Federal Circuit Affirms USPTO in In re Bilski

Today a divided Court of Appeals for the Federal Circuit, sitting en banc, ruled that to be patentable under 35 U.S.C. § 101 a process must (1) be tied to a particular machine or apparatus; or (2) transform a particular article into a different state or thing. Ex parte Bilski, Appeal No. 2007-1130 (Fed. Cir. October 30, 2008). In doing so, the Court affirmed the USPTO’s rejection of Bilski’s claims for managing consumption risk costs of a commodity that, by the applicant’s admission, required no computer apparatus.

The Court interpreted Supreme Court precedent as teaching that the “machine-or-transformation” test is the sole test for patentable processes, while recognizing that the Supreme Court may ultimately decide to alter or set aside this test in view of emerging technologies. Therefore, the Court proclaimed the inadequacy of previous articulations of section 101 tests, such as the Freeman-Walter-Abele test, the State Street Bank “useful, concrete, and tangible result” test, and the “technological arts” test.

The majority opinion of the Court was written by Chief Judge Michel and joined by eight of the eleven other judges, specifically Judges Lourie, Schall, Bryson, Gajarsa, Linn, Dyk, Prost, and Moore. The majority opinion drew heavily from the Supreme Court cases of Parker v. Flook and Gottschalk v. Benson to explain the machine-or-transformation test. For a process to be patentable under the machine-or-transformation test, “the use of a specific machine or transformation of an article must impose meaningful limits on the claim’s scope….” Slip op. at 24. Furthermore, “the involvement of the machine or transformation in the claimed process must not merely be insignificant extra-solution activity.” Id.

To satisfy the “transformation” prong, according to the Court, a process must transform a physical object or substance. The Court explained that this would not include processes that transform signals, data, or “abstract constructs such as legal obligations, organizational relationships, and business risks.” Slip op. at 25. Regarding the “machine implementation” prong, the Court left for another day whether and when the recitation of a computer alone would suffice to tie a process to a particular machine.

Judge Dyk, joined by Judge Linn, filed a concurring opinion to document statutory support for the majority’s opinion, analyzing the history of the patent statute beginning with the Patent Act of 1793 and its English underpinnings. Judge Dyk concluded that the uniform assumption has always been that the processes eligible for patenting are those that produce or use manufactures, machines, and compositions of matter.

Judge Newman filed a vigorous dissent lengthier than the majority opinion. Her Honor argued that the exclusion of process inventions is contrary to the statute and precedent, and ignores the constitutional mandate to promote useful arts and science.

Judge Rader also dissented. He argued that the majority opinion “links patent eligibility to the age of iron and steel at a time of subatomic particles and terabytes” and will have a chilling effect on innovation.

Judge Mayer dissented, arguing that the majority did not go far enough. His Honor would have overruled State Street Bank and AT&T v. Excel. According to Judge Mayer, affording patent protection to business methods lacks statutory support and retards innovation.