Bilski: What’s at Stake

This is the first of four posts discussing the issues in the controversial Bilski case. This first post will give a brief overview of In re Bilski, 545 F.3d 943 (Fed. Cir. 2008), currently under review by the Supreme Court. Bilski raises the issue of what constitutes a patentable process under 35 U.S.C. § 101. The second and third posts will give a brief overview of the central arguments on each side of the appeal. The fourth and final post will discuss the highlights from oral argument, and will conclude with a discussion of what is ultimately at stake in the Supreme Court’s decision.

Part 1: Background and The Federal Circuit’s Decision

According to § 101, the first step in determining whether a claimed invention is patent-eligible involves an assessment of whether the invention is a “new and useful process, machine, manufacture, or composition of matter.”

Last year, the Federal Circuit was called upon to decide whether a particular applicant’s claimed business method qualified as a patentable “process” under § 101 in Bilski. Prior to Bilski, courts had applied various tests to determine what constitutes patentable subject matter under § 101. For example, a claimed invention could be patentable under § 101 if it transformed an article or physical object to a different state or thing, or if it otherwise produced a “useful, concrete and tangible result.” See State St. Bank & Tr. v. Signature Financial Group, 149 F.3d 1368 (Fed. Cir. 1998). However, the Federal Circuit rejected this test, along with several others, in Bilski, and instead adopted the “machine-or-transformation” test as the exclusive test for all process claims.

In Bilski, the applicant sought a patent for “a method of hedging risk in the field of commodities trading,” which is a type of invention that is generally referred to as a “business method.” The Federal Circuit held that Bilski’s application did not claim patentable subject matter. The court did not say that all business methods were unpatentable. Instead, it held that the “machine-or-transformation” test was the exclusive test for determining whether a claimed invention is a patentable process under § 101. Thus, in this case, Bilski’s claimed business method was not a patentable process under § 101 since (1) it was not tied to a particular machine or apparatus, and (2) it did not transform a particular article into a different state or thing.

However, as the dissenting opinions illustrate, the majority’s decision raises several issues. For example, according to Judge Newman, the mandatory machine-or-transformation test is problematic because it is contrary to both statute and precedent. Furthermore, Judge Newman argued that it is inappropriate for the courts to apply such a rigid, mandatory test under the threshold inquiry for determining patentability because Congress intended for § 101 to be read broadly. In addition, the contradiction between the majority’s holding and prior precedent is problematic considering the public’s reliance on this precedent. Therefore, the majority’s holding is troublesome because it creates a great deal of uncertainty for both past and future patent owners, and it affects all types of process patents, not just business methods.

On the other hand, Judge Mayer’s dissent criticized the majority for not expressly overruling State Street Bank and holding that all business methods are not patentable. Judge Mayer argued that protecting business methods actually impedes the progress of science and the useful arts, stifles innovation, and results in patents that are of poor quality. Accordingly, the patent office’s limited resources would be better spent on applications for inventions that are truly useful technological advances, as opposed to business methods, which have historically been unpatentable.

As these points illustrate, the Federal Circuit’s holding raises several issues concerning the proper test for patentable processes under § 101, and whether business methods should even be patentable at all. Thus, recognizing the importance of this issue, the Supreme Court granted certiorari to review the question of what constitutes a patentable process under § 101. Oral arguments are scheduled to be heard on Monday, November 9th.

Coming up next:

Part 2: A Brief Overview of Petitioner’s Arguments

Part 3: A Brief Overview of Respondent’s Arguments

Part 4: Issues Raised in Oral Argument and What’s at Stake