Bilski v. Kappos
561 U. S. ____ (2010) (2010)
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Rule of Law:
The machine-or-transformation test is not the sole test for determining whether a process is patent-eligible under 35 U.S.C. § 101; rather, it is a useful and important clue. A claimed process is not patent-eligible if it is merely an attempt to patent an abstract idea, such as a fundamental economic practice, even when limited to a specific field of use.
Facts:
- Bernard Bilski and Rand Warsaw developed a method for hedging risk in commodities trading within the energy market.
- The method involved initiating a series of transactions between a commodity provider and consumers, where consumers purchase the commodity at a fixed rate based on historical averages.
- The method then required identifying market participants who held a counter-risk position to the consumers.
- Finally, the method involved initiating a second series of transactions between the provider and these market participants at another fixed rate to balance the provider's overall risk.
- The patent application described this concept as a series of steps and also expressed it as a mathematical formula.
Procedural Posture:
- Bernard Bilski and Rand Warsaw filed a patent application with the U.S. Patent and Trademark Office for a method of hedging risk.
- The patent examiner rejected the application, concluding it claimed an unpatentable abstract idea.
- The Board of Patent Appeals and Interferences affirmed the examiner's rejection.
- Bilski and Warsaw (appellants) appealed to the U.S. Court of Appeals for the Federal Circuit.
- The Federal Circuit, sitting en banc, affirmed the rejection, holding that the 'machine-or-transformation' test is the sole and exclusive test for the patent-eligibility of a process.
- The court found Bilski's claim failed this test because it was not tied to a particular machine nor did it transform any article into a different state or thing.
- Bilski and Warsaw (petitioners) petitioned the U.S. Supreme Court for a writ of certiorari, which was granted.
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Issue:
Is the machine-or-transformation test the sole test for determining whether a process is patent-eligible under 35 U.S.C. § 101?
Opinions:
Majority - Justice Kennedy
No. The machine-or-transformation test is not the sole test for determining the patent eligibility of a process under § 101. While the test is a useful and important clue, § 101's broad language, defining a 'process' as a 'process, art or method,' does not contain this limitation. Adopting it as the exclusive standard would improperly read a limitation into the statute that Congress has not expressed. Although the Federal Circuit's test is rejected as the sole standard, Bilski's claims are nonetheless unpatentable because they represent an attempt to patent an abstract idea. The concept of hedging is a fundamental economic practice, and under the Court's precedents in Benson and Flook, an abstract idea cannot be made patentable simply by limiting its use to a particular field, such as the energy market.
Concurring - Justice Stevens
No. The machine-or-transformation test is not the exclusive test, and the Court is correct to reject the patent application. However, the Court should have held that business methods are categorically ineligible for patent protection under § 101. A thorough review of patent history reveals that the constitutional term 'useful Arts' and the statutory term 'process' were historically understood to encompass technological and industrial arts, not methods of structuring commercial transactions. By failing to adopt this categorical rule, the majority's opinion invites uncertainty and future litigation over the patentability of business methods, rather than restoring patent law to its historical and constitutional foundation.
Concurring - Justice Breyer
No. A general method of engaging in business transactions is not a patentable 'process.' I join Justice Stevens' opinion in full and write separately to highlight four points of substantial agreement among the Court: 1) § 101 is broad but has limits, such as the exception for abstract ideas; 2) the machine-or-transformation test is a useful clue; 3) it is not the sole test for patentability; and 4) the Federal Circuit's previous 'useful, concrete and tangible result' test from State Street is incorrect and has been properly rejected. Emphasizing these points of agreement provides clarity in a highly technical area of law.
Analysis:
Bilski v. Kappos significantly reshaped patent eligibility jurisprudence by rejecting the Federal Circuit's rigid machine-or-transformation test as the sole standard for processes. While this opened the door for Information Age inventions like software to be patented without being tied to a specific machine, the Court simultaneously reinforced the 'abstract idea' exception as a potent check on patentability. The decision struck down the specific business method patent at issue, signaling a retreat from the permissive era of State Street Bank, but it declined to create a bright-line rule excluding all business methods from patent protection. This left the exact boundaries of § 101 ambiguous, delegating to lower courts the task of developing further limiting principles and setting the stage for subsequent Supreme Court cases like Alice Corp. v. CLS Bank to provide a more structured test.
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