The Supreme Court Rules on Bilski v. Kappos, No. 08-964

The Supreme Court Rules on Bilski v. Kappos, No. 08-964

Clarifies Scope of Patent-Eligible Subject Matter

On June 28, 2010 [Bilski v. Kappos, 2010 U.S. LEXIS 5521 (U.S. June 28, 2010)], the Supreme Court of the United States issued its much anticipated decision on patent-eligible subject matter under 35 U.S.C. § 101. This is the first section 101 decision in 29 years, since Diamond v. Diehr in 1981. Although the Bilski Court split 5-4 in upholding the patentability of business method patents, the Court unanimously disagreed with the Federal Circuit that the "machine-or-transformation test" is the "sole test" for determining whether a method claim satisfies section 101. Writing for the Court, Justice Kennedy acknowledged that the machine-or-transformation test provides an important clue or investigative tool. Additionally, the Court recognized that section 101 precludes an interpretation of the term "process" that categorically excludes business methods. With Bilski, the Court reaffirmed the vitality of its previous decisions in Diehr, Benson, and Flook, and confirmed that section 101 should not be narrowed based on the type of science or technology.


Test for Patent-Eligible Subject Matter
The Supreme Court disagreed with the Federal Circuit that to be patent eligible, a process must satisfy the "machine-or-transformation" test:

  • it is tied to a particular machine or apparatus, or
  • it transforms a particular article into a different state or thing.

Rather, the Court, held that the machine-or-transformation test is "a useful and important clue, an investigative tool, . . . [but] is not the sole test for deciding whether an invention is a patent-eligible 'process.'"

Section 100(b) defines the term "process" as "process, art or method, and includes a new use of a known process, machine, manufacture, composition of matter, or material." The Court was unaware of any "ordinary, contemporary, common meaning" that would require these terms to be tied to a machine or to transform an article.

The Court also noted that its prior decisions indicate that the machine-or-transformation test was not intended to be an exhaustive or exclusive test. See Gottschalk v. Benson, 409 U.S. 63, 70 (1972); Parker v. Flook, 437 U.S. 504, 588-89 (1978). Rather, "[s]ection 101's terms suggest new technologies may call for new inquiries." The Information Age "puts the possibility of innovation in the hands of more people and raises new difficulties for the patent law." The Court was clear, however, that nothing in its opinion should be read as taking a position on where the balance should be struck between protecting innovation and granting monopolies.

Specific Subject Matter: Business Methods and Software
The Court declined invitations to exclude specific categories of technology - i.e., business methods - from patent protection. Instead, the Court held that section 101 precluded the broad contention that the term "process" categorically excludes business methods. In support, the Court relied on the plain meaning of "method" in the patent statute and 35 U.S.C. § 273(b)(1), which provides a prior use defense to infringement claims based on "a method in [a] patent." For the purposes of that defense, section 273 defines the term "method" as "a method of doing or conducting business." By establishing this defense, section 273 clarified that a business method is simply one kind of "method," which is patent-eligible under section 101. The Court reasoned that holding business methods categorically not patentable-eligible would render section 273 meaningless.

The Court declined to endorse interpretations of section 101 that the Federal Circuit has used in the past, such as in State Street Bank & Trust Co. v. Signature Financial Group, Inc., 149 F.3d 1368 (Fed. Cir. 1998). Rather, the Court held that there was no need to define what constitutes a patent-eligible process beyond pointing to the definition of the term provided in section 100(b) and looking to the guideposts in Benson, Flook, and Diehr. Following this precedent, the Court held that the specific claims at issue pertaining to hedging risk from price fluctuations in the commodities industry were not patent-eligible because they claimed an abstract idea. The Court stated that the opinion does not foreclose the Federal Circuit's development of other limiting criteria that further the purposes of the Patent Act and are not inconsistent with its text.

By ensuring the vitality of its section 101 precedent, the Court confirmed the broad, flexible approach to analysis under section 101. The Court was cognizant not to exclude new and unforeseen technologies by limiting patent-eligibility to a single test. While the Court declined to further define a patent-eligible "process," the Court did not prohibit the Federal Circuit from developing further limitations. Many district court cases have been stayed pending the decision in Bilski. With those cases back on track, the Federal Circuit is sure to have its share of section 101 cases to continue to develop precedent along the lines set forth by the Supreme Court today.

Separate Opinions
Justice Stevens authored a 47-page concurring opinion, which was joined by Justices Ginsburg, Breyer and Sotomayor, in which he argues that business methods are not patent-eligible subject matter. Justice Stevens based his argument on the development of patentable subject matter throughout the history of American patent jurisprudence.

Justice Breyer's short 4-page concurring opinion, joined by Justice Scalia, emphasizes that the entire Court agreed that the claims at issue were "unpatentable abstract ideas." He further noted four points of agreement between all nine justices: (1) that section 101 is not unlimited; (2) that the machine-or-transformation test remains a helpful "clue" to patent eligibility; (3) that machine-or-transformation is not the sole test for determining patentability; and (4) that the Court's holding should not be read as an endorsement of the Federal Circuit's "useful, concrete and tangible result" test as set out in State Street.


If you have any questions about how this decision may impact your company, please contact your attorney at Brinks Hofer Gilson & Lione.

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