Intellectual Property, Pages 668–685

Bilski v. Kappos

Supreme Court of the United States, 2010

Facts:

Petitioners sought a patent for a claimed invention of hedging transactions of commodities based on historical price averages and doing so specifically in the energy market.

Procedural History:

  • The patent examiner rejected their applications for merely being an abstract idea that solves a purely mathematical problem and not being limited to a practical application thereof.

  • The Board of Patent Appeals and Interferences affirmed.

  • The United States court of appeals for the Federal Circuit affirmed en banc, producing five different opinions.

    • The court rejected its previous test of seeing whether the process produced a "useful, concrete, and tangible result." It instead said that a process is patentable if either:
      1. It is tied to a particular machine or apparatus, or
      2. It transforms a particular article into a different state or thing

Issue:

Are business methods patentable?

Reasoning:

  • The court of appeals said that process must be tied to a particular machine or apparatus or transform a particular article into a different state or thing. However, courts should not read limits into the patent laws where none exist. This requirement is not in any usual definition of "process". While the machine-or-transformation test is a useful clue for telling whether something is a process, it is not determinative.

    While the rule once basically followed this, this does not discount new inventions like computer programs from being patented. Section 101 was intended to be broad and to encompass new unforeseen inventions. Denying whole new areas of technology would frustrate this purpose.

    This test may work well for physical, tangible inventions, but it does not for inventions in the Information Age.

  • Similarly, it does not categorically exclude business methods. A "method" is a type of "process." Federal law even refers to "method[s in] patent[s]".

    Although business methods are patentable however, they must have a limit to avoid chilling creative endeavor. Forbidding patenting abstract ideas would be a good limitation.

  • Although business methods in general are patentable, that does not meant that petitioners' application is. Their application claims an abstract an idea. You cannot just patent the idea of hedging risk. It is essentially just a mathematical formula.

Holding:

Business methods are patentable as long as they are not just abstract ideas like petitioners'. Affirmed.

Concurring Opinions:

  • Stevens: Rather than defining what a process is ourselves, we should restore patent law to its historical and constitutional moorings. It used to be that a series of steps for conducting business was not patentable. When the courts began to question this, Congress quickly passed the law referencing business method patents to stop it from disrupting the business community. This does not mean that it endorsed this definition of "process." A business method does not fall within the meaning of a process in § 101.

    "Process" in § 101 does not mean the usual definition.

    The plurality is right that this is abstract, but it does not go over what methods it uses to reach that conclusion.

    If any "process" in the common definition were patentable, this would include a ridiculous amount of stuff. Training a dog, a dance, how to shoot a basketball, and possibly stories could all be considered "processes" under the common definition.

    The historical evidence shows that a method is not a patentable process.

    It is doubtful business method patents promote progress by disclosing things not already public. Even if they did, it is doubtful they would outweigh the impediments on the business community.

  • Breyer: Business methods are not patentable. In addition to what Justice Stevens said, there are also many things the court agrees on.

    1. § 101 is broad but not without limit. Notably, "[p]henomena of nature . . ., mental processes, and abstract intellectual concepts are not patentable".
    2. Transformation of an article into a different state is the clue to patentability.
    3. Although the machine-or-transformation test is a "useful and important clue," it has never been the sole test.
    4. Not everything that produces a "useful, concrete, and tangible result" is patentable.
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