Bilski v. Kappos.

 The machine-or-transformation test is not the sole test for patent eligibility under §101. 

(Supreme Court 2009, 08-964)

As stated by Justice Kennedy in the opinion of the Court, the question in this case turned on whether a patent can be issued for a claimed invention designed for the business world. The Bilski patent application claimed a procedure for instructing buyers and sellers how to protect against the risk of price fluctuations in a discrete section of the economy.

35 U.S.C. 101 specifies that “[w]hoever invents or discovers any new and useful process, machine, manufacture, or composition of matter, or any new and useful improvement thereof, may obtain a patent therefor, subject to the conditions and requirements of this title”.  Supreme Court precedents provide three specific exceptions to §101’s broad principles, namely that “laws of nature, physical phenomena, and abstract ideas” are not patent-eligible subject matter.

The USPTO Examiner had earlier rejected Bilski’s claims as “not directed to the technological arts”. Upon appeal to the Board of Patent Appeals and Intereferences (BPAI), the BPAI affirmed on the grounds that the application involved only mental steps that do not transform physical matter and was directed to an abstract idea. The Court of Appeals for the Federal Circuit (CAFC) heard the case, and affirmed the decisions of the Examiner and the BPAI. However, the CAFC went further to rule that the “machine-or-transformation test” was the sole test to be used for determining the patentability of a “process” under the Patent Act, 35 U. S. C. §101.

In the opinion, the Supreme Court affirmed the decisions of the USPTO and lower courts, which held that the Bilski invention was not patent-eligible subject matter. In particular, the Court found that the Bilski invention is an unpatentable “abstract idea”.

The Supreme Court disagreed with the CAFC’s adoption of the machine-or-transformation test as the sole test for what constitutes a “process”, however.   The Supreme Court ruled that the machine-or-transformation test is just an important and useful clue in determining whether an invention is patent-eligible subject matter.  Thus, the Court’s guidepost precedents in the patent cases of Benson, Flook, and Diehr , which affirm that “laws of nature, physical phenomena, and abstract ideas” are exceptions to the patentable subject matter requirements of §101, should broadly control any inquiry as to whether an invention is patent-eligible subject matter.

Of particular interest to patent practitioners is that the opinion holds that a business method is simply one kind of “method” that is, at least in some circumstances, eligible for patenting under §101.  Business methods cannot be categorically excluded as patent-eligible subject matter under §101.  This contrasts starkly with the position taken by Justice Stevens in his lengthy concurrence (a dissent of sorts), which would have held that a series of steps for conducting business is not, in itself, patentable subject matter.

AFFIRMED.

JW Note: There are many other Bilski summaries available at your local patent blogs, which delve more into the analysis of this important case. However, the take-home from my reading is fairly simple: 1) business methods are patentable; 2) laws of nature, physical phenomena, and abstract ideas are not patentable (duh); and 3) the machine-or-transformation test can still be used, but only as a “guide” for determining patent-eligibility of an invention.

In fact, 3) appears to already have been implemented into USPTO practices, as evidenced by this memo promulgated to the Examining Corps shortly after the Bilski decision issued.    The memo acknowledges that even if the machine-or-transformation is satisfied, it can be rebutted by establishing that the invention does not fall into one of the excluded categories of 2).  In my opinion, this was a good decision by the Supreme Court, and certainly a workable outcome for applicants and patent practitioners!