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Supreme Court Takes a Broad View as to What May be a Patentable Process in the Information Age

Bilski v. Kappos
By William Birdwell
06.30.10
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In a long awaited opinion that could affect virtually every modern industry – computer software, electronic signal processing, communications, medical diagnosis and treatment, financial services and investments, to name a few – the Supreme Court has taken a broad view as to what may be patentable as a process under the Patent Act. The Court suggested that the only boundaries may be the long-established prohibition against patenting laws of nature, physical phenomena, and abstract ideas. Construing the section of the Patent Act that defines patentable subject matter, 35 U.S.C. § 101, the Court rejected a ruling of the Court of Appeals for the Federal Circuit that the sole test as to whether a process constitutes patent eligible subject matter is whether the process is (1) tied to a particular machine or apparatus, or (2) transforms a particular article into a different state or thing. The Court also rejected the contention that the term “process” in the statutory definition of patentable subject matter necessarily excludes business methods. Nevertheless, the Court unanimously affirmed the patent examiner’s rejection of the process at issue, a method for buyers and sellers of commodities to hedge against the risk of price changes, as an unpatentable abstract idea. Bilski v. Kappos, No. 08-964; 561 U.S. ____ (2010).

The Court reiterated that “Congress plainly contemplated that the patent laws would be given wide scope,” that Congress “took this approach to patent eligibility to ensure that ‘ingenuity should receive a liberal encouragement,’” and that the Court had “more than once cautioned that courts ‘should not read into the patent laws limitations and conditions which the legislature has not expressed.’” The majority of the Justices focused on the “ordinary, contemporary, common meaning” of the words of Section 101, and a companion Section 100(b) that defines a “process” as a “process, art or method.” They observed that they were unaware of any ordinary, contemporary, common meaning that “would require these terms to be tied to a machine or to transform an article.” Nor were they aware of any argument that the ordinary, contemporary, common meaning of “method” excludes business methods. Consequently, while acknowledging that the “machine-or-transformation” test may be a useful analytical tool, the majority of the Court rejected these two categorical tests as to whether a process is patent eligible subject matter. A minority of the Court would have held that a business method, such as the process at issue, is not a process within the meaning of Section 101.   

In the Court’s opinion a plurality of the Justices characterized Section 101 as a “dynamic provision designed to encompass new and unforeseen inventions” and stated that, while the “machine-or-transformation test may well provide a sufficient basis for evaluating processes similar to those in the Industrial Age – for example, inventions grounded in a physical or other tangible form, . . . there are reasons to doubt whether the test should be the sole criterion for determining the patentability of inventions in the Information Age.” For example, such a requirement “would create uncertainty as to the patentability of software, advanced diagnostic medical techniques, and inventions based on linear programming, data compression, and the manipulation of digital signals.” These Justices also suggested that, while the Patent Act leaves open the possibility that there are some business methods that are patentable, the “Court’s precedents on the upatentability of abstract ideas provide useful tools” for finding a limiting principle.

Since this decision rejects categorical rules as to what constitutes a patentable process, it leaves the boundaries of patentable processes uncertain, though abstract ideas are off limits. At the same time, it is also likely to encourage more patent applications for processes and perhaps more innovation and investment in new Information Age technologies.

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