SCOTUS Bilski Decision: "Do No Harm"

Bilski v. Kappos, No. 08–964 (June 28, 2010)

The Supreme Court struck down Bilski's patent application directed to a procedure for instructing buyers and sellers how to protect against the risk of price fluctuations.  In its analysis, the Court essentially found that existing statues and case law were sufficient to conclude that the application merely claimed an abstract idea.

35 U.S.C. §101

The Court stated at the outset that interpretation of the statute, unless otherwise defined, would be interpreted using the words of the statute "taking their ordinary, contemporary, common meaning."  Furthermore, the opinion added that "[t]his Court has more than once cautioned that courts ‘should not read into the patent laws limitations and conditions which the legislature has not expressed.'"

THE FEDERAL CIRCUIT'S "MACHINE-OR-TRANSFORMATION TEST"

The Court of Appeals incorrectly concluded that this Court has endorsed the machine-or-transformation test as the exclusive test.  It is true that Cochrane v. Deener, 94 U. S. 780, 788 (1877), explained that a “process” is “an act, or a series of acts, performed upon the subject-matter to be transformed and reduced to a different state or thing.”  More recent cases, however, have rejected the broad implications of this dictum; and, in all events, later authority shows that it was not intended to be an exhaustive or exclusive test.

This Court’s precedents establish that the machine-or-transformation test is a useful and important clue, an investigative tool, for determining whether some claimed inventions are processes under §101. The machine-or-transformation test is not the sole test for deciding whether an invention is a patent-eligible “process.”

DEFENDING COMPUTER SOFTWARE PATENTS

The Court's opinion clearly recognized computer software as patent-eligible subject matter:

[I]t was once forcefully argued that until recent times, “well-established principles of patent law probably would have prevented the issuance of a valid patent on almost any conceivable computer program.” . . . But this fact does not mean that unforeseen innovations such as computer programs are always unpatentable. . . .Section 101 is a “dynamic provision designed to encompass new and unforeseen inventions.” . . . A categorical rule denying patent protection for “inventions in areas not contemplated by Congress . . . would frustrate the purposes of the patent law.”

DEFINING PATENTABLE SUBJECT MATTER

On this issue, the Court was careful to not specify any bright-line test on patentable subject matter:

It is important to emphasize that 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. This Age puts the possibility of innovation in the hands of more people and raises new difficulties for the patent law. With ever more people trying to innovate and thus seeking patent protections for their inventions, the patent law faces a great challenge in striking the balance between protecting inventors and not granting monopolies over procedures that others would discover by independent, creative application of general principles. Nothing in this opinion should be read to take a position on where that balance ought to be struck.

BUSINESS METHOD PATENTS: THE GOOD

The Court's opinion clearly indicated that there was no categorical exemption for business method patents

The term “method,” which is within §100(b)’s definition of “process,” at least as a textual matter and before consulting other limitations in the Patent Act and this Court’s precedents, may include at least some methods of doing business.  The Court is unaware of any argument that the “‘ordinary, contemporary, common meaning,’” of “method” excludes business methods. Nor is it clear how far a prohibition on business method patents would reach, and whether it would exclude technologies for conducting a business more efficiently.

BUSINESS METHOD PATENTS: THE BAD

Clearly, a significant number of Justices (Stevens, Ginsburg, Sotomayor, Breyer) have issues with business method patents and would like to see them banished from patent law.  In Stevens' concurring opinion, he states:

The breadth of business methods, their omnipresence inour society, and their potential vagueness also invite a particularly pernicious use of patents that we have long criticized. As early as the 19th century, we explained that the patent laws are not intended to “creat[e] a class of speculative schemers who make it their business to watch the advancing wave of improvement, and gather its foam in the form of patented monopolies, which enable them to lay a heavy tax upon the industry of the country, without contributing anything to the real advancement of the arts.”

These many costs of business method patents not only may stifle innovation, but they are also likely to “stifle competition,” . . . Even if a business method patent is ultimately held invalid, patent holders may be able to use it to threaten litigation and to bully competitors, especially those that cannot bear the costs of a drawn out, fact-intensive patent litigation. That can take a particular toll on small and upstart businesses. Of course, patents always serve as a barrier to competition for the type of subject matter that is patented. But patents on business methods are patents on business itself. Therefore, unlike virtually every other category of patents, they are by their very nature likely to depress the dynamism of the marketplace.

 CONCLUSION

In essence, the opinion simply negates the "machine-or-transformation" test as the sole test for patent eligibility.  In a way, the opinion could potentially lead to the broadening of patentable subject matter eligibility, since courts could undertake other "tests" for their determination (although the likelihood of this is pretty low).

Interestingly, the breadth of the ruling is an open question.  As Tom Goldstein pointed out in the SCOTUS blog,

Justice Kennedy seemingly suggested that the Court favored the basic patent eligibility “of inventions in the Information Age,” including to some extent with respect to “software, advanced diagnostic medicine techniques, and inventions based on linear programming, data compression, and the manipulation of digital signals.”  But that part of the opinion is only a plurality – not controlling – because Justice Scalia did not join that discussion and did not explain his reasons for declining to do so.