IP Update, Special Edition (30 June 2010)

Editors: Marc S. Weiner, Esq. and Nicholas P. Godici

U.S. Supreme Court Publishes Bilski Decision

On Monday, June 28, 2010, the U.S. Supreme Court published their decision in Bilski v. Kappos, No. 08-964 (U.S. June 28, 2010).

The Court affirmed the ruling of the Court of Appeals for the Federal Circuit (Fed. Cir.) that the claims in the Bilski patent application, which are directed to a concept of hedging risk or protecting against risks, relate to an abstract idea and thus are not patentable. However, the Court determined in a narrow 5-4 vote that business methods are not excluded from patentability under 35 U.S.C. §101. The Court particularly pointed out that 35 U.S.C. §273 explicitly contemplates the existence of some business method patents.

The Court also held that the standard suggested by the Fed. Cir., wherein 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) "is not the sole test for deciding whether an invention is a patent-eligible 'process'" under 35 U.S.C. §101. Bilski v. Kappos, No. 08-964, slip op. at 8 (U.S. June 28, 2010). Instead, the Court declined to impose limitations on 35 U.S.C. §101 as to what constitutes a patentable "process." Rather than adopting categorical rules that might have wide-ranging and unforeseen impacts, Bilski was decided narrowly on the basis of prior Court decisions in Gottschalk v. Benson, 409 U.S. 63, 70 (1972); Parker v. Flook, 437 U.S. 584 (1978); and Diamond v. Diehr, 450 U.S. 175 (1981). The Court indicated that the Court "need not define further what constitutes a patentable 'process,' beyond pointing to the definition of that term provided in §100(b) and looking to the guideposts in Benson, Flook, and Diehr." Id. at 16. All members of the Court agreed that the claims set forth in the Bilski patent application are directed to an abstract idea that is not entitled to protection under the provisions of 35 U.S.C. §101.

Although the Court held that the machine-or-transformation test is not the sole test for deciding whether an invention is a patent-eligible 'process'" under 35 U.S.C. §101, the Court acknowledged that "the machine-or-transformation test is a useful and important clue, an investigative tool, for determining whether some claimed inventions are processes under §101." Id. at 8.

In addition, although the Court declined to suggest a specific test for determining the patentability of a process, the Court appeared to leave it up to the Court of Appeals to develop a more refined rule. In particular, the Court stated: "And nothing in today's opinion should be read as endorsing interpretations of §101 that the Court of Appeals for the Federal Circuit has used in the past." See, e.g., State Street, 149 F. 3d, at 1373; AT&T Corp., 172 F. 3d, at 1357. It may be that the Court of Appeals thought it needed to make the machine-or-transformation test exclusive precisely because its case law had not adequately identified less extreme means of restricting business method patents, including (but not limited to) application of our opinions in Benson, Flook, and Diehr. In disapproving an exclusive machine-or-transformation test, we by no means foreclose the Federal Circuit's development of other limiting criteria that further the purposes of the Patent Act and are not inconsistent with its text." Id. at 16.

The U.S. Patent and Trademark Office on Monday, June 28, 2010 issued a memorandum, directing patent examiners to continue to use the existing guidance concerning the machine-or-transformation test as a tool for process patent applications, as well as taking into consideration whether the claimed process is an abstract idea. The memorandum also stated "the USPTO is reviewing the decision in Bilski and will be developing further guidance on patent subject matter eligibility under 35 U.S.C. §101."

For more information, please see the Supreme Court's decision.

Summary provided by Greg Hsu

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