WASHINGTON, D.C. - (Mealey's) In a long-anticipated
ruling, the U.S. Supreme Court on June 28, 2010 agreed with the Federal Circuit
U.S. Court of Appeals that a method for hedging consumption risk costs is not
patent-eligible and is instead an "abstract idea" (Bernard L. Bilski
and Rand Warsaw v. David J. Kappos, No. 08-964, U.S. Sup.; See 11/16/09,
The majority, in an opinion
written by Justice Anthony Kennedy, stopped short of endorsing the
"machine-or-transformation" test as an exclusive test for patentability, however.
According to the majority,
that standard - in which the Federal Circuit redefined the word "process" to
exclude all processes that do not transform physical subject matter or that are
not performed by machines - "may be a useful and important clue or
investigative tool" for courts, but it nonetheless violates the principles of
statutory interpretation set forth in Diamond v. Diehr (450 U.S. 175,
"The court is unaware of any
ordinary, contemporary, common meaning of 'process' that would require it to be
tied to a machine or the transformation of an article," the majority held.
Justice Kennedy was joined in
full by Chief Justice John G. Roberts Jr., Justice Clarence Thomas and Justice
Samuel Alito. Justice Antonin Scalia joined with the majority in
part. Justice Stephen Breyer issued a concurrence, which was joined by
Justice Scalia, while Justice John Paul Stevens issued a separate concurrence,
joined by Justice Ruth Bader Ginsburg, Justice Breyer and Justice Sonia
In September 2006, the U.S.
Patent and Trademark Office's (PTO) Board of Patent Appeals and Interferences
affirmed the PTO's rejection of the patent application by petitioners Bernard
Bilski and co-inventor Rand Warsaw. The board ultimately found that "in questionable
cases" involving method or process claims, "the public interest is best served
in making a rejection."
The Federal Circuit in February 2008 granted en banc review of the board
ruling and heard oral arguments in May 2008. In its ruling, the Federal
Circuit upheld the rejection, saying "transformations or manipulations of . . .
business risks, or other such abstractions cannot meet the test because they
are not physical objects or substances." The panel then clarified and
endorsed the machine-or-transformation test, rejecting as "inadequate" the
standard set in State Street Bank & Trust Co. v. Signature Financial
Group Inc. (149 F.3d 1368 ). The Supreme Court agreed last
summer to review that ruling, leading more than 60 amici to file briefs
over the following months. Oral arguments were held in November.
Claiming to have resolved the
case "narrowly," the majority noted that "all members of the court agree that
the patent application at issue here falls outside of [Section] 101 [of the
Patent Act] because it claims an abstract idea." The majority declined
the opportunity to take its analysis a step further and definitively craft a
test for patent eligibility, however, a point urged by most amici.
"The Court need not define
further what constitutes a patentable process beyond pointing to the
definitions of that term provided in [Section] 100(b) [of the Patent Act] and
looking to the guideposts" of Diehr, Parker v. Flook (437 U.S.
584, 588 ) and Gottschalk v. Benson (409 U.S. 63, 70 ), the
[Editor's Note: Full
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