Notes on Bilski
June 29th, 2010

On June 28, 2010, the Supreme Court decided the Bilski decision.  Here is a pdf version: .Bilski   A commentary is being prepared.   A brief preliminary summary:

In Bilski v. Kappos (2010), the Supreme Court affirmed the Federal Circuit’s decision upholding rejection of the applicant Bilski’s claims to a commodities trading risk-hedging method. The claims were to abstract ideas and thus unpatentable under the hoary Benson-Flook-Diehr trilogy. The Court declined to adopt “categorical rules that might have wide-ranging and unforeseen impacts.”

The Court did not fully endorse the view of any of the five opinions by the Federal Circuit judges in the en banc Bilski.  However, the Court was consolatory: “Students of patent law would be well advised to study these scholarly opinions.”

1. Inconclusive Contribution. Bilski is a remarkably inconclusive contribution to the law on patent eligible subject matter. One reason for the inconclusiveness may have been that the concurring opinion by Justice Stevens, discussed below, reads as if  it were drafted to be a majority opinion. That opinion and the opinion for the Court by Justice Kennedy, discussed below, reach the same conclusion on the merits of the specific application, to wit, that the Federal Circuit’s affirmance of the PTO’s rejection should be affirmed. The Stevens opinion may have become a concurring one only after it failed to garner the necessary fifth vote. The relatively shorter Kennedy opinion reads as if  it were drafted as a compromise statement later in the Court’s deliberative process. Justice Scalia, who declined to concur in two parts of the Justice Kennedy opinion and concurred in one part of the Justice Breyer opinion, may have been the potential swing vote. Justice Scalia’s action suggests that he was sympathetic with some of the views in the Stevens and Breyer opinions that advocated restricting the scope of patent eligible subject matter but that he could not accept the categorical ban on business method patents espoused by Justice Stevens.

2. The “Majority” Opinion; Holdings. In Bilski, Justice Kennedy wrote the lead opinion. Chief Justice Roberts and Justices Thomas and Alito joined “in full.” Justice Scalia, without explanation, joined the Kennedy opinion “except for Parts II-B-2 and II-C-2.” Thus, Justice Kennedy’s opinion is the majority opinion of the Court except as to what is said in those two subparts.

In the portions of the Kennedy opinion concurred in by the Court majority, the Court held that:

(a) the “three specific exceptions to §101′s broad patent-eligibility principles” derived from case law, to wit: ” `laws of nature, physical phenomena, and abstract ideas’,” remain the law even though those exceptions were “not required by the statutory text” (Section 101).

(b) the MORT (machine-or-transformation) test is a “useful and important clue, an investigative tool, for determining whether some claimed claimed inventions are processes under §101,” but, contrary to the Federal Circuit majority, the MORT test “is not the sole test for deciding whether an invention is a patent-eligible `process’.”

(c) Section 101′s category of “process,” which Section 100(b) defines as including a “method,” does not “categorically exclude[] business methods,” because (a) the ordinary meaning of “method” does not exclude business methods, (b) it was not clear “how far a prohibition of business method patents would reach,” (c) it was not clear whether such a prohibition “would exclude technologies for conducting a business more efficiently,” and (d) the Section 273 infringement defense clarified that “a business method is simply one kind of `method’ that is, at least in some circumstances, eligible for patenting under §101.”

(d) Bilski’s “patent application … falls outside of §101,” not because of either of the two rejected “broad and atextual approaches,” that is, the MORT test and the business method categorical exclusion, but because its claims cover an abstract idea–to wit, either the “basic of concept of hedging” (claim 1), that concept reduced to a mathematical formula (claim 4), or that concept limited to a particular field or to “token post solution components,” abstract ideas being one of the Section 101 exceptions established in the Benson, Flook and Diehr decisions.

Concluding, the Court cautioned that it was neither endorsing past Federal Circuit precedent nor precluding the Federal Circuit from developing “other limiting criteria,” including “less extreme means of restricting business method patents.”

3. Stevens, Concurring. Justice Stevens, who, inter alia, had authored Parker v. Flook (1978), and dissented in Diamond v. Diehr (1981), wrote a lengthy concurring opinion, joined by Justices Ginsburg, Breyer and Sotomayor. In the opinion, issued the day of his retirement from the Supreme Court, Justice Stevens agreed that the MORT test was “reliable in most cases” but “not the exclusive test.” However, he argued that the Court should “restore patent law to its historical and constitutional moorings” by declaring that “methods of doing business are not, in themselves, covered by the statute.”

4. Breyer, Concurring. Justice Breyer also wrote a concurring opinion. In part I, Justice Breyer agreed with Justice Stevens that “business methods” are not patentable. In part II, in which Justice Scalia joined, Justice Breyer argued that four points were consistent with both the Court’s opinion (that is, Justice Kennedy’s opinion) and Justice Steven’s concurring opinion: (1) Section 101 is “broad” but “not without limit,” excluding phenomena of nature (though newly discovered), mental processes, and abstract intellectual concepts; (2) the MORT test has repeatedly helped the Court determine what is a patentable “process” in cases extending “back over a century,” (3), MORT has never been the “sole test,” and (4) the suggestion in State Street Bank (1998) that “anything which produces a `useful, concrete, and tangible result” “may be patented” is unsupported by Supreme Court authority, and the Court’s decision in this case should not be taken as disapproving of the Federal Circuit’s rejection of the “useful, concrete and tangible result” test.

The last specific point, repudiation of the State Street “useful, concrete and tangible” test, reflected the views of at least five Justices and hence can be regarded as the holding of the Court.

5. Structure of the Majority Opinion. The Court’s opinion by Justice Kennedy first summarized the determinative question in the case and the three arguments why the patent application at issue was “outside the scope of patent law.”

In Part I, it reviewed the subject matter of the application and claims, the rejections by the Patent and Trademark Office, and the Federal Circuit’s holding with its concurring and dissent opinions.

In Part II, the Court discussed the applicable legal principles.

In Part III, the Court resolved the case “in the light of” three precedents, Benson, Flook, and Diehr.

Finally, the Court concluded:

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 our precedents on the unpatentability of abstract ideas.  The Court, therefore, need not define further what constitutes a patentable “process,” beyond pointing to the definition of that term provided in §100(b) and looking to the guideposts in Benson, Flook, and Diehr. And nothing in today’s opinion should be read as endorsing interpretations of §101 that the Court of Appeals for the Federal Circuit has used in the past. See, e.g., State Street [Bank & Trust Co. v. Signature Financial Group, Inc., 149 F. 3d 1368, 1373 (1998)], and AT&T Corp. [v. Excel Communications, Inc., 172 F. 3d 1352, 1357 (1999)]. It may be that the Court of Appeals thought it needed to make the machine-or-transformation test exclusive precisely because its case law had not adequately identified less extreme means of restricting business method patents, including (but not limited to) application of our opinions in Benson, Flook, and Diehr. 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.”

6. Comment on “Abstract Ideas.”  The Court’s characterization of the claims as “abstract ideas” is palpably unsatisfying. The claims were to a series of specified steps a human can take (e.g, “identifying market participants” and “initiating a series of transactions.” The claimed subject matter may have been very obvious in view of the state of the art or possibly unduly vague, but to characterize it  as an ”abstract idea” stretches the meaning of “abstract” and “idea” beyond recognition.