On November 9 2009, the Supreme Court heard oral argument in In re Bilski, a case that will likely impact whether business methods, already patented and to be patented, are eligible for patent protection under US law. Patent-eligibility under section 101 of the US patent code is one of several hurdles to patentability, and requires that an invention be a "new and useful process, machine, manufacture, or composition of matter". Not all processes are patent-eligible. Although the Supreme Court has not yet precisely defined what is required of a process to be eligible, it has identified what is not eligible for patenting – laws of nature, natural phenomena, and abstract ideas (the Diehr test).
The Supreme Court has also not defined what is required of a business method to be patent-eligible, which the patent statute classifies as a "process". The Federal Circuit broke ground in State Street Bank v Signature Financial (Fed Cir 1998), holding a business method to be patent-eligible if it "produces a useful, concrete, and tangible result". In In re Bilski (2008) (en banc), the Federal Circuit held business methods to a tighter patent-eligibility test – a so-called machine-or-transformation test – requiring an invention to either "transform an article into a different state or thing" or be "tied to a machine". Because business methods transform abstractions (for example, business risks or legal obligations) and not articles, they are not patent-eligible unless "tied to a machine".
The USPTO and (arguably) the Federal Circuit have applied the Federal Circuit's Bilski decision and the machine-or-transformation test to all methods and processes. (See Classen v Biogen, Fed.Cir 2008; Mayo v Prometheus, Petition for Writ of Cert; USPTO's Interim Examination Instructions, August 2009).
The Supreme Court will now decide in Bilski whether the machine-or-transformation test is the sole way for business methods, and possibly all methods and processes, to satisfy §101 so as to be patent-eligible.
The Bilski oral argument brought to light the difficulties in finding an appropriate test. The Justices identified unresolved issues raised by the machine-or-transformation test, including the thorny issue of determining when a process is sufficiently "tied to a machine" (for example, whether adding an insignificant machine was sufficient), the likely need to revise the test in the future to accommodate unforeseen technology, and the breadth of the required transformation. The Justices inquired about a test that requires an invention be tied to technology (as in the case of Europe's "technology test"), and a test that excludes all business matters from patent protection, but neither side embraced those ideas. Respondent USPTO pressed for the machine-or-transformation test, while petitioner Bilski pressed for the Diehr test.
Bilski argued that Congress and not the courts should modify the law. However, Justice Breyer suggested that Congress would be unlikely to take something out of a law that covers "everything under the sun", and would be more apt to tailor the law if the court first narrows it. As a practical matter, the fate of patents that have already issued for business methods (and possibly all methods and processes) may hinge on which branch modifies the law. A modification by Congress could be made effective as of the enactment date and would thus only apply to future applications for patents, while a modification by the Supreme Court would likely apply to already-issued patents.
If the Supreme Court deems the machine-or-transformation test as the defining test for all methods and processes, a wide array of industries will feel the ramifications, as evidenced by the submission of 67 amicus briefs in Bilski. Business methods will need to be tied to a machine, while all other methods and processes will need to either transform an article or be tied to a machine. On the other hand, it could be a non-event if the Court simply endorses its Diehr test and decides Bilski narrowly. As Justice Ginsburg observed, "this case could be decided without making any bold steps".
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| Julia S Kim |
Cohen Pontani Lieberman & Pavane LLP
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