On October 31, 2011 a federal jury cleared Twitter of charges brought against it by VS Technologies LLC (“VS”) for allegedly infringing on VS’s patent for a “method and system for creating an interactive virtual community of famous people” (patent number 6,408,309), which it obtained in 2002. The case not only saved Twitter, the largest U.S. microblogging site, from potential destruction, it also continues the trend of skepticism regarding so-called “business method patents.”

In its complaint, filed on January 18, 2011, VS alleged that Twitter “creates and makes publicly available, interactive, virtual communities and profiles of people in various fields of endeavor” in violation of its patent. In response, Twitter primarily argued that VS’s patent was invalid under the recent Supreme Court case Bilski v. Kappos, which held, in part, that a process is patent-eligible if (1) it is tied to a particular machine or apparatus, or (2) it transforms a particular article into a different state or thing (the “machine-or-transformation” test).

First, Twitter argued that VS’s “virtual community” patent failed the “machine” prong of the test because it was not “tied” to a particular machine or apparatus, in this case, the internet, because the patent described the process as publishing profiles over any “machine readable media.” Twitter also asserted that even if the patented process was “tied” to the internet (i.e. required publication via the internet), the internet is not “a particular machine” for purposes of satisfying the machine prong. To support this proposition, Twitter cited CyberSource Corp. v. Retail Decisions, Inc., in which the Federal Circuit stated that practicing the patented method “over the internet” did not tie the process to a particular machine because the internet is an “abstraction” comprising a network of many individual machines.

Second, Twitter argued that the patent did not satisfy the “transformation” prong because the patent merely organized data and did not transform it into “a different state or thing.” Twitter further argued that VS’s patent was not distinguishable from the “prior art”— all the information that has been made available to the public in any form before a given date that might be relevant to a patent’s claims of originality; if an invention has been described in prior art, a patent on that invention is not valid—because certain previous online technologies described similar “online communities.”

Finally, Twitter argued that even if VS’s patent was valid, its service works differently than the system described in the patent such that Twitter’s service does not infringe on VS’s patent.

Twitter’s motion for summary judgment was denied, and the case proceeded to trial on October 24th. At the conclusion of the trial, the jury found that Twitter was not liable and refused to award the $8.4 million in damages claimed by VS; the jury found not only that Twitter did not infringe VS’s patent, but agreed with Twitter that the patent was invalid because it did not describe a novel invention. Had the jury found otherwise, any website on which individuals maintain profiles and can interact as an online community may have been in jeopardy.

While the outcome of this case has an immediate impact on Twitter, potentially saving it from total destruction, it also continues the recent trend of chipping away at the controversial “business method patent.” A business method patent is defined as a class of patents that disclose a new method of doing business, including types of e-commerce, insurance, banking, and tax compliance. For many years, the U.S. Patent and Trademark Office (USPTO) took the position that “methods of doing business” were not patentable, but with the explosion of internet-based technologies and start-ups during the 1980s and 1990s, the Federal Circuit ultimately decided that they could be, if the basic criteria for patentability were satisfied (novelty, non-obviousness, usefulness).

The Supreme Court in Bilski cast doubt on the appropriate scope of business method patents, but did not decide in that case whether they were per se unacceptable. Despite the lack of clear guidance on the issue, a number of courts, including the Federal Circuit itself, have taken steps to significantly restrict the scope of business method patents. If this trend continues, and I believe it will, the business method patent may become a thing of the past. The Supreme Court is already set to visit the issue of the scope of “medical method” patents in December, and will also hopefully clarify the permissibility and scope of business method patents in that case once and for all.

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