U.S. Supreme Court to Address Limits of Patentable Subject Matter
June 1, 2009
The U.S. Supreme Court on June 1 granted certiorari to decide the limits of subject matter that is patentable under Section 101 of the Patent Act (Bilski v. Doll, U.S., No. 08-964, cert. granted 6/1/09). In a case with potentially wide-ranging impact on industries that rely on patents based on information technology and business related methods, this case asks the court to define what constitutes a patentable “process” under 35 U.S.C. § 101.
Application for Risk Hedging Methods Rejected.
In the en banc 2008 decision in In re Bilski, 545 F.3d 943 (Fed. Cir. 2008), the U.S. Court of Appeals for the Federal Circuit affirmed the rejection of all 11claims of a patent application (Serial No. 08/833,892 ) filed by Bernard L. Bilski and Rand A. Warsaw (Bilski) relating to a method of doing business—hedging commodities risk.
In doing so, the court held that the “claims are not directed to patent-eligible subject matter” under Section 101 of the Patent Act since they (1) are not tied to a particular machine or apparatus or (2) do not transform a particular article into a different state or thing. This “machine-or-transformation test” is the only test to be used in determining whether a claimed process is eligible for patenting under § 101, the court held, citing Supreme Court authority.
The Federal Circuit also concluded that its test for patentability under Section 101 based on whether a process leads to a “useful, concrete and tangible result,” as set forth in State Street Bank & Trust Co. v. Signature Financial Group, 149 F.3d 1368 (Fed. Cir. 1998), is no longer applicable. Moreover, the court rejected a “technological arts” test that would deny patentability to a claimed process unless it is directed to an advance in science or technology.
Voices of Discord.
The en banc Federal Circuit said that its ruling was intended to “clarify the standards applicable in determining whether a claimed method constitutes a statutory `process’ under § 101.” However, the Section 101 picture was left far from clear after this 9-3 ruling by the appellate court.
In her dissenting opinion, Judge Pauline Newman said that the majority mistakenly read Supreme Court precedent to require the “per se limits to patent eligibility,” and that such limits may threaten the patentability of future technologies. Newman stated:
The court today acts en banc to impose a new and far-reaching restriction on the kinds of inventions that are eligible to participate in the patent system. The court achieves this result by redefining the word “process” in the patent statute, to exclude all processes that do not transform physical matter or that are not performed by machines. The court thus excludes many of the kinds of inventions that apply today’s electronic and photonic technologies, as well as other processes that handle data and information in novel ways. Such processes have long been patent eligible, and contribute to the vigor and variety of today’s Information Age. This exclusion of process inventions is contrary to statute, contrary to precedent, and a negation of the constitutional mandate. Its impact on the future, as well as on the thousands of patents already granted, is unknown.
Judge Randall R. Rader, also dissenting, said that the court could have correctly resolved this case by stating in one sentence that Bilski’s application is rejected for claiming abstract ideas. He said that the majority went down a troubled path in relying on “dicta taken out of context from numerous Supreme Court opinions dealing with the technology of the past. In other words, as innovators seek the path to the next techno-revolution, this court ties our patent system to dicta from an industrial age decades removed from the bleeding edge.”
Quoting the statutory language, Rader emphasized that patentability under Section
101 is available to “any new and useful process, machine, manufacture, or composition of matter, or any new and useful improvement thereof.” The statute, he said, sets forth broad categories of patent eligible subject matter, and it conditions patentability “on the characteristics, not the category, of the claimed invention.”
However, Judge Haldane Robert Mayer dissented from the ruling by arguing that the majority did not go far enough to stop the “legal tsunami” of business method patents resulting from the State Street decision. “Not only do such patents tend to impede rather than promote innovation, they are frequently of poor quality,” Mayer argued, pointing out that “[b]ecause the innovative aspect of such methods is an entrepreneurial rather than a technological one, they should be deemed ineligible for patent protection.” Seeking a “technological arts” requirement for patentability, he said that the majority fell short of stemming the flow of these suspect patents since its test can be circumvented by clever drafting that rewrites nearly every process claim to include a physical transformation.
Certiorari Granted on §101 Case After Nearly 30 Years.
After losing the appeal, Bilski petitioned the Supreme Court, asking the following questions:
1.Whether the Federal Circuit erred by holding that a “process” must be tied to a particular machine or apparatus, or transform a particular article into a different state or thing … despite this Court’s precedent declining to limit the broad statutory grant of patent eligibility for “any” new and useful process beyond excluding patents for “laws of nature, physical phenomena, and abstract ideas.”
2.Whether the Federal Circuit’s “machine-or-transformation” test for patent eligibility, which effectively forecloses meaningful patent protection to many business methods, contradicts the clear Congressional intent that patents protect “method[s] of doing or conducting business.” 35 U.S.C. § 273.
Perhaps sensing confusion at the court of appeals on the issue, the high court granted the petition on June 1. In doing so, it is addressing Section 101 patentability for the first time in almost 30 years, since the rulings in Diamond v. Chakrabarty, 447 U.S. 303 (1980) and Diamond v. Diehr, 450 U. S. 175 (1981).
Echoes of Metabolite?
With the high probability that Judge Sonia Sotomayor will soon be confirmed to the Supreme Court, it is worth noting that she will replace Justice David Souter, one of the dissenters from the dismissal of another recent case involving patentability, Laboratory Corp. of Am. Holdings v. Metabolite Labs. Inc., 548 U.S. 124 (2006). That infringement suit was dismissed as improvidently granted, but Justice Stephen Breyer, joined by Souter and Justice John Paul Stevens, argued that the case should not have been dismissed and should have been resolved under Section 101.
The process claim of the patent in suit should not be patentable because it simply discloses a “natural phenomenon”--the correlation between the amino acid homocysteine and vitamin B deficiency, Breyer argued. He went on to note that precisely defining the scope of the “natural phenomenon” doctrine or other doctrine under Section 101 may be difficult, but that “this case is not at the boundary” because the process steps at issue “embody only the correlation between homocysteine and vitamin deficiency that the researchers uncovered.” Breyer said there was a duty to resolve the case and declare the claim invalid because of the burden that this patent places on doctors and the health care industry.
To fail to do so threatens to leave the medical profession subject to the restrictions imposed by this individual patent and others of its kind. Those restrictions may inhibit doctors from using their best medical judgment; they may force doctors to spend unnecessary time and energy to enter into license agreements; they may divert resources from the medical task of health care to the legal task of searching patent files for similar simple correlations; they may raise the cost of healthcare while inhibiting its effective delivery.
Similarly, in calling for the rejection of business method patents in Bilski, Judge Mayer latched on to Breyer’s comment in Metabolite that “sometimes too much patent protection can impede rather than ‘promote the Progress of Science and useful Arts,’ the constitutional objective of patent and copyright protection."
Whichever way Bilski is decided, it is likely to have far-reaching consequences on not only business method patents, but on the scope of patentable subject matter generally.