In Bilski v Kappos, 130 S Ct 3218 (2010) the majority of the US Supreme Court held the business method patent at issue to be unpatentable as claiming an “abstract idea” (13). But Bilski has by no means settled the question of whether business methods are patentable in US law. There is a long-standing division of opinion in the US courts as to what it means to claim an “abstract idea,” that parallels the European debate over the meaning of the “as such” proviso in EPC Art 52(3). The contrasting post-Bilski decisions of the Federal Circuit in Ultramercial v Hulu, 657 F 3d 1323 (Fed Cir 2011) and last Friday’s decision in Dealertrack v Huber, 2009-1566, -1588 (Fed Cir 2012) show that this split is alive and well.
One strand, exemplified by the US Supreme Court decisions in Benson 409 US 63 (1972) and Flook 437 US 584 (1978), understands the rule as a substantive objection to patenting ideas or algorithms. A claim is invalid if it would “wholly pre-empt the mathematical formula and in practical effect would be a patent on the algorithm itself” (Benson 72). So, according to Flook at 591-92: “Whether the algorithm was in fact known or unknown at the time of the claimed invention . . . it is treated as though it were a familiar part of the prior art.”
This divergence was not resolved by Bilski. In Ultramercial the Federal Circuit held that a claim to a method for distributing copy-righted products (e.g. songs, movies, books) over the Internet was patentable subject matter, on the basis that it was “a practical application of the general concept of advertising as currency” (14). In contrast, in Dealertrack a different panel of the court held claims to a computer aided method of managing a car loan credit application through an electronic clearinghouse to be unpatentable subject matter on the basis that the claims were “directed to an abstract idea preemptive of a fundamental concept or idea” (35). Though the claims were limited to the use of a clearinghouse in the car loan application process, “it nonetheless covers a broad idea”, (37) and simply adding a “computer aided” limitation is insufficient to render the claim patent eligible (36).
This Kat’s view is that both approaches are wrong. While Chief Judge Rader is right in his approach to the rule against abstract claims, which was distorted beyond recognition by the US Supreme Court in Benson and Flook, the US courts generally have been wrong to refuse to identify any limits on subject matter patentability other than that imposed by that rule. The concurrence of Justice Stevens in Bilski adopts the right approach, which is to say that the rule against abstract claims and exclusion of particular subject matter fields are entirely distinct, so that it is quite possible for a business method to survive the rule against abstract claims, because it is embodied in a practical application, and yet still be invalid on the basis that business methods are excluded, even if it is claimed in a practical application. Whether business methods in particular are an excluded field is a distinct question which flows from this framework. By consistently addressing subject matter exclusions in terms of the rule against abstract claims, the US Supreme Court has used the wrong tool for the job; consequently, it has damaged the tool, and done a poor job.
For more of this Kat’s views on the incoherence of the US approach, see here, and see here for more on the rule against abstract claims.