Outsourcing Law & Business Journal™: June 2010
June 30, 2010 by Bierce & Kenerson, P.C.
OUTSOURCING LAW & BUSINESS JOURNAL (™) : Strategies and rules for adding value and improving legal and regulation compliance through business process management techniques in strategic alliances, joint ventures, shared services and cost-effective, durable and flexible sourcing of services. www.outsourcing-law.com. Visit our blog at http://blog.outsourcing-law.com for commentary on current events.
Insights by Bierce & Kenerson, P.C., Editors. www.biercekenerson.com
Vol. 10, No. 6 (June 2010)
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1. U.S. Discrimination against Foreign Call Centers: Sen. Schumer’s Personal Trade War.
2. Business Method Patents for Business Process Sourcing : Strategies for Hedging Your Bets when Strategies for Hedging Weather Futures are Unpatentable under U.S. Supreme Court’s Bilski Decision.
3. Humor.
4. Conferences.
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1. U.S. Discrimination against Foreign Call Centers: Sen. Schumer’s Personal Trade War. Call center operations can be conducted anywhere in the world without U.S. regulation, unless the activities involve regulated business services such as mortgage banking, consumer credit and lending, broker-dealer securities brokerage, life insurance sales and the regulated professions such as public accounting, the practice of law, engineering and architecture. The Democrats and the Obama Administration appear to want to control call center operations more than the mere directive in the TARP program, which forbids the use of any federal funds by TARP stimulus recipients for foreign call centers. Now comes Sen. Charles Schumer (D., N.Y.) with a proposal to tax all foreign call center calls at $0.25 per call, but exempt all U.S. call center calls from this tax. For the complete article, click here: http://www.outsourcing-law.com/2010/06/u-s-discrimination-against-foreign-call-centers/
2. Business Method Patents for Business Process Sourcing : Strategies for Hedging Your Bets when Strategies for Hedging Weather Futures are Unpatentable under U.S. Supreme Court’s Bilski Decision. Business process outsourcing (BPO) has led many entrepreneurs and their investor cousins (sometimes called “patent trolls”) to seek patent protection for their business methods. The long-awaited decision of the U.S. Supreme Court in Bilski v. Kappas, 561 U.S. ___ (June 28, 2010) was anticipated to lay down the groundwork for defining the parameters of patentable business methods. Its decision disappoints the more than 60 parties that filed briefs on both sides of the debate over what is patentable. Read more by clicking here: http://www.outsourcing-law.com/2010/06/business-method-patents-for-business-process-sourcing/
3. Humor.
Patent, n. (1) a legal monopoly until it is declared illegal, invalid, obvious or not useful; (2) bargaining chip for a standard agreement; (3) public declaration of what you do in private.
Patent troll, n. (1) non-operating owner of a business method that everyone uses; (2) sheriff deputized for highway robber.
4. Conferences.
July 14-16, 2010. IQPC Presents Shared Services for Finance and Accounting, Chicago, Illinois. The SSFA 2010 Summit brings together leading financial shared services experts to network, benchmark and learn through keynote presentations, interactive roundtables, case studies and discussion panels. This program will help you improve internal accounting processes, maximize your efficiency with less resources, make smarter sourcing decisions, and drive continuous value through your financial services. For more information, visit http://www.sharedservicesfa.com/Event.aspx?id=314126
September 13-15, 2010. 5th eDiscovery for Pharma, Biotech and Medical Device Industries, Philadelphia, Pennsylvania. Presented by IQPC, this event will bring together industry leaders from in-house eDiscovery teams, expert judges and outside counsel as they discuss:
- How the new Pension Committee decision will effect eDiscovery professionals in the life science industries
- The unique challenges biopharmaceutical and medical device companies face with respect to social media content
- Preparing and responding to FDA inquiries, patent issues, and other types of pharmaceutical litigation
- A progress report on the 7th circuit eDiscovery pilot program and its implications for Pharma and Biotech
- Reducing patient privacy risks and unnecessary disclosures due to indiscriminate document retention
- Discovering new technologies to reach your goal of gaining proactive control over all your data
To register and view the whole program, click here.
September 26-28, 2010. IQPC Shared Services Exchange™ Event, 2nd Annual, to be held in The Hague, Netherlands. Shared Service Centres have long been seen as the cost saving centre of HR, Finance & Accounting and IT processes, but with changing employment trends and global challenges facing organisations, how can SSC’s continually offer service value?
Unlike typical conferences, the Shared Services Exchange™, which will be co-located with the Corporate Finance Exchange™, focuses on networking, strategic conference sessions and one-on-one meetings with solution providers. The Exchange invites strategic decision makers to take a step back from their current operations, see what strategies and solutions others are adopting, develop new partnerships and make investment choices that deliver innovative solutions and benefits to their businesses.
To request your complimentary delegate invitation or for information on solution provider packages, please contact: exchangeinfo@iqpc.com, call +44 (0) 207 368 9709, or visit their website at http://www.sharedservicesexchange.co.uk/Event.aspx?id=263014
October 21-22, 2010, American Conference Institute’s 5th National Forum on Reducing Legal Costs, Philadelphia, Pennsylvania.
The essential cross-industry forum for corporate and outside counsel who are truly motivated to create value and reduce legal costs through innovative fee arrangements, enhanced relationships, and streamlined operations
Come join senior corporate counsel responsible for cost-reduction success stories, as well as leaders from law firms that have pioneered the use of alternative fee arrangements and other innovative cost-reduction initiatives, as they provide a roadmap for navigating the complexities of keeping legal department costs in check. Now in its fifth installment, this event offers unique networking opportunities with senior practitioners from around the nation, including in-house counsel from a wide range of companies and industries.
Reference discount code “outlaw” for the discounted rate of $1695! To get more information, visit www.americanconference.com/legalcosts
October 25-27, 2010, The 8th Annual HR Shared Services and Outsourcing Summit, Orlando, Florida. This will be a gathering for corporate HR & shared services executives from companies across North America to exchange ideas, develop new partnerships and discuss the latest tools, technologies and strategies being employed in the profession to enhance departmental efficiencies and propel corporate growth. The event will focus on the most current topics in the HR shared services industry including metrics, automation, outsourcing, globalization, compensation & rewards, benefits and an overall focus on the new strategic role of HR shared services. We will review how to tackle change management, analyze current and future projects and further develop the instrumental key areas within HR shared services. Outsourcing Law contacts can receive 20% off the standard all access price when they register with the code HRSS5. Register by calling 212-885-2738. View the program brochure for more details by clicking here.
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Business Method Patents for Business Process Sourcing : Strategies for Hedging Your Bets when Strategies for Hedging Weather Futures are Unpatentable under U.S. Supreme Court’s Bilski Decision
June 30, 2010 by Bierce & Kenerson, P.C.
Business process outsourcing (BPO) has led many entrepreneurs and their investor cousins (sometimes called “patent trolls”) to seek patent protection for their business methods. The long-awaited decision of the U.S. Supreme Court in Bilski v. Kappas, 561 U.S. ___ (June 28, 2010) was anticipated to lay down the groundwork for defining the parameters of patentable business methods. Its decision disappoints the more than 60 parties that filed briefs on both sides of the debate over what is patentable.
The Bilski Decision. The case inspired multiple opinions, leading to different majorities for different propositions.
Unanimously, all nine Justices agreed that the patent for hedging financially against weather-related losses in the energy industry was too abstract, citing the Court’s precedents that provide three specific exceptions to the broad patent-eligibility principles of 35 USC Section 101: “laws of na¬ture, physical phenomena, and abstract ideas.”
The majority ruled that the patent should not have been granted. That was the easy part of the decision. The hard part was to identify why that particular patent should not have been granted.
A smaller majority invited the Federal Circuit court to propose an alternative or supplemental statement of the legal test for patentability that is now used, the “machine or transformation” test. This test permits patentability only if the process is used in a machine or transforms physical properties. Justice Kennedy’s majority opinion expressly refrained from adopting any new legal test for “any particular invention, let alone holding that any of the above-mentioned technologies from the Information Age should or should not receive patent protection.” (Slip Op., pp. 9-10).
Justice John Paul Stevens, for the minority of four (himself and Justices Ginsburg, Breyer and Sotomayor), criticized the “tepid disposition” of the case by the majority. He argued that the First Inventor Defense Act of 1999, 35 USC Section 273, only protects first inventors from claims, and is not to be construed to modify the general test of patentability under the 1952 Patent Act. (Slip Op., p. 34-36). “The [1999] Act merely limited one potential effect of that decision: that businesses might suddenly find themselves liable for innocently using methods they as¬sumed could not be patented.” (Slip Op., p. 34). As a matter of statutory construction, he concluded “In light of its history and purpose, I think it obvious that the 1999 Congress would never have enacted §273 if it had foreseen that this Court would rely on the provision as a basis for concluding that business methods are pat¬entable. Section 273 is a red herring; we should be focus¬ing our attention on §101 itself.” (Slip Op., pp. 37-38).
On this basis, Justice Stevens, concurring, concluded that “methods of doing business” are not “processes” eligible for patent protection under 35 USC Section 101, and that a too-expansive grant of patent protection would impede economic progress. “The primary concern is that patents on business methods may prohibit a wide swath of legitimate competition and innovation.” (Slip Op., p. 43).
Intellectual Property Strategies for Business Process Protections, after Bilski. Enterprises hiring service providers normally demand indemnification for patent breach. Service providers now need to refocus their intellectual property strategies on ways to deal with the inconclusiveness of the Bilski majority decision under Justice Kennedy. This means:
o Trade Secrets. Enterprises should refocus on their policies, procedures and “idea farming” activities under trade secrecy. The implementation should be directed towards ensuring that only a few trusted individuals know the entire secret formula.
o Challenge the BPM Patent Trolls. Justice Stevens was inciting business executives not to succumb too quickly to patent trolls. Patent laws were not intended to create a new class of “speculative schemers who make it their business to watch the advancing wave of improvement, and gather its foam in the form of patented monopolies, which enable them to lay a heavy tax upon the industry of the country, without contributing anything to the real advancement of the arts.” (Slip Op., p. 45, citing Atlantic Works v. Brady, 107 U. S. 192. 200 (1883).
o Antitrust Laws. Patents grant monopolies, while antitrust laws ban monopolies in restraint of trade. Antitrust litigation offers a further avenue of attack against patent trolls. Prosecution of antitrust laws can be done both by regulatory enforcers (DOJ, FTC) or private plaintiffs. Business method patents are dangerously close to business practices, so a patent troll relying on such patents would need to be willing to risk a treble damage claim plus payment of the plaintiff’s attorneys’ fees.
o Link the Process to the Machine-or-Transformation Criteria. As BPO virtualizes with telecom, virtualization software in the public (or private) “cloud,” BPO patents will be increasingly challenged to fit within the “machine-or-transformation” test, or some unknown, unpredictable CAFC future interpretation. Defensively, businesses that use machines simply for processing and transmission might not meet a new CAFC test. Offensively, the business methods should be tied to automation concepts where machines take action. The difference, then, is that introducing human agents cuts back on patent protection rights, as well as possible infringement claims.
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