Supreme Court Bilski Argument

    By Kevin E. Noonan --

The highest form of tea leaf-reading is guessing how the Supreme Court will rule based on oral argument.  Yet occasionally the Court's questioning suggests general trends and tendencies, and today's argument in Bilski v. Kappos may be one of those times.

The claims at issue are directed to a method for hedging risk in a commodities trade, and are broadly directed to such methods (i.e., there is no requirement that the method be performed using a computer or other particular machine).  The claims were rejected by the Patent Office and appealed to a Federal Circuit panel, but before the panel decision was issued, the CAFC sua sponte ordered rehearing en banc.  In its en banc decision, the Federal Circuit promulgated a new, exclusive test for patent eligibility of method claims, requiring that a method either be tied to a machine or transform a particular article into a different state or thing (the "machine or transformation" test).  The Supreme Court granted certiorari to consider whether this test was contrary to the Court's "precedent declining to limit the broad statutory grant of patent eligibility for 'any' new and useful process beyond excluding patents for 'laws of nature, physical phenomena, and abstract ideas'."

In today's argument, it became clear that the Justices thought little of the argument that Bilski's claim should be patent-eligible.  Bilski's advocate, J. Michael Jakes, staunchly kept to his position that what should be considered a patent-eligible process be broadly construed, refusing to concede that any method posed as a hypothetical by the Court should be per se ineligible.  These far-fetched hypothetical methods included methods for teaching antitrust law without putting students to sleep (Justice Breyer), speed-dating (Justice Sotomayor), horse-whispering (Justice Scalia), as well as more concrete examples ("an estate plan, tax avoidance, how to resist a corporate takeover [or] how to choose a jury," by Justice Ginsberg).  The Court was clearly concerned about conferring the broadest scope to method claims, such as "anything that helps any businessman succeed is patentable because we reduce it to a number of steps," according to Justice Breyer.  To each of these instances, Mr. Jakes argued that such a claim was "potentially patentable," subject to the other requirements of the statute.  To Justice Sotomayor's question about how to limit patent eligibility to "something reasonable" if it is not limited to technology or the sciences, Mr. Jakes argued that the useful arts excludes "[s]peaking, literature, poems" and that "a corporation [or] a human being" were not included in the statutory categories of the useful arts.  However, Mr. Jakes did not specifically assert that Bilski's claim should be patent-eligible, merely that the Federal Circuit's test was without support in the plain language of the statute or any of the Court's earlier precedent.

The Chief Justice asked how the claim was not disqualified as being a mere abstract idea, in the process conflating what may not be patentable ("classic commodity hedging that has been going on for centuries") with what should be patent-eligible.  Justice Kennedy, citing the development of actuarial tables and methods for calculating risk by the nascent insurance industry in the 17th Century, asked whether Congress would have intended that "only one person [would have] the capacity to issue insurance."  Mr. Jakes did not directly answer this question, but maintained that such methods could be patent-eligible, falling within the ambit of the statutory definitions of patent-eligible inventions.

Justice Ginsburg was concerned about the practices in other countries, which do not include methods like the Bilski method within the scope of patent-eligible subject matter.  Mr. Jakes responded by reminding the Court that other countries have defined "technology" differently than the U.S. has, and it was these definitions that provide the basis for excluding types of inventions patent-eligible under 35 U.S.C. § 101.  Mr. Jakes also challenged the assertion by Justice Sotomayor that "a patent limits the free flow of information," asserting (correctly) that patents promote disclosure of inventions, so that "information gets to the public generally," while conceding Justice Scalia's point that the public cannot use an invention until the patent expires.

Justice Stevens asked two interesting jurisprudential questions.  The first was for Mr. Jakes to identify the "strongest case" from the Court's jurisprudence that supported his position, and without apparent irony (in view of the Federal Circuit majority's reliance upon it) he answer Diamond v. Diehr.  (Justice Stevens did not appear to think the Diehr case provided much support for Mr. Jakes's position.)  Second, the Justice asked whether Judge Rich had ever written on the scope of patent-eligibility for process claims, to which Mr. Jakes answered that he had written the Alappat decision as well as the State Street decision.

Turning to the Diehr decision, the Court seemed to grapple with the similarities and distinctions between methods for curing rubber ("an industrial process of the conventional type," as characterized by Mr. Jakes) and methods for manipulating information or electronic signals (although Justice Sotomayor drew a distinction between manipulation of electronic signals and manipulation of information as being "different in kind").  Justice Breyer made the distinction explicit, saying that there are "four things in patent law that everyone accepts."  These include "two that are a plus" (increased innovation and disclosure) and "two that are a minus" (higher prices and "having to get permission [that] can really slow things down and destroy advance").  (Despite the negative tone, he characterized this situation as "a balance.")  In the 19th Century, he said, methods were directed towards machines, whereas Mr. Jakes's position is that today patent-eligible methods should include those performed on information.  To that proposition and how the appropriate balance should be drawn the Justice candidly admitted "I don't know.  And I don't know whether across the board or in this area or that area patent protection would do no harm or more harm than good."

The Court also considered the Morse and Bell patents, with Justice Scalia arguing that the Bell claims would pass the "transformation" prong of the Federal Circuit's test, since sound was transformed into electrical signals and vice versa in the practice of the claimed method for transmitting sound over a distance.

The Court closely questioned the government's position as articulated by Deputy Solicitor General Malcolm Stewart.  Speaking for the first time, Justice Alito asked whether the Court should render a decision on the "very broad issue" raised by Bilski, to which Mr. Stewart answered that the government would prefer to prevail more narrowly.  In doing so, Mr. Stewart asserted that the Federal Circuit's "machine or transformation" test was not "rigid or inflexible" based in large part in the questions left unanswered in the opinion (such as the extent to which a process is "tied to a particular machine").  Justice Sotomayor asked the fundamental question of whether the Court should simply declare that business methods are unpatentable and avoid the issues of destroying the computer or biomedical industries as had been argued by various amici.  This wouldn't solve the problem, according to Mr. Stewart, because the basis for business method patents (the State Street case) involved a machine rather than a process (Justice Sotomayor impliedly agreeing by saying "[n]o ruling in this case is going to change State Street").  Justice Breyer characterized the Federal Circuit's decision as a "pull back" on the scope of patent-eligible methods, but with little guidance from the Federal Circuit on the scope of how far they CAFC has "pulled back," in view of the failure to define the extent of transformation or ties to a particular machine that would satisfy the standard.

The Chief Justice took Mr. Stewart to task for "the last footnote" of the government's brief, which he understood to assert that the use of a computer in Bilski's method might make the process patentable -- he characterized this as the equivalent of saying that using a typewriter to type out a method would make a process patentable.  Mr. Stewart attempted to distinguish this interpretation using a hypothetical involving an interactive website for practicing the method but with little success; the Chief Justice said that the government's hypothetical "involves the most tangential and insignificant use of a machine."  Importantly, Mr. Stewart then indicated that the government did not want the Court to opine broadly in its decision:

I guess the point I'm trying to make is simply that we don't want the Court, for instance, in the area of software innovations or medical diagnostic techniques to be trying to use this case as the vehicle for identifying the circumstances in which innovations of that sort would and would not be patent eligible, because the case really doesn't present any -- any question regarding those technologies.

Justice Sotomayor agreed with this sentiment, saying in response that "by saying that we exclusively rely on the machine-or-transformation test, that we're precluding applications of the patent law in those fields, the things we can't imagine.  Once you announce an exclusive test, you're shoe-horning technologies that might be different."  She also asked the Deputy's help in fashioning a test "that doesn't go to the extreme the Federal Circuit did" with regard to having to reverse earlier precedent that did not preclude methods that would fail the "machine or transformation" test.  Justice Ginsburg asked whether Judge Mayer's calculus in his concurrence -- "if it's technology, then it's within the realm of patent, and if it's not technology, it isn't" -- wasn't the simplest test to be used, and Mr. Stewart answered that "our test . . . has a shorthand version of that," suggesting at least an acquiescence to a "technology arts" standard.  He went on to say however that this was not the simple solution it appeared to be, based on the definition of "technology" and what should be "properly regarded as technological advances," as well as whether the "technology" component was "sufficiently substantial" to render a process claim patent-eligible.  Several of the Justices also voiced the view that merely programming a computer to perform a new process did not convert the computer into a "new" machine, again seeming to conflate patent eligibility with patentability.

Returning to the government's view of the appropriate scope of the Court's decision in this case, the Deputy argued:

We thought that this case would provide an unsuitable vehicle for resolving the hard questions because the case doesn't involve computer software or medical diagnostic techniques, and therefore, we thought the Court would arrive at the position that I think, at least some members are feeling that you have arrived at, that you will decide this case, and most of the hard questions remain unresolved.  And, frankly, we think that's true.

To Justice Steven's remark following this statement that "[w]e know that things that we haven't yet contemplated may be around the corner, and when they happen, we will deal with them," Mr. Stewart responded that the government "would be entirely content with a ruling like that."

In his brief rebuttal, Mr. Jakes appeared to agree with this sentiment:

The Federal Circuit did announce this test as the sole test for all processes.  It said it applied no matter what the process was, so we do have to face these difficult questions.  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?

It appears evident that the Court does not believe that Bilski's claims are patentable, but that this case is not the case to make any broad pronouncements on subject matter eligibility for computer software or diagnostic methods claims.  While it is reassuring to believe that the Court is thus disinclined to "shoehorn" the patent-eligibility of these types of method claims into its decision on Bilski's claims (and the Federal Circuit's "machine or transformation" test), it also suggests that the Court (or at least Justices Breyer and Stevens, whose views are on record in the Metabolite dissent) may recognize that a more appropriate occasion to consider diagnostic method claims is available with the certiorari petition in Prometheus Laboratories, Inc. v. Mayo Collaborative Services case.  Until the Court decides whether it will hear that case, the status of diagnostic method claims will remain in doubt no matter how the Court rules in Bilski.

A transcript of today's oral argument is available here.

Comments

[EG]

Kevin,

Having now read through the oral argument transcript, it speaks volumes on what I’ve said before: using 35 USC 101 as anything other than a coarse screen to rule out patents on abstract ideas, natural phenomena, and discoveries of laws of nature is an exercise in futility. The Justices repeatedly asked for a test other than the Federal Circuit machine or transformation test that could be used, and it’s clear from what was said during oral argument that no one there could articulate an objective test beyond screening out abstract ideas, natural phenomena, and discoveries of laws of nature. Justice Breyer frankly confessed that he couldn’t come up with any meaningful test under 35 USC 101. The Chief Justice was particularly on target is asking Jakes whether the Bilski claim covered an abstract idea. In other words, what Judge Rader said in dissent was correct: this Bilskl claim is not patentable subject matter because it simply covers an abstract idea.

I also give high marks to what Justice Sotamayor appears to understand: the Bilski claim is being judged for patentability under the wrong patent statute. It’s pretty clear to me she feels this Bilski claim should be judged first under 35 USC 102 or 103, not 35 USC 101. And I give very low marks to Justices Scalia and Ginsburg. Scalia obviously can’t get past the 19th Century. And Justice Ginsburg’s comment about looking to international patent standards was very nicely shot down by Jakes.

I thought Jakes did a pretty good job considering the difficult position he was trying to argue for. He at least understands that O’Reilly v. Morse is really an enablement or claim scope case, not a patentable subject matter case. He certainly had a better command of his argument than those who argued in KSR International.

Bottomline: If the oral argument is any reflection of where SCOTUS is going with this case, they aren’t going to issue an “earthshaking” ruling here. I predict the Federal Circuit “machine or transformation” test will be trounced as too inflexible (SCOTUS may still retain it as a test, but not the only one, like TSM in KSR International). I also predict that SCOTUS will affirm the PTO ruling that the Bilski claim is not patentable subject matter but on the ground that it covers an abstract idea, as suggested by Judge Rader’s dissent.

The only thing unclear to me is how SCOTUS will treat the enactment of 35 USC 273 on the issue before them. Other than Jakes mentioning it during oral argument, there really wasn’t any comment from the Justices on this statute. (Someone else has already commented on 35 USC 273 as being the "elephant in the room.")

Someone on Patently-O also made an astute observation about how to separate out the “abstract idea” chaff from the “real world” wheat: reinstate the “useful, concrete and tangible result” standard. Reinstating this standard would do much to make 35 USC 101 objective. The Bilski claim would have failed this standard as not providing, as that someone said, a “concrete outcome.” The Federal Circuit should have never dumped this standard in Bilski in favor of the nonsensical "machine or tranformation" test.

[EG]

Kevin,

On further reflection and having reviewed again the Bilski application and Bilski claim 1, I've come to the view that this case should have never gone up to SCOTUS under 35 USC 101. Instead, the Bilski claims should have been trounced under one or both of parsgraphs 1 and 2 of 35 USC 112. Many, if not all, of the key claim terms are undefined (and undefinable from) the Bilski patent specification. Illustrative examples are: "series of transactions," "commodity provider," "historical averages," "market participants," "counter-risk
position," "balances the risk position." The paucity of the description in the Bilski patent specification simply doesn't define these claim terms, nor does it "enable" the claim scope.

This reinforces my view that claims should be judged first under 35 USC 112 before applying 35 USC 101. That 35 USC 101 comes before 35 USC 112 in the statutes shouldn't change this. Until you understand what the claims mean, and whether the scope of those claims are enabled under 35 USC 112, determining whether the claimed invention is "useful" under 35 USC 101 is an exercise in futility.

I also remain convinced that the "useful, concrete, and tangible result" standard should be reinstated for determining whether 35 USC 101 is satisfied. It is the only objective standard I've seen for applying 35 USC 101. How to apply this standard to root out claims to "disembodied" abstract ideas is articulated well by Alappat and State Street. Again, 35 USC 112 should be the initial screen, not 35 USC 101.

[Marc Haman]

Hello,

I am a software developer, and I have a few questions that someone here might be able to answer.

Software has protections via copyright.

What I want to know is if another test would be viable: How much of the invention is covered by copyright? I see copyright as being fairly good protection for abstract concepts.

But isn't much of the Bilski "invention" covered by copyright? If the vast majority is covered, then is a patent a legitimate request?

Aren't copyrights better suited for protection of abstract concepts and ideas and works of art?

[Robert F. Zielinski]

Marc,

You raise a number of different points. As a threshold matter and as many others will, no doubt, state more eloquently than I, copyright protection simply does not extend to abstract concepts and ideas. It is only the expression of those concepts and ideas (fixed in a tangible medium) that is afforded copyright. Importantly, copyright gives the owner/author the right to exclude others from copying the work, making derivative or adaptations of the work, and publishing, displaying, performing and importing the work. Copyright does not protect against a third party independently creating identical expression. Conceivably, a software developer working in the same field as you, solving the same or similar problems could create code that is identical to yours and provided it was not copied, it would not be an infringement of your work. Thus, copyright has significant limitations in terms of providing a scheme for carving out broad protection for software and encroachment by competitors.

Patents, on the other hand, do provide broader protection and due to the way in which patent claims are written, patents can be directed to what would appear to be "concepts" (insofar as that term is used loosely here). But suffice it to say that the disclosures and teachings that are found in a patent typically support a far broader interpretation of the protected subject matter than do copyrights. Thus, patents have a far greater value when it comes to keeping competitors from developing products which may be similar or identical to yours.

Lastly, and vitally important is that patent protection and copyright protection are not and have never been mutually exclusive. The code that runs on a computer would indeed be copyrightable and even under Bilski, could also be patentable.

Regardless of how much or how little of the Bilski invention could be covered by copyright, there is no basis under the patent or copyright statutes to force an inventor to choose a sub-optimal protection scheme when he or she is otherwise entitled to the broadest possible protection.

[angry dude]

Dear software developer,

you obviously have no clue about these issues

Try to do your homework first before asking stupid questions

Then you can read this:
http://www.ipjur.com/01.php3

[Marc Haman]

Thanks very much for your response, Robert.

AngryDude seems very angry. I recommend you read:
http://www.apa.org/topics/controlanger.html
before posting rude responses.

That said, I will remember Roberts advice and not angrydudes, and everything will be good in the world once again.

:)