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Supreme Court on Business Method Patents - The Bilski Decision, June 2010

 

Today, June 26, 2010, the Supreme Court has finally rendered it's decision in the Bilski case.  The full text of the Bilski case can be found here.

 

Summary

In short, the Supreme Court has stated that the business method patents are PATENTABLE, and while the current test of "Specific Machine or Transformation of Matter" is an accurate test for patentability, there are OTHER tests available as well.  Similar to the KSR case concerning obviousness, the Supreme Court has stated that there is no "bright line" test for whether a new invention is patentable.  Such tests only offer "clues."

 

Chastising the Lower Court / Reaffirming Broad Scope of Patentability

More specifically, the Supreme Court, while affirming tha Bilski patent application is not patentable subject matter because it is abstract (see below, "Why did Bilski not get a patent?"), chastises the Federal Circuit:


Under the Court of Appeals’ formulation, an invention isa “process” only if: “(1) it is tied to a particular machine or apparatus, or (2) it transforms a particular article into a different state or thing.” 545 F. 3d, at 954. This Court has “more than once cautioned that courts ‘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) (quoting Chakrabarty, supra, at 308; some internal quotation marks omitted).


The chastising goes on for some time:


Any suggestion in this Court’s case law that the Patent Act’s terms deviate from their ordinary meaning has only been an explanation for the exceptions for laws of nature,physical phenomena, and abstract ideas. See Parker v. Flook, 437 U. S. 584, 588–589 (1978). This Court has not indicated that the existence of these well-established exceptions gives the Judiciary carte blanche to imposeother limitations that are inconsistent with the text and the statute’s purpose and design.


That is, The Supreme Court has reaffirmed - unless your concept is a law of nature (e.g. trying to patent gravity), physical phenomena (e.g. trying to patent ball lightning), or abstract idea (e.g. trying to patent hedging a bet, as in Bilski) it's patentable subject matter.

 

What of the Current Machine or Transformation Test?

The machine or transformation test, that is, the test which says that the claims of your patent application have to be tied to a specific machine (not just a general purpose computer) or transform matter into another form, is a valid test for patentability.  Other things are also patentable . . .

This Court’s precedents establish that the machine-or-transformation test is a useful and important clue, an investigative tool, for determining whether some claimed inventions are processes under §101. The machine-or-transformation test is not the sole test for decidingwhether an invention is a patent-eligible “process.”


. . . but it gets better.  Justice Kennedy, writing for a plurality of four justices, has explicitly stated that SOFTWARE IS PATENTABLE!  The machine/transformation of matter test is simply too narrow to be the sole test of patentability.


It is true that patents for inventions that did not satisfy the machine-or-transformation test were rarely granted in earlier eras, especially in the Industrial Age, as explained by Judge Dyk’s thoughtful historical review. See 545

F. 3d, at 966–976 (concurring opinion). But times change.  Technology and other innovations progress in unexpected ways. For example, it was once forcefully argued that until recent times, “well-established principles of patentlaw probably would have prevented the issuance of a valid patent on almost any conceivable computer program.” Diehr, 450 U. S., at 195 (STEVENS, J., dissenting). But this fact does not mean that unforeseen innovations such as computer programs are always unpatentable. See id., at 192–193 (majority opinion) (holding a procedure for molding rubber that included a computer program iswithin patentable subject matter). Section 101 is a “dy-namic provision designed to encompass new and unfore-seen inventions.” J. E. M. Ag Supply, Inc. v. Pioneer Hi-Bred Int’l, Inc., 534 U. S. 124, 135 (2001). A categoricalrule denying patent protection for “inventions in areas not contemplated by Congress . . . would frustrate the pur-poses of the patent law.” Chakrabarty, 447 U. S., at 315.

Unfortunately, with regards to the above, Scalia did not join so we have four opinions stating the above, and four stating that they would apply a less broad test (see below).

 


So Why Did Bilski Not Get a Patent? It's abstract!

The Supreme Court, in a 9-0 ruling, agrees that Bilski is not patentable because he tried to claim an abstract idea:

Indeed, all members of the Court agree that the patent application at issue here falls out-side of §101 because it claims an abstract idea.

Quoting Benson, 409 U.S. 64-67, the Supreme Court reaffirms what an "abstract" idea is:

“‘[a] principle, in the abstract, is a fundamental truth; anoriginal cause; a motive; these cannot be patented, as noone can claim in either of them an exclusive right.’”

The Law Firm of Michael Feigin, Esq. would argue that this definition is imprecise, precisely because one cannot define what is abstract for that is precisely the definition of abstract - something which we cannot define.  Hence, we are really back where we have always been - we cannot define the difference between abstract and tangible and we still are left with no rule which can be applied systematically.

The Patent Office and it's Examiners like systematic rules to apply so that a patent application can be given a "yay" or "neigh" for being patentable subject matter, but as the Supreme Court keeps saying, there simply aren't any hard and fast rules to determine what is abstract.  This decision reaffirms our faith in the Supreme Court.

Justice Kennedy upholds previous case law and simply refuses to define a new test for patentability:

Today, the Court once again declines to impose limita-tions on the Patent Act that are inconsistent with the Act’s text.

The result - we are left with a broad scope of what is considered patentable subject matter.


Justice Steven's Dissent Written as a Concurrence

Justice Stevens, with three others joining, agrees that Bilski isn't patentable because it's abstract, but wants to limit the definition of "process" to include far less business method patents.

Justice Stevens writes in a concurrence:

. . .as the entire Court agrees, that although the machine-or-transformation test is reliable in most cases, it is not the exclusive test.  I agree with the Court that, in light of the uncertainty that currently pervades this field, it is prudent to provide further guidance.

However, Justice Stevens provides little more guidance.  He would define the word "process" (e.g. a business method) as being more narrow than the word itself would suggest.  Harping on the majority's use of the word "process" in the first patent statute (35 U.S.C. § 101), he states:

Although this is a fine approach to statutory interpretation in general, it is adeeply flawed approach to a statute that relies on complex terms of art developed against a particular historical background.  Indeed, the approach would render §101 almost comical. A process for training a dog, a series of dance steps, a method of shooting a basketball, may be even words, stories, or songs if framed as the steps oftyping letters or uttering sounds—all would be patent-eligible. I am confident that the term “process” in §101 is not nearly so capacious.

In the opinion of this firm, Stevens is making a fundamental mistake.  A process of training a dog and the other examples he gives is not patentable, in most cases, because of section 103 - obviousness.  However, such concepts are tangible methods of carrying out an act.  Section 101 should not be used to call such items abstract.

Justice Stevens then spends pages and pages on the history of patent law and what was patented in the 1700s, in the English system prior to the United States, and so forth.  He concludes, without citing legal precedent:

By the early 20th century, it was widely understood that a series of steps for conducting business could not be patented.

 

So What Test Can We Rely on?

Well, no opinion of the Supreme Court really gives us a bright line rule for patentability.  We know that if your product is tied to a specific machine (not a general purpose computer - e.g. we tend to use "bidirectional transceivers") or it transforms matter (e.g. your method includes graphite being smooshed onto paper?), then it is patentable.

Beyond the above, we have two opinions.  Stevens, after spending a few dozen more pages on the history of patents, states:

Those clues all point toward the same conclusion:that petitioners’ claim is not a “process” within the mean-ing of §101 because methods of doing business are not, inthemselves, covered by the statute.


Justice Breyer, in his concurrence, notes that the opinions of all nine justices have much agreement and concludes:

In sum, it is my view that, in reemphasizing that the“machine-or-transformation” test is not necessarily the sole test of patentability, the Court intends neither to de-emphasize the test’s usefulness nor to suggest that many patentable processes lie beyond its reach.


Conclusion

The takeaway message is that we cannot define what is abstract and what is not.  While some justices would do away with "business methods" which are not "processes", even finding definitions of these words is difficult.  The exact contour of what is patentable will remain an enigma and this must be so.  If knew such definitions, this would preclude innovation in regards to things we do not know.  This is precisely the realm and purpose of patents.

The machine or transformation of matter test will remain with us, and judging by past history, the U.S. Patent Office will develop a formulaic method of determining whether your patent application meets this test.  However, the court has created, in our opinion, a "Machine or Transformation of Matter Plus" test.  There is wiggle room to argue that greater things are patentable, including especially, in our opinion, with regards to software.

Under the Court of Appeals’ formulation, an invention isa “process” only if: “(1) it is tied to a particular machine or apparatus, or (2) it transforms a particular article into a different state or thing.” 545 F. 3d, at 954. This Court has “more than once cautioned that courts ‘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) (quoting Chakrabarty, supra, at 308; some internal quotation marks omitted).