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Supreme Court rules some business methods patentable subject matter

By Christian Ehret

[JURIST] The US Supreme Court [official website; JURIST news archive] on Monday ruled [opinion, PDF] in Bilski v. Kappos [Cornell LII backgrounder] that business method patents [Jones Day backgrounder] may qualify as patentable subject matter but that a specific method for hedging risks in commodities trading is ineligible for patent protection because it is an abstract idea. Justice Anthony Kennedy, writing for a divided court and affirming the invalidity of the patent at issue, rejected the ruling [opinion, PDF; JURIST report] of the US Court of Appeals for the Federal Circuit that the "machine-or-transformation test" is the exclusive consideration for determining whether a process is patentable subject matter under 35 USC § 101 [text]. Instead of premising the patentability of a process on whether it is "tied to a particular machine or apparatus" or "transforms a particular article into a different state or thing," the court suggested that such a test is merely a helpful inquiry rather than a per se rule. Declining to construct any new tests for determining what processes are patentable, the court stressed the importance of flexible patent protection for emerging technologies, stating that:

The machine-or-transformation test may well provide a sufficient basis for evaluating processes similar to those in the Industrial Age; for example, inventions grounded in a physical or other tangible form. But there are reasons to doubt whether the test should be the sole criterion for determining the patentability of inventions in the Information Age. ... In the course of applying the machine-or-transformation test to emerging technologies, courts may pose questions of such intricacy and refinement that they risk obscuring the larger object of securing patents for valuable inventions without transgressing the public domain. ... This Age puts the possibility of innovation in the hands of more people and raises new difficulties for the patent law. With ever more people trying to innovate and thus seeking patent protections for their inventions, the patent law faces a great challenge in striking the balance between protecting inventors and not granting monopolies over procedures that others would discover by independent, creative application of general principles. Nothing in this opinion should be read to take a position on where that balance ought to be struck.

The ruling rejects the argument that business methods are not subject to patent protection by pointing to the statutory definition of "processes," the mention of business method patents in 35 USC § 273 [text] and prior Supreme Court cases including Gottschalk v. Benson and Parker v. Flook [opinions text]. Chief Justice Roberts and Justices Clarence Thomas and Samuel Alito joined the full opinion, while Justice Antonin Scalia joined except for Parts II-B-2 and II-C-2. Justice John Paul Stevens filed an opinion concurring in the judgment, which Justices Ruth Bader Ginsburg, Stephen Breyer and Sonia Sotomayor joined. Breyer also filed a concurring opinion, which Scalia joined in part. Stevens' opinion concurs that the "machine-or-transformation test" is not the exclusive means of determining patentability for processes but disagrees with the overall patentability of business methods, stating:

But the Court is quite wrong, in my view, to suggest that any series of steps that is not itself an abstract idea or law of nature may constitute a process within the meaning of § 101. The language in the Courts opinion to this effect can only cause mischief. The wiser course would have been to hold that petitioners method is not a process because it describes only a general method of engaging in business transactions and business methods are not patentable.

Breyer's concurring opinion also rejects business methods as patentable subject matter. The short concurrence attempts to clarify the points in the opinions that all the Justices seem to agree on: that patentable subject matter is not without limit, that the "machine-or-transformation" test is still an important consideration in determining what processes are patentable, although not the sole consideration, and that the Federal Circuit's previous "useful, concrete, and tangible result" test is also incapable of wholly deciding patentability.

The patentability of business methods and software as "processes" is a controversial subject among practitioners. Monday's opinion has been long anticipated in the patent law community and adds to a significant line of cases spanning several decades defining patentable "processes." The court granted certiorari in June 2009 and heard oral arguments [JURIST reports] in November of that year. During arguments, the court approached the issue of classifying business methods and other processes as patentable subject matter broadly and with skepticism.

Full post as published by JURIST - The Paper Chase on June 28, 2010 (boomark / email).