No. 13
July 2010
International Association for the Protection of Intellectual Property
AIPPI General Secretariat |Toedistrasse 16 | CH-8027 Zurich
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The Long-Awaited Bilski Decision
Mark J. Deboy, Sughrue Mion PLLC

On Monday, June 28, 2010, the U.S. Supreme Court rendered its decision in the case of Bilski v. Kappos, No. 08-964 (U.S. June 28, 2010).

The decision, with a 5-4 vote, affirmed the ruling of the Federal Circuit that Bilski's claims, which are directed to a method of hedging risk in commodities trading, were unpatentable because they claimed an abstract idea. Moreover, the majority opinion explained that business method patents are not categorically outside the realm of patentable subject matter, and that the Federal Circuit was incorrect in setting out the “machine-or-transformation” test as the sole test for determining whether a process claim encompasses patentable subject matter.

Bernard L. Bilski's patent application was initially rejected by the U.S. Patent and Trademark Office because the invention was “not implemented on a specific apparatus and merely manipulates an abstract idea.” Bilski appealed the decision to the U.S. Court of Appeals for the Federal Circuit, which concluded that the “machine-or-transformation test” was “the sole test governing § 101 analysis.” Under the “machine-or-transformation”” test, a process is patentable if: “(1) it is tied to a particular machine or apparatus, or (2) it transforms a particular article into a different state or thing.” Applying the machine-or-transformation test, the Federal Circuit affirmed the rejection, but the case produced five different opinions. The Supreme Court therefore granted review and many expected the Supreme Court to use this opportunity to clarify the law on patentable subject matter.

Unfortunately, the Supreme Court may have only muddied the waters. The majority opinion called the “machine-or-transformation” test “a useful and important clue, an investigative tool, for determining whether some claimed inventions are processes under § 101,” but not the sole test in making the determination. The majority left the Federal Circuit free to develop other tests for the patentability of process and method claims, so long as the tests are consistent with the wording of the U.S. patent laws. Accordingly, within days of the Bilski decision, the Supreme Court remanded several other cases involving statutory subject matter issues back to the Federal Circuit for reconsideration.

In discussing the usefulness of the “machine-or-transformation” test, four justices noted that the opinion should not be read as commenting on the patentability of technologies other than those represented in the Bilski claims, such as emerging technologies. The opinion suggests that new inquiries may be required to evaluate the patentability of “Information Age” technologies, such as software, advanced diagnostic medicine techniques, and inventions based on linear programming, data compression, and the manipulation of digital signals. The majority further concluded that the “ordinary, contemporary, common meaning” of “process” does not exclude business methods as patentable subject matter.

Equally interesting is the opinion of the minority, written by Justice Stevens, and joined by three other justices. While concurring with the judgment of the Court that the rejection of the Bilski application be affirmed, the minority was clearly dissatisfied with how the majority reached its conclusion, and noted, as have many that have read the majority opinion, that it fails to provide any test or direction for lower courts to follow.

In conclusion, the Bilski opinion clearly states that the “machine-or-transformation” test is not the sole test for determining whether a process claim encompasses patentable subject matter, but it has done seemingly little in the way of giving lower courts and practitioners further guidance. The USPTO reacted to the decision by immediately issuing instructions to Examiners to begin their analysis with the “machine or transformation” test and, if the test is not passed, to permit applicants to show that the invention is not simply an “abstract idea.” It seems, however, that this subject has not been definitively decided, but will remain a source of discussion for years to come.

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