Monday, June 28, 2010

Bilski

Supreme Court Rules Bilski Can’t Patent An Abstract Idea
The long-awaited Supreme Court decision on “business method” patents in the case of Bilski v. Kappos was handed down today (June 28, 2010) and, in a rare instance of unanimity, the Court concluded that Bilski’s method of hedging risks in commodity trading was not eligible for patent protection because the patent applicant was seeking to patent an abstract idea.  The unanimity, however, was only skin-deep.  Although Justice Kennedy wrote the opinion for the Court, Justice Stevens wrote a concurring opinion that was joined by Justices Ginsberg, Breyer and Sotomayor expressing different reasons why Bilski’s method was not patentable subject matter. Justice Breyer also wrote a concurring opinion, joined by Justice Scalia.  Interestingly, it was the four more liberal members of the Court who took a strict constructionist approach and would have struck down all business method patents as not within the historic meaning of “process.”
Ironically, Justice Kennedy’s opinion for the Court vindicates the position taken by the humble patent examiner who first rejected Bilski’s patent application and started this case on its path of appellate decisions by the Patent Office Board of Appeals, a three-judge panel of the Court of Appeals for the Federal Circuit (CAFC), and finally, an en banc decision by the entire 11-judge bench of the CAFC before reaching the Supreme Court.
The Supreme Court rejected the en banc decision by the CAFC that all method claims were govern by a single test: a method is eligible for patenting only if it is tied to a specific machine implementation or it transforms an article from one state to another.  Justice Kennedy wrote that “[a]dopting the machine-or-transformation test as the sole test for what constitutes a “process” (as opposed to just an important and useful clue) violates [statutory] interpretation principles.”  The opinion goes on to state that the CAFC “incorrectly concluded that this Court has endorsed the machine-or-transformation test as the exclusive test.”
Justice Kennedy’s opinion refrained from any far-reaching pronouncements on what test should be applied to business methods, generally.  In finding that Bilski’s patent was drawn to non-eliglible subject matter, he chose the simplest approach and relied upon long standing precedent that one cannot patent an abstract idea and, in this instance, Bilski’s method of hedging commodity trades was just that: an abstract idea.  (Five years earlier, the patent office examiner handling Bilski’s original patent application had reached the same conclusion and had rejected the claims as “merely manipulating an abstract idea.”
Justice Stevens’ concurring opinion traced the history of patent law from early English common law and American jurisprudence to the last comprehensive revision of the U.S. Patent laws in 1952 and concluded that Congress never intended to make any methods of doing business patentable.  According to Justice Stevens, “[t]he breadth of business methods, their omnipresence in our society, and their potential vagueness also invite a particularly pernicious use of patents that we have long criticized.” Another concurring opinion by Justice Breyer, joined by Justice Scalia, specifically took aim at an earlier CAFC test for patent eligibility: the “useful, concrete and tangible result” test set forth in the State Street Bank case.  Justices Breyer and Scalia noted that this test had never been adopted by the Supreme Court and, in their minds, has led to granting of patents that ranged from the “somewhat ridiculous to the truly absurd.”
Oral arguments in the Bilski case were heard very early in the Court’s current term on November 9, 2009 but the decision was deferred until almost the end of the term.  When the Bilski case was heard, not a single justice expressed support for Bilski’s argument that the U.S. Patent Laws only required that a business method be “new and useful” in order for it to be patentable.  The Justices pounced on Bilski’s attorney immediately.  Justice Scalia asked if Dale Carnegie’s book “How to Win Friends and Influence People” could be patented. Chief Justice Roberts wondered about patenting the business model “buy low and sell high.”  Justice Sotomayor asked about “a method of speed-dating,” Justice Ginsburg asked about a method for picking a jury.  The rest of the Court raised similar skeptical questions.
Although the outcome seemed predictable by the tough questioning, the patent bar and industry took more than a passing interest in this case. Interested parties had filed 68 amicus or “friend of the court” briefs.  At issue was whether the Supreme Court would affirm the stringent test set forth by the Court of Appeals for the Federal Circuit – the federal court of appeals responsible for patent matters.  The Federal Circuit court had ruled that Bilski’s business method claims were not patentable subject matter because the claims failed the so-called “machine-or-transformation” test.  According to this test, a method is eligible for patenting only if it is tied to a specific machine implementation or it transforms an article from one state to another.
Although the Bilski test was set forth by the Federal Circuit in the context of a method for hedging risk in commodity trading, the opinion also stated the “machine-or-transformation test was henceforth the sole test for determining whether method and process claims were directed to patentable subject matter.  It was soon recognized that applying this test to all method and process patents could perhaps have unintended consequences in a number of industries.  The software industry worried that data processing would not be deemed sufficiently transformative.  Likewise, the biotechnology industry worried that medical diagnostic inventions, e.g., discoveries of correlations between DNA or protein markers and certain illnesses, would not be sufficient for patent eligibility.  Nearly half of the 68 amicus briefs filed with the Supreme Court took no position on Bilski’s particular circumstances but instead urged the Court to relax the “machine-or-transformation” test in one way or another.
The Court’s opinion did indeed relax the “machine-or-transformation” test.  Justice Kennedy notes that “the Patent Act leaves open the possibility that there are at least some processes that can be fairly described as business methods that are within patentable subject matter under §101.”  However, the opinion offers little advice for distinguishing between “abstract” and non-abstract business methods.  Instead it encourages the CAFC to search for new “less extreme” means for restricting business methods.
Justice Stevens’ concurring opinion was particularly critical in noting the lack of guidance from the Court on how business methods claims should be judged going forward:  "The Court, in sum, never provides a satisfying account of what constitutes an unpatentable abstract idea. Indeed, the Court does not even explain if it is using the machine-or-transformation criteria. The Court essentially asserts its conclusion that petitioners’ application claims an abstract idea. This mode of analysis (or lack thereof) may have led to the correct outcome in this case, but it also means that the Court’s musings on this issue stand for very little."
Today’s Supreme Court decision was narrowly drawn to the facts of Bilski’s case and leaves most of the issues raised by the amicus briefs unanswered.  Following its time-honored traditions, the Court chose to avoid far-reaching pronouncements and let the law of patent-eligible subject matter evolve in due course.  Those who seek business method patents in the future, however, will need to be wary since Justice Stevens and the other three Justices who joined in his concurring opinion are clearly of the opinion that business method patents are not authorized by U.S. Patent laws, no way, no how, nowhere.

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