Bilski v. Kappos (901422128)

Read for 2/14/11

Reading Notes

• Decided by the USSC in 2010
• Bilski was denied a patent for "method of hedging risk in field of commodities trading in the energy market based on lack of patent-eligible subject matter
  • PTO and Patent Appeals all sustained rejection
  • CAFC affirmed and certiorari was granted
• Application seeks protection for an invention that explains how commodities buyers and sellers in the energy market can protect, or hedge, against the risk of price changes
  • Claim 1 - series of steps instruction how to hedge risk
  • Claim 4 - places claim 1 into a mathematical formula
• Examiner rejected for lack of specific apparatus
  • Solves pure math
• Instead of State Street test

1. 1. Has to be tied to a particular apparatus or
   2. Transform an article into a different state or thing

• USSC affirms judgment
• This invention claims to be a process
• Machine or transformation is not the sole test - not ordinary meaning of process
• The current invention is not categorically outside of 101 but it is still not a "process" under 101
  • Seek to patent the concept of hedging and application of such to energy markets
• Cite Benson, Flook, and Diehr as attempts to patent abstract ideas
• Previous reasoning:

The patent examiner rejected petitioners' application, explaining that it “ ‘is not implemented on a specific apparatus and merely manipulates [an] abstract idea and solves a purely mathematical problem without any limitation to a practical application, therefore, the invention is not directed to the technological arts.’ ” App. to Pet. for Cert. 148a. The Board of Patent Appeals and Interferences affirmed, concluding that the application involved only mental steps that do not transform physical matter and was directed to an abstract idea.

• • CAFC affirmed
• CAFC rejected useful, concrete, and tangible result test and used machine-or-transformation
  • Three dissenting opinions (business method, abstract idea, remanded)
• Two considered limitations - machine-or-transformation and business methods
  • Machine-or-transformation test as sole test violates statutory interpretation - noscitur a sociis is not applicable here
    • Important and useful clue, but not sole test
  • Business methods exclusion is also precluded
    • Section 273 specifically acknowledges possible patents for business methods
• Precedents on the unpatentability of abstract ideas are useful tools
• Application is not outside of 101 under the above tests
  • Still nonstatutory because it attempts to patent abstract ideas
• Cite Benson, Flook, and Diehr
  • All discuss the patenting of abstract ideas in various ways
  • This is like Benson and Flook

Patentable Subject Matter

• Cites State Street - useful, concrete, and tangible results
• Four eligible categories

1. 1. Process
   2. Machine
   3. Manufacture
   4. Composition of matter

• USSC has not endorsed the machine-or-transformation test
• Cannot read 101 to specifically exclude business methods
  • In fact an infringement statute acknowledges that there may be business method patents
• By disapproving the machine-or-transformation test they are not precluding other limiting criteria
• Even if patentable must pass 102 and 103
• Machine-or-transform test is useful but not the sole test

Concurring judges - 1

• Law must remain stable and clear
• Restore patent law to its historical and constitutional moorings
• Act of 1999 provided limited defense to claims of patent infringement - specifically business methods
• Thinks the court is wrong in suggesting that any series of steps that is not an abstract idea or law of nature may constitute a process under 101
  • A process is not barred because it is useful for business but a claim that merely describes a method of business does not qualify as a "process"
• Judge Dyk (CAFC) said there is no suggestion of process patents for organizing human activity
• Three main issues with the courts decision

1. 1. Literally using the "ordinary meaning" opinion would deem virtually any set of steps patentable - it is absurd
   2. Use language that is inconsistent with the old reliance on the machine-or-transformation test as clues

for patentability

1. 1. In discussion of "abstract idea" the Court uses language that could suggest a shift in the approach to that issue

• Court limits the claims to hedging and sayd hedging is an abstract idea
  • Do so in a way to suggest any process which uses an abstract idea is nonstatutory
• Claims are broad but that is covered in 112
• Court never provides a satisfactory account of what constitutes an unpatentable abstract idea
• The text of 101 is starting point, but not ending point
  • In ordinary talk, a process is any series of steps but it has always been clear that that is not the right interpretation
• Can get clues to a word from its context
  • Other three categories are made by man and involve technology
  • These judges feel that "process" next to the others cannot prove that it is limited to particular categories but it does give reason to be skeptical that the scope of a patentable process extends to cover any series of steps
• By looking at the history of patent law it is clear that doing business is not a "process" under 101
  • History concludes a business method is not a "process"
• In 1999 an act was passed which provides limited defense to claims of patent infringement regarding methods of doing business
  • This does not however intend to change the scope of 101
  • Was passed to limit the effects of the State Street decision
  • Section 273 is a red herring
• Have to weed out which inventions meet the balance between encouraging innovation and avoiding monopolies
• Most don't believe patents are necessary to encourage business innovation
  • Capitalism replaces the need for business patents
• Business method patents basically present more of a danger to business than a promotion of progress
• Scope of statutory matter is broad but not endless

History of patent law

• English backdrop
  • American patent law largely based on English law
  • No bases in English precedent to infer that business methods qualify - only one untested example of a business patent
• Early American patent law
  • Patent power intended to promote the progress of useful arts
  • 1790 was the first Patent Act and revised in 1793
  • Have assumed "useful art" is a term of art that at the time colloquially included creation or transformation of physical substances
    • What we would call technological arts today
  • Would at the time have been absurd to file a patent for methods of doing business
• Development of American patent law
  • No business patents in the early years
  • Congress has always stayed away from adding conditions for patentablility and left this to the courts
  • By early 20th Century it was understood that a series of steps for doing business could not be patented
• Modern American patent law
  • In 1952 changed from "art" to "process" but did not alter the scope
  • Petitioners rely on the "everything under the sun" phrase
    • Doing this is very misplaced
  • The 1952 Act cannot be understood as expanding the scope of patentable subject matter

Concurring judges - 2

• Agrees that business methods are not statutory
• Four points consistent with the opinion of the court and the concurring judges

1. 1. The text of 101 is broad, but not without limit
   2. Historically, the USSC has stated that "transformation and reduction of an article to a different state of thing is the clue to the patentability of a process claim that does not include a particular machine" (Diehr)
   3. Machine-or-transformation test has always been useful and important but never the sole test of patentability
   4. The previous by no means indicates that anything which produces a "useful, concrete, and tangible result" (State Street) is patentable