Bilski: What’s At Stake, Part 2

This series discusses the recent appeal to the Supreme Court of In re Bilski, 545 F.3d 943 (Fed. Cir. 2008), cert. granted, 129 S.Ct. 2735 (2009). Bilski raises the issue of what constitutes a patentable process under 35 U.S.C. § 101.

Part 2: A Brief Overview of Bilski’s Arguments

This post provides an overview of the main arguments from the petitioner’s brief to the Supreme Court. According to Bilski, the petitioner and patent applicant, the Federal Circuit erred by adopting the mandatory machine-or-transformation test and rejecting Bilski’s patent application. Bilski highlighted five main arguments for reversal of the Federal Circuit.

First, Bilski argues that the mandatory machine-or-transformation test is inconsistent with the patent statute and Supreme Court precedent. According to Bilski, § 101 has always been broadly interpreted, and there is no statutory basis for treating processes differently from the other categories of patentable subject matter under § 101. Furthermore, although the machine-or-transformation test is one possible way to assess process patentability, the Supreme Court has twice rejected this test as the exclusive test. In Gottschalk v. Benson, 409 U.S. 63 (1972), the Court expressly stated that although the machine-or-transformation test could be used, this was not the only test for processes. The Court then reaffirmed this position in Parker v. Flook, 437 U.S. 584 (1978), emphasizing the broad definition of “process.” In the most recent case, Diamond v. Diehr, 450 U.S. 175 (1981), the Court quoted Benson in stating “[t]ransformation and reduction of an article ‘to a different state or thing’ is the clue to the patentability of a process claim that does not include particular machines.” Although the Court said in Benson this is “the clue” to patentability, the Court’s holding specifically rejected the idea that every process must pass the machine-or-transformation test. Additionally, in Diehr, the quote was only used to illustrate an example of how a process could be patentable under § 101. Thus, the Federal Circuit’s mandatory test is inconsistent with this precedent. Finally, the Court should not impose a rigid test under the threshold inquiry for patentability because this is consistent with the Court’s recent rejection of rigid rules in patent cases. See, e.g., eBay Inc. v. MercExchange, LLC, 547 U.S. 388 (2006); KSR Int’l Co. v. Teleflex Inc., 550 U.S. 398 (2007).

Second, Bilski argues that business methods should be patentable under § 101 in light of § 273, which provides an affirmative defense to infringement of business method patents that are commercially used. According to Bilski, § 273 represents Congress’s approval of business methods and the “useful, concrete, and tangible result” test from State Street Bank. Additionally, the legislative history does not indicate that the § 273 defense was intended to be available only to those business methods that pass the machine-or-transformation test. In effect, the mandatory machine-or-transformation test would make § 273 a meaningless defense since this class of business method patents could not exist.

Third, Bilski argues that courts should not impose limits on the broad statutory language of § 101 because this is a matter of public policy that should be addressed by the legislature. In applying the mandatory machine-or-transformation test, the Federal Circuit inappropriately disrupted the expectations of patent owners and inventors. Thus, the Federal Circuit should not have imposed this limit, especially under the threshold inquiry for patentability, because the legislature, not the courts, should decide such issues of public policy.

Fourth, Bilski argues that the Court should reaffirm the flexible practical application rule for inventions involving fundamental principles. In other words, although abstract ideas, laws of nature, and natural phenomena are not patentable under § 101, a practical application of any of these principles should be patentable.

Finally, petitioner argues that the Federal Circuit erred when it rejected Bilski’s application. Bilski argues that the process is patentable because none of the claims involve an abstract idea, law of nature, or natural phenomenon. Bilski contends that a method for hedging risk is not an abstract idea, and that even if it were an abstract idea, it is still patentable because the patent recites a practical application of a mathematical formula which has a useful result in the field of commodities trading.

Thus, in essence, Bilski argues that the Federal Circuit erred in rejecting this patent because a more flexible test should have been applied, and based on this flexible test, Bilski’s process is patentable under § 101.

Other Parts:

Part 1: Background and the Federal Circuit’s Decision

Part 2: A Brief Overview of Petitioner’s Arguments

Part 3: A Brief Overview of Respondent’s Arguments

Part 4: How the Supreme Court Should Rule