On November 9, 2009, the Supreme Court heard oral arguments on behalf of the patent applicants and the U.S. Patent Office in In re Bilski. At the heart of In re Bilski is how a business method may fall within the definition of "process" as it is used in Section 101 of the U.S. Patent Act. Section 101 of the Patent Act broadly defines proper patentable subject matter in the United States as "any new and useful process, machine, manufacture, or composition of matter, or any new and useful improvement thereof." Due to the breadth of this definition, it is often left to the courts to render decisions concerning how new technologies or advancements fit within this definition and ultimately left to Congress to enact legislation that further restricts or defines the patentability of these new technologies or advancements. While the term "process" has an ordinary meaning that is quite broad, the Supreme Court has previously limited the definition to something narrower than its ordinary meaning by concluding that a patent claim covering a "process" is not patent-eligible if it claims "laws of nature, natural phenomena, [or] abstract ideas."
The Bilski case stems from an application for patent protection filed by Bernard L. Bilski and Rand A. Warsaw in 1997 and covering a method of hedging risk in the field of commodities trading. The U.S. Patent Office refused Bilski's claims as failing to meet the patent eligibility standard of Section 101. The patent examiner supported the refusal of all claims in the application stating that "the invention 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." The applicants appealed the patent examiner's decision to the Board of Patent Appeals and Interferences at the U.S. Patent Office. While the Board rejected the patent examiner's reasoning, it did agree that the claimed method was not proper patentable subject matter. Specifically, the Board concluded that the applicants' claims did not involve any patent-eligible transformation, holding that transformation of "non-physical financial risks and legal liabilities of the commodity provider, the consumer, and the market participants" is not patent-eligible subject matter. The Board also held that Applicants' claims "preempt[] any and every possible way of performing the steps of the [claimed process], by human or by any kind of machine or by any combination thereof," and thus concluded that they only claim an abstract idea ineligible for patent protection. Finally, the Board held that Applicants' process as claimed did not produce a "useful, concrete and tangible result," and for this reason as well was not drawn to patent-eligible subject matter.
The applicants timely appealed the decision of the Board to the Federal Circuit Court of Appeals. The Federal Circuit, sitting en banc, affirmed the Board's decision that the applicants' claims did not meet the patent eligibility standard of Section 101. The Federal Circuit held that a "process" must be tied to a particular machine or apparatus, or must transform a particular article into a different state or thing (the "machine-or-transformation" test), to be eligible for patenting under Section 101 of the Patent Act. Of particular significance during prosecution of the application, the appeal to the Board and appeal to the Federal Circuit was the admission by the applicants that the claimed "process" was not limited to application on a computer, removing the "machine" portion of the "machine-or-transformation" test from consideration by the Federal Circuit. Because the applicants' claims do not involve the transformation of any physical object or substance, or an electronic signal representative of any physical object or substance, the Federal Circuit concluded that "transformation" portion of the "machine-or-transformation" test was not met.
The applicants appealed the Federal Circuit's decision to the Supreme Court, asking the Supreme Court to consider whether the Federal Circuit erred by holding that a "process" must be tied to a particular machine or apparatus, or transform a particular article into a different state or thing ("machine-or-transformation" test), to be eligible for patenting under Section 101 of the Patent Act. The matter was fully briefed on behalf of the applicants and the Patent Office earlier this year. A total of 67 "friends of the court" or amicus curiae briefs have been filed by patent owners, bar associations, interested organizations, academics, and individuals, both supporting and refuting the Federal Circuit's "machine-or-transformation" test. Supportive briefs generally fell in line with the position that the "machine-or-transformation" test would provide meaningful limits to the scope of patent claims as they apply to methods and processes. Briefs refuting the test generally criticize it as being arbitrary, more restrictive than what has been previously applied by the Federal Circuit in similar matters, and in conflict with accepted definitions of statutory terms. Some amicus curiae briefs plead the case of application or non-application of the "machine-or-transformation" test to software patents, clearly requesting the Supreme Court to render a decision beyond the scope of the case at issue.
At oral argument, Justices Sotomayor, Kennedy and Breyer were particularly active, with only slightly lesser participation by Justices Scalia and Ginsburg and Chief Justice Roberts. The Court clearly understood the far reaching implications this decision will have on business methods and methods covering new technologies yet to be developed. During the presentation of the applicants' argument, the Justices peppered applicants' counsel with questions on where to establish a limitation on patentable subject matter, should the "machine-or-transformation" test not be accepted. The Justices all appeared concerned of the consequences of setting no limits and affording patent protection to abstract ideas. The Justices appeared equally concerned that the "machine-or-transformation" test could ultimately turn into something too easily applied on a rigid basis. The Solicitor General answered the Justices' questions by seeking to demonstrate how the "machine-or-transformation" test was a flexible test and a test that would not have changed the result of other seminal cases regarding patentability of processes.
The Supreme Court's decision is expected in the spring of 2010. The business and legal world alike anxiously await this decision. The Supreme Court may decide the issue without much analysis beyond the specific circumstances at hand, leaving open the possibility for more arguments and analysis as new issues arise, or the Supreme Court may decide to render a broad reaching decision that could extend to cover a host of issues concerning methods and processes.
Vol. 53, June 2010