On June 28, 2010, the Supreme Court rendered what was arguably one of the most anticipated patent law cases: Bilski v. Kappos. Although the Court held that Bilski’s claims did not satisfy the 35 USC 101 patent-eligibility inquiry, the Court did explicitly recognize that patent protection is available for “at least some methods of doing business.”
Holding
The Supreme Court held: 1) Bilski’s patent claims were “an unpatentable abstract idea, just like the algorithms at issue in Benson and Flook“; 2) the Federal Circuit’s “machine-or-transformation test” is NOT the sole test for determining patentability under 35 USC 101; 3) Section 101 “precludes a reading of the term ‘process’ that would categorically exclude business methods”; and 4) the “useful, concrete, tangible result” test of State Street is likely no longer applicable.
Background
The claimed subject matter in the Bilski patent application related to a method of hedging against risk created by price changes in the field of commodities trading. The United States Patent and Trademark Office (USPTO) Board of Patent Appeals and Interferences(BPAI) affirmed the Patent Examiners rejection of the claims under 35 USC 101 concluding that:
“Applicants’ claims do not involve any patent-eligible transformation, holding that transformation of “non-physical financial risks and legal liabilities of the commodity provider, the consumer, and the market participants” is not patent-eligible subject matter. Id. at 43. The Board also held that Applicants’ claims “preempt[] any and every possible way of performing the steps of the [claimed process], by human or by any kind of machine or by any combination thereof,” and thus concluded that they only claim an abstract idea ineligible for patent protection. Id. at 46-47. Finally, the Board held that Applicants’ process as claimed did not produce a “useful, concrete and tangible result,” and for this reason as well was not drawn to patent-eligible subject matter. Id. at 49-50.”
Similarly, the Court of Appeals for the Federal Circuit (CAFC), sitting en banc, also held that Bilksi’s claims were not patentable. To determine whether a claimed process met the initial patentability requirement of 35 USC 101, the CAFC in essence rejected its prior “State Street” patentability test (claimed process is patentable under 35 USC 101 if it produces a “useful, concrete, and tangible result”) and introduced a new (and arguably more restrictive) “machine-or-transformation” test (claimed process is patentable under 35 USC 101 if: “1) it is tied to a particular machine or apparatus; or 2) it transforms an article into a different state or thing.”)
Guidance for Determining Patent Eligible Subject Matter
Although the Court did not annunciate an explicit test for determining when a process claim may satisfy 35 USC 101, the following items highlight the opinion:
- Congressional Intent | “Wide Scope” for Patent Laws | Three Exceptions to 35 USC 101
The Court states that Congress intended for the patent laws to have a “wide scope” with the exception of three specific items:
“Section 101 thus specifies four independent categories of inventions or discoveries that are eligible for protection: processes, machines, manufactures, and compositions of matter. ‘In choosing such expansive terms . . . modified by the comprehensive ‘any,’ Congress plainly contemplated that the patent laws would be given wide scope.’ Diamond v. Chakrabarty, 447 U. S. 303, 308 (1980). Congress took this permissive approach to patent eligibility to ensure that “‘ingenuity should receive a liberal encouragement.’” Id., at 308–309 (quoting 5 Writings of Thomas Jefferson 75–76 (H. Washington ed. 1871)). The Court’s precedents provide three specific exceptions to §101’s broad patent-eligibility principles: ‘laws of nature, physical phenomena, and abstract ideas.’ Chakrabarty, supra, at 309.”
- 35 USC 101 | “Threshold Test”
The Court confirmed that 35 USC 101 is only a threshold test in determining patent-eligible subject matter. Overcoming this initial patentability hurdle does not automatically result in a patent grant as an Applicant must still overcome the additional patentability requirements of 35 USC 102 and 35 USC 103 (anticipation and obviousness, respectively) in addition to 35 USC 112 (invention which is fully & particularly described). The Court stated:
“The §101 patent-eligibility inquiry is only a threshold test. Even if an invention qualifies as a process, machine,manufacture, or composition of matter, in order to receive the Patent Act’s protection the claimed invention must also satisfy ‘the conditions and requirements of this title.’ §101. Those requirements include that the invention be novel, see §102, nonobvious, see §103, and fully and particularly described, see §112.”
- Machine-or-Transformation Test | “Not the Sole Test” | Useful & Important Clue or Investigative Tool | Industrial Age vs. Information Age (non-precedential)
The Supreme Court stated that “the Federal Circuit incorrectly concluded that this Court has endorsed the machine-or-transformation test as the exclusive test.” Instead, “the court’s precedents establish that although that 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” under 101.”
Although Parts II-B-2 and II-C-2 are non-precedential (Justice Scalia did not join these parts), the court therein cites the uncertainty that would be created with a sole machine-or-transformation test with regard to Information Age products such as “software, advanced diagnostic medicine techniques, and inventions based on linear programming, data compression, and the manipulation of digital signals.” Accordingly, a disconnect between a test rooted in the Industrial Age vs. our current Information Age Economy is realized herein: “the machine-or-transformation test may well provide a sufficient basis for evaluating processes similar to those in the Industrial Age-for example, inventions grounded in a physical or other tangible form … there are reasons to doubt whether the test should be the sole criterion for determining the patentability of inventions in the Information Age.” However, the Court is careful in stating that they are not opining on whether the aforementioned list of technologies should or should not receive patent protection. Additionally, it is stated here that “section 101′s terms suggest that new technologies may call for new inquiries.”
- Patentable “Business Method” Process | 1) Definition of “Process” found in 35 USC 100(b); and 2) Guideposts in Benson, Flook, and Diehr
The Court held that because the Bilski patent application can be rejected as an abstract idea, it “need not define further what constitutes a patent ‘process,’ beyond pointing to the statutory definition of that term in 100(b) and looking to the guideposts in Benson, Flook, and Diehr.”
1. Statutory Definition: the Court states that at least some methods of doing business are likely covered by 35 USC 100(b) purely from a textual perspective as the term ”method” is within 35 USC 100(b)’s definition of “process.” Accordingly, the Court requires that the “ordinary, contemporary, common meaning” of 35 USC 100(b) be utilized in determining whether a process satisfies the threshold test of 35 USC 101. The Court rejects a judicially created definition by asserting that:
“this court has ‘more than once cautioned that court’s should not read into the patent laws limitations and conditions which the legislature has not expressed.’ Diamond v. Diehr, 450 U.S. 175, 182 (1981) … in patent law, as in all statutory construction, ‘[u]nless otherwise defined, words will be interpreted as taking their ordinary, contemporary, common meaning.’ Diehr, supra at 182.”
However, the Court states that “nor is it clear how far a prohibition on business method patents would reach, and whether it would exclude technologies for conducting a business more efficiently.”
To provide support for the assertion that business methods are not categorically excluded from 35 USC 101, the Court points to Federal Law (35 USC 273) :
“For purposes of this defense alone, ‘method’ is defined as ‘a method of doing or conducting business.’ 273(a)(3) … by allowing this defense the statute itself acknowledges that there may be business method patents … while 273 appears to leave open the possibility of some business method patents, it does not suggest broad patentability of such claimed inventions.”
2. Trilogy of Prior Supreme Court Cases: The Court states that in addition to reviewing the text of 35 USC 100(b), the trilogy of Supreme Court cases (Benson, Flook, and Diehr) provide a “guidepost” (or guidance) in determining whether a process satisfies the initial threshold of 35 USC 101. Part III of the opinion details each of these cases briefly.
- “Useful, Concrete, and Tangible Result” Test | Other Federal Circuit “Limiting Critera” Possible
It is likely that the “useful, concrete, and tangible result” test of State Street is game over as the Court states that “nothing in today’s opinion should be read as endorsing interpretations of 101 that the Court of Appeals for the Federal Circuit has used in the past. See e.g., State Street, 149 F. 3d at 1373; AT&T Corp., 172 F.3d. at 1357.” Additionally, the aforementioned assertion is furthered by item #4 listed below.
However, the Court does indicate to the Federal Circuit that “we by no means foreclose the Federal Circuit’s development of other limiting criteria that further the purposes of the Patent Act and are not inconsistent with the text.”
- Four Points of “Substantial Agreeement”
Justice Breyer’s concurring opinion with whom Justice Scalia joins provides four items which “highlight the substantial agreement among many Members of the Court on many of the fundamental issues of patent law raised by this case.” The four items are as follows:
1. ”Although the text of 35 USC 101 is broad, it is not without limit.”
2. ”In a series of cases that extend back over a century, the Court has stated that ‘[t]ransformation and reduction of an article to a different state or thing is the clue to to the patentability of a process claim that does not include particular machines.”
3. “While the machine-or-transformation test has always been a ‘useful and important clue,’ it has never been the ‘sole test for determining patentability.’”
4. ”Although the machine-or-transformation test is not the only test for patentability, this by no means indicates that anything which produces a ‘useful, concrete, and tangible result’ … is patentable.”
Conclusion
A possible “take away” from this decision is that a more centrist position for 35 USC 101 is to be developed in line with the statutory definition of “process” and the Supreme Court Trilogy (Benson, Flook, and Diehr). This “centrist position” would fall somewhere in between the two ends of the spectrum, namely the broad “useful, concrete, and tangible result” test of State Street on one end and the more restrictive sole “machine-or-transformation” test on the other end.
Another possible “take away” from the case is that by keeping the door open for “at least some methods of doing business,” some may assert that the Court recognized that the tools and products of our knowledge economy will not always conform to rigid constructs (e.g., sole “machine-or-transformation” test). Such a belief is not surprising as the Supreme Court in J.E.M. Ag Supply, Inc. v. Pioneer Hi-Bred Int’l. stated that that 35 USC 101 is a “dynamic provision designed to encompass new and unforeseen inventions,” while in Chakrabarty it stated that “Congress employed broad general language in drafting 101 precisely because [new types of] inventions are often unforseeable.” Such an assertion may be compatible with the aforementioned “centrist position” as 35 USC 101 (a “threshold test”) could be tempered by 35 USC 102/103/112.
In conclusion, business method patents have not been wiped off the map, and the Federal Circuit (or Congress) is now tasked with providing further guidance regarding 35 USC 101.
Text of Bilski v. Kappos.