Bilski v. Kappos (JWB)

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The Case

  • Bilski (petitioner) challenge Kappos (Director of PTO) in the denial of patent application for method of hedging risk in field of commodities trading in the energy market
  • PTO, Board of Patent Appeals and Inferences rejected all claims in application, Court of Appeals affirmed


  • explains how commodities buyers and sellers in the energy market can protect, or hedge, against the risk of price changes.
    • key claims are claim 1, which describes a series of steps instructing how to hedge risk
    • claim 4, which places the claim 1 concept into a simple mathematical formula.

Section 101

  • Congress: any new and useful process, machine, manufacture, or composition of matter
    • except “laws of nature, physical phenomena, and abstract ideas.”
  • “When a statute includes an explicit definition, we must follow that definition”
    • § 100(b) already explicitly defines the term “process.”
    • Court of Appeals: “process” only if: “(1) it is tied to a particular machine or apparatus, or (2) it transforms a particular article into a different state or thing.” -- cannot redefine “process”
  • The machine-or-transformation test is not the sole test for patent eligibility under § 101
    • The machine-or-transformation test may well provide a sufficient basis for evaluating processes similar to those in the Industrial Age… But there are reasons to doubt whether the test should be the sole criterion for determining the patentability of inventions in the Information Age
    • A rule denying patent protection for “inventions in areas not contemplated by Congress would frustrate the purposes of patent law”
  • a business method is simply one kind of “method” that is, at least in some circumstances, eligible for patenting under § 101 (Section 273)
    • The term “method,” which is within § 100(b)'s definition of “process,” may include at least some methods of doing business


  • PTO, Board of Patent Appeals and Interferences rejected the application because it is not “implemented on a specific apparatus, merely manipulates an abstract idea, and solves a purely mathematical problem”
  • Court of Appeals (‘en banc court’ = more than four judges) rejected prior testing for determining patentability of a process under 101, i.e. whether the invention produced a “useful, concrete, and tangible result,”
    • This patent is not patentable because: (1) it is not tied to a machine and does not transform an article; (2) it involves a method of conducting business; and (3) it is merely an abstract idea

Supreme Court

  • all members of the Court agree that the patent application at issue here falls outside of § 101 because it claims an abstract idea.
  • Flook established that limiting an abstract idea to one field of use or adding token postsolution components did not make the concept patentable
  • Court of Appeals decision is affirmed

Concurring Opinion (Stevens)

  • machine-or-transformation test, while reliable, is not the exclusive test
  • The Court never provides a satisfying account of what constitutes an unpatentable abstract idea
  • § 100(b) defines the term “process” by using the term “process,” as well as several other general terms. **This is not a case, then, in which we must either “follow” a definition or rely on neighboring words to understand the scope of an ambiguous term. The definition itself contains the very ambiguous term that we must define.
  • As I read the history, it strongly supports the conclusion that a method of doing business is not a “process” under § 101.
  • Patent law originally based on English Patent law, and nothing in English law infers that business methods could qualify for patents
  • Patent Act of 1793 stated ‘useful art’ as patent criteria. “It appears, however, that regardless of how one construes the term “useful arts,” business methods are not included”
    • business and finance were not generally considered part of the “useful arts” in the founding Era
  • 1790-1950: “Although courts occasionally struggled with defining what was a patentable “art” during those 160 years, they consistently rejected patents on methods of doing business”
  • 1952: “changed the operative language in § 101, replacing the term “art” with “process” and adding a definition of “process” as a “process, art or method,” § 100(b).”
    • word ‘process’ still undefined; put in to reflect prior rulings
    • “the 1952 Act merely codified the meaning of “process” and did not expand it”

Although it may be difficult to define with precision what is a patentable “process” under § 101, the historical clues converge on one conclusion: A business method is not a “process.”

  • After State Street case of 1999, Congress codified in 35 U.S.C. 273: limited defense to claims of patent infringement regarding certain “methods of doing or conducting business”
    • did not comment on the patentability of business methods
    • contradicted 1952, which did not include business methods
    • the 1999 Congress would never have enacted § 273 if it had foreseen that this Court would rely on the provision as a basis for concluding that business methods are patentable (rather than 101)
  • Congress wanted to ‘promote the useful arts’
    • laws of nature are not patentable because that would stifle the art, and if business methods were patented, they would also stifle progress rather that promote it
  • Innovative business methods are rewarded with successful businesses
    • do not need patents as incentive to develop business method
  • The primary concern is that patents on business methods may prohibit a wide swath of legitimate competition and innovation
    • similar to ‘big ideas’ needed to further innovation (like abstract concepts)
    • many business decisions, no matter how small, could be potential patent violations

Second Concurring Opinion (Breyer)

  • The things worth a patent must outweigh the restrictive effect of the limited patent monopoly
  • the ‘machine-or-transformation test’ has repeatedly helped the Court to determine a patentable process
  • the Court has emphasized that a process claim meets the requirements of § 101 when, “considered as a whole,” it “is performing a function which the patent laws were designed to protect ( e.g., transforming or reducing an article to a different state or thing).”
  • the machine-or-transformation test by no means indicates that anything which produces a ‘useful, concrete, tangible result’ is patentable