In a long-awaited decision in Bilski v. Kappos, the
Supreme Court today held that the "Machine or
Transformation" test is not the exclusive test
for determining whether a claimed process is eligible for patenting
under Section 101 of the patent statute, 35 U.S.C. §101. The
opinion effectively overrules the prior decision of the Federal
Circuit, in which the appeals court had established that a claimed
process was eligible for patenting only if it was tied to a
particular machine or transformed an article into a different state
or thing. The prior decision had generated substantial concern and
confusion over the patentability of Information Age processes,
including those involving software, signal processing and business
methods.
Faulting the Federal Circuit's interpretation of the patent
statute, the Supreme Court explained that Section 101 of the
statute broadly describes subject matter eligible for patenting.
Looking to the Court's prior case law, the opinion identified
only three exceptions to the statute's broad patent-eligibility
principles: laws of nature, abstract ideas, or natural phenomena.
While the Court recognized that the "Machine or
Transformation" test is a useful tool for analyzing processes
under Section 101, it rejected as inconsistent with the broad
statutory language the Federal Circuit's conclusion that the
test is the sole or exclusive way in which to determine
patent-eligibility for processes.
However, the Supreme Court affirmed the Federal Circuit's
judgment that the claims of Bilski's patent application were
not patentable subject matter under Section 101, yet did so because
the claims are directed to abstract ideas. According to the Court,
the Bilski application attempts to patent the concept of hedging
risk, but allowing such a patent would preempt use of the risk
hedging approach in all fields. Other claims in the Bilski
application were similarly ruled unpatentable as being mere
attempts to limit the risk hedging concept to the energy market
field or to add token postsolution activity; but the limitations
were deemed insufficient, in light of the Court's precedents,
to make the claims patent-eligible.
While the Court's opinion does not definitively answer all of
the questions raised by the prior Federal Circuit ruling, it may
give some comfort to those concerned that Information Age
inventions would fall outside of the scope of patentable processes
defined by an exclusive Machine or Transformation test. Many of the
concerns as expressed in amicus briefs were directed to how the
Machine or Transformation test would be applied to emerging
technologies, and that potentially narrow interpretations of the
test might exclude patents on inventions that otherwise appear to
lie within the core purposes of the patent statute. The Court's
citation of the broad language of the statute, and its conclusion
that there is no exclusive test, suggest that there will be ample
room to establish that emerging Information Age inventions are
within the scope of patentable subject matter. A key factor may be
whether the claimed invention preempts all practical use of an idea
or concept.
One aspect of the Supreme Court's decision indicates that some
controversy may continue. Rejecting the broad notion that
"business methods" are excluded from patentable subject
matter, the majority opinion concluded that some business methods
may be patent-eligible, citing the prior use defense set forth in
Section 273 of the statute. As a caution, however, the majority
opinion also stated that while Section 273 contemplates the
possibility of some business method patents, "it does not
suggest broad patentability of such claimed inventions."
In a lengthy concurring opinion, Justice Stevens agreed with the
Court's determination that Bilski's claims are not
patentable, but starkly disagreed as to the potential patentability
of "business method" patents generally. According to
Justice Stevens, whose concurring opinion was joined by three other
justices, Congress and the courts understood that, when Section 101
was enacted as part of the 1952 Patent Act, methods of doing
business were not patentable subject matter and, accordingly, such
methods should be deemed outside of the scope of patent
protection.
Given the Supreme Court's ruling and the disagreement over
patentability of business methods, it remains to be seen how the
PTO and the courts will respond to inventions directed to methods
of conducting business.
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