by Jake Meyer

On November 9, 2009, the U.S. Supreme Court heard oral arguments in the case Bilski v. Kappos.  This important patent case asks the question: what is the proper test for determining what is patentable subject matter for a process?  Patents are not supposed to be granted on mental processes, but Bilski’s claims are directed to a method of hedging risk in commodities trading, which the Federal Circuit has states is a “process wherein all of the process steps may be performed entirely in the human mind.”

In In re Bilski, the Federal Circuit announced that the proper test to determine whether a process was patentable subject matter under 35 U.S.C. § 101, was the machine-or-transformation test, stating that: a “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.”  The Federal Circuit has since applied the machine-or-transformation test in a biotechnology case, Prometheus v. Mayo, which I previously blogged about.

Under the test, the Federal Circuit held that Bilski’s claims were not patentable because the claims were not tied to a machine and did not transform an article into a different state or thing.  Claims such as Bilski’s, are considered “business method” claims, and so the Court was also asked the question “[w]hether 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.  The Justices made many interesting quotes during the oral argument which shed light on the interesting and fundamental patent law question: what is patentable subject matter?

At oral argument, Bilski’s attorney, J. Michael Jakes, argued for a less rigid rule than the machine-or transformation test.

MR. JAKES: . . . I think the question can be avoided, because we don’t need a rigid test of this type based on machine-or-transformation. The question we are looking at and should be looking at is: Are we trying to patent an abstract idea?

At oral argument, the Justices pushed Bilski’s attorney, J. Michael Jakes, by giving seemingly ludicrous examples of things that would be patentable under a more liberal test that did not require a machine-or-transformation.

JUSTICE BREYER: So you are going to answer this question yes. You know, I have a great, wonderful, really original method of teaching antitrust law, and it kept 80 percent of the students awake. They learned things –
(Laughter.)
JUSTICE BREYER: It was fabulous. And I could probably have reduced it to a set of steps and other teachers could have followed it. That you are going to say is patentable, too?
MR. JAKES: Potentially.

Scalia searched for some historical context.

JUSTICE SCALIA: You know, you mention that there are all these — these new areas that didn’t exist in the past because of modern business and what-not, but there are also areas that existed in the past that don’t exist today. Let’s take training horses. Don’t you think that — that some people, horse whisperers or others, had some, you know, some insights into the best way to train horses? And that should have been patentable on your theory.
MR. JAKES: They might have, yes.
JUSTICE SCALIA: Well, why didn’t anybody patent those things?

Breyer brought up concerns of the costs of patents on information.

JUSTICE BREYER: That’s exactly what I -maybe I can get you to inadvertently help my — my hypothesis you don’t like. That’s why I say it’s inadvertent.
You said there are two things. There are actually four things in the patent law which everyone accepts. There are two that are plus and two that are minus. And the two that are plus is by giving people a monopoly, you get them to produce more. As you said, you get them to disclose.
The two minuses are they charge a higher price, so people use the product less; and moreover, the act of getting permissions and having to get permission can really slow things down and destroy advance. So there is a balance.
In the nineteenth century, they made it one way with respect to machines. Now you’re telling us: Make it today in respect to information. And if you ask
me as a person how to make that balance in respect to information, if I am honest, I have to tell you: I don’t know. And I don’t know whether across the board or in this area or that area patent protection will do no harm or more harm than good.
So that’s the true situation in which I find myself in respect to your argument. And it’s in respect to that, I would say: All right, so what do I do?

Sotomayor was also concerned with the cost patents exact on the free flow of information.

JUSTICE SOTOMAYOR: But a patent limits the free flow of information. It requires licensing fees and other steps, legal steps. So you can’t argue that your definition is improving the free flow of information.

Sotomayor gave some attention to amici’s concern that a broad ruling in Bilski may hurt the biomedical world.

JUSTICE SOTOMAYOR: How about if we say something as simple as patent law doesn’t cover business matters instead of what the Federal circuit has begun to say, which is technology is tied to a machine or a transformation of the substance, but I have no idea what the limits of that ruling will impose in the computer world, in the biomedical world, all of the amici who are talking about how it will destroy industries? If we are unsure about that, wouldn’t the safer practice be simply to say it doesn’t involve business methods?

Justices Breyer and Sotomayor are right to be concerned about the effect of patents on the free flow of information.  This is particularly troublesome when patents are on information itself.  For example, with patents on gene sequences, the “invention” is the information.  It’s the A’s, C’s, T’s, and G’s that make up the sequence that are of value, and the disclosure of this information is meaningless because the patent prevents it from being built upon.

At oral argument in Bilski, the lawyer representing the patent office, Malcolm L. Stewart, argued for keeping the machine or transformation test, but to leave it open to an exception for unforeseen technologies.

MR. STEWART: Well, I think the Court could say — could do essentially what was done in Benson and Flook, namely acknowledge that there had never been a case up to this point in which a process had been held patent eligible that didn’t involve a machine or a transformation. It could leave open the possibility that some new and as yet unforeseen technology could necessitate the creation of an exception.

The government is right to be concerned about limiting unforeseen technologies, and the machine-or-transformation test could be an effective test for determining patentable subject matter of processes.  However, the Federal Circuit’s decision in Prometheus showed that the Federal Circuit considers the machine-or-transformation test to be a low hurdle, by holding that the physical step not central to the claim was transformative.  If the Supreme Court decides to keep the machine-or-transformation test, the Court shall have to give guidance to the Federal Circuit on what is to be considered transformative and what is to be considered a machine or else clever claim drafting can add a computer (machine) or other non-essential step (which could potentially be argued to be transformative) to any process claim and make it patentable, which would come with the high cost of limiting the free flow of information.