In re Bilski

SUPREME COURT

Oral Arguments

Amici Briefs

Case Summary

Claim at Issue
1. A method for managing the consumption risk costs of a commodity sold by a commodity provider at a fixed price comprising the steps of:

(a) initiating a series of transactions between said commodity provider and consumers of said commodity wherein said consumers purchase said commodity at a fixed rate based upon historical averages, said fixed rate corresponding to a risk position of said consumer;

(b) identifying market participants for said commodity having a counter-risk position to said consumers; and

(c) initiating a series of transactions between said commodity provider and said market participants at a second fixed rate such that said series of market participant transactions balances the risk position of said series of consumer transactions.

This case is an appeal from a BPAI ruling (see below) finding the claims to be nonstatutory methods under 35 U.S.C. §101. The Examiner rejected the case because the claims were directed “solely to an abstract idea and solve[…] a purely mathematical problem without practical application in the technological arts.” The BPAI disagreed with the Examiner's reasoning but upheld the rejection because at least some of the claims do not require a machine to perform the claimed method and the method recited does not transform an article or matter into another state or thing.

The Fed. Cir. affirmed, stating that the claim fails the “machine-or-transformation test set forth by the Supreme Court and clarified herein.”

Supreme Court Grants Cert (06/03/09)

On June 1, 2009, the Supreme Court granted Cert. | |

On Writ of Certiorari - Supreme Court

On 01/27/09, Bilski filed for writ of certiorari with the following two questions being presented:

  1. Whether the Federal Circuit erred by holding that a “process” must be tied to a particular machine or apparatus, or transform a particular article into a different state or thing (“machine-or-transformation” test), to be eligible for patenting under 35 U.S.C. § 101, despite this Court’s precedent declining to limit the broad statutory grant of patent eligibility for “any” new and useful process beyond excluding patents for “laws of nature, physical phenomena, and abstract ideas.”
  2. Whether the Federal Circuit’s “machine-or-transformation” test for patent eligibility, which effectively forecloses meaningful patent protection to many business methods, contradicts the clear Congressional intent that patents protect “method[s] of doing or conducting business.” 35 U.S.C. § 273.

Amicus Curiae Breifs

~NEW~This section is a work in progress

Amicus ps 1) Arguments in support of Petitioners For 101?
AIPLA ps “There is no logical connection between the 'machine or transformation' test and whether the claimed process is a law of nature, etc.” Broad
Boston IPLA ps The machine-or-transformation requirement conflicts with S.Ct. precedent and undermines the broad purpose of section 101, calling the patentability of many landmark inventions into question.
Borland Software ps “The . . . test is not not well supported by case law” and “is incongruent with . . . Diehr”; “clarification of Diehr . . . is needed”; ”. . . policy considerations are important factors that must be considered.”
Philips Electronics ps “The . . . Court of Appeals' decision raise[s] a host of issues and unanswered questions which will delay new investments in essential research and technologies.” “Broad process claims are commercially necessary. . . .” “The unexpected financial impact of the new mandatory test . . . on patent-centric companies like Philips will be severe.” “The . . . holding inherently discriminates against inventions in the computer, information science, content delivery and information science technologies.”
Anne Barschall ps “The law with respect to patentable subject matter contains flaws in reasoning that have led to endless litigation and therefore need to be reviewed and corrected.” “Those who seek to reproduce results first developed by others will naturally loudly proclaim that their innovation is stifled by intellectual property law. Their cries are not dissimilar from those of the angry driver, stopped for speeding, who feels entitled to violate the speed limits due to his or her own personal haste. The speed limits, like the patent law, serve a valuable purpose.”
Medistem ps “If unchecked, Bilski’s test has the potential of creating a disincentive to innovate in the biotechnology industry, and particularly in the area of diagnostic and treatment methods, and the emerging field of 'personalized medicine.'” Broad
Accenture-corrected ps Broad
Franklin Pierce Law Center ps
John Sutton ps

Before the Court of Appeals for the Federal Circuit

On February 15, 2007, the Fed. Cir. ordered sua sponte, an en banc hearing on ex parte Bilski.

RULING

The Fed. Cir. finally handed down its decision in In re Bilski. Stated the court: “The true issue before us then is whether Applicants are seeking to claim a fundamental principle (such as an abstract idea) or a mental process. And the underlying legal question thus presented is what test or set of criteria governs the determination by the Patent and Trademark Office (“PTO”) or courts as to whether a claim to a process is patentable under § 101 or, conversely, is drawn to unpatentable subject matter because it claims only a fundamental principle.”

The Fed. Cir. ruled that, ”[b]ecause the applicable test to determine whether a claim is drawn to a patent-eligible process under § 101 is the machine-or-transformation test set forth by the Supreme Court and clarified herein, and Applicants' claim here plainly fails that test, the decision of the Board is AFFIRMED.”

Key holdings include:

  1. ”[A] claim is not patent-eligible 'process' if it claims 'laws of nature, natural phenomena, [or] abstract ideas.'” (Quoting the S.Ct. in Diehr 2) )
  2. ”[W]hile a claim drawn to a fundamental principle is unpatentable, 'an application of a law of nature or mathematical formula to a known structure or process may well be deserving of patent protection.'” (Quoting Diehr 3) and also citing Mackay Radio 4) with approval.)
  3. “A claimed process is surely patent-eligible under § 101 if: (1) it is tied to a particular machine or apparatus, or (2) it transforms a particular article into a different state or thing.” (Citing Benson 5), Diehr 6), Flook 7), and Cochrane v. Deener 8) ).
    • ”[T]he Court explicitly stated in Benson that '[t]ransformation and reduction of an article “to a different state or thing” is the clue to the patentability of a process claim that does not include particular machines'” (emphasis in original). The Fed. Cir. noted in footnote 11, that “We do not consider the word 'clue' to indicate that the machine-or-implementation test is optional or merely advisory. Rather, the Court described it as the clue, not merely 'a' clue.”
  4. ”[M]ere field-of-use limitations are generally insufficient to render an otherwise ineligible process claim patent-eligible.” (Citing Diehr 9).)
  5. ”[T]he Freeman-Walter-Abele test” comprising (1) determining whether the claim recites an “algorithm” within the meaning of Benson, then (2) determining whether that algorithm is “applied in any manner to physical elements or process steps, “is inadequate.” (Citing In re Freeman 10), In re Walter 11), and In re Abele 12) ).
  6. ”[T]he 'useful, concrete and tangible result' inquiry is inadequate and reaffirm that the machine-or-transformation test outlined by the Supreme Court is the proper test to apply. (Citing with disapproval State St. Bank & Trust Co. v. Signature Fin. Group 13), In re Alappat 14), and AT&T Corp. v. Excel Commc'ns, Inc. 15).)
  7. There is no technical arts test or mental process test. In re Comiskey does not implicitly apply a new test barring any claim reciting a mental process that lacks significant “mental steps.”
  8. Data gathering or insignificant extra-solution activity does not make an algorithm patentable. (Citing In re Grams 16), In re Meyer 17), In re Schrader 18), and Parker v. Flook 19).)

Precedents cited with approval:

  • Diamond v. Diehr, 450 U.S. 175 (1981) (Diamond_v._Diehr)
  • Parker v. Flook, 437 U.S. 584 (1978) (Parker_v._Flook)
  • Gottschalk v. Benson, 409 U.S. 63 (1972) (Gottschalk_v._Benson)
  • Mackay Radio & Tel. Co. v. Radio Corp. of Am., 306 U.S. 86 (1939)
  • Cochrane v. Deener 94 U.S. 780 (1876)

Precedents cited with disapproval:

  • In re Freeman, 573 F.2d 1237 (CCPA 1978)
  • In re Walter, 618 F.2d 758 (CCPA 1980)
  • In re Abele, 684 F.2d 902 (CCPA 1982)
  • State St. Bank & Trust Co. v. Signature Fin. Group, 149 F.3d 1368 (Fed. Cir. 1998)
  • In re Alappat, 33 F.3d 1526 (Fed. Cir. 1994)
  • AT&T Corp. v. Excel Commc'ns, Inc., 172 F.3d 1352 (Fed. Cir. 1998)

Precedents clarified

  • In re Comiskey, 499 F.3d 13651 (Fed. Cir. 2007)

Blog/News posts

ORAL ARGUMENTS

On May 8, 2008, the Fed. Cir. heard oral arguments.

AUDIO RECORDINGS OF ORAL ARGUMENTS
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Original arguments, Oct. 1, 2007 56MB, 61 min 13.9 MB, 61 min BS: 11MB, 47 min
Oral Hearing En Banc part 1, May 8, 2008 69MB,73 min 16.8 MB, 73 min BS: 13MB, 57 min
Oral Hearing En Banc part 2, May 8, 2008 6MB, 7 min 1.5 MB, 7 min BS: 1.2MB, 5 min

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NOTABLE AMICUS BRIEFS

AIPLA

Arguing that “process” in § 101 should be interpreted broadly, the AIPLA states,

“Yet today many would force these process inventions into the shells of machines or transforming articles. Such a requirement would not only be archaic; it would constitute an artifice, a distinction without a difference. The focus must always be on where the innovation resides. More importantly, requiring a process to result in a “physical transformation of an article” or be “tied to a machine” in order to be patent-eligible under section 101 would hinder progress of the useful arts and would contravene the intent of both the framers of the Constitution and the drafters of the 1952 Patent Statute.”
IPO

The IPO Amicus “in support of neither party” nevertheless promotes the concept promoted by the decision below rendered by the BPAI of limiting § 101 to methods either “tied to a particular machine or operates to transform matter into a different state or thing.”

IBM

IBM is also in support of neither party but supports the limits imposed by the BPAI in the decision below. Specifically, IBM states,

“IBM respectfully submits that the Supreme Court’s precedents in this area can be synthesized . . . by recognizing that a patentable “process” under § 101 must involve a technological contribution. More specifically, such a process must either (i) be tied to a particular machine or apparatus, see, e.g., Benson, 409 U.S. at 70-71, or (ii) cause transformation or reduction of an article to a different state or thing, . . . and in either instance produce technologically beneficial results. Processes without such technological” 20).

* IBM Amicus (Cached copy)

SIIA

The Software and Information Industry Association (SIIA) argues for affirming the BPAI decision and holding Bilski's claim 1 as not patentable because it is directed to a mental process:

“Bilski’s claim 1 is similar to the arbitration method claims 1 and 32 at issue in In re Comiskey. The inventions in both cases primarily constitute a human being making decisions (mental processes) based upon categories of information available to him or her, and resulting in certain relationships and obligations. While these relationships or obligations may have practical, useful results, that is not enough to establish statutory subject matter.21) Comiskey’s mental process solved a legal problem. . . . Bilski’s process mitigated the financial problem of risks in energy commodities trades. But both processes are “untied to another category of statutory subject matter.” Id. at 1378. They amount to an attempt to claim human intelligence itself.

* SIIA Amicus (Cached copy)

ACLU

The ACLU opposes granting Bilski's claim 1 as a violation of the free speech clause of the First Amendment. Citing

As noted, the claim in this case involves pure speech and/or thought. . . . the claim itself consists essentially of two conversations (one proposing the tirst transaction and one proposing the second transaction). At an even more basic level, because the claim does not have any specification of the details of those conversations, it can be read, as the appellees do, as a pure abstract idea.

Amicus suggests that the “breathing room” required for First Amendment values to be fully protected must be recognized in patent law analysis. Claims which predominantly or in their essence seek a government monopoly on speech and/or ideas should be viewed with skepticism and generally disallowed. Patent doctrines such as that prohibiting patenting of an abstract idea should be construed to avoid the First Amendment problems that exist when the patent claim appears to be predominantly aimed at speech and/or thought. If that process is applied in this case, the claim should be disallowed.
BIO

The Biotechnology Industry Organization (BIO) argues retain the current scope of statutory subject matter under § 101:

BIO believes the current standard for patentable subject matter is appropriate – a process or method is eligible for patenting under § 101, when viewed as a whole, unless it is limited to a law of nature, natural phenomenon, or an abstract idea.

. . .

Thus, BIO does not take a position regarding whether claim 1 falls within §101, except to note that a patent-eligible process does not require physical transformation or achine-implementation. To the extent the USPTO relies upon footnote 9 in Parker v. Flook, 437 U.S. 584 (1978), the USPTO has misread that footnote. The Supreme Court clearly stated in Flook, that “a valid process patent may issue even if it does not meet one of these qualifications [transformation or machine-implementation] of our earlier precedent (emphasis added). Id. at 589 n.9.

BIO additionally provided several examples of claims which BIO believed were “clearly patent eligible” despite neither “result[ing] in a physical transformation [nor being] tied to a machine.” The exemplary claims are directed instead to methods for treating, methods for classifying, and methods for predicting.

General Discussion

Prior Rulings

The Examiner

During prosecution of an applicaiton filed April 10, 1997 22), entitled “Energy Risk Management Method,” The Examiner rejected a claim (at right) for managing risk of energy consumption, i.e., risk that demand for energy will fluctuate in response to weather or other conditions, because “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.”

In the rejection, the Examiner relied on In re Musgrave, 23) and defined “technology” as “application of science and engineering to the development of machines and procedures in order to enhance or improve human conditions, or at least improve human efficiency in some respect,” 24) The Examiner concluded that, since there is no specific disclosure of an apparatus for performing the steps, “the claims are non-statutory, because they are directed solely to an abstract idea and solve[] a purely mathematical problem without practical application in the technological art.”

The BPAI

In a non-precedential “Informative” opinion, the BPAI, in Ex Parte Bilski, initially held that State St. Bank & Trust Co. v. Siqnature Fin. Group, Inc., 25) and AT&T Corp. v. Excel Communications, Inc., 26) are not controlling “because we interpret those cases to involve the “special case” of transformation of data by a machine,” which is not claimed or disclosed in the present case.

Opinion incorporates Lundgren

Citing Ex parte Lundgren, 27) (PDF) (which in turn cites Diamond v. Diehr 28) which in turn quotes Cochrane v. Deener, 29) ) the BPAI held that “the Supreme Court has arguably defined a “process” as “an act, or series of acts, performed on the subject matter to be transformed and reduced to a different state or thing.” In this view, the BPAI stated, “The subject matter transformed may be tangible (matter) or intangible (some form of energy, such as the conversion of electrical signals or the conversion of heat into other forms of energy (thermodynamics)), but it must be physical. [Lundgren] at 1398-99.”

BPAI Conclusions

The BPAI recognized the following conclusions that it hopes would be addressed by the Federal Circuit:

  1. Not every process in the dictionary sense is a “process” under § 101; i.e., not every series of steps is a “process” under 5 101.
  2. The definition of a “process” under § 101 requires a transformation of physical subject matter to a different state or thing.
  3. The physical subject matter transformed can be matter (an object or material) or some form of energy (e.g., heat into mechanical motion; electromagnetic waves propagating in space into electrical current in a wire; etc.).
  4. The oft-quoted statement that “Congress intended statutory subject matter to 'include anything under the sun that is made by man,'” is based on the Senate Report statement that ”[a] person may have 'invented' a machine or manufacture, which may include anything under the sun made by man.” The Senate Report indicates that things made by man (“machines, manufactures, or [man-made] compositions of matter”) are statutory, but does not imply that Congress intended every concept conceived by man that can be claimed as a method to be patentable subject matter.
  5. Some claims that nominally fall within § 101 because they recite a general purpose machine or a method performed on a general purpose machine (e.g., “a computer-implemented method comprising . . .”) may nonetheless be nonstatutory subject matter if all that is performed is an “abstract idea.” This is a “special case” because the subject matter is technically within § 101 by virtue of the machine, as opposed to an exclusion that was never within § 101.
  6. “Abstract ideas” can represent ideas “made by man.”
  7. Possible indicia of an “abstract idea” may be (i) the lack of transformation of physical subject matter according to the definition of a “process” under § 101, and/or (ii) the claim covers (preempts) any and every possible way that the steps can be performed.
  8. Physical steps or limitations in a claim are not necessarily sufficient to convert the claim into statutory subject matter, e.g., data-gathering steps, field of use limitations, and minimal post-solution activity.
  9. It is possible that a non-machine-implemented method may be nonstatutory subject matter if it does not perform a transformation of physical subject matter even though it contains physical steps that might prevent if from being labeled an “abstract idea.”
  10. The holding of State Street is limited to transformation of data by a machine.
  11. AT&T involved a machine-implemented process claim.
  12. The “useful, concrete and tangible result” test of State Street and AT&T is presently limited to machine claims and machine-implemented process claims.
  13. The terms “useful, concrete and tangible” have not yet been defined.
  14. During prosecution, claims that read on statutory and nonstatutory subject matter should be held to be unpatentable.
  15. There is no separate “technological arts” test for statutory subject matter.

Critique of Interim Guidelines

The BPAI then launched into a critique of the Interim Guidelines (now incorporated into MPEP 2100). The following summarizes the BPAI's criticisms:

  1. Interim Guidelines are not consistent with case law which states that a series of steps is not necessarily a process under §101.
  2. Interim Guidelines do not provide adequate direction for Examiners on determining whether an invention is an abstract idea, a law of nature, or natural phenomenon.
  3. Interim Guidelines perpetuate the misunderstanding that “transformation” requires transformation of a tangible object or article, contrary to cases that explain that the subject matter can be physical, yet intangible, phenomena such as electrical signals.
  4. Interim Guidelines fail to qualify the general State Street test for patentable subject matter (the “useful, concrete, and tangible result” test) as having exceptions.
  5. Interim Guidelines' definitions of “useful,” “concrete,” and “tangible,” fail to cite any support in cases dealing with patentable subject matter, and are circular and therefore unhelpful.
  6. Interim Guidelines fail to provide any guidance as to how examiners should determine whether the claimed invention preempts an abstract idea, law of nature, or natural phenomenon.

Fortunately, the Interim Guidelines are “less binding than the Pirate's Code” (Footnote 8). Because the claimed method is not tied to a computer or other machine and the only thing transformed are non-physical financial risks, the Board affirmed the Examiner's rejection.

Holdings

  1. Again citing Ex parte Lundgren 30) the BPAI held that the “technological arts” is not a separate and distinct test for statutory subject matter, reversed the examiner's rejection, to the extent that it is based on a “technological arts” test. Furthermore, the BPAI held that that there is no implication made by caselaw that a process is not in the technological arts if it is not performed on a machine. repudiated the Examiner's reasoning that, since no specific apparatus is disclosed to perform the steps and because the only way to perform the steps is by a human, the method is not in the technological arts. Specifically, the BPAI pointed out that the case relied upon by the Examiner, In re Musgrave did not require a machine and in fact held that steps performed mentally could be patentable.
  2. The BPAI then applied the three tests outlined in Lundgren:
    1. Transformation: Since the steps need not be performed on a computer (as acknowledged by the appellants in this case) there is no implicit transformation of electrical signals from one state to another as happens in a computer. Furthermore there is no data transformation since there is no specific, well-defined series of steps, i.e., an algorithm) performed on data as in a computer-implemented process. The last clause of claim one indicates that what is transformed are the non-physical financial risks and legal liabilities.
    2. “Abstract idea” exclusion: Since claim 1 covers a nonstatutory “abstract idea” it is non-patentable under the abstract exclusion. Claim on is directed to an abstract idea because it “is not instantiated in some physical way so as to become a practical application of the idea.” The fact that claim 1 may cover specific physical implementation that might possibly be statutory does not make it patentable.
    3. “Useful, concrete and tangible result”: Claim 1 fails the State Street test because claim 1 does not recite a “concrete and tangible result” or a “practical application” of the hedging plan set forth in claim 1. The fact that the method may be useful in the sense of having potential utility to society, it is not implemented in some specific way and is therefore not practically useful in a patentability sense. Even if it were useful, however, the State Street test requires that it be “useful” and “concrete” and “tangible.”
  3. The BPAI found Appellant's arguments not persuasive and sustained the Examiner's rejection under § 101
1) paper-saver version
2) , 3) Diamond v. Diehr, 450 U.S. 175, 185 (1981)
4) Mackay Radio & Tel. Co. v. Radio Corp. of Am., 306 U.S. 86, 94 (1939)
5) Gottschalk v. Benson, 409 U.S. 63, 70 (1972)
6) Diamond v. Diehr, 450 U.S. 175, 192 (1981)
7) Parker v. Flook, 437 U.S. 584, 589 (1978)
8) 94 U.S. 780, 788 (1876)
9) Diamond v. Diehr, 450 U.S. 175, 191-92 (1981)
10) 573 F.2d 1237 (CCPA 1978)
11) 618 F.2d 758 (CCPA 1980)
12) 684 F.2d 902 (CCPA 1982)
13) 149 F.3d 1368, 1373 (Fed. Cir. 1998)
14) 33 F.3d 1526, 1544 (Fed. Cir. 1994)
15) 172 F.3d 1352, 1357 (Fed. Cir. 1998)
16) 888 F.2d 835, 840 (Fed. Cir. 1989)
17) 688 F.2d 789, 794 (CCPA 1982)
18) 22 F.3d 290, 291 (Fed. Cir. 1994)
19) 437 U.S. 584 (1978)
20) citations omitted
21) citation omitted
22) 08/833,892, which claims the priority benefit under 35 U.S.C. 5 119(e) of Provisional Application 60/015,756, filed April 16, 1996
23) 431 F.2d 882, 893, 167 USPQ 280, 289-90 (CCPA 1970)
24) citing The Computer Dictionary (Microsoft Press, 2d ed. 1994) for this definition.
25) 149 F. 3d 1368, 47 USPQ2d 1596 (Fed. Cir. 1998)
26) 172 F.3d 1352, 50 USPQ2d 1447 (Fed. Cir. 1999)
27) 76 USPQ2d 1385, 1393-1429, 1398 (Bd. Pat. App. & Int. 2005)
28) 450 U.S. 175, 209 USPQ 1 (S. Ct. 1981)
29) 94 U.S. 780 (1876)
30) 76 USP2d at 1388.
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