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

Machine-or-Transformation Test

Again, the Court of Appeals stated that a process is only patentable if it is (1) tied to a particular machine or apparatus, or (2) it transforms a particular article into a different state or thing. So, with a reminder of the test, Justice Kennedy went on to slap the wrists of the Court of Appeals:

"This Court has "more than once cautioned that courts 'should not read into the patent laws limitations and conditions which the legislature has not expressed.'" (Diamond v Diehr (1981). In patent law, as in all statutory construction "[u]nless otherwise defined, 'words will be interpreted as taking their ordinary, contemporary, common meaning.'"....

The Court has not indicated that the existence of these well-established exceptions gives the Judiciary carte blanche to impose other limitations that are inconsistent with the text and the statute's purpose and design.

Adopting the machine-or-transformation test as the sole test for what constitutes a "process" violates these statutory interpretation principles."

So considering the ordinary, contemporary, common meaning of the section 100(b) definition of "process" (cited above), the Court questioned how on earth the Court of Appeals thought this would require the definition of "process" to be tied to a machine or transformation. The Court of Appeals was further chastised for incorrectly concluding that the Supreme Court had endorsed the machine-or-transformation test as the exclusive test. Although Cochrane v Deener (1877) explained a process as "an act, or a series of acts, performed upon the subject-matter to be transformed and reduced to a different state or thing" later authorities had rejected the overly broad implications of the case.

Key Point: Following this discussion, the Supreme Court ruled that although the machine-or-transformation test was held to be a "useful and important clue, and investigative tool, for determining whether some claimed inventions are processes under section 101", it is not the sole test for deciding whether an invention is a patent-eligible "process". The Court recognized that although historically it may have been the case that patents for inventions that did not satisfy the machine-or-transformation test were rarely granted in earlier eras, times have changed and unforeseen innovations may not satisfy this test but may still be patentable. To hold that the machine-or-transformation test is the sole test for "process" patentability would "create uncertainty as to the patentability of software, advanced diagnostic medicine techniques, and inventions based on linear programming, data compression, and the manipulation of digital signals." Further section 101's terms were so expansive that it's wording suggests and allows for new tests for new technologies.

Business Method Patents

To undermine the argument that the patentability of business methods should be categorically excluded from Section 101's scope, the Court again examined the statutory wording of the definition of the term 'method'. The definition of "method" includes a "process" which of course may indeed include at least some methods of doing business. This categorical exclusion is further undermined when section 273(b)(1) and section 273(a)(3) are examined. These sections define "method" as "a method of doing or conducting business." The statute itself therefore recognizes that there may be business method patents. Albeit problematic in terms of vagueness and validity, the Court therefore held that business methods are patent eligible.

The Bilski Patent

The Court concluded that although the two limitations - machine-or-transformation and business method patents - are not sole exclusions when determining whether a process is patent eligble, the Bilski patent still did not satisfy as a "process". It was instead a "concept" for hedging risk and the application of that concept to energy markets. The patent was, the Court said, an attempt to patent abstract ideas. The Court cited the cases of Benson, Flook and Diehr as bench-posts for determining whether a process was patent eligible.

Benson determined that an application for an algorithm used to convert binary-coded decimal numerals into pure binary code was not a process but an unpatentable idea because it was a "formula for converting...numerals to pure binary numerals". Flook went further. In this case the the patent application was for a procedure for monitoring the conditions during the catalytic process in the petrochemical and oil-refining industries, but the only innovation in the application relied on a mathematical algorithm. Although the Court here conceded that the invention had been limited so that the invention could be freely used outside the petrochemical industries, it still rejected the patent "not because it contan[ed] a mathematical algorithm as one component, but because once that algorithm [wa]s assumed to be within the prior art, the application, considered as a whole, contain[ed] no patentable invention". In Diehr the Court established limitations on the principles in Benson and Flook by explaining that while an abstract idea, law of nature, or mathematical formula could not be patented " an application of law of nature or mathematical formula to a known structure or process may well be deserving of patent protection."

Following these three precedents the Court determined that the Bilski application explained the basic concept of hedging or protecting against risk and reduced it to a mathematical formula - an unpatentable abstract idea just like the algorithms in Benson and Flook. The Court therefore concluded that the Bilski patent was not patent eligible.

This majority decision was uniquely and strangely brief for such an important case. The brevity and the language used in the decision was heavily criticized by Justice Stevens. The AmeriKat will be back next week to discuss Justice Stevens lengthy reasoning and criticism of the abrupt majority decision.