On June 28, 2010, the United States Supreme Court handed down
its much-anticipated decision in Bilski v. Kappos (No.
08-964), in which it ruled on the patent-eligibility of business
methods and processes under 35 U.S.C. § 101. While rejecting
both the exclusivity of the "machine-or-transformation"
test and a categorical exclusion of business methods from
patent-eligibility, the Supreme Court nonetheless found the claims
of Bilski's application unpatentable as "attempts to
patent abstract ideas."
In October 2008, the U.S. Court of Appeals for the Federal Circuit,
in an en banc decision, renounced the "useful, concrete and
tangible result" test and other alternative tests of
patentability in favor of the "machine-or-transformation"
test. Under the machine-or-transformation test, a patentable
"process" under Section 101 must: (1) be "tied to a
particular machine or apparatus" or (2) transform "a
particular article or substance into a different state or
thing." Applying that test, the Federal Circuit ruled that
Bilski's "method for managing the consumption risk costs
of a commodity" did not represent patentable subject matter
under Section 101.
The Supreme Court's majority opinion began by finding that the
Federal Circuit's distilled "machine-or-transformation
test is not the sole test for deciding whether an invention is a
patent-eligible 'process.'" Instead, the
machine-or-transformation test is properly considered "a
useful and important clue, an investigative tool, for determining
whether some claimed inventions are processes under §
101." The Court reasoned that treating the
machine-or-transformation analysis as the "sole test" was
contrary to the plain language of Section 101 and misread the
Court's precedents. The Court also pointed out that it was not
"endorsing interpretations of §101 that the Court of
Appeals for the Federal Circuit has used in the past" (i.e.,
the useful, concrete, and tangible result test of State Street
Bank) and that its decision did not "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." Notably, all nine Justices agreed that the
machine-or-transformation test was not a proper exclusive test
under 35 U.S.C. § 101.
The majority opinion also stated that "Section 101 similarly
precludes the broad contention that the term 'process'
categorically excludes business methods." While acknowledging
that prior opinions had recognized several categorical exceptions
to the general rule of patent-eligibility, including
"exceptions for laws of nature, physical phenomena, and
abstract ideas," the majority determined that a categorical
exception from patent-eligibility for business methods could not be
reconciled with the plain language of either Section 101 or Section
273 (the prior user defense for business methods). A minority of
four Justices, voiced by Justice Stevens' Concurrence in the
Judgment, disagreed on this point and would have found a
categorical exception from patent-eligibility for business
methods.
The Court ultimately determined that prior
precedent—particularly the prohibition on patenting
"abstract ideas" addressed in Benson, Flook, and
Diehr—was adequate to address the claims of Bilski's
application. As explained by the Court: "Rather than adopting
categorical rules that might have wide-ranging and unforeseen
impacts, the Court resolves this case narrowly on the basis of this
Court's decisions in Benson, Flook, and Diehr, which show that
petitioners' claims are not patentable processes because they
are attempts to patent abstract ideas." The Court concluded
that claims 1 and 4 were directed to the "basic concept of
hedging," which is "an unpatentable abstract idea, just
like the algorithms at issue in Benson and Flook." The Court
then addressed Bilski's remaining claims regarding the use of
hedging in commodities and energy markets.
"Flook established that limiting an abstract idea to one field
of use or adding token postsolution components did not make the
concept patentable. That is exactly what the remaining claims in
petitioners' application do. These claims attempt to patent the
use of the abstract idea of hedging risk in the energy market and
then instruct the use of well-known random analysis techniques to
help establish some of the inputs into the equation."
Ultimately, all nine Justices agreed that Bilski's claims were
directed to an "abstract idea" and, thus,
unpatentable.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
