July 1, 2010
By Erika Harmon Arner; Charles T. Collins-Chase; Rachel L. Emsley
In its highly anticipated Bilski v. Kappos decision, issued on June 28, 2010, the Supreme Court overturned the Federal Circuit's "machine−or−transformation" test, which required that a patentable process either be tied to a machine or apparatus or involve a transformation of a particular article into a different state or thing. Slip op. at 8. The Court also affirmatively recognized that "business methods" are not categorically excluded from the scope of 35 U.S.C. § 101. Id. at 11. While emphasizing the breadth of § 101, the majority, formed by Justices Kennedy, Roberts, Thomas, Alito, and Scalia, held that Petitioners' claims to "how buyers and sellers of commodities in the energy market can protect, or hedge, against the risk of price changes" are not patent−eligible because the claims represent an "abstract idea." Id. at 2, 13.
Writing for the majority, Justice Kennedy highlighted the Patent Act's four independent categories of patent−eligible subject matter—"processes, machines, manufactures, and compositions of matter"—and recognized the three judicial exceptions for "laws of nature, physical phenomena, and abstract ideas." Id. at 4−5. He also distinguished the "threshold" § 101 analysis from the other "conditions and requirements" for patentability found in § 102 (novelty), § 103 (nonobviousness), and § 112 (particular description). Id. (emphasis added).
Justice Kennedy started his analysis by looking to the "ordinary, contemporary, common meaning" of the term process, and noted that 35 U.S.C. § 100(b) provides an explicit definition of the term. He concluded that neither the text of the Patent Act nor Supreme Court precedent supported the "machine−or−transformation" test as the sole test for deciding which processes are patent−eligible. Id. at 6−7. He noted, however, that the "machine−or−transformation" test remains "a useful and important clue . . . for determining whether some claimed inventions are processes under § 101." Id. at 8.
Justice Kennedy next explained that there is no "ordinary, contemporary, [or] common meaning" of the term "method" that excludes business methods as patent−eligible processes. Id. at 10. In reaching this conclusion, he analyzed 35 U.S.C. § 273, which provides a prior user defense to infringement of patent claims for "method[s] of doing or conducting business," and reasoned that "federal law explicitly contemplates the existence of at least some business method patents." Id. As such, Justice Kennedy reasoned that the Court should not interpret the Patent Act so as to "render another provision superfluous," and concluded that business methods cannot be categorically excluded from patent eligibility. Id. at 11.
Despite upholding the patentability of business methods, the majority nonetheless rejected Petitioners' application for "fall[ing] outside of § 101 because it claims an abstract idea." Id. at 13. Beyond pointing to § 100(b) and the "guideposts" of Benson, Flook, and Diehr, the majority did not further define a patentable "process." Id. at 16. Notably, the majority did not endorse any past Federal Circuit interpretation of § 101, though the Court "by no means foreclose[d] the Federal Circuit's development of other limiting criteria" consistent with the Patent Act and Supreme Court precedent. Id. at 16.
Justice Scalia did not join two additional sections of Justice Kennedy's opinion, thus not part of the holding. In the first, Justice Kennedy compared the "Information Age" to the "Industrial Age" and recognized that the "machine−or−transformation" test as a "sole criterion" could imperil emerging technologies. Id. at 9. In the second, he cautioned against looking to historically granted patents for guidance on patent eligibility, but also warned that a low bar for patentability of business methods would "put a chill on creative endeavor and dynamic change." Id. at 11-12. He also recognized the "critical" role of §§ 102, 103, and 112 in "adjusting the tension . . . between stimulating innovation . . . and impeding progress." Id. at 12−13.
Justice Stevens authored a lengthy concurring opinion joined by Justices Breyer, Ginsburg, and Sotomayor. While Justice Stevens agreed with the majority that the "machine−or−transformation" test is helpful, though not exclusive, and agreed that Petitioners' claims were unpatentable, from there he departed significantly from the majority's analysis, ultimately concluding that business methods should not be patentable processes under § 101. Justice Stevens disagreed with distinguishing between "Information Age" and "Industrial Age" claims, and argued that the majority has not clearly shown why the Petitioners' invention is an abstract idea, and "never provides a satisfying account of what constitutes an unpatentable abstract idea." Slip. op. at 9 (Stevens, J., concurring).
Justice Stevens conducted his own statutory analysis of § 101, disagreeing with the majority and stating that "process" has not previously and cannot now be given its ordinary meaning. Id. at 11. He argued that § 100(b) does not provide a useful definition of "process", and that the other § 101 terms "machine, manufacture, or composition of matter" indicate that "process" is not entirely open−ended. Id. at 10−14. Justice Stevens also argued that history is relevant to interpretation, and felt the historical practice, language, and conventions of the old English patent system, the framers, and patent practitioners from the 18th through the 20th century all "converge on one conclusion: A business method is not a ‘process'." Id. at 33. Justice Stevens also rejected the argument that the prior user defense of § 273 codified the existence of business method patents, stating that "[i]t is apparent, both from the content and history of the Act, that Congress did not in any way ratify State Street." Id. at 34.
Finally, Justice Stevens argued that courts must strike a balance between innovation and patent monopolies when interpreting ambiguous sections of the patent statute. He argued that business method patents would "press the limits" of this balance, "more likely stifling progress than promoting it," citing numerous academic articles and his own conclusions about the costs and benefits of business method patents. Id. at 40. From these "textual, historical, and functional clues," Stevens concluded that "petitioners' claim is not a ‘process'" because "methods of doing business are not, in themselves, covered by the statute." Id. at 47.
Justice Breyer also filed a concurrence, joined in part by Justice Scalia, outlining what he felt were four points of agreement between the opinions of the majority and Justice Stevens. First, he stated that "although the text of § 101 is broad, it is not without limit." Slip op. at 2 (Breyer, J., concurring). Second, Breyer stated that Supreme Court precedent has long viewed the presence of a machine or a transformation as a helpful clue to determining patentable subject matter. Third, Justice Breyer noted that nonetheless the "machine−or−transformation" test is not and has never been an exclusive test. Finally, he stated that while the Court overturned the "machine-or-transformation" test as the exclusive test of patent eligibility, it in no way was endorsing the "useful, concrete, and tangible result" test set out in State Street, which governed patentability under § 101 prior to the Federal Circuit's en banc opinion in Bilski.
Following Bilski, the Supreme Court denied certiorari in Ferguson v. USPTO where the Federal Circuit rejected claims for a "marketing paradigm," and granted certiorari and then vacated and remanded Classen Immunotherapies, Inc. v. Biogen IDEC and Mayo Collaborative Svcs. v. Prometheus Labs. The Federal Circuit will now reevaluate the diagnostic and treatment method claims in Classen and Prometheus in light of the Supreme Court's decision in Bilski.
In response to the decision, the USPTO has instructed Examiners first to apply the "machine−or−transformation" test, but also to make a separate assessment of whether claims embody an abstract idea. If an applicant's claims are rejected as embodying an abstract idea, the applicant would have the opportunity to rebut this conclusion.
Copyright © Finnegan, Henderson, Farabow, Garrett & Dunner, LLP. This article is for informational purposes, is not intended to constitute legal advice, and may be considered advertising under applicable state laws. This article is only the opinion of the authors and is not attributable to Finnegan, Henderson, Farabow, Garrett & Dunner, LLP, or the firm's clients.
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