Supreme Court Will Hear Bilski Despite SG’s Recommendation

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by Brian Fletcher on June 1, 2009

The case is a challenge to an en banc ruling last October by the U.S. Court of Appeals for the Federal Circuit that a process for predicting and hedging risk in commodities markets did not deserve a patent, because it was not tied to a machine, and did not result in a physical transformation.


The In re Bilski machine-or-transformation test for patentable subject matter is “drawn directly from” the U.S. Supreme Court’s decisions on the issue, the U.S. Solicitor General argued in a May 4 brief submitted in opposition to the petition for a writ of certiorari in the case (Bilski v. Doll, U.S., No. 08-964, brief filed 5/4/09).


Saying that further review of the case is not warranted, the brief also noted with approval that the U.S. Court of Appeals for the Federal Circuit repudiated its “useful, concrete, and tangible” test for patentable processes.


Further, in countering both the petition and the dissenting opinions in the case, the brief contended that the patent application in the instant case does not provide an opportunity to confront the issue of whether the machine-or-transformation test forecloses patentability on “frontier technologies.”


Questions Presented


The U.S. Court of Appeals for the Federal Circuit, in weighing the patentability of the claimed risk-hedging process, defined the test for determining patentable subject matter for process claims on Oct. 30 in In re Bilski, 545 F.3d 943, 88 USPQ2d 1385 (Fed. Cir. 2008) (en banc) (211 PTD, 10/31/08).


The court held that “A claimed process is surely patent-eligible under [35 U.S.C.] §101 if: (1) it is tied to a particular machine or apparatus, or (2) it transforms a particular article into a different state or thing.”


The majority opinion generated several critical reactions from the patent community immediately after the decision, and continues to stir debate even among international jurists.


The petition seeking Supreme Court review was filed Jan. 28 by the law firm Finnegan, Henderson, Farabow, Garrett & Dunner, Washington, D.C., on behalf of the rejected business method patent applicants, but citing as the real party in interest EQT IP Ventures LLP, Las Vegas(17 PTD, 1/29/09).


The petition presented two questions:


Whether the Federal Circuit erred by holding that a “process” must be tied to a particular machine or apparatus, or transform a particular article into a different state or thing (“machine-or-transformation” test), to be eligible for patenting under 35 U.S.C. §101, despite this Court’s precedent declining to limit the broad statutory grant of patent eligibility for “any” new and useful process beyond excluding patents for “laws of nature, physical phenomena, and abstract ideas.”


Whether the Federal Circuit’s “machine-or-transformation” test for patent eligibility, which effectively forecloses meaningful patent protection to many business methods, contradicts the clear Congressional intent that patents protect “method[s] of doing or conducting business.”  35 U.S.C. §273.


The petition frequently cited the dissenting opinion of Judge Pauline Newman that accompanied what the petition called the Federal Circuit’s “fractured decision.”


Test Drawn Directly From Diehr


The government’s brief in opposition, submitted by Solicitor General Elena Kagan, questions the petitioners’ claim that the Federal Circuit’s ruling was “fractured.”


Of the 9-3 decision, Kagan said that only Newman’s dissent “would have held that petitioners’ claimed method was patentable.”  Judge Randall R. Rader’s dissenting opinion would still have rejected the application “solely on the ground that it seeks to patent an abstract idea,” Kagen said, adding that Judge Haldane Robert Mayer’s dissent would have held all patents directed to methods of conducting business unpatentable.


Supporting the majority opinion, Kagan said that the machine-or-transformation test “is drawn directly from [the Supreme Court’s] most recent decisions.”  The brief cited with approval the Federal Circuit’s view that the test is effectively a restatement of the holding that “[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” in Diamond v. Diehr, 450 U.S. 175, 205 USPQ 488 (1981).


Put ‘Anything Under the Sun’ in Context


The solicitor general’s brief also knocked down the argument made by petitioners and others that Congress, in passing the 1952 Patent Act, intended a broader scope for patentability, reflected in the Supreme Court’s decision in Diamond v. Chakrabarty, 447 U.S. 303, 206 USPQ 193.


In that decision, the court echoed a phrase in the legislative record that “anything under the sun that is made by man” is patentable, but Kagan presented the full quote:


A person may have ‘invented’ a machine or a manufacture, which may include anything under the sun that is made by man, but it is not necessarily patentable under section 101 unless the conditions of the title are fulfilled.


Thus, she said, that language “was not addressed to process claims at all, but rather to machines and ‘manufactures,’ which this Court had previously construed to encompass ‘anything made for use from raw or prepared materials.’ ”  “It refers to things ‘made by man,’ not to methods of organizing human activity,” she said, quoting Judge Timothy B. Dyk’s concurring opinion in Bilski.


Opinion Does Not Address Frontier Technologies


The government’s brief further took issue with the petitioners’ contention that the machine-or-transformation test “threatens to stifle innovation in emerging technologies.”  “Newman’s dissenting opinion in Bilski was even more strongly worded, referring to the need for patentability in technologies at “the frontiers of science,” and saying the majority opinion would limit “eligibility for patenting to what has been done in the past, and to foreclose what might be done in the future.”


The solicitor general instead argued that the majority opinion “does not address the application of the machine-or-transformation test to computer software, data-manipulation techniques, or other such technologies not involved in petitioners’ risk-hedging claim” (emphasis added).  The brief cited with approval the Federal Circuit’s approach to emerging technologies, quoting from the Bilski opinion:


[W]e agree that future developments in technology and the sciences may present difficult challenges to the machine-or-transformation test, just as the widespread use of computers and the advent of the Internet has begun to challenge it in the past decade. … And we certainly do not rule out the possibility that this court may in the future refine or augment the test or how it is applied.  At present, however, and certainly for the present case, we see no need for such a departure.


“Such an accretionary approach is entirely consistent with [the Supreme Court’s] decisions,” the solicitor general said, lauding the approach as “prudent” in also providing a clear rule for process claim examination by the Patent and Trademark Office.


Case Not a Suitable Vehicle


Even if the petitioners’ policy concerns were justified, Kagan argued, “they are essentially irrelevant to the proper disposition of this case because petitioners’ patent application involves none of the frontier technologies on which the petition dwells.”


The inventors’ risk-hedging claim should not be considered allowable under the two Federal Circuit cases deemed by many to have authorized business method patents, she said, distinguishing those cases.  Unlike the petitioners’ claims, which describe nothing more than a series of steps performed by humans, she said, the disputed claim was drawn to a “machine” in State Street Bank & Trust Co. v. Signature Financial Group Inc., 149 F.3d 1368, 47 USPQ2d 1596 (Fed. Cir. 1998), and to a “machine-based process” in AT&T Corp. v. Excel Communications Inc., 172 F.3d 1352, 50 USPQ2d 1447 (Fed. Cir. 1999).


Finally, the brief addressed petitioners’ second question presented, that the majority opinion is inconsistent with Section 273 of the Patent Act, which provides an infringement defense to preexisting users of patented business methods.


First, Kagan said, “This case does not provide a suitable vehicle for addressing the meaning and scope of Section 273.” She noted that the issue was neither argued nor “a focus of the briefing” below, inasmuch as infringement was not at issue here.


More importantly, she said that “nothing in the decision below is inconsistent with Section 273. … The text of Section 273 does not address the criteria for patent-eligibility, much less adopt a ‘useful, concrete, and tangible result’ test.”


Again, she repeated that the Bilski decision “did not hold that business methods are categorically ineligible for patent protection,” and made note of the fact that the majority did not accept Mayer’s dissenting opinion that would have held just that.


In a footnote, she added, potentially anticipating concerns about the broader implications of the Federal Circuit’s ruling, that “nothing in the decision below threatens the eligibility of biotechnological or chemical inventions for patent protection, as long as they involve a transformation.”


Accordingly, the brief concluded, the petition for writ of certiorari should be denied.


Should be interesting to see how it will play out that Bislsi “does not address the application of the machine-or-transformation test to computer software, data-manipulation techniques, or other such technologies ….”

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