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U.S. Supreme Court Renders Decision in Bilski v. Kappos

6/28/2010

Monday, June 28, 2010

On Monday, June 28, 2010, the U.S. Supreme Court rendered its decision in the case of Bilski v. Kappos, No. 08-964 (U.S. June 28, 2010).  The majority, penned by Justice Kennedy, affirmed the ruling of the Federal Circuit that Bilski’s claims were unpatentable,[1] while holding that the Federal Circuit was incorrect in setting out the “machine-or-transformation” test as the sole test for whether a process claim encompasses patentable subject matter. [2]  The majority further explained that while business method patents are not categorically outside the realm of patentable subject matter, the specific claims in the Bilski application were not patentable subject matter. [3]  The claims, which were directed to a method of hedging risk in commodities trading in general, and energy markets in particular, were unpatentable because they encompassed an abstract idea.[4]

Why Not the Machine-Or-Transformation Test?

The majority in Bilski views the “machine-or-transformation” test as “a useful and important clue, an investigative tool, for determining whether some claimed inventions are processes under § 101,” but not the sole test in making the determination.[5] 

Under the “machine-or-transformation” test a process is patentable if: “(1) it is tied to a particular machine or apparatus, or (2) it transforms a particular article into a different state or thing.”[6]  The majority concluded that the test is improper as the sole test for whether process claims are patentable subject matter because doing so would “impose limitations on the Patent Act that are inconsistent with the Act’s text.”[7]  The Court was unaware of any “ordinary, contemporary, common meaning” of a process as defined in the Patent Act that requires a process to be tied to a machine, or to transform an article.  Accordingly, the Court declined to impose these added limitations on process claims. 

The majority also makes clear that while they disagreed with the Federal Circuit’s decision with regard to sole use of the “machine-or-transformation” test, it was not the majority’s intent to “foreclose the Federal Circuit’s development of other limiting criteria that further the purposes of the Patent Act and are not inconsistent with its text.”[8] 

In discussing the usefulness of the “machine-or-transformation” test, Justices Kennedy, Alito, Thomas and the Chief Justice take care to note that the opinion should not be read as commenting on the patentability of technologies other than those represented in the Bilski claims, particularly emerging technologies.[9]  The four Justices suggest that new inquiries may be required to evaluate the patentability of “Information Age” technologies, such as software, advanced diagnostic medicine techniques, and inventions based on linear programming, data compression, and the manipulation of digital signals.[10]

Business Methods Can be Patentable

The majority further concluded that business methods are within the realm of patentable subject matter.  Similar to the reasoning used to evaluate the “machine-or-transformation” test, the majority found that the “ordinary, contemporary, common meaning” of “process” does not exclude business methods.[11] 

The majority further reasoned that categorically denying the patentability of business methods would render meaningless 35 U.S.C. § 273 which explicitly refers to “methods of doing or conducting business.”[12]  Even so, the majority does show a certain level of skepticism towards business patents, stating, “Finally, while § 273 appears to leave open the possibility of some business method patents, it does not suggest broad patentability of such claimed inventions.”[13]

Why Not Bilski’s Claims?

Even though the “machine-or-transformation” test is not the sole test for whether a process is patentable subject matter, and business methods may at times be patentable, the majority still found the Bilski claims unpatentable as falling into one of the judicially created exceptions to the patentable subject matter.  Specifically, the Court found the Bilski claims as encompassing an abstract idea.  The majority felt that the claims simply “explain the concept of hedging or protecting against risk,” and this is nothing more than an abstract idea.[14]  While agreeing with the final conclusion, the concurrence of Justices Stevens, Ginsburg, Breyer, and Sotomayor found the majority’s analysis of what constitutes an abstract idea unsatisfying, and noted the lack of any test or direction for lower courts to follow.[15]

Conclusion

While the Bilski opinion clearly states that the “machine-or-transformation” test is not the sole test for whether a process claim encompasses patentable subject matter, the decision has seemingly done little in the way of giving lower courts further guidance in making this determination.  Additionally, the decision leaves the question of the extent to which business methods claims are patentable up to later decisions. 



[1] See In re Bilski, 545 F.3d 943, 88 U.S.P.Q.2d 1385 (Fed. Cir. 2008).  Justices Alito, Scalia, Thomas and the Chief Justice joined Justice Kennedy in the opinion.  Justice Scalia did not join Parts II-B-2 and II-C-s of the opinion, rendering these sections not part of the opinion of the Court.

[2] Bilski v. Kappos, No. 08-964, slip op. at 8 (U.S. June 28, 2010).  

[3] Id. at 15.

[4] Id. at 15.

[5] Id. at 8.

[6] Id. at 6.

[7] Id. at 16.

[8] Id.

[9] Id. at 9.  This discussion is from a portion of the opinion not joined by Justice Scalia. 

[10] Id.

[11] Id. at 10.

[12] Id. at 11.

[13] Id.

[14] Id. at 15.

[15] Bilski, slip op. at 9 (Stevens J., concurring in the judgement).