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U.S. Supreme Court Affirms Rejection, Says No Exclusive Test For Patentability

WASHINGTON, D.C. - (Mealey's) In a long-anticipated ruling, the U.S. Supreme Court on June 28 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.).

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, 182 [1981]).

"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 Sotomayor.

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 [1998]).  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 [1978]) and Gottschalk v. Benson (409 U.S. 63, 70 [1972]), the majority held.

[Editor's Note:  Full coverage will be in the July 2 issue of Mealey's Litigation Report: Intellectual Property.  In the meantime, the decision is available at or by calling the Customer Support Department at 1-800-833-9844.  Document #16-100702-010Z.  For all of your legal news needs, please visit]

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