be enforceable within the state and that just isn’t logical for most companies to have different patent procedures based on where you’re located at.”

Indiana University Maurer School of Law professor Mark Janis said this issue has surfaced nationally and internationally in the patent community for years, and he doesn’t see it as productive for the Indiana General Assembly to jump into the fray.

He said that founding father James Madison once examined this issue and said it wouldn’t be effective, and that was a topic addressed in the Federalist Papers.

“In my view, they’d be far better off considering ways to better connect Indiana businesses with intellectual property law expertise, to ensure that those businesses are able to secure the federal intellectual property rights to which they are entitled and to build on the existing intellectual property infrastructure in the state,” he said.•

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  1. I have been on this program while on parole from 2011-2013. No person should be forced mentally to share private details of their personal life with total strangers. Also giving permission for a mental therapist to report to your parole agent that your not participating in group therapy because you don't have the financial mean to be in the group therapy. I was personally singled out and sent back three times for not having money and also sent back within the six month when you aren't to be sent according to state law. I will work to het this INSOMM's removed from this state. I also had twelve or thirteen parole agents with a fifteen month period. Thanks for your time.

  2. Our nation produces very few jurists of the caliber of Justice DOUGLAS and his peers these days. Here is that great civil libertarian, who recognized government as both a blessing and, when corrupted by ideological interests, a curse: "Once the investigator has only the conscience of government as a guide, the conscience can become ‘ravenous,’ as Cromwell, bent on destroying Thomas More, said in Bolt, A Man For All Seasons (1960), p. 120. The First Amendment mirrors many episodes where men, harried and harassed by government, sought refuge in their conscience, as these lines of Thomas More show: ‘MORE: And when we stand before God, and you are sent to Paradise for doing according to your conscience, *575 and I am damned for not doing according to mine, will you come with me, for fellowship? ‘CRANMER: So those of us whose names are there are damned, Sir Thomas? ‘MORE: I don't know, Your Grace. I have no window to look into another man's conscience. I condemn no one. ‘CRANMER: Then the matter is capable of question? ‘MORE: Certainly. ‘CRANMER: But that you owe obedience to your King is not capable of question. So weigh a doubt against a certainty—and sign. ‘MORE: Some men think the Earth is round, others think it flat; it is a matter capable of question. But if it is flat, will the King's command make it round? And if it is round, will the King's command flatten it? No, I will not sign.’ Id., pp. 132—133. DOUGLAS THEN WROTE: Where government is the Big Brother,11 privacy gives way to surveillance. **909 But our commitment is otherwise. *576 By the First Amendment we have staked our security on freedom to promote a multiplicity of ideas, to associate at will with kindred spirits, and to defy governmental intrusion into these precincts" Gibson v. Florida Legislative Investigation Comm., 372 U.S. 539, 574-76, 83 S. Ct. 889, 908-09, 9 L. Ed. 2d 929 (1963) Mr. Justice DOUGLAS, concurring. I write: Happy Memorial Day to all -- God please bless our fallen who lived and died to preserve constitutional governance in our wonderful series of Republics. And God open the eyes of those government officials who denounce the constitutions of these Republics by arbitrary actions arising out capricious motives.

  3. From back in the day before secularism got a stranglehold on Hoosier jurists comes this great excerpt via Indiana federal court judge Allan Sharp, dedicated to those many Indiana government attorneys (with whom I have dealt) who count the law as a mere tool, an optional tool that is not to be used when political correctness compels a more acceptable result than merely following the path that the law directs: ALLEN SHARP, District Judge. I. In a scene following a visit by Henry VIII to the home of Sir Thomas More, playwriter Robert Bolt puts the following words into the mouths of his characters: Margaret: Father, that man's bad. MORE: There is no law against that. ROPER: There is! God's law! MORE: Then God can arrest him. ROPER: Sophistication upon sophistication! MORE: No, sheer simplicity. The law, Roper, the law. I know what's legal not what's right. And I'll stick to what's legal. ROPER: Then you set man's law above God's! MORE: No, far below; but let me draw your attention to a fact I'm not God. The currents and eddies of right and wrong, which you find such plain sailing, I can't navigate. I'm no voyager. But in the thickets of law, oh, there I'm a forester. I doubt if there's a man alive who could follow me there, thank God... ALICE: (Exasperated, pointing after Rich) While you talk, he's gone! MORE: And go he should, if he was the Devil himself, until he broke the law! ROPER: So now you'd give the Devil benefit of law! MORE: Yes. What would you do? Cut a great road through the law to get after the Devil? ROPER: I'd cut down every law in England to do that! MORE: (Roused and excited) Oh? (Advances on Roper) And when the last law was down, and the Devil turned round on you where would you hide, Roper, the laws being flat? (He leaves *1257 him) This country's planted thick with laws from coast to coast man's laws, not God's and if you cut them down and you're just the man to do it d'you really think you would stand upright in the winds that would blow then? (Quietly) Yes, I'd give the Devil benefit of law, for my own safety's sake. ROPER: I have long suspected this; this is the golden calf; the law's your god. MORE: (Wearily) Oh, Roper, you're a fool, God's my god... (Rather bitterly) But I find him rather too (Very bitterly) subtle... I don't know where he is nor what he wants. ROPER: My God wants service, to the end and unremitting; nothing else! MORE: (Dryly) Are you sure that's God! He sounds like Moloch. But indeed it may be God And whoever hunts for me, Roper, God or Devil, will find me hiding in the thickets of the law! And I'll hide my daughter with me! Not hoist her up the mainmast of your seagoing principles! They put about too nimbly! (Exit More. They all look after him). Pgs. 65-67, A MAN FOR ALL SEASONS A Play in Two Acts, Robert Bolt, Random House, New York, 1960. Linley E. Pearson, Atty. Gen. of Indiana, Indianapolis, for defendants. Childs v. Duckworth, 509 F. Supp. 1254, 1256 (N.D. Ind. 1981) aff'd, 705 F.2d 915 (7th Cir. 1983)

  4. "Meanwhile small- and mid-size firms are getting squeezed and likely will not survive unless they become a boutique firm." I've been a business attorney in small, and now mid-size firm for over 30 years, and for over 30 years legal consultants have been preaching this exact same mantra of impending doom for small and mid-sized firms -- verbatim. This claim apparently helps them gin up merger opportunities from smaller firms who become convinced that they need to become larger overnight. The claim that large corporations are interested in cost-saving and efficiency has likewise been preached for decades, and is likewise bunk. If large corporations had any real interest in saving money they wouldn't use large law firms whose rates are substantially higher than those of high-quality mid-sized firms.

  5. The family is the foundation of all human government. That is the Grand Design. Modern governments throw off this Design and make bureaucratic war against the family, as does Hollywood and cultural elitists such as third wave feminists. Since WWII we have been on a ship of fools that way, with both the elite and government and their social engineering hacks relentlessly attacking the very foundation of social order. And their success? See it in the streets of Fergusson, on the food stamp doles (mostly broken families)and in the above article. Reject the Grand Design for true social function, enter the Glorious State to manage social dysfunction. Our Brave New World will be a prison camp, and we will welcome it as the only way to manage given the anarchy without it.

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