Bilski v. Kappos

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Bilski v. Kappos
Seal of the United States Supreme Court.svg
Supreme Court of the United States
Argued November 9, 2009
Decided June 28, 2010
Full case nameBernard L. Bilski and Rand A. Warsaw v. David J. Kappos, Under Secretary of Commerce for Intellectual Property and Director, Patent and Trademark Office
Docket no. 08-964
Citations561 U.S. 593 ( more )
130 S. Ct. 3218; 177 L. Ed. 2d 792; 2010 U.S. LEXIS 5521; 78 USLW 4802; 2010-1 USTC P 50,481; 95 U.S.P.Q. (BNA) 1001; 10 Cal. Daily Op. Serv. 7966; 2010 Daily Journal D.A.R. 9848; 22 Fla. L. Weekly Fed. S 703
Case history
Prior In re Bilski , 545 F.3d 943, (Fed. Cir. 2008) (judgment affirmed)
Holding
The machine-or-transformation test is not the sole test for determining the patent eligibility of a process, but rather a useful tool. Bilski's application, seeking a patent on a method for hedging risk in the commodities market, did not draw to patent eligible subject matter. Affirmed.
Court membership
Chief Justice
John Roberts
Associate Justices
John P. Stevens  · Antonin Scalia
Anthony Kennedy  · Clarence Thomas
Ruth Bader Ginsburg  · Stephen Breyer
Samuel Alito  · Sonia Sotomayor
Case opinions
MajorityKennedy, joined by Roberts, Thomas, Alito; Scalia (except Parts II–B–2 and II–C–2)
ConcurrenceStevens (in judgment), joined by Ginsburg, Breyer, Sotomayor
ConcurrenceBreyer (in judgment), joined by Scalia (Part II)
Laws applied
35 U.S.C.   § 101

Bilski v. Kappos, 561 U.S. 593 (2010), was a case decided by the Supreme Court of the United States holding that the machine-or-transformation test is not the sole test for determining the patent eligibility of a process, but rather "a useful and important clue, an investigative tool, for determining whether some claimed inventions are processes under § 101." [1] In so doing, the Supreme Court affirmed the rejection of an application for a patent on a method of hedging losses in one segment of the energy industry by making investments in other segments of that industry, on the basis that the abstract investment strategy set forth in the application was not patentable subject matter.

Contents

Majority opinion

The Court affirmed the judgment of the Federal Circuit in In re Bilski , the case below. [2] However, it rejected the machine-or-transformation test as a sole test of patentability based on an interpretation of the language of § 101. [3] The Court rejected the Federal Circuit's statutory interpretation regarding the word "process", finding the definition in § 100(b) to be sufficient without turning to the canon of noscitur a sociis. [4] Section 100(b) defines process as a "process, art or method, and includes a new use of a known process, machine, manufacture, composition of matter, or material".

The Court looked to Gottschalk v. Benson and Parker v. Flook , and noted that both had explicitly refused to rely on the machine-or-transformation test as the sole test for patent eligibility. [5] [6]

The Court also rejected a categorical exclusion of business method patents from eligibility, reasoning that the definition of "process" in § 100(b) includes the word "method", which appears to comprehend some forms of business method patents. [7] 35 U.S.C. § 273(b)(1) also provides as a defense to patent infringement prior use of a "method of conducting or doing business". By acknowledging the defense, the statute also acknowledged the possibility of business method patents. [8]

Regarding Bilski's claimed subject matter, the Court found that his method of optimizing a fixed bill system for energy markets was an unpatentable abstract idea. [9] Despite taking a broader reading of patent eligibility for processes, according to the majority opinion "this Court by no means desires to preclude the Federal Circuit’s development of other limiting criteria that further the Patent Act’s purposes and are not inconsistent with its text." [10]

In the plurality sections of Kennedy's opinion, an overall Court minority opinion as not joined by Scalia, he notes that strict adherence to only "the machine-or-transformation test would create uncertainty as to the patentability of software, advanced diagnostic medicine techniques, and inventions based on linear programming, data compression, and the manipulation of digital signals" but "the Court today is not commenting on the patentability of any particular invention, let alone holding that any of the above-mentioned technologies from the Information Age should or should not receive patent protection." [11] Kennedy also suggests that a categorical exclusion of some types of business methods from patent eligibility might be legitimate if that rule was based on the idea that purely abstract ideas are not patentable. [12]

Concurrences

The holding of the Court was unanimous, but there were two concurring opinions, and no single opinion commanded a majority of the Court as to all parts.

Stevens' concurrence

Justice Stevens' concurrence, joined by Justices Ginsburg, Breyer, and Sotomayor, argues that the majority interpret the term "process" too broadly. [13] Stevens rejected the majority's reliance on the mention of the word "method" in 35 U.S.C. § 273(b), saying that the statute, originally known as the First Inventors Defense Act of 1999, was only passed by Congress in response to the confusion created by State Street Bank v. Signature Financial Group . [14] 149 F.3d 1368 (Fed. Cir. 1998). [13] He would categorically exclude business methods from patentability, as they have not traditionally been patentable in the U.S., despite significant innovations in business methods. [15]

It was the final opinion in Stevens' 35-year career on the Supreme Court. His retirement became effective the next day.

Breyer's concurrence

Justice Breyer's concurrence began by agreeing with Justice Stevens "that a 'general method of engaging in business transactions' is not a patentable 'process'". In a second part, joined by Justice Scalia, Breyer highlighted four points which he felt were consistent with both the opinion of the Court and Justice Stevens' concurring opinion: [16]

  1. that although the law's description of what is patentable in §101 "is broad, it is not without limit";
  2. the Court has repeatedly stated that "transformation and reduction of an article to a different state or thing is the clue to the patentability of a process claim that does not include particular machines";
  3. "while the machine-or-transformation test has always been a 'useful and important clue', it has never been the 'sole test' for determining patentability";
  4. "although the machine-or-transformation test is not the only test for patentability, this by no means indicates that anything which produces a 'useful, concrete, and tangible result' [as held in State Street Bank v. Signature Financial Group ] is patentable."

Part II sums up by stating "it is my view that, in reemphasizing that the 'machine-or-transformation' test is not necessarily the sole test of patentability, the Court intends neither to de-emphasize the test's usefulness nor to suggest that many patentable processes lie beyond its reach."

Impact

The Court's opinion in this case is seen as moderating the machine-or-transformation test requirement instated by the Federal Circuit in In re Bilski , while also leaving little guidance as to what should be considered patentable under § 101. [17] "[T]he outcome from the decision might be best stated as 'business as usual'." [18]

In light of the decision in Bilski v. Kappos, the Supreme Court granted judicial review, vacated the decisions of the Federal Circuit, and remanded to the Federal Circuit for reconsideration the cases of Mayo Collaborative Services v. Prometheus Laboratories, Inc. [19] and Classen Immunotherapies, Inc. v. Biogen Idec. [20] The two claims related to medical diagnostics, and the claims in Prometheus were found patentable under the machine-or-transformation test while the claims in Classen were not. [21] In December 2010, the Federal Circuit applied the broad eligibility of Bilski in Research Corp. Technologies v. Microsoft Corp., which upheld the patent eligibility of a process for digital image halftoning. [22]

Patent examiners and practitioners were given interim instructions on the interpretation of Bilski v. Kappos both during the appeal process (on August 29, 2009) and shortly after the decision (on July 27, 2010) in documents issued by the USPTO. [23]

See also

Related Research Articles

Neither software nor computer programs are explicitly mentioned in statutory United States patent law. Patent law has changed to address new technologies, and decisions of the United States Supreme Court and United States Court of Appeals for the Federal Circuit (CAFC) beginning in the latter part of the 20th century have sought to clarify the boundary between patent-eligible and patent-ineligible subject matter for a number of new technologies including computers and software. The first computer software case in the Supreme Court was Gottschalk v. Benson in 1972. Since then, the Supreme Court has decided about a half dozen cases touching on the patent eligibility of software-related inventions.

State Street Bank and Trust Company v. Signature Financial Group, Inc., 149 F.3d 1368, also referred to as State Street or State Street Bank, was a 1998 decision of the United States Court of Appeals for the Federal Circuit concerning the patentability of business methods. State Street for a time established the principle that a claimed invention was eligible for protection by a patent in the United States if it involved some practical application and, in the words of the State Street opinion, "it produces a useful, concrete and tangible result."

Business method patents are a class of patents which disclose and claim new methods of doing business. This includes new types of e-commerce, insurance, banking and tax compliance etc. Business method patents are a relatively new species of patent and there have been several reviews investigating the appropriateness of patenting business methods. Nonetheless, they have become important assets for both independent inventors and major corporations.

Ex Parte Bowman 61 U.S.P.Q.2d 1669 was a decision by the U.S. Board of Patent Appeals and Interferences which asserted that in order to be patent-eligible, a process had to involve or promote the technological arts. This decision was overruled by the Board's subsequent Ex Parte Lundgren decision, but the Board's and then the Federal Circuit's In re Bilski opinion then superseded Lundgren. In re Bilski, however, rejects use of "not in the technological arts" as a basis for a rejection, although it seems to accept the concept when differently named. Bilski was affirmed by the Supreme Court in Bilski v. Kappos.

LabCorp v. Metabolite, Inc., 548 U.S. 124 (2006), is the first case since Diamond v. Chakrabarty in which the U.S. Supreme Court indicated a renewed interest in examining the limits of patentable subject matter for advances in life sciences. Although the Court initially agreed to hear the case, it was later dismissed in 2006 with three Justices dissenting. The defendant's petition to the Supreme Court raised an issue not addressed in opinions from the lower courts: the claim at issue was directed to patent ineligible subject matter and therefore invalid.

Gottschalk v. Benson, 409 U.S. 63 (1972), was a United States Supreme Court case in which the Court ruled that a process claim directed to a numerical algorithm, as such, was not patentable because "the patent would wholly pre-empt the mathematical formula and in practical effect would be a patent on the algorithm itself." That would be tantamount to allowing a patent on an abstract idea, contrary to precedent dating back to the middle of the 19th century. The ruling stated "Direct attempts to patent programs have been rejected [and] indirect attempts to obtain patents and avoid the rejection ... have confused the issue further and should not be permitted." The case was argued on October 16, 1972, and was decided November 20, 1972.

Freeman-Walter-Abele is a now outdated judicial test in United States patent law. It came from three decisions of the United States Court of Customs and Patent Appeals—In re Freeman, 573 F.2d 1237, In re Walter, 618 F.2d 758 ; and In re Abele, 684 F.2d 902 —which attempted to comply with then-recent decisions of the Supreme Court concerning software-related patent claims.

<i>In re Bilski</i>

In re Bilski, 545 F.3d 943, 88 U.S.P.Q.2d 1385, was an en banc decision of the United States Court of Appeals for the Federal Circuit (CAFC) on the patenting of method claims, particularly business methods. The court affirmed the rejection of the patent claims involving a method of hedging risks in commodities trading, as non-patentable subject matter. Most importantly, the Court concluded, that machine-or-transformation test "was proper test to apply to determine patent-eligibility of process", and that the “useful, concrete and tangible result” of State Street Bank v. Signature Financial Group and AT&T Corp. v. Excel Communications, Inc. should no longer be relied upon.

Dann v. Johnston, 425 U.S. 219 (1976), is a decision of the United States Supreme Court on the patentability of a claim for a business method patent.

In United States patent law, the machine-or-transformation test is a test of patent eligibility under which a claim to a process qualifies for consideration if (1) the process is implemented by a particular machine in a non-conventional and non-trivial manner or (2) the process transforms an article from one state to another.

<i>In re Ferguson</i>

In re Ferguson, 558 F.3d 1359 is an early 2009 decision of the United States Court of Appeals for the Federal Circuit, affirming a rejection of business method claims by the United States Patent and Trademark Office (USPTO). One of the first post-Bilski decisions by a Federal Circuit panel, Ferguson confirms the breadth of the en banc Bilski opinion's rejection of the core holdings in State Street Bank & Trust Co. v. Signature Financial Group, Inc.

AT&T Corp. v. Excel Communications, Inc., 172 F.3d 1352 was a case in which the United States Court of Appeals for the Federal Circuit reversed the decision of the United States District Court for the District of Delaware, which had granted summary judgment to Excel Communications, Inc. and decided that AT&T Corp. had failed to claim statutory subject matter with U.S. Patent No. 5,333,184 under 35 U.S.C. § 101. The United States Court of Appeals for the Federal Circuit remanded the case for further proceedings.

Mayo v. Prometheus, 566 U.S. 66 (2012), was a case decided by the Supreme Court of the United States that unanimously held that claims directed to a method of giving a drug to a patient, measuring metabolites of that drug, and with a known threshold for efficacy in mind, deciding whether to increase or decrease the dosage of the drug, were not patent-eligible subject matter.

CyberSource Corp. v. Retail Decisions, Inc., 654 F.3d 1366, is a United States Court of Appeals for the Federal Circuit case that disputed patent eligibility for the '154 patent, which describes a method and system for detecting fraud of credit card transactions through the internet. This court affirmed the decision of United States District Court for the Northern District of California which ruled that the patent is actually unpatentable.

Alice Corp. v. CLS Bank International, 573 U.S. 208 (2014), was a 2014 United States Supreme Court decision about patent eligibility of business method patents. The issue in the case was whether certain patent claims for a computer-implemented, electronic escrow service covered abstract ideas, which would make the claims ineligible for patent protection. The patents were held to be invalid, because the claims were drawn to an abstract idea, and implementing those claims on a computer was not enough to transform that abstract idea into patentable subject matter.

<i>In re Lowry</i>

In re Lowry, 32 F.3d 1579 was a 1994 decision of the United States Court of Appeals for the Federal Circuit on the patent eligibility of data structures. The decision, which reversed a PTO rejection of data structure claims, was followed by a significant change in PTO policy as to granting software related patents, a cessation of PTO appeals to the Supreme Court from reversals of PTO rejections of software patent applications, an increasing lenity at the Federal Circuit toward such patents and patent applications, and a great increase in the number of software patents issued by the PTO.

<i>In re Alappat</i>

In re Alappat, 33 F.3d 1526, along with In re Lowry and the State Street Bank case, form an important mid-to-late-1990s trilogy of Federal Circuit opinions because in these cases, that court changed course by abandoning the Freeman-Walter-Abele Test that it had previously used to determine patent eligibility of software patents and patent applications. The result was to open a floodgate of software and business-method patent applications, many or most of which later became invalid patents as a result of Supreme Court opinions in the early part of the following century in Bilski v. Kappos and Alice v. CLS Bank.

<i>In re Schrader</i>

In re Schrader, 22 F.3d 290 is a 1994 decision of the United States Court of Appeals for the Federal Circuit in which the court summarized and synthesized its precedents under the Freeman-Walter-Abele Test of patent eligibility. Under this test a key element is that the claimed invention is implemented with some type of hardware—that is, a particular machine. This was one of the last Federal Circuit decisions using that test.

Association for Molecular Pathology v. Myriad Genetics, Inc., 569 U.S. 576 (2013), was a Supreme Court case, which decided that "a naturally occurring DNA segment is a product of nature and not patent eligible merely because it has been isolated.” However, as a "bizarre conciliatory prize" the Court allowed patenting of complementary DNA, which contains exactly the same protein-coding base pair sequence as the natural DNA, albeit with introns removed.

<span class="mw-page-title-main">Patentable subject matter in the United States</span>

Patentable subject matter in the United States is governed by 35 U.S.C. 101. The current patentable subject matter practice in the U.S. is very different from the corresponding practices by WIPO/Patent Cooperation Treaty and by the European Patent Office, and it is considered to be broader in general.

References

  1. ↑ Bilski v. Kappos, 561 U.S. 593 (2010). PD-icon.svg This article incorporates public domain material from this U.S government document.
  2. ↑ In re Bilski , 545F.3d943 ( Fed. Cir. 2008).
  3. ↑ Bilski, slip op. at 8.
  4. ↑ Bilski, slip op. at 7.
  5. ↑ Gottschalk v. Benson , 409 U.S. 63, 70 (1972).
  6. ↑ Parker v. Flook , 437 U.S. 584, 588 (1978).
  7. ↑ Bilski, slip op. at 10.
  8. ↑ Bilski, slip op. at 11.
  9. ↑ Bilski, slip op. at 15–16.
  10. ↑ Bilski, slip op. at 16.
  11. ↑ Bilski, slip op. at 9–10.
  12. ↑ Bilski, slip op. at 12.
  13. 1 2 Bilski, slip op. at 2 (Stevens, J., concurring)
  14. ↑ State Street Bank & Trust Co. v. Signature Financial Group, Inc. , 149F.3d1368 (Fed. Cir.1998).
  15. ↑ Bilski, slip op. at 33 (Stevens, J., concurring)
  16. ↑ Bilski, slip op. at 1 (Breyer, J., concurring).
  17. ↑ DeIulio, Matthew (2010). "Courts Left with Little Guidance Following The Supreme Court's Decision in Bilski v. Kappos". Tulane Journal of Technology and Intellectual Property. 13: 285.
  18. ↑ Dennis Crouch,  Bilski v. Kappos , Patently-O (June 28, 2010).
  19. ↑ Mayo Collaborative Services v. Prometheus Laboratories, Inc. , 566 U.S. 66 (2012).
  20. ↑ Supreme Court Orders. Tuesday June 29, 2010.
  21. ↑ Kevin E. Noonan,  Bilski v. Kappos: What Effects on Biotechnology Patents? , Patent Docs (July 1, 2010).
  22. ↑ Research Corp. Technologies v. Microsoft Corp., 627F.3d859 (Fed. Cir.2010).
  23. ↑ Interim Guidance for Determining Subject Matter Eligibility for Process Claims in View of Bilski v. Kappos

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