VOLATILE ENERGY HEDGE FUNDS - PATENT LAW - & BIRDS OF FEATHER FLOCKING TOGETHER

Another unanimous fractured opinion has emerged from the nation's Marble Palace. The case is Bilski v. Kappos, No -08-694. Bernard Bilski and Rand Warsaw applied for a patent. They didn't invent a "thing" as much as they figured out a really complex mathematical problem. Their discovery explains how buyer and sellers of commodities in the energy market can protect, or hedge, against the risk of price changes. I wonder how Bilski and Warsaw account for fraud in their calculations. Fraud was the issue with Enron in the largest collapse of a company in the energy market to date.

The patent examiner rejected Bilski and Warsaw's application because their "invention" is not implemented on a specific apparatus, but merely manipulates an abstract idea solving a purely mathematical problem. The Board of Patent Appeals and Interferences agreed and affirmed. The Federal Circuit, in turn, affirmed.

The Federal Circuit sitting en banc rejected its prior test for determining whether a claimed invention was a patentable “process” under Patent Act, 35 U. S. C. §101— i.e., whether the invention produced a “useful, concrete, and tangible result,” — holding instead that a claimed 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. Concluding that this “machine-or-transformation test” is the sole test for determining patent eligibility of a “process” under §101, the court applied the test and held that the application was not patent eligible.

The Supreme Court upheld the judgment of the Federal Circuit, but took that court to task for its narrow interpretation of Patent Law.

The Patent Law specifies four independent categories of inventions or discoveries that are patent eligible: “processes,” “machines,”“manufactures,” and “composition[s] of matter.” “In choosing such expansive terms, . . . Congress plainly contemplated that the patent laws would be given wide scope. Prior decisions of the Supreme Court provide precedents provide three specific exceptions to §101’s broad principles: laws of nature, physical phenomena, and abstract ideas. The Bilski/Warsaw concept is clearly an abstract idea.

Even if the Bilski/Warsaw concept had been otherwise patent eligible it would have still been required to demonstrate novelty, nonobviousness, and demonstrate a full and particular description. The invention at issue is claimed to be a “process,” which the Patent Law defines as a “process, art or method, and includes a new use of a known process, machine, manufacture, composition of matter, or material.”

The Court ruled that the Machine-or-Transformation Test was not the sole test determining patent eligibility. The Court said this test may be a useful and important clue or investigative tool, it is not the sole test for deciding whether an invention is a patent-eligible “process”.

The Federal Circuit violated two principles of statutory interpretation, the Court said. Courts should not read into the patent laws limitations and conditions which the legislature has not expressed. Unless otherwise defined, words will be interpreted as taking their ordinary, contemporary, common meaning. The Court is unaware of any ordinary, contemporary, common meaning of “process” that would require it to be tied to a machine or the transformation of an article.

The Patent Director argued that looking at all sections of the Patent Law where the term "process" was used led to the confining opinion that the "process" need be tied to the Machine-or Transformation Test. Associate Justice Kennedy said that the doctrine of noscitur a sociis does not apply here. Noscitur a sociis is a Latin phrase meaning "it is known by the company it keeps". Hence the translation is "birds of a feather flock together". This legal maxim originated in England with the dicta of Judge Stamp in the 1967 case of Bourne v. Norwich Crematorium, Ltd where he said:

"Sentences are not mere collections of words to be taken out of the sentence, defined separately by reference to the dictionary or decided cases, and then put back into the sentence with the meaning you have assigned to them as separate words."

What Kennedy is saying that there wasn't anything unclear about the word "process." It was not necessary for the Patent Office and the Federal Circuit to limit the language provided by the Congress.

Kennedy refers to the Federal Circuit's sole test as the categorical exclusion argument. He says, "The categorical exclusion argument is further undermined by the fact that federal law explicitly contemplates the existence of at least some business method patents: Under §273(b)(1) [ of the Patent Law], if a patent-holder claims infringement based on “a method in [a] patent,” the alleged infringer can assert a defense of prior use. By allowing this defense, the statute itself acknowledges that there may be business method patents. Section 273 thus clarifies the understanding that a business method is simply one kind of “method” that is, at least in some circumstances, eligible for patenting under §101. A contrary conclusion would violate the canon against interpreting any statutory provision in a manner that would render another provision superfluous."

Having corrected the Federal Circuit the Court goes on to explain that Bilski and Warsaw fail because they are trying to "patent both the concept of hedging risk and the application of that concept to energy markets". Kennedy said "these are not patentable processes but attempts to patent abstract ideas."

Abstract ideas are not patent eligible.

I called this a fractured opinion because Associate Justice Kennedy delivered the opinion of the Court except as to Parts II-B-2 and II-C-2.  The Court agreed in the outcome only. 

The Abortion Cases Part Thirteen

The Court revisits Partial Birth Abortion

In Gonzales v. Carhart and the companion case of Gonzales v. Planned Parenthood Federation of America the Court again tackles the gruesome topic of Partial Birth Abortion. This time a federal statute, the Partial-Birth Abortion Ban Act of 2003.

This Act, 18 U.S.C. § 1531, differs from the Nebraska statute in Stenberg v. Carhart. First the Act does not regulate the most common method of abortion used during the first trimester of pregnancy. Second the Act does not apply to a partial-birth abortion that is necessary to save the life of a mother whose life is endangered by a physical disorder, physical illness, or physical injury, including a life-endangering physical condition caused by or arising from the pregnancy itself.

Congress made findings that there was a moral, medical, and ethical consensus that partial-birth abortion is a gruesome and inhumane procedure that is never medically necessary and should be prohibited.

Attorney General Alberto Gonzalez

In the principal case, Gonzales v. Carhart, Carhart made a facial challenge to the constitutionality of the Act. Carhart's claimed the Act was void for vagueness, or in the alternative, it was constitutionally infirm because it placed an undue burden based on a woman's right to abortion based on the Act's overbreadth or lack of health exception.

Associate Justice Anthony Kennedy wrote the Court's 5 - 4 opinion. He was joined by Chief Justice John Roberts, and Associate Justices Scalia, Thomas, and Alito. Associate Justice Clarence Thomas wrote a separate concurring opinion joined by Justice Scalia.

Associate Justice Ruth Bader Ginsburg wrote the dissenting opinion and was joined by Associate Justices Stevens, Souter, and Breyer.

Associate Justice Anthony Kennedy

For the majority Kennedy begins by distinguishing the case of Planned Parenthood v. Casey. Kennedy writes "Whatever one’s views concerning the Casey joint opinion, it is evident a premise central to its conclusion—that the government has a legitimate and substantial interest in preserving and promoting fetal life — would be repudiated were the Court now to affirm the judgments of the Courts of Appeals."

Kennedy concluded that the Act in this case was not void for vagueness and did not impose an undue burden from any sense of overbreadth. The facial challenge to the Act failed.

It is important to note that the Act applies without regard to whether the fetus is pre or post viable. "The Act does apply both previability and postviability because, by common understanding and scientific terminology, a fetus is a living organism while within the womb, whether or not it is viable outside the womb.  We do not understand this point to be contested by the parties.”

The Act’s definition of partial-birth abortion requires the fetus to be delivered “until, in the case of a head-first presentation, the entire fetal head is outside the body of the mother, or, in the case of breech presentation, any part of the fetal trunk past the navel is outside the body of the mother.” §1531(b)(1)(A).  The Attorney General concedes, and we agree, that if an abortion procedure does not involve the delivery of a living fetus to one of these “anatomical ‘landmarks’”—where, depending on the presentation, either the fetal head or the fetal trunk past the navel is outside the body of the mother—the prohibitions of the Act do not apply.

Third, to fall within the Act, a doctor must perform an “overt act, other than completion of delivery, that kills the partially delivered living fetus.” §1531(b)(1)(B) (2000 ed., Supp. IV). For purposes of criminal liability, the overt act causing the fetus’ death must be separate from delivery. And the overt act must occur after the delivery to an anatomical landmark. This is because the Act proscribes killing “the partially delivered” fetus, which, when read in context, refers to a fetus that has been delivered to an anatomical landmark.

Finally the Court discusses mens rea, "Fourth, the Act contains scienter requirements concerning all the actions involved in the prohibited abortion. To begin with, the physician must have “deliberately and intentionally” delivered the fetus to one of the Act’s anatomical landmarks. §1531(b)(1)(A). If a living fetus is delivered past the critical point by accident or inadvertence, the Act is inapplicable. In addition, the fetus must have been delivered “for the purpose of performing an overt act that the [doctor] knows will kill [it].” If either intent is absent, no crime has occurred. This follows from the general principle that where scienter is required no crime is committed absent the requisite state of mind."

Associate Justice Clarence Thomas continues to claim that there is no right to an abortion under the Constitution. He deftly notes that the question of whether abortion is permissible under the Commerce Clause is not before the Court. The Act makes specific reference to the Commerce Clause of the Constitution.

§1531

(a) Any physician who, in or affecting interstate or foreign commerce, knowingly performs a partial-birth abortion and thereby kills a human fetus shall be fined under this title or imprisoned not more than 2 years, or both. This subsection does not apply to a partial-birth abortion that is necessary to save the life of a mother whose life is endangered by a physical disorder, physical illness, or physical injury, including a life-endangering physical condition caused by or arising from the pregnancy itself.

We must be alert to attempts to derail the decision of Roe v. Wade by those who argue that no fundamental right to Liberty exists and thus there would be no right to privacy.

Associate Justice Ginsburg protests the short shrift given stare decisis in the Court's opinion. She wrote:

Today’s decision is alarming. It refuses to take Casey and Stenberg seriously. It tolerates, indeed applauds, federal intervention to ban nationwide a procedure found necessary and proper in certain cases by the American College of Obstetricians and Gynecologists (ACOG). It blurs the line, firmly drawn in Casey, between previability and postviability abortions. And, for the first time since Roe, the Court blesses a prohibition with no exception safeguarding a woman’s health. 

I dissent from the Court’s disposition. Retreating from prior rulings that abortion restrictions cannot be imposed absent an exception safeguarding a woman’s health, the Court upholds an Act that surely would not survive under the close scrutiny that previously attended state-decreed limitations on a woman’s reproductive choices.

Justice Ginsburg's point is well taken. Here is the applicable part of the Act.

§1531

(d)

(1) A defendant accused of an offense under this section may seek a hearing before the State Medical Board on whether the physician’s conduct was necessary to save the life of the mother whose life was endangered by a physical disorder, physical illness, or physical injury, including a life-endangering physical condition caused by or arising from the pregnancy itself.

The exception does not apply to the woman's health.

Recall that the Partial Birth Abortion cases apply to only a narrow percentage of all abortive procedures. It is readily apparent that neither side is giving much credence to the other side when it comes to fashioning a consistent rule of law guiding late term abortions. However, the majority, minus Justice Thomas, affirmed the essential holding of Roe in this case.

The Abortion Cases Part Twelve

Nebraska's Dr. Leroy Carhart

A Nebraska law criminalizing late term abortions was the focus of the Supreme Court's decision in Stenberg v. Carhart. The Court's majority consisted of five Associate Justices Stephen Breyer, who wrote the opinion and was joined by Associate Justices Stevens, O'Connor, Souter, and Ginsburg. Justice Stevens wrote a concurring opinion, in which Justice Ginsburg joined. Justice O’Connor filed a concurring opinion. Justice Ginsburg filed a concurring opinion, in which Justice Stevens joined.

There were four in dissent, Chief Justice Rehnquist, and Associate Justices Scalia, Thomas, and Kennedy.

Breyer's opening volley lays to rest any notion that the landmark decision of Roe v. Wade would be overturned. He said: 

Associate Justice Stephen Breyer

"We again consider the right to an abortion. We understand the controversial nature of the problem. Millions of Americans believe that life begins at conception and consequently that an abortion is akin to causing the death of an innocent child; they recoil at the thought of a law that would permit it. Other millions fear that a law that forbids abortion would condemn many American women to lives that lack dignity, depriving them of equal liberty and leading those with least resources to undergo illegal abortions with the attendant risks of death and suffering. Taking account of these virtually irreconcilable points of view, aware that constitutional law must govern a society whose different members sincerely hold directly opposing views, and considering the matter in light of the Constitution’s guarantees of fundamental individual liberty, this Court, in the course of a generation, has determined and then redetermined that the Constitution offers basic protection to the woman’s right to choose. Roe v. Wade; Planned Parenthood of Southeastern Pa. v. Casey. We shall not revisit those legal principles. Rather, we apply them to the circumstances of this case."

The Court considered three established principles in making that application. "First, before 'viability … the woman has a right to choose to terminate her pregnancy.'”

 "Second,'“a law designed to further the State’s interest in fetal life which imposes an undue burden on the woman’s decision before fetal viability' is unconstitutional. An “undue burden is … shorthand for the conclusion that a state regulation has the purpose or effect of placing a substantial obstacle in the path of a woman seeking an abortion of a nonviable fetus.”

"Third, ‘subsequent to viability, the State in promoting its interest in the potentiality of human life may, if it chooses, regulate, and even proscribe, abortion except where it is necessary, in appropriate medical judgment, for the preservation of the life or health of the mother.'"

The Nebraska statute §28—328(1) provided “No partial birth abortion shall be performed in this state, unless such procedure is necessary to save the life of the mother whose life is endangered by a physical disorder, physical illness, or physical injury, including a life-endangering physical condition caused by or arising from the pregnancy itself.”

Partial Birth Abortion was defined as “an abortion procedure in which the person performing the abortion partially delivers vaginally a living unborn child before killing the unborn child and completing the delivery.” §28—326(9).

The law further defines “partially delivers vaginally a living unborn child before killing the unborn child” to mean the “deliberately and intentionally delivering into the vagina a living unborn child, or a substantial portion thereof, for the purpose of performing a procedure that the person performing such procedure knows will kill the unborn child and does kill the unborn child.”

In Nebraska, a person found guilty of violating this law would be guilty of a felony "carrying a prison term of up to 20 years, and a fine of up to $25,000. §§28—328(2), 28—105. It also provides for the automatic revocation of a doctor’s license to practice medicine in Nebraska. §28—328(4)."

The Court found Nebraska's law unconstitutional, affirming the decision of the trial court and the Eighth Circuit Court of Appeals. The original action was brought by Dr. Leroy Carhart seeking declaratory relief.

Nebraska law prohibited one method of abortion. For clarity the Court discussed several different abortion method. About 90% of all abortions occur in the first trimester of pregnancy, before 12 weeks of gestational age, using a method called vacuum aspiration. The procedure’s mortality rates for first trimester abortion are, for example, 5 to 10 times lower than those associated with carrying the fetus to term. Complication rates are also low."

About 10% of all abortions take place in the second trimester, gestational age weeks 12 - 24. In the 1970's second trimester abortions tended to employ the saline injection method, as discussed in Danforth v. Planned Parenthood. Since then "the medical profession has switched from medical induction of labor to surgical procedures for most second trimester abortions. The most commonly used procedure is called “dilation and evacuation” (D&E)."

D&E “refers generically to transcervical procedures performed at 13 weeks gestation or later.” American Medical Association, Report of Board of Trustees on Late-Term Abortion.

“D&E is similar to vacuum aspiration except that the cervix must be dilated more widely because surgical instruments are used to remove larger pieces of tissue. Osmotic dilators are usually used. Intravenous fluids and an analgesic or sedative may be administered. A local anesthetic such as a paracervical block may be administered, dilating agents, if used, are removed and instruments are inserted through the cervix into the uterus to removal fetal and placental tissue. Because fetal tissue is friable and easily broken, the fetus may not be removed intact. The walls of the uterus are scraped with a curette to ensure that no tissue remains.”

After 15 weeks: "Because the fetus is larger at this stage of gestation (particularly the head), and because bones are more rigid, dismemberment or other destructive procedures are more likely to be required than at earlier gestational ages to remove fetal and placental tissue.”

After 20 weeks: “Some physicians use intrafetal potassium chloride or digoxin to induce fetal demise prior to a late D&E (after 20 weeks), to facilitate evacuation.”

There are variations in D&E operative strategy; compare ibid. with W. Hern, Abortion Practice 146—156 (1984), and Medical and Surgical Abortion 133—135. However, the common points are that D&E involves (1) dilation of the cervix; (2) removal of at least some fetal tissue using nonvacuum instruments; and (3) (after the 15th week) the potential need for instrumental disarticulation or dismemberment of the fetus or the collapse of fetal parts to facilitate evacuation from the uterus.

There were two fatal flaws in the Nebraska law. First, the criminal statute did not provide any exception for the health of the mother. Second, the act imposed an undue burden on a woman's ability to choose a D&E abortion, thus unduly burdening her right to choose an abortion.

Justice Stevens said that it made no sense for Nebraska to choose one method of abortion over another. Roe v. Wade's "[h]olding–that the word “liberty” in the Fourteenth Amendment includes a woman’s right to make this difficult and extremely personal decision–makes it impossible for me to understand how a State has any legitimate interest in requiring a doctor to follow any procedure other than the one that he or she reasonably believes will best protect the woman in her exercise of this constitutional liberty. But one need not even approach this view today to conclude that Nebraska’s law must fall. For the notion that either of these two equally gruesome procedures performed at this late stage of gestation is more akin to infanticide than the other, or that the State furthers any legitimate interest by banning one but not the other, is simply irrational."

Justice O'Connor probably could not believe her ears when counsel for Nebraska said that the late term "procedure will not, in some circumstances, be “necessary to preserve the life or health of the mother" She said "a ban on partial-birth abortion that only proscribed the D&X method of abortion and that included an exception to preserve the life and health of the mother would be constitutional" in her view.  My bet is that a lady as mature as Justice O'Connor can recall from personal experience a number of women whose deaths were attributed to maternal mortality.  I know I can, and I am a little younger than this distinguished jurist.

Associate Justice Ruthe Bader Ginsberg

Associate Justice Ginsburg quoting the Chief Judge of the Seventh Circuit Court of Appeals, Richard Posner, in the case of Hope Clinic v. Ryan said "if a statute burdens constitutional rights and all that can be said on its behalf is that it is the vehicle that legislators have chosen for expressing their hostility to those rights, the burden is undue.”

Chief Judge Richard Posner of the Seventh Circuit

Chief Justice Rehnquist deferred to the analysis of Justices Kennedy and Thomas in their dissents.

Justice Scalia, who as we recall cannot find the concept of Liberty in the Constitution, attacked the Court's opinion as "policy-judgment-couched-as-law."

Justices Kennedy and Thomas dissents violently clash with the Court's majority opinion in general and Justice O'Connor's opinion in particular. Rehnquist, Scalia, Kennedy, and Thomas would give great deference to Nebraska. They find Justice O'Connor's view that the statute would pass constitutional muster with an appropriate exception for the health of the mother disingenuous.

When the Rehnquist branch of the Court write the opinion they are seen as substituting policy for judgment couched as law. When they are in the minority they hurl that barb at the majority. Abortion remains a contentious issue on the Court.

The Court seldom airs its internal conflicts as openly as it does in these cases.

H.R. 5175, CONGRESS ANSWERS THE SUPREME COURT'S DECISION IN "CITIZENS UNITED"

This past January the Supreme Court overruled Austin v. Michigan Chamber of Commerce, and partially overruled McConnell v, Federal Election Commission with its decision in Citizens United v. Federal Elections Commission.

That decision opened the flood gates for corporate money to pollute the American political process. H.R. 5175 - the Democracy is Strengthened by Casting Light on Spending in Elections (DISCLOSE) Act, is poised at the Rules Committee on its way to a floor vote. H.R. 5175 was sponsored by Maryland Democrat Chris Van Hollen, with 114 cosponsers.

Justice Kennedy

Much of what Justice Kennedy said in his majority opinion in Citizen's United makes sense to me. I love the First Amendment. I am a strong advocate for free speech. I accept the proposition that in elections, more speech is always better than less speech. The problem I have with Citizen's United is the legal fiction of a corporation being a "person" and entitled to speak on electoral matters.

Corporations don't have a soul to save or a butt to kick, all you can do is hit them in the pocketbook. Corporations seem to be a lot like Missouri's Mules. In order to get their attention you have to whack them in the head, or that other end.

The catastrophe continuing to unfold in the Gulf of Mexico is a perfect example of why Citizen's United doesn't make sense. The cozy relationship between bureaucrats and the Oil Industry ended up with an unsafe well being drilled. Now shall we let British Petroleum, Halliburton, and other energy conglomerates buy a Congress, or a Congress and a White House? The cost of purchasing politicians is less expensive than drilling safely, or really paying all the extended costs of this crisis.

H.R. 5175 tries to salvage the Federal Campaign Act of 1971. It makes a determined effort. Under the bill government contractors will be prohibited from making campaign contributions in federal elections. Foreign corporations are also banned from making contributions. Campaign finance disclosures are tightened by H.R. 5175. The bill clarifies, using the "reasonable person" standard, of a clearly identifiable candidate.

Rachel Maddow

In a Rachel Maddow like "Moment of Geek", the bill requires that persons required to file a report after making a campaign contribution are then required to "electronically file" reports after making subsequent contributions. The bill presumes that the "internets" are working. Or maybe the Congress is privy to some new technology, perhaps an "FEC REPORT AP" for your smart phone? Well the reports have to be "searchable, sortable, and downloadable." I can just feel the famous Maddow glee!

The bill is technical. It is a primer for the FEC to study and employ in the wake of Citizen's United, It just isn't enough for me. It will still be challenged because of the dopey rule that corporations are persons. That's hogwash!

My idea is to amend the Constitution saying that only registered voters can make campaign donations, of any nature, to candidates for federal office. Only corporations whose primary business is the "news business" may make endorsements for candidates in federal elections.

The only people who should have a voice in campaigns and elections will be registered voters with skin in the game. No Unions, no Chambers of Commerce, No associations of lawyers, doctors or Indian Chiefs, no hospitals or insurance companies, no churches, temples or synagogues, neither bowling leagues, taverns, or civic organizations. And, Mr. Justice Kennedy, no PACs.

Justice Kennedy displayed a rare disconnect with reality and the magnitude of influence created by corporate cash in his obiter dictum in Citizen's United. Kennedy noted that out of the millions of corporations only about 2000 had trekked the arduous path to set up a PAC. Mr. Justice Kennedy! Get real! Only the wealthiest corporations set up PACs. Kennedy has blindly compared Fortune 500 corporations to your janitor's closely held family corporation. Kennedy clearly mixed his applesauce in with his chicken manure, yuck!

The Senate version of this bill is S. 3295.