Patentable Subject Matter II:
Bilski v. Kappos
Patent Law – Prof. Merges
1.12.2012
“purified and isolated” genes
1.An isolated DNA coding for a BRCA1
polypeptide, said polypeptide having the
amino acid sequence set forth in SEQ ID NO:
1.
2. The isolated DNA of claim 1, wherein said
DNA has the nucleotide sequence set forth in
SEQ ID NO:2.
Sequence ID’s
• Long strings of abbreviations for amino acids
(e.g., Phe-Leu-Ser-Cys . . .)
• Long strings of base pairs for DNA sequences
such as genes (TAGCTGGCATAT . . . .)
United States Court of Appeals for the Federal
Circuit
2007-1130
545 F.3d 943 (Fed. Cir. 2008)
IN RE BERNARD L. BILSKI
and RAND A. WARSAW
Main points
• Rejection of claims to commodity price
hedging technique – AFFIRMED
• Announces a new/old “machine or
transformation” test for patentable subject
matter
What is the claim in Bilski about?
• Fixed price contract: creates a risk that prices
will fall; protects against the risk that prices
will rise
• What if you wanted to reduce the risk
without losing the protection?
Hedging
• Simple examples: travel insurance; spending
money on a “backup plan”
• More formally: Hedging risk from a major
purchase by making an offsetting investment
WeatherWise USA, located in Pittsburgh, PA, is the
premier provider of customized consumer energy
products including SetYourBillSM, WeatherProof Bill®:
fixed bills, capped bills, EnerCheck® energy efficiency .
. . Our unique use of computerized models based on
engineering, rather than econometric principles
enables the development of products and services
that reduce financial risk for energy providers and
their residential and commercial consumers.
Can you patent something like this?
• The section 101 question
• NOTE: Distinct from other requirements of
patentability
– NOT asking whether claim 1 in Bilski is new,
nonobvious, etc.
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;
Bilski claim 1 cont’d
(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.
Narrower, “dependent” claim
2. The method of claim 1 wherein
said commodity is energy and
said market participants are
transmission distributors.
Rejection: The process involved
abstract intangible entities:
transactions, legal relationship, market
participants having a “counter-risk
position,” and more “transactions” to
balance risk positions.
• The process was of the type that
could readily be carried out by a
human being – without using any kind
of machine.
Nothing physical (not even
data) appeared to be
transformed by the claimed
process
Contrast: chemical process
Federal Circuit in Bilski
• Stated the “Machine or Transformation” test
• In order to be a patentable process, a process
must either:
–Transform an article to a different
state or thing, and/or
–Be “tied to a particular machine.”
Reliance on Supreme Court Cases
Gottschalk v. Benson, 409 U.S. 63
(1972).
Parker v. Flook, 437 U.S. 584 (1978).
Diamond v. Diehr, 450 U.S. 175
(1981).
• Gottschalk v. Benson (1972) involved the
conversion of binary-coded decimal (BCD) data to
a pure binary format, found merely an effort to
patent an algorithm.
• No machine; involved transformation of
unspecified data.
• Diamond v. Diehr (1981) involved a computercontrolled process of making tires, definitely a
physical transformation that was also tied to a
machine.
• These cases are, for now, the primary guides for
determining patentable subject matter.
“When a claim containing a mathematical
formula implements or applies the
formula in a structure or process which,
when considered as a whole, is
performing a function which the patent
laws were designed to protect (e.g.,
transforming or reducing an article to a
different state or thing), then the claim
satisfies 101's requirements.” -Gottschalk v. Benson, 409 U.S. 63
(1972).
Bilski v Kapppos
130 S Ct 3218 (2010)
Bilski v. Kappos
• Holding
• “Roads not taken”
• History, context – and future?
Supreme Court approach: The Big 7
• Four categories of patentable subject matter
– Process, machine, manufacture, composition of
matter
– Then the 3 exceptions
Process definition
“process, art or method, and
includes a new use of a known
process, machine, manufacture,
composition of matter, or
material” – 35 USC 100(b)
The Court's precedents provide three specific
exceptions to § 101's broad patent-eligibility
principles: “laws of nature, physical
phenomena, and abstract ideas.” Chakrabarty,
supra, at 309. While these exceptions are not
required by the statutory text, they are
consistent with the notion that a patentable
process must be “new and useful.” And, in any
case, these exceptions have defined the reach
of the statute as a matter of statutory stare
decisis going back 150 years.
The Holding
Rather than adopting categorical rules that might
have wide-ranging and unforeseen impacts, the
Court resolves this case narrowly on the basis of
this Court's decisions in Benson, Flook, and
Diehr, which show that petitioners' claims are
not patentable processes because they are
attempts to patent abstract ideas. Indeed, all
members of the Court agree that the patent
application at issue here falls outside of § 101
because it claims an abstract idea.
Two “Roads Not Taken”
1.Federal Circuit “machine or transformation”
test
2.“Categorical prohibition” on business
methods
Under the Court of Appeals' formulation, an
invention is a “process” only if: “(1) it is tied to
a particular machine or apparatus, or (2) it
transforms a particular article into a different
state or thing.” 545 F.3d, at 954. This Court has
“more than once cautioned that courts
‘should not read into the patent laws
limitations and conditions which the
legislature has not expressed.’ ” Diamond v.
Diehr . . . .
Ordinary meaning:
Adopting the machine-ortransformation test as the sole test
for what constitutes a “process” (as
opposed to just an important and
useful clue) violates [several]
statutory interpretation principles.
Categorical exclusion
• Again, plain meaning; dictionary definition of
“process” does not exclude business
methods/processes
• Section 273(b)(1) of the Patent Act – prior
user defense for business methods
Supp. at 9
[I]f a patent-holder claims
infringement based on ‘‘a method in
[a] patent,’’ the alleged infringer can
assert a defense of prior use. For
purposes of this defense alone,
‘‘method’’ is defined as ‘‘a method
of doing or conducting business.’’
§273(a)(3).
Holding (cont’d)
The concept of hedging, described in claim 1
and reduced to a mathematical formula in
claim 4, is an unpatentable abstract idea, just
like the algorithms at issue in Benson and
Flook. Allowing petitioners to patent risk
hedging would pre-empt use of this approach
in all fields, and would effectively grant a
monopoly over an abstract idea.
One rejected view
Respondent urges the Court to look to the other
patentable categories in § 101-machines,
manufactures, and compositions of matter-to
confine the meaning of “process” to a machine
or transformation, under the doctrine of
noscitur a sociis. Under this canon, “an
ambiguous term may be given more precise
content by the neighboring words with which it
is associated. [But] § 100(b) already explicitly
defines the term “process.”
What lies behind this rejected view?
• “Patents are about technology” – machines,
manufactures, compositions of matter . . .
• “Technological arts” concept in Europe and
some earlier US cases: rejected
The plurality portions of the majority
opinion – Justice Kennedy
The machine-or-transformation test may well
provide a sufficient basis for evaluating
processes similar to those in the Industrial Agefor example, inventions grounded in a physical
or other tangible form. But there are reasons
to doubt whether the test should be the sole
criterion for determining the patentability of
inventions in the Information Age.
Dissent: Justice Stevens
The wiser course would have been to hold that
petitioners' method is not a “process” because
it describes only a general method of engaging
in business transactions-and business methods
are not patentable. More precisely, although a
process is not patent-ineligible simply because
it is useful for conducting business, a claim that
merely describes a method of doing business
does not qualify as a “process” under § 101.
Dissent (cont’d)
“[p]erhaps this was in part a function of an
understanding – shared widely among legislators,
courts, patent office officials, and inventors –
about what patents were meant to protect.
Everyone knew that manufactures and machines
were at the core of the patent system.” Merges,
Property Rights for Business Concepts and Patent
System Reform, 14 Berkeley Tech. L.J. 577, 585
(1999) (hereinafter Merges)
“Patent originalism”
• In keeping with recent trends in
Supreme Court jurisprudence and
scholarly discourse
• But very difficult to apply to a field
where innovation is the cornerstone of
the entire enterprise
Originalism and the Constitution
• Eg, District of Columbia v. Heller,
128 S.Ct. 2783 (2008), the recent
Supreme Court case on the 2nd
Amendment
Bilski and patent volume
• It is difficult to separate the conceptual
question in cases such as Bilski – what types
of creative ideas/products should be allowed
to be patented? – from certain practical
issues
• Particularly, the “floodgates” problem
The USPTO issued more utility patents in
calendar year 2011 than in any year in
history. The 2011 total – just shy of 225,000
issued patents – is only a small increase
over 2010, but towers above all other
historic figures. The previous record was set
in 2006 with about 173,000 issued utility
patents. – PatentlyO.com 1/5/12
“Patent Failure”, Bessen and Meurer
AS MANY AS SIX IMPOSSIBLE PATENTS BEFORE
BREAKFAST: PROPERTY RIGHTS FOR BUSINESS
CONCEPTS AND PATENT SYSTEM REFORM, 14 BTLJ
577 (1999)
By Robert P. Merges
• Merges, Software and Patent
Scope: A Report from the Middle
Innings, 85 Tex. L. Rev. 1528 (2007)