Post-Bilski split on patentable subject matter

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.”

Patentable

The other strand holds that the objection is to patenting of abstract ideas. If the idea or formula is embodied in a practical application, it is patentable. This was long the view of the US Federal Circuit. Despite Benson and Flook, in In re Alappat 33 F 3d 1526, 1544 (Fed Cir 1994) the court required only a “useful, concrete, and tangible result,” and similarly in State Street 149 F 3d 1368, 1373 (Fed Cir 1998) the court held that “a practical application of a mathematical algorithm” is enough to render the subject matter patentable. The rationale for this approach is that a substantive objection to patenting of ideas “if carried to its extreme, make all inventions unpatentable because all inventions can be reduced to underlying principles of nature which, once known, make their implementation obvious” (Diehr 450 US 175, 189 (1981)). As Laddie J said in Fujitsu Ltd's Application, [1996] RPC 511 at 523 (Pat), “most inventions are based on what would be viewed by many people as discoveries.”

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).

Unpatentable

The court in Dealertrack purported to reconcile Ultramercial on the wholly unconvincing basis that in Ultramercial “the patent claimed a practical application with concrete steps requiring an extensive computer interface,” whereas “the claims here recite only that the method is ‘computer aided’ without specifying any level of involvement or detail” (36). The only real distinction is that there was no overlap in the composition of the panel. Chief Justice Rader wrote the decision in Ultramercial, with Judges Lourie and O’Malley concurring. He has consistently been a strong proponent of the view that the it is only abstract claims which are prohibited – see his opinion in Bilski 545 F3d 943 (Fed Cir 2008). In Dealertrack Judge Linn wrote for himself and Judge Dyk. Judge Plager in Dealertrack declared a plague on both houses; he held that the courts should not “foray into the jurisprudential morass of §101 [subject matter] unless absolutely necessary.” He would therefore have instructed that the trial courts should always decide invalidity on all other possible grounds before addressing subject matter. (Merpel says that Judge Linn declined to adopt this approach precisely because he did not want Chief Judge Rader to be clearing the only path through the morass.)

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.