In a fractured decision, the Supreme Court's Bilski opinion (June 28, 2010) has ruled that patent law is available to secure the exclusive ownership of certain business methods. The Court failed to provide any clear rules for distinguishing between viable business methods for patent protection purposes and unprotectable abstract ideas.
The Court's opinion was directed to whether patents should be available for methods of doing business. In light of the negative press which patent law has experienced in recent years (some, but not all, of which was with merit), including the issue of business-method patents, it is surprising that the opinion was not more limiting in nature. It would not have been a complete surprise if the Court held that no business method is patentable. That was not the case. The patent statute continues to provide that any new process (and method) may be patentable. The majority opinion declined to read a business-method exception into the patent statute. However, in contrast, Justice Stevens's concurring opinion advocates that all business methods should be carved out from the patent statute.
The majority opinion holds that the Federal Circuit's test of whether a method or process is patentable (i.e., the machine-transformation test) is not the sole test. The majority opinion and concurring opinion lead us to believe the test is still viable, although it is not the sole test. The Federal Circuit's machine-transformation test holds that a process or method must be tied to a particular machine or apparatus, or transform a particular article into a different state or thing to be eligible for patenting. Under the machine-transformation test, most if not all pure business methods or processes would not be patentable.
Further, the majority opinion interprets the scope of the patent statute broadly or literally, holding that the term "method" may include at least some methods of doing business. Yet, we are also warned that some business-method patents raise special problems in terms of vagueness and suspect validity.
Notwithstanding, the petitioners seeking patent protection for a pure business method did not prevail on the issue of patentability. Bilski claims a procedure for instructing buyers and sellers how to protect against the risk of price fluctuations in a discrete section of the economy. While the opinion suggests that additional or other tests are required to be formulated by the lower courts to decide whether a process or method is patentable, the Court relied on its earlier decisions to find the petitioners' business method was not patentable. Further, while the Court advocated against reading into the patent statute exceptions as to patentable processes, the Court relied on a previously created exception. In particular, the Court held Bilski's claims related to abstract ideas and thus were not patentable.
Specifically, the Court acknowledged that its precedents provide three specific exceptions to the patent statute's broad patent-eligibility principles: "laws of nature, physical phenomena, and abstract ideas." The Court justified these exceptions as consistent with the notion that a patentable process must be "new and useful" and further that these exceptions have defined the reach of the statute as a matter of statutory stare decisis going back 150 years. Otherwise, the Court was unaware of any other "exceptions" carved out from the patent statute without appropriate basis for doing so. Again, Justice Stevens's concurring opinion advocated excluding all business methods as not patentable.
The majority opinion repeatedly affirmed the Court's earlier Benson, Flook, and Diehr decisions. The Court's 1972 Benson decision considered whether a patent application for an algorithm to convert binary-coded decimal numerals into pure binary code was a "process" under the patent statute. The Court held it was not a "process" but an unpatentable abstract idea. A contrary holding would wholly preempt the mathematical formula and in practical effect would allow a patent on the algorithm itself.
The Court's 1978 Flook decision was directed to a procedure for monitoring the conditions during the catalytic conversion process in the petrochemical and oil-refining industries. The Court held the process unpatentable as the only innovation was reliance on a mathematical algorithm and that the limitation to a particular field (petrochemical and oil-refining) did not rescue the process from being unpatentable. Thus, the proposition that abstract ideas are not rendered patentable with the addition of insignificant post-solution activity.
The Court's 1981 Diehr decision was directed to an unknown method for molding raw, uncured synthetic rubber into cured precision products using a mathematical formula to complete some of its several steps by way of a computer. Diehr explained that while an abstract idea, law of nature, or mathematical formula could not be patented, an application of a law of nature or mathematical formula to a known structure or process may well be deserving of patent protection.
So what does it all mean? Reading the tea leaves, it would appear that a business method may be patentable if it is somewhere between a pure business method and one tied to a machine or which transforms a particular article.
As to computer software programs, the opinion arguably advocates patent protection once again. Yet, it is not an unbridled position. In particular, the opinion refers to the Diehr decision repeatedly, noting that the majority opinion in that case held that a procedure for molding rubber that included a computer program is within patentable subject matter. Further, the Bilski Court noted that relying solely on the machine-transformation test would create uncertainty as to the patentability of software, advanced diagnostic medicine techniques, and inventions based on linear programming, data compression, and the manipulation of digital signals.
All in all, the opinion advocates patent protection yet roughs out some vague guidelines in which to operate, and affirms the Court's earlier decisions as to guiding the lower courts. Thus, business methods remain potentially patentable, but subject to further and possibly uncertain scrutiny as lower courts attempt to interpret and implement Bilski.
Vol. 53, June 2010