The Supreme Court today issued its long-awaited opinion in Bilski v. Kappos, affirming the en banc Federal Circuit decision that itself affirmed the PTO’s rejection of Bilski’s claims under 35 U.S.C. 101. This Client Alert quickly reviews the case and provides some food for thought with respect to Section 101 issues moving forward.
The relevant claims of the Bilski patent application involve a method in which energy consumers, such as businesses and homeowners, are offered a fixed energy bill, for example, for the winter so they can avoid the risk of high heating bills due to abnormally cold weather. The method does not require the use of a computer. The Patent Office rejected the claims (though it accepted other claims) and the en banc Federal Circuit affirmed, holding that a process is patent-eligible 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.” The Federal Circuit claimed to have discerned such a standard from Supreme Court case law in the area.
The Supreme Court Decision
Justice Kennedy delivered the opinion of the Court (with Justices Roberts, Thomas, Alito, and Scalia – though Justice Scalia dropped off for two sections noted below) that affirmed the rejection of Bilski’s claims, though certain Justices did not join all sections of the opinion and some filed concurring opinions. The majority noted that Section 101 recites broad patent eligibility, limited by “laws of nature, physical phenomena, and abstract ideas.” Slip op. at 5, citing Diamond v. Chakrabarty, 447 U.S. 303, 309 (1980). The majority then refused to adopt two general exceptions to patentability: (1) the machine-or-transformation test (all but Justice Scalia also joined a section noting that inventions not contemplated by Congress should be excluded protection and that “new technologies may call for new inquiries.”); and (2) a categorical exclusion of business method patents (all but Justice Scalia joined a section opining on the unpatentability of abstract ideas as a guide to the patentability of business methods). Slip Op. at 9-12. In getting to its core holding, the Court notes: “Petitioners seek to patent both the concept of hedging risk and the application of that concept to energy markets. Rather than adopting categorical rules that might have wide-ranging and unforeseen impacts, the Court resolves this case narrowly on the basis of this Court’s decisions in Benson, Flook, and Diehr, which show that petitioner’s claims are not patentable processes because they are attempts to patent abstract ideas.” Slip Op. at 13. In closing, the Court emphasized that “nothing in today’s opinion should be read as endorsing interpretations of [Section] 101 that the [Federal Circuit] has used in the past. [citing Allapat and AT&T]. … 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.”
Justice Stevens concurred across 47 pages (the majority opinion was 16 pages), joined by Justices Ginsburg, Breyer, and Sotomayor. Justice Stevens rules that some guidance was required by the Court’s opinion, but he would “restore patent law to its historical and constitutional moorings”: “The wiser course [as compared to the majority’s suggestion that one can patent, as a “process,” any series of steps that is not abstract or a law of nature] would have been to hold that petitioners’ method is not a ‘process’ because it describes only a general method of engaging in business transactions—and business methods are not patentable. More precisely, although a process is not patent-ineligible simply because it is useful for conducting business, a claim that merely describes a method of doing business does not qualify as a ‘process’ under [Section] 101.” Dissent at 2-3. He also criticizes the majority for “never provid[ing] a satisfying account of what constitutes an unpatentable abstract idea. This mode of analysis (or lack thereof) may have led to the correct outcome in this case, but it also means that the Court’s musings on this issue stand for very little.”
Justice Breyer also concurred on two issues, with Justice Scalia joining the second. On the first issue, he agreed with Justice Stevens “that a ‘general method of engaging in business transactions’ is not a patentable ‘process’ within the meaning of [Section 101].” On the second issue, he identified four points that appeared to be common to the majority and to Justice Stevens: (1) “[A]lthough the text of [Section] 101 is broad, it is not without limit”; (2) the machine-or-transformation test has been helpful to the Court in the past; (3) that test has been a “useful and important clue,” but not the “sole test”; and (4) patent-eligibility is not available for “anything which [sic, that] produces a ‘useful, concrete, and tangible result. [citing State Street Bank]’”
#1: The Court’s opinion appears to be what most Court-watchers believed it would be immediately after the oral argument – i.e., an effort to block the patent-eligibility of “pure” business methods that are nothing more than abstract ideas. The Court clearly recognizes that its statements in this area are important to commerce and that the Bilski facts do not extend far – so it is being very careful (and very terse).
#2: Justice Stevens is probably right that the majority has provided little guidance for distinguishing something that is “abstract” from something that is not – that omission could not have been unintentional. Future cases will need to fill it in.
#3: The decision is rather moderate and breaks down along the traditional political lines. The “conservative” justices are in the majority, with Justice Kennedy as the deciding vote. The “liberal” justices are in the minority, with Justice Stevens leading the way. But both are very general in their statements, and the divide between them does not seem wide, as Justice Breyer tries to point out (with Justice Scalia joining). Hopefully, we will get a much more specific opinion, and better-defined distinctions between the two sides, in the next couple years.
#4: It is expected that the Court will issue an order on the Mayo v. Prometheus case later today or tomorrow morning. (Fish represents Mayo in that case.) While the Bilski majority’s alteration of the role of the machine-or-transformation test undercuts the Federal Circuit’s holding in Mayo v. Prometheus (which was based on the machine-or-transformation test), the Bilski decision does not resolve that appeal. Rather, the focus of the Mayo v. Prometheus appeal is whether the Prometheus claims violate the more fundamental prohibition – indicated by the Bilski majority – against a patent effectively preempting laws of nature or physical phenomena. The holding in Bilski also does not seem to answer the questions in the Myriad case concerning the ability to patent isolated genes and method for using such genes, which appear to be much closer to the issues in Mayo v. Prometheus.
#5: While some have argued that there is no novelty component under Section 101, the majority indicates that the rationale behind the prohibition on patenting laws of nature, physical phenomena, and abstract ideas is that they are not “new and useful.” Slip op. at 5.
#6: Judge Rader is now the chief judge of the Federal Circuit. Note the opening sentence of his dissent in the en banc decision in Bilski: “This [en banc] court labors for page after page, paragraph after paragraph, explanation after explanation to say what could have been said in a single sentence: ‘Because Bilski claims merely an abstract idea, this court affirms the Board’s rejection.’”