Letter from AmeriKat I: Bilski, Baby! (Justice Kennedy)

The AmeriKat would like to wish you and yours a very Happy Fourth of July!

Like many people when the AmeriKat is expecting to hear from someone or about something every e-mail inbox alert and text message beep makes her heart race and her whiskers twitch with the expectation of the message inside. Never more so than in the past few weeks has the AmeriKat been prowling by her computer, phone and various communication devices. (picture, left - the AmeriKat pawing at her phone expectantly) But with every 'ring' and 'badoop', her tail would soon drop when the message revealed the lackluster and predictable. But this past Monday, the Amerikat, after weeks of anticipation, received the message that finally merited her resulting purr - the Supreme Court issuing their decision in the case of Bilski! She has been waiting all week to get her paws on the 71-page judgment, but her evenings have been jammed packed with those gorgeous summer events that occupy us all. But finally, for your reading pleasure, she sets out the reasoning of the Supreme Court in the year's most talked about patent case.

Given the length and technicality of the decision (especially Justice Stevens' opinion), this week's post on the topic will be a "four-parter". The first of the two-parts this week will focus on Justice Kennedy's majority opinion. The final two-parts will address Justice Stevens epic concurring opinion next week.

Bilksi et al v Kappos (2010)

Last Monday after weeks and months of waiting, the US Supreme Court issued their decision in Bilski ruling that business method patents were patentable, just not this one. Justice Kennedy, who was joined by Justices Roberts and Thomas, delivered the opinion of the Court with reasoning lasting a mere 16-pages. But what about the remaining 57 pages? Well, the AmeriKat's favorite Justice, Justice Stevens, took care of that with his concurring judgment joined by Justices Ginsburg, Breyer and Sotomayor. For those not familiar with the political affiliations of the Justices, the Justice Kennedy group are considered conservatives, whereas the Justice Stevens group is the liberal group. The AmeriKat is struck by this political 'division' (as much as there can be in a unanimous decision) in the court in a patent case.

Background

Prior to launching to the reasoning of the court, the background of the case is as follows: Bilski et al filed a patent application for an invention that explains how commodities buyers and sellers in the energy market can protect (or hedge) against the risk of price changes. The key claims at issue were as follows:

Claim 1 - describe a series of steps instructing how to hedge risk, namely:

(a) initiating a series of transactions between said commodity provider and consumers of said commodity...

(b) identifying market participants for said commodity having a counter-risk position to said consumers...

(c) initiating a series of transactions between said commodity provider and said market participants ...

Claim 4 - formulates Claim 1 into a mathematical formula

Rest of the Claims - describe how claims 1 and 4 can be applied to allow energy suppliers and consumers to minimize the risks resulting from fluctuations in market demand.

The USPTO patent examiner rejected the application on the grounds that the invention was not implemented on a machine or apparatus and was thus just a method for solving a mathematical formula. The Board of Patent Appeals and Interferences agreed, as did the Federal Circuit. The US Court of Appeals for the Federal Circuit's en banc court rejected their previous test for determining whether a claimed invention was a patentable "process" under Section 101 of the Patent Act. (picture, left - Justice Kennedy) The test was whether the invention produced a "useful, concrete and tangible result"(State Street Bank & Trust Co v Signature Financial Group (1998) ). The en banc court instead held that the claimed process is patent eligible if it satisfied the "machine-or-transformation test". This test asks whether the claimed patent is either tied to a particular machine or apparatus, or transforms a particular article into a different state. The Court of Appeals then concluded that this was the sole test for determining whether a process was patent eligible under section 101. Applying this 'sole' test, the court determined that the Bilski patent did not satisfy this test and was therefore not patent eligible (the AmeriKat believes this terminology is used instead of 'patentable', because if something is patentable then it is patentable, whereas 'patent eligible' suggests that there is an eligibility for patentablilty but it may not actually be patentable - see this IPKat post). The writ of certortai was granted last year and oral argument took place last October (see previous AmeriKat post here).

So the question the court had to decide was this: Can an invention for the business world be patent eligible?

Justice Kennedy's opinion

It is important to note, of course, that the Court made clear that they were "not commenting on the patentability of any particular invention", especially on those technologies from the Information Age. The Court recognized that the the Information Age had democratized the possibilities of innovation ad was careful to note that "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."

After first outlining the background of the case, Justice Kennedy delved into the meaning of Section 101 of the Patents Act. Section 101 states:

Whoever 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.

Section 101 identifies four categories of inventions that are eligible for protection - process, machines, manufactures and compositions of matter. The eminent case of Diamond v Chakrabarty (1980) was cited to emphasize the 'expansive' approach Congress intended Section 101 to fulfill when determining whether something was patentable to encourage ingenuity. There are three exceptions to section 101's broad patent-eligibility principles - laws of nature, physical phenomena, and abstract ideas. These exceptions were a product of case-law and not of statutory origin, but are consistent with the notion that a patentable process must be "new and useful".

The Court reiterated that section 101's patent-eligibility inquiry is only a threshold test, so even if an invention qualifies into one of the four categories it must still satisfy the tests for novelty (section 102), non-obviousness (section 103), and being full and particularly described (section 112).

The Bilski patent was claimed to be a "process". Section 100(b) defines a "process" as a " process, art, or method, and includes a new use of a known process, machine, manufacture, composition of matter, or material". Justice Kennedy's opinion then considered the two categorical limitations of "process" patents: (A)the machine-or-transformation test and (B) the categorical exclusion of business method patents.

Continued in Part II.