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Innovation & Design

A Scholar-Activist Challenges U.S. Patent Law

John Duffy wants courts to rethink what can be patented and how to calculate damages. He wants more protection for business methods

Critics of the U.S. patent system have high hopes that 2009 might be the year Congress acts to amend it. But their lobbying has failed for years, so John F. Duffy sees another path to change: litigation. "I've thought a lot about reform of the patent system through the courts," says the George Washington University Law School professor. "It's not like the courts can't adjust in this area."

Duffy, 45, should know. Two years ago, in a case known as KSR, he helped win the most important U.S. Supreme Court ruling on patent law in 40 years, making it harder to patent readily apparent inventions. And on June 1, the high court agreed to review another hugely important case with which Duffy has been involved, dealing with what kinds of business methods can be patented.

While teaching and scholarship are his primary focuses, Duffy has served as legal counsel to such companies as Goldman Sachs (GS), Bank of America (BAC), Intel (INTC), and Yahoo! (YHOO) in other cases that challenge established doctrine. "He seems to have the discipline to keep his own personal opinion isolated, which I appreciate because there are lots of people who are long on opinions and short on analysis," says Chief Judge Paul R. Michel of the U.S. Court of Appeals for the Federal Circuit, which hears all patent appeals.

protection for "business methods?"

Today's debate over patent law generally pits pharmaceutical and traditional manufacturers against high-tech companies. Makers of long-lived products want strong patent protection to ward off copycats. They and such tech powerhouses as IBM (IBM) and Microsoft (MSFT) are backing a Senate bill even though it would reduce penalties that patent infringers might be ordered to pay. But others in the faster-paced tech sector have turned against the measure because it doesn't cap damage awards enough. Without a concerted push by business, the Senate may once again shelve action to deal with more pressing matters.

Duffy isn't aligned with any industry camp. But he ardently contends that to promote innovation in an evolving economy, advances in a broad range of areas ought to be eligible for patent protection. This includes business methods, which are controversial because they cover things such as financial instruments and management techniques, not physical-world inventions like a new chemical or a machine. Thus, critics say, they don't warrant protection.

That view is too narrow, Duffy counters. "Precisely because innovations break with the preconceptions of the past, the law should not rely on yesteryear's notions of technology," he says, sitting in his paper-strewn office, which offers a view of the Washington Monument's upper half. "Innovation constantly surprises us and that's exactly what we should want."

a former law clerk for Justice Scalia

Duffy may yet get his way. Last spring, in a case known as Bilski, the Federal Circuit hand-picked Duffy to argue for broadly patenting business methods. The court rejected his argument in an October ruling that significantly pared back what can be patented. Now that the case is headed to the Supreme Court, Duffy says he expects to make another amicus—or friend of the court— filing.

A one-time speedy long-distance runner—he was on Harvard's cross-country team and has run a near-Olympic-qualifying 2:24 marathon—Duffy has been hobbled recently by bad knees. But he still races around to present his ideas at conferences, from Atlanta to Buenos Aries.

At one of those talks in 2003, in Amelia Island, Fla., he told his audience he thought the question of when an invention was too obvious to get a patent was ripe for revisiting by the Supreme Court. Duffy, who had been a law clerk for Justice Antonin Scalia from 1992 to 1993, thought patent examiners and lower courts had gotten too lax about this requirement and were granting droves of patents for things that weren't true breakthroughs.

In 2005, Duffy got an e-mail from attorney James W. Dabney, who had attended the presentation. An appeals court had just found Dabney's client, Canadian auto parts maker KSR International, liable for infringing a patent on a gas pedal that could be adjusted to accommodate drivers of different heights. After reviewing the patent and poring over the case files, Duffy signed on with Dabney to take the case to the Supreme Court. Dabney is a partner at Fried, Frank, Shriver, Harris & Jacobson, a New York law firm with which Duffy is now affiliated.

Challenging damage computations, too

In a unanimous decision in 2007, the court sided with KSR, tossing out the gas-pedal patent because it was obvious. More significantly, the ruling raised the bar on what it takes to get a patent. "Obviousness is really the heart of patenting, and the holding from that decision is now cited in almost every patent litigation, and in every patent application rejection written by an examiner," says Dennis Crouch, a professor at the University of Missouri School of Law.

Duffy has signed an amicus brief in another case that could upset the status quo. In this case, Microsoft is trying to persuade the Federal Circuit to overturn a $500 million infringement award to Alcatel-Lucent (ALU). Siding with Microsoft—and filed on behalf of a group of clients including Intel, Yahoo, Palm (PALM), and SAP (SAP)—the brief calls for a change in the way patent damages are computed.

Tech companies in particular are upset that juries sometimes calculate awards based on the entire value of a product—Microsoft's Outlook e-mail program, in this lawsuit—and not the value of what is often a tiny infringing component, such as the feature that allows users to create an appointment in Outlook's calendar function. The appellate judges heard arguments in the case on June 2.

once a card-counting blackjack player

Duffy's career path wasn't a straight shot. A physics major at Harvard, he spent his first year out of college in New Jersey, researching optical computing at the famed Bell Labs (now owned by Alcatel-Lucent) before heading to law school at the University of Chicago in 1986. "If you're curious about the laws of nature, you can also be curious about the laws of mankind," Duffy says, explaining his decision. "It's a much bigger puzzle in some ways."

Even outside the courtroom, the boyishly clean-cut and wonkish academic can be disruptive. He drew the ire of casino managers as a card-counting blackjack player in college. Last year, his publication of a paper concluding that dozens of administrative judges in the Patent Office had been unconstitutionally appointed sent Congress scrambling to fix the flaw, forcing the judges to be reappointed retroactively under revised procedures.

Having spent a good deal of time examining the historical evolution of U.S. patent law, Duffy has this to say: "If you dig deep enough, you sometimes find there is an academic at the bottom of the change—sometimes to their credit, sometimes not so."

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