Bilski v. Kappos

PETITIONER: Bernard L. Bilski and Rand A. Warsaw
RESPONDENT: David J. Kappos, Under Secretary of Commerce for Intellectual Property and Director, Patent and Trademark Office
LOCATION: United States Court of Appeals for the Federal Circuit

DOCKET NO.: 08-964
DECIDED BY: Roberts Court (2009-2010)
LOWER COURT: United States Court of Appeals for the Federal Circuit

CITATION: 561 US 593 (2010)
GRANTED: Jun 01, 2009
ARGUED: Nov 09, 2009
DECIDED: Jun 28, 2010

ADVOCATES:
J. Michael Jakes - for the petitioners
Malcolm L. Stewart - Deputy Solicitor General, Department of Justice, for the respondent

Facts of the case

Applicants were denied a patent by the Patent and Trademark Office (PTO) for claims pertaining to a process of managing risk in commodities trading. The PTO examiner deemed the invention not to be of patentable subject matter under 35 U.S.C. Section 101. The Board of Patent Appeals and Interferences affirmed the decision.

On appeal, the U.S. Court of Appeals for the Federal Circuit affirmed. The court relied on Supreme Court precedent stating that an invention is patentable if: "1) it is tied to a particular machine or apparatus, or 2) it transforms a particular article into a different state or thing." Reasoning from this, it held that the applicants' invention clearly failed this test (machine-or-transformation test) and therefore did not constitute patentable subject matter.

Question

1) Did the Federal Circuit err by using the machine-or-transformation test in determining patentable subject matter?

2) Does the machine-or-transformation test prevent patent protection for many business methods and thus contradict congressional intent that patents protect "methods of doing or conducting business."

Media for Bilski v. Kappos

Audio Transcription for Oral Argument - November 09, 2009 in Bilski v. Kappos

Audio Transcription for Opinion Announcement - June 28, 2010 in Bilski v. Kappos

John G. Roberts, Jr.:

In case 08964 Bilski versus Kappos, Justice Kennedy has the opinion of the Court.

Anthony M. Kennedy:

The petitioner seek to patent a series of steps that instruct buyers and sellers how to protect against the risk of price changes and especially in the energy markets.

Using petitioner's method, for example a large energy company can protect against the risk that a drastic change in weather will lead to a decrease in demand for its product, the utility company might worry that if there is particularly mild winter its revenues would be insufficient to cover its long-term supply contracts and so it may seek ways in which to hedge against that risk.

United States Court of Appeals for the Federal Circuit sitting en banc held petitioner's application was not eligible for patent protection.

The Court of Appeals explained that the claimed invention at issue was not patentable because it was not tied to a particular machine nor did it -- and it did not transform a particular article into a different state or thing.

In the Court of Appeals, the case produced five different opinions, including three dissents and students of the patent law will be well advised to read these scholarly opinions from the Court of Appeals.

Section 101 of the Patent Act specifies four independent categories of inventions or discoveries that are eligible for protection. Processes, machines, manufactures and compositions of matter.

This case concerns the patentability of a process.

The act defines this term as process, art or method that includes a new use of a known process, machine, manufacture, composition of matter or material.

In addition the Court's precedents provide three specific exceptions to Section 101 broad patent eligibility principles and those exceptions are for the laws of nature, physical phenomena and abstract ideas.

The Court today rejects the Court of Appeals rule that the machine or transformation test is the exclusive test for whether a process is patentable.

This Court is more than once cautioned that court should not read into the patent laws, limitations and conditions which the Legislature has not expressed.

The Court is unaware of any ordinary, contemporary or common meaning of the definitional terms process or the method that would require these terms be tied to a machine or to transform an article.

This Court's precedents establish that the machine or transformation test is a useful and important clue, but not the exclusive test for determining whether some claimed inventions are processes.

For a similar reason, Section 101 precludes a broad contention that the term process categorically excludes business method patents.

The Court is unaware of any argument that the ordinary meaning of the term method which is within the statutory definition of process, would exclude business methods.

The argument that business methods are categorically outside of Section 101 scope is further undermined by the fact that Section 273 explicitly contemplates the existence of at least some business method patents by creating a special defense applicable only to those patents.

The conclusion that business method patents are always unpatentable would render Section 273 meaningless.

Rather than adopting categorical rules that might have unforeseen impacts, the Court today resolves this case narrowly on the basis of this Court's earlier decisions in three cases and the opinion refers to those cases as Benson and Fluke and Dyer.

These precedents establish that the claims the petitioners make in this case are not patentable processes, because they attempt to patent abstract ideas.

Today all members of the Court agree that the patent application at issue claims an abstract idea and so is not patentable.

As Judge Ryder at the Court of Appeals said hedging is a fundamental economic practice long prevalent in our system of commerce and taught in any introductory finance class.

Today the Court once again declines to impose limitations on the Patent Act that are inconsistent with the act's text.

The patent application here can be rejected under precedence on the unpatentability of abstract ideas.

Nothing in today's opinion should be read as endorsing interpretations of the Patent Act the Court of Appeals used in the past and in disapproving an exclusive machine or transformation test we by no means foreclose the Federal Circuit's development of other limiting criteria that further the purposes of the Patent Act and are not inconsistent with its text.

The judgment of the Court of Appeals is affirmed.

Justice Stevens has filed an opinion concurring in the judgment in which Justices Ginsburg, Breyer and Satomayor join.

Justices Breyer -- Justice Breyer has filed an opinion concurring in the judgment in which Justice Scalia joins in part.

John Paul Stevens:

As Justice Kennedy has pointed out I have filed a concurring opinion which is an extremely long opinion concurring in the judgment that's joined by Justice Breyer, Justice Ginsburg and Justice Satomayor.

My opinion discusses the question whether business methods are patentable subject matter at some length, but this statement will be brief.