Vringo (NASDAQ:VRNG) is suing Google (NASDAQ:GOOG) (and some other companies too (NASDAQ:MSFT)) for search engine patents. None of the cases have reached appeal yet. Although nobody has bothered to write much about it in Vringo's context, Mayo is a Supreme Court precedent signaling that Vringo will lose on appeal. I have written about it in prior articles, so I will simply repeat this for the introduction, and then we can move on to the new Supreme Court case, which is AMP.
The Real Issue: Abstract Ideas and Laws of Nature
Bitlaw has a summary of the only recent Supreme Court decision [Mayo] relating to software patent law. It was an unanimous decision. Quoting:
The claims of this patent essentially required three separate steps: administering a drug to a patient, measuring a metabolite created by the body of the patient as a result of the drug, and informing whether more or less drug should be administered to the patient based on the measured levels of the metabolite. In this invention, the drug was known in the prior art, as was the fact that the drug produced the metabolite. Even the fact that the metabolite levels could be used to determine the efficacy of the dosage of the drug was previously known. What was not known was the precise correlations between the metabolite levels and the efficacy of the drug.
Vringo's patent is like this drug test. Search user scores are a test, measuring the rank of a link. These ranks, like the metabolite levels, are established through correlation. There are a variety of statistical approaches for establishing the precise correlations, and the fact that correlations exist between link quality and user identity was already known. These precise correlations, and various routes to implementation, like intricacies of the drug test, are not patentable.
Mayo has provided a Supreme Court precedent overthrowing broad, abstract diagnostic processes. But, lower courts so far have been interpreting this precedent inconsistently. Lower courts often ignore the Supreme Court for patents when allowed to. But there are limits to such disobedience. Repeat precedents are not ignorable.
The pending Supreme Court case, AMP, tests the patentability of genetically dynamic cell diagnostics. It could help bridge Mayo's application to Vringo. Methods for ordering search signals are like methods for sequencing DNA signals. The process: isolating anomalies from their natural states, applying the extracted information, and updating the model. Patent law expert Dan Ravicher is among those litigating to destroy such patentability in AMP.
These claims give rise to the same concern expressed by this Court in Mayo regarding how patents "threaten to inhibit the development of more refined treatment recommendations." The "isolated" DNA claims allow Myriad to dictate the standard of testing that is offered. It is undisputed that for several years, Myriad was performing tests that did not identify all known mutations. Women with mutations not detected by Myriad's tests were and continue to be given falsely reassuring results.
Indeed, Myriad continues to separate testing for large genetic rearrangements from its standard testing, even though national guidelines recommend that patients receive such testing. Moreover, Myriad's monopoly on the BRCA genes prevents other laboratories from including these genes when clinically assaying the over twenty genes now known to be associated with hereditary risk for breast and ovarian cancer or when using next generation testing methods.
Ravicher and friends weave a very relevant narrative in this gene case AMP. Myriad was granted a monopoly to perform tests. Myriad was performing tests, but not enough of them. When important technologies are restricted by patent monopolies, we risk important applications being neglected.
If we were to go back to when Vringo's patents were originally filed, respect the monopoly implied by the filing, and restrict Google from innovating, who knows how much progress we would have missed out on as a society? Technological uncertainty is antifragile: we simply cannot predict who the next Google is -- so we must not set system-wide precedents such as Vringo's.
Every lawyer knows: the higher up one goes in appeals, the harder it is to prosecute patents.
USPTO and trial court is a proletariat retail broker happily collecting tolls from trolls; appeal court is a petty-bourgeois status arbiter, which like academia functions through groupthink; Supreme Court is the ruling class, or true bourgeois. This is the crass but accurate ROV framework for appeals hierarchy as the Supreme Court repeats Mayo with AMP.
The Supreme Court will reiterate its unanimous 9-0 stance as taken in Mayo. This will send a clear message to appeals court, where Vringo v. Google is inevitably headed. The message is: we ruled twice on this, so don't try to get cute helping out patent trolls - once could be a mistake, but twice is a commitment.
Sometimes the petty bourgeois need to be put in their place (if only to prop up their superiors). Here is what the lower appeals court said when it rejected Ravicher's gene team, ruling incorrectly against gene patent liberty with AMP. This is the idea which will be overturned:
isolated DNA which does not exist alone in nature can be patented [and the] drug screening claims were valid.
This is a subject-matter-patentability issue. In other words, the following principles will be simultaneously discharged by the Supreme Court:
the entire abstract set of all isolated search results (which do not exist alone in nature) can be patented.
Vringo's broad, abstract, fundamental screening claims (which describe all of Vringo's claims) were valid.
Vringo has a telecom trolling case in Germany, which I am quite pessimistic on for too many reasons to discuss here. The Google thing is not looking so good. I think Vringo stock should trade closer to $2 at this time, and frankly I think it probably goes to zero before it goes to $4.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.
Additional disclosure: The disclosures made are minimal and readers should assume writers have conflicts of some sort.