Bilski on the Hot Seat: Supreme Court Holds Lively Hearing on Patentability of Business Methods

 

By John L. Conway

 

O

ral argument before the Supreme Court on November 9 in Bilski v. Kappos left observers wondering if business method patents are an endangered species in the United States. The court expressed skepticism that “pure” methods of doing business, that is, methods unaided by technology, can be protected by a United States patent. Also unclear was whether coupling a computer to a pure business method can transform it into a patentable process.

Bilski was granted Supreme Court review of an October 2008 decision of the Federal Circuit that found his method for hedging risk in commodities trading ineligible for patent protection. The Federal Circuit held that, to be eligible for a patent, a process must either be tied to a particular machine or apparatus, or involve a transformation of a particular article into a different state or thing. Further, the machine or transformation in the claimed process (a) must impose meaningful limits on the claims scope, and (b) must not merely be insignificant extra-solution activity. 

The justices barraged Bilski’s attorney with questions that suggested hostility to granting patent protection to processes that were neither tied to physical elements nor technology-based. Justice Sotomayor asked if methods of speed-dating would qualify for patent protection, while Justice Scalia questioned whether horse-whispering might make the cut according to Bilski’s standards. Scalia also invoked Dale Carnegie’s principle of “How to win friends and influence people” to illustrate problems with protecting methods that deal solely with human behavior. 

Justice Breyer chimed in that he had a very effective method for teaching antitrust law that would qualify for protection according to Bilski. Breyer also mused whether the framers of the Constitution envisioned every successful businessman running to Washington to get a patent, stopping the wheels of progress unless competitors get permission from the inventor. And Justice Kennedy wondered whether the insurance industry would have been stifled by patents covering the actuarial methods pioneered in the 17th century.

The justices appeared troubled that a method divorced from both technology and physical elements could be patented. Chief Justice Roberts said he saw nothing physical in Bilski’s method of hedging commodity risks. Justice Ginsburg pointed out that Europe does not permit business method patents, getting along nicely without patenting methods that are untied to technology. 

And Justice Stevens pinned down Bilski’s attorney, forcing him to admit that the Supreme Court had never approved business method patents. The attorney asserted that the Supreme Court came closest to supporting Bilski’s position in Diamond v Diehr, a decision that approved a patent that used software to run an industrial process that cured rubber. 

The justices also appeared uncertain as to the proper rule to apply, whether the Federal Circuit’s newly articulated machine-or-transformation test or something else. Justice Sotomayor wondered whether the court should just strike down business methods as patent ineligible and avoid articulating a new rule that might affect patentability of other processes, such as software or biomedical testing. Sotomayor seemed troubled that the Federal Circuit’s new rule might prevent emerging, unforeseen technologies from gaining patent protection. 

Chief Justice Roberts worried that merely adding a computer to the end of an otherwise unpatentable process could make the process eligible for patent protection. Roberts questioned how central the tie to the machine or the transformation would have to be for the process to pass muster as patentable. 

Similarly, Justice Breyer expressed concern that a method that is unpatentable under the Federal Circuit’s new test could be made patentable by rewriting the claim as a device claim that included a general purpose computer – in line with the State Street Bank & Trust Co. v. Signature Financial Group, Inc. decision. 

The attorney for the PTO stated that the Bilski case did not present such issues and that sorting out the implications of the Federal Circuit’s machine-or-transformation test should await future cases. 

Based on the questioning, it appears likely that the Supreme Court will, at the very least, agree with the Federal Circuit that Bilski’s method of hedging risks is unpatentable. Additionally, the court may strike down as too rigid the Federal Circuit’s machine-or-transformation test for determining patentability of processes.It remains to be seen what guidance to the lower courts, if any, the Supreme Court will articulate in place of this test.