,
Brian Berliner and
Sue Roeder 
Today, the United States Supreme Court ruled in Bilski v.
Kappos (Case No. 08-964) that some business methods may be
eligible for patent protection under United States law. The Supreme
Court rejected the Federal Circuit's
"machine-or-transformation test" as the sole test for
determining what constitutes a patent-eligible process. But the
Court declined to adopt any specific test for determining the
patentability of business methods, other than affirming its
previous decisions and three, previously-identified exceptions:
"laws of nature, physical phenomena, and abstract ideas."
The Court held that the particular claims involved in the case
(methods of hedging risk in the field of commodities trading) were
ineligible for patent protection because they were "attempts
to patent abstract ideas."
The Court's decision does not provide the certainty regarding
business method patents that many had hoped for. Some had hoped it
would be the death of business method patents, and four justices
advocated that position. Others had hoped it would provide clear
guidance to applicants, the PTO, and the courts regarding the
patentable scope of business methods. This result, however,
perpetuates uncertainty and guarantees continued litigation.
The Patent Act defines patentable subject matter to include
"any new and useful process . . ." 35 U.S.C. § 101.
The majority opinion, authored by Justice Kennedy, rejected a
contention that the term "process" categorically excludes
business methods. The majority found the term "process"
is broad enough to include such methods and another, later-enacted
statute contemplates the existence of at least some business method
patents. The majority also held that nothing requires the term
"process" as used in the Patent Act to be tied to a
machine or to transform an article, as the Federal Circuit had
previously ruled. Accordingly, although the majority described the
"machine-or-transformation test" as "a useful and
important clue" and "an investigative tool," it is
not the sole test for determining the patentability of
processes.
The justices unanimously agreed that the patent claims at issue in
the case were unpatentable and that the machine-or-transformation
test is not the sole test for patentability. Beyond that, the
decision was fractured. Portions of the majority opinion joined by
only four justices (Kennedy, Roberts, Thomas, and Alito) expressed
concerns about relying on categorical rules given the pace of
technological development. These justices recognized the challenges
of striking a balance between protecting inventors and not granting
monopolies over procedures that others would discover through
application of general principles. But they cautioned that
"[n]othing in this opinion should be read to take a position
on where that balance ought to be struck." Justice Scalia
declined to join these portions of the majority opinion, although
he was otherwise in the majority.
Justice Stevens, in a concurring opinion joined by Justices
Ginsburg, Breyer, and Sotomayor, "strongly disagree[d]"
with the majority's decision that some business methods are
eligible for patent protection. They criticized the majority's
conclusion that the claims were directed at "abstract
ideas" as lacking analysis, and instead they would have held
that methods of doing business are not patentable based on the
"limited textual, historical, and functional clues"
available. Justice Breyer issued a concurring opinion that outlined
four areas of supposed agreement among the opinions, but Justice
Scalia was the only justice to join Justice Breyer's
concurrence.
Today's Supreme Court decision can be viewed as merely another
example of the Court rejecting the use of a bright-line test
proposed by the Federal Circuit. In this case, although the Federal
Circuit had attempted to build a foundation of Supreme Court
precedent for the "machine-or-transformation" test, the
Supreme Court's decision today rejected the use of any
definitive test. The Supreme Court also cautioned that
"nothing in today's opinion should be read as endorsing
interpretations . . . that the Court of Appeals for the Federal
Circuit has used in the past," even while inviting the Federal
Circuit to develop "other limiting criteria that further the
purposes of the Patent Act and are not inconsistent with its
text."
Bilski provides little concrete guidance and perpetuates
uncertainty regarding the status of business method patents. The
PTO, which had issued interim examination guidelines following the
Federal Circuit's decision in Bilski, may continue to
evaluate applications based on the non-exclusive
machine-or-transformation test. Applicants can be expected to argue
that their process claims are allowable even if they don't
satisfy that test. Accused infringers will challenge many business
method patents by comparing them to the three exceptions and
limited precedent confirmed today by the Supreme Court. And courts
will have to resolve those challenges without the benefit of a
definitive test. The Supreme Court's decision guarantees that
the law in this area will continue to develop on a case-by-case
basis, rather than by judicially-created bright-line rules or
categorical exclusions.
O'Melveny & Myers LLP routinely provides advice to clients on complex transactions in which these issues may arise, including finance, mergers and acquisitions, and licensing arrangements. If you have any questions about the operation of the applicable statutory provisions or the case law interpreting these provisions, please contact any of the attorneys listed on this alert.
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