CPLRG™ 0015 - Bilski v. Kappos - Jun. 28, 2010

Bilski v. Kappos, 130 S. Ct. 3218, CPLRG 0015 (2010) (KENNEDY, Roberts, Thomas, Alito & Scalia (except for Parts II-B-2 and II-C-2), STEVENS, Ginsburg, Breyer & Sotomayor, concurring; BREYER & Scalia (as to Part II), concurring)   


MAJOR ISSUES: Business method patents; “process” in Section 101; exceptions for abstract ideas, natural phenomena, and laws of nature

For discussions of “processes” patent eligible subject matter, see Chisum on Patents 1.03. On business methods, see Chisum on Patents 1.03[5]. See also Chisum Patent Law Digest 1110. For an essay on Bilski, see Chisum Essay.   Essay on Bilski

In this landmark, must-read decision, the Supreme Court affirms the judgment (but not reasoning) of the Federal Circuit, which upheld rejection of the applicant Bilski’s claims to a commodities trading risk hedging method. See In re Bilski, 545 F.3d 943 (Fed. Cir. 2008) (en banc), aff’d, 130 S. Ct. 3218 (2010). The claims were to an abstract idea or would pre-empt use of the idea, generally or in the particular field of commodities and energy markets. The claims were, therefore, unpatentable under the Supreme Court’s decisions in Gottschalk v. Benson, 409 U.S. 63 (1972); Parker v. Flook, 437 U.S. 584 (1978), and Diamond v. Diehr, 450 U.S. 175 (1981). The Court declined to adopt “categorical rules that might have wide-ranging and unforeseen impacts.”

1. OPINIONS. The Court issued three opinions.

     a. KENNEDY, J. FOR COURT (EXCEPT AS TO TWO PARTS). 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, the lead Kennedy opinion is a majority opinion for the Court except as to Part II-B-C and Part II-C-2.

     b. STEVENS, J., CONCURRING. Justice Stevens, who had authored Flook (1978), and dissented in Diehr (1981), wrote a lengthy concurring opinion, joined by Justices Ginsburg, Breyer and Sotomayor.

     c. BREYER. Justice Breyer wrote a short concurring opinion.

2. HOLDINGS. The portions of the Stevens opinion concurred in by the Court majority include four holdings.

     a. EXCEPTIONS TO SECTION 101. 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. MACHINE-OR-TRANSFORMATION TEST: USEFUL TOOL, NOT AN EXCLUSIVE TEST. The MORT (machine-or-transformation) test is a “useful and important clue, an investigative tool, for determining whether some 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. BUSINESS METHODS: NOT CATEGORICALLY EXCLUDED. Section 101’s category of “process,” which Section 100(b) defines as including a “method,” does not “categorically exclude[] business methods.”

          i. ORDINARY MEANING. The ordinary meaning of “method” does not exclude business methods.

          ii. HOW FAR WOULD A PROHIBITION REACH? It was not clear “how far a prohibition of business method patents would reach.”

          iii. TECHNOLOGIES FOR CONDUCTING A BUSINESS MORE EFFICIENTLY. It was not clear whether such a prohibition “would exclude technologies for conducting a business more efficiently.”

          iv. SECTION 273 DEFENSE. The Section 273 infringement defense, added in 1999, clarified that “a business method is simply one kind of `method’ that is, at least in some circumstances, eligible for patenting under §101.”

3. REJECTION OF CLAIMS AFFIRMED. 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.

4. PAST FEDERAL CIRCUIT PRECEDENT: NOT ENDORSED. The Court cautioned that it did not endorse past Federal Circuit precedent.

5. FEDERAL CIRCUIT MAY DEVELOP “OTHER LIMITING CRITERIA”; “LESS EXTREME MEANS OF RESTRICTING BUSINESS METHOD PATENTS.” The Court did not preclude the Federal Circuit from developing “other limiting criteria,” including “less extreme means of restricting business method patents.”

7. STEVENS, CONCURRING: BUSINESS METHODS NOT PATENTABLE. Justice Stevens agreed that the MORT test was “reliable in most cases” but “not the exclusive test.” However, in an extensive opinion, he garnered historical and policy support for excluding patents on business methods. In his view, 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.”

8. BREYER, CONCURRING. In a separate opinion joined in pertinent part by Justice Scalia, 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.

     a. Section 101 is “broad” but “not without limit,” excluding phenomena of nature (though newly discovered), mental processes, and abstract intellectual concepts.

     b. The MORT test has repeatedly helped the Court determine what is a patentable “process” in cases extending “back over a century,”

     c. MORT has never been the “sole test.”

     d. STATE STREET BANK (1998); “USEFUL, CONCRETE, AND TANGIBLE RESULT” TEST NOT SUPPORTED BY SUPREME COURT AUTHORITY. The suggestion in State Street Bank & Trust Co. v. Signature Financial Group, Inc., 149 F.3d 1368, 1373 (1998), that “anything which produces a `useful, concrete, and tangible result,'” can be patented, is not supported by Supreme Court authority, and the Court’s decision in this case should not be taken as disapproving of the Federal Circuit’s rejection in this case of the “useful, concrete and tangible result” test.

9. STRUCTURE OF OPINION FOR THE COURT. The Court’s opinion by Justice Kennedy addressed in separate parts the three arguments why the patent application at issue was “outside the scope of patent law.”

     a. 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.

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

          i. In Part II A, the Court discussed the statute, Section 101.

          ii. In Part II B, the Court discussed whether the MORT test was an exclusive one, holding that it was not. Justice Scalia joined Part II B 1 but not Part II B 2, making only the former the opinion for the Court.

          iii. In Part II C, the Court discussed business methods, rejecting the argument that they were categorically excluded from patentability. Justice Scalia joined Part II C 1 but not Part II C 2, making only the former the opinion for the Court.

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

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