The Federal Circuit issued an en banc decision in In re Bernard L. Bilski late last week, making clear that for every action, there is an equal and opposite reaction. While theoretically leaving alive the prospect of valid business method patents, the Court made clear that unless a process claim is "tied to a particular machine or apparatus" or "transforms a particular article into a different state or thing," the reaction is scientifically certain - no patentable subject matter.
Bilski applied for a patent that claimed, among other things, a method for hedging risk in the field of commodities trading, although the application extended the claim to other non-commodity transactions. The Examiner rejected the claim as an abstract idea. While the Board of Patent Appeals concluded that the Examiner's test (requiring technological arts and a specific apparatus) was erroneous, it also determined that the application was nonetheless nonpatentable because it merely claimed an intangible idea (in this case "transformation of risks") and thus was not patentable subject matter under the "process" component of Section 101.
The Federal Circuit brought its own method to the process.
The Federal Circuit identified the critical inquiry as whether the claim recites a fundamental principle and, if so, whether it would pre-empt substantially all uses of the fundamental principle. More simply, the query is whether the claim is narrow enough to encompass only particular applications of a fundamental principle rather than preempting the principle itself. Claims directed to a particular machine or apparatus, or that transform a particular article into a different state or thing, are "surely patent-eligible" because they would not preempt all other uses.
While previously the Supreme Court precedent may have been equivocal as to the machine-or-transformation test, the Federal Circuit put all such equivocation to rest by adopting the machine-or-transformation test as the sole test for governing patentability under Section 101, repudiating the "useful, concrete, and tangible" test from its State Street decision -- at least for the time being, while leaving room for future refinement to its newly announced method:
"Nevertheless, we agree that future developments in technology and sciences may present difficult challenges to the machine-or-transformation test, just as the widespread use of computers and the advent of the Internet has begun to challenge it in the past decade. Thus, we recognize that the Supreme Court may ultimately decide to alter or perhaps even set aside this test to accommodate emerging technologies."
As scientific discoveries continue, apparently so might the method of analysis announced in Bilski.
Bilski Method Applied
The Bilski application for a method to hedge commodities risk did not transform any article into a different state or thing. Because it failed to meet the machine prong as well, it is not patent-eligible subject matter. The claim constituted a purely mental process that would preempt the use of mathematical calculations to facilitate hedging.
A limitation in the claim limiting it to the field of consumable commodities was not a sufficient limit to salvage the claim's patentability. The Federal Circuit addressed the generally-insufficient addition of a field of use limitation designed to curtail the scope of an otherwise-preempting fundamental principle. In drawing a distinction between the use of a fundamental principle in a particular field of art rather than for a particular use, the Court noted that only the latter scope is patentable, while the former is not.
Bilski Practical Tips:
- Where an algorithm or formula is central to the innovative idea, ensure that that the claims are directed to a particular apparatus -- perhaps using dependent claims (e.g., separate claims in which the fundamental process is related to a machine, such as a computer, a calculator, a slide rule, an abacus, and so on).
- Even without a particular apparatus or machine, draft claims to highlight the transformative nature of the process.
- In litigation, Bilski will place a premium on construing limitations in method claims that are arguably directed to particular tangible applications or uses.
- Litigants unsatisfied with the likely results of a machine/transformation test will have to start early to develop case themes and a discovery record to demonstrate why the test is insufficient and so take advantage of the Court's willingness to consider "future developments in technology."
- Given the Court's warning that Sections 102 and 103 considerations are not relevant to Section 101, litigants will have to exercise care and vigilance in developing discrete records for each statute, especially given a likely overlap among the facts that bear on all three issues (e.g., "surprise results" may have bearing on both the "transformation" prong and a Section 103 obviousness analysis).
Perhaps there is a method to the madness. E = mc2 is an important scientific discovery. It's just not patentable.
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