A Big Year Ahead for the Supreme Court and the Information Economy

Posted by Brad Smith
General Counsel

Today the Supreme Court begins its 2009-2010 term.  It promises to be an important session, not least because the Court and new Justice Sonia Sotomayor will grapple with laws that are at the heart of the information economy. 

There will be a number of cases that will directly impact the legal rules that incentivize innovation and define relationships between those in the information technology sector and the online ecosystem.  These sectors, in turn, play a crucial role in the U.S. economy, supplying over five million jobs, boosting productivity and helping address pressing social issues such as health care, education and energy.

The Court’s recent rulings on patent law are particularly noteworthy. In the past five years, the Court has decided eight patent cases. In the process, it has addressed what constitutes an “obvious” and thus un-patentable invention, clarified the standard for granting injunctions in patent cases and clarified other key concepts of patent law.

Building on those decisions, one of the most anticipated cases of the upcoming term is Bilski v. Kappos,  set for argument November 9, which considers whether and to what extent “business methods”—particular ways of doing business, as opposed to tangible inventions—can be patented.  Thousands of patents for business methods have been issued in the past decade, many related to online applications and services.  AsKiplinger’s magazine observed recently, “the Court’s determination (in Bilski) could have a broad impact, especially in the software development industry.”  Bilski also marks the first time in nearly 30 years that the Supreme Court will consider the scope of patentable subject matter under U.S. law. 

Microsoft supports a balanced, effective patent system that ensures high quality patents, and drives innovation and opportunity for both inventors and technology consumers. The Bilski case addresses questions relating to the patentability of purely abstract ideas. For decades, the Supreme Court has been clear, and we are in agreement, that mere abstract ideas are not and should not be patentable.

Reed Elsevier, Inc. v. Muchnick, slated for argument this Wednesday , will consider the jurisdiction of the federal courts to approve certain types of settlements for infringement of copyrighted works.  The ruling in this case could affect how technology companies and content owners resolve infringement claims that arise in the context of new digital distribution channels. 

Even cases that do not have direct connections to technology could impact the online ecosystem, such as those interpreting the First Amendment.  Tomorrow  the court will hear U.S. v. Stevens, a case concerning the constitutionality of a 1999 federal law that prohibits the depiction of animal cruelty.  The case has attracted considerable interest from artists, filmmakers, photographers and publishers who claim that the law, despite its laudable intentions, undermines broader principles of freedom of expression. 

On other fronts, in the case Free Enterprise Fund v. Public Company Accounting Oversight Board, to be argued December 7, the Court will rule on the constitutionality of a government agency that regulates auditors of publicly traded-companies.  The decision in that case is likely to impact the review by a federal appeals court of the Copyright Royalty Board, which Congress established to set copyright royalty rates paid under certain statutory licenses, including one that governs royalties paid by radio webcasters to record labels and recording artists. 

Many cases important to technology and innovation are also making their way through the lower courts and could come to the Supreme Court in the future.  The Court may be called upon, for example, to decide whether “Net neutrality” rules obliging Internet service providers not to impair users’ access to lawful Web sites violate the First Amendment, and how constitutional limits on state jurisdiction apply to commercial transactions over the Internet.  In a case decided this past term, FCC v. Fox Television Stations, the court upheld Federal Communications Commission regulation of the broadcast of “fleeting expletives” as a matter of administrative law, but left open whether the regulation violates the First Amendment—a question many expect the Court to consider after lower courts make their rulings.

Just as technology innovations invariably shape the law, legal rulings—particularly those by the Supreme Court—can have a significant impact on innovation. In helping to bring greater clarity to the rules that form the basis of our technology- and information-driven economy, the courts, and the Supreme Court in particular, play an important role in the IT and online ecosystems.


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