On June 1st the Supreme Court agreed to review a case PK took a particular interest in: In Re Bilski, now known as Bilski v. Doll. The Bilski patent is a method of hedging risks in commodities trading and the type of patent is known as a business method patent. The method basically involves asking two parties about the risk of a purchase to better understand how to value a commodity. The initial patent examiner rejected Bilski's invention on the grounds “the invention is not implemented on a specific apparatus and merely manipulates [an] abstract idea and solves a purely mathematical problem without any limitation to a practical application, therefore, the invention is not directed to the technological arts.” The outcome of this case could have a significant impact on the boundaries of what inventions are patentable.
The two questions the Court has been asked to answer by Bilski are:
1) Whether the Federal Circuit erred in holding that a “process” must be tied to a particular machine or must transform something into a different state or thing (this is the “machine-or-transformation” test)
2) Whether the “machine-or-transformation” test adopted by the Federal Circuit contradicts Congress's intent to protect “method[s] of doing or conducting business” in 35 U.S.C. Section 273
Question 1 asks the court if the Federal Circuit is using the right test to determine if an idea is eligible for patent protection. Here the court has the options to uphold the test endorsed by the Federal Circuit or to rewrite the test altogether. PK hopes that the court starts over with a better test. Question 2 is a little more clever: the question tries to focus the court on a plain reading of the statute to invalidate the Federal Circuit test. The second question basically says, “Congress wanted to cover the business methods — it says so right there in the statute — thus you should protect them.” Fortunately for us, the court has more than just one sentence of the patent act, taken out of context, to look at to form its decision. The Court can and should look at the larger question of whether business method patents are eligible for protection under the patent act given the constitutional constraints of Article 1 Section 8 Clause 8. If the answer is yes, of which I am personally dubious, then the court should go back to question 1 and make sure that the test they approve does the best job of creating an incentive to innovate, while not stifling future innovation or access to ideas in a way that harms the public.
These questions target the heart of the issues raised in Bilski: what are the boundaries of patentable subject mater, and how abstract can an invention be before it is no longer patentable? This case is also particularly interesting as many of the judges for the Federal Circuit, both agreeing with and disagreeing with the majority opinion, thought that the majority did not go far enough to limit business method patents. The majority opinion did not completely over rule the earlier business process patent case State Street. State Street is the case that basically expanded business process patents by allowing a patent for an accounting method that used computers to crunch the numbers involved on the grounds that “it produce[d] a useful, concrete and tangible result.” Judge Mayer dissented on grounds including that the court failed to overrule State Street explicitly. At the Federal Circuit level in Bilski, Judge Dyk, joined by Judge Linn, also agreed with Judge Mayer that the framers of the Constitution intended to limit patent protection by excluding “methods for organizing human activity that do not involve manufactures, machines, or compositions of matter.” All three of these judges would have supported a more limited patent test then the one supported by the majority.
Not all of the judges at the Federal Circuit level wanted to see patents restricted. On the other side of the argument, Judge Rader states that “the Supreme Court has counseled that the only limits on eligibility are inventions that embrace natural laws, natural phenomena, and abstract ideas.” This reading of the Supreme Court's past cases places very few limits on patents and could lead to an expansion of already growing patent abuses. I am very curious if the Supreme Court will agree with Rader on his reading of their past opinions. Rader also explicitly points out the fact that software patents have no anchor in the physical world, but he argues software should be allowed patent protection. Although it should be noted that even Rader would reject the Bilski patent, he would just rewrite the majority opinion to be one sentence long: “Because Bilski claims merely an abstract idea, this court affirms the Board’s rejection.” This means that Rader would uphold State Street, but finds Bilski to have gone too far, while the Federal Circuit in rejecting Bilski is doing it in a way that only complicating things.
As you may remember, PK, in coalition with Consumers Union and Electronic Frontier Foundation, submitted a friend-of-the-court brief with the Samuelson Law, Technology, and Public Policy Clinic. This brief argued that non-technological inventions, like abstract business methods, should not be patentable. The coalition brief focused on creating a five factor test based on past Supreme Court cases, to help determine if a process that does not transform matter, machines, or manufactures but does employ them to achieve a practice result should be granted patent protection. This test only grants protection when the process uses technologies (machines, matter, manufactures) to perform some other task. This limited test was created in the spirit of Diamond v. Diehr, a Supreme Court case, which expressly warned against allowing inventions that merely contained technology as a token aspect of a claim. The coalition test would have overturned turned State Street, while allowing other patents like In re Abele's method of improving CAT scanners. The coalition approach was not the most restricted approach to granting patents by any means. For example, Free Software Foundation's friend of-the-court-brief argued that Bilski is the right opportunity for the court to end software patents.
The relevant principle of law “[e]xclude[s] from . . . patent protection . . . laws of nature, natural phenomena, and abstract ideas.” Diamond v. Diehr, 450 U. S. 175, 185 (1981).
I would be very surprised if the Court took this case to affirm the patentable nature of Bilski's invention. Instead this case is likely to add much needed clarity and hopefully restraint to what can be patented. Several members of the Court have signaled that they are searching for a case to reevaluate the boundaries of patent law with regards to business methods. In the Court's decision eBay v. MercExchange, concurring Justices Kennedy, Breyer, Souter, and Stevens issued a warning to courts to be on the look out for “the potential vagueness and suspect validity” of business method patents. Then again in 2006, Justices Breyer, Stevens and Souter, argued that the Court should have reviewed the case Lab Corp v. Metabolite. The Justices made the case that the legal standard in State Street, or at least the way it was being read, created an erroneous legal test which would allow some patent-ineligible ideas to be granted patent protection. Theses three justices also pointed out that “sometimes too much patent protection can impede rather than 'promote the Progress of Science and useful Arts,' the constitutional objective of patent and copyright protection[,]” something PK believes in strongly.