1 August 2010Patents

No fireworks at the Supreme Court as Bilski finally comes to an end

The Supreme Court took the case after the Federal Circuit had ruled the method unpatentable. In so doing, it identified a test for process patents that a claimed process is patent-eligible if it is tied to a particular machine or apparatus, or it transforms a particular article into a different state or thing.

The Supreme Court upheld the Federal Circuit’s finding that the claims were unpatentable, but did so based on its finding that Bilski was attempting to patent an abstract idea. It rejected the Federal Circuit’s ‘machine or transformation’ test as the exclusive test for patentable processes.

When the Supreme Court finally released its judgment on the case, on June 28, 2010, it was conspicuously uncontroversial. Indeed, in as far as the court did anything in Bilski v. Kappos, it preached uncertainty as a virtue. Better to leave the lower courts leeway in deciding cases on their particular circumstances than to possibly damage future innovation by unnecessarily limiting the scope of the statute, the court seemed to say.

This has implications for a range of cases in several industries, but clearly rejects the Federal Circuit’s view of the case. The Supreme Court found that the Federal Circuit “incorrectly concluded that this Court has endorsed the machine-or-transformation test as the exclusive test” for the patentability of process patents, and that the “machine-or-transformation test is not the sole test for deciding whether an invention is a patent-eligible ‘process’”.

That is not to say that the Supreme Court is in favour of business method patents. Indeed, the majority acknowledged that the machine or transformation test is “a useful and important clue...for determining whether some claimed inventions are processes” and further made a point of not “[foreclosing] the Federal Circuit’s development of other limiting criteria that further the purposes of the Patent Act and are not inconsistent with its text”.

What might have been?

Since the Supreme Court appears to have taken a fairly risk-free approach to the case, declining to uphold the Federal Circuit’s strict definition of a patentable process and also declining to elaborate an alternative definition, it would be easy to wonder why the case drew such attention in the first place.

If the answer to the question of whether a business method is patentable is “possibly, but it’s relatively unlikely”, are we really any better off than we would have been relying solely on 35 U.S.C. 101, which states that “[w]hoever invents or discovers any new and useful process, machine, manufacture, or composition of matter, or any new and useful improvement thereof, may obtain a patent therefor, subject to the conditions and requirements of this title”?

The answer to that question is probably no, but there are many people who would argue that had the court come to a more restrictive decision, it could have had significant negative implications for a wide variety of industries and several ongoing cases. The most obviously contentious areas for business methods lie in so-called ‘information age’ technologies, especially software, and in biotechnology industries.

As the Supreme Court acknowledged (though notably in a section of the judgment that did not command majority support): “The machineor- transformation test may well provide a sufficient basis for evaluating processes similar to those in the Industrial Age—for example, inventions grounded in a physical or other tangible form. But there are reasons to doubt whether the test should be the sole criterion for determining the patentability of inventions in the Information Age.”

Several amicus briefs highlighted the potential problems that adhering to a strict machine or transformation test might create. The Biotechnology Industry Organization (BIO) noted that “[b]iotechnology and medical technology innovation and investment are predicated on inclusive standards of patent eligibility”, especially since innovations in these fields typically require high-risk investment in research and development.

The brief continued: “Application of Bilski’s rigid ‘machine-or-transformation’ test to biotechnology and medical technology process inventions is contrary to [the Supreme Court’s] precedents and creates uncertainty regarding their patent eligibility, even for those inventions that have already been patented.”

On the information age technology side, several of the largest technology companies in the US also filed briefs urging the court not to adopt the machine or transformation test exclusively.

Internet search company Yahoo! said in its amicus brief: “At a time when many of society’s most significant technological advances involve electronic signals and magnetic impulses, the inquiry into whether there has been a change of tangible materials to a ‘different state or thing’ is no longer exhaustive. Similarly, in the realm of computer-executed processes, the line between a ‘machine’ and a ‘process’ is indistinct at best.”

The Supreme Court’s decision not to endorse the machine or transformation test came as a relief to many of the amici, and indeed has immediate implications for specific cases in these industries. After its decision in Bilski, the court remanded two further cases to the Federal Circuit to consider in light of its determination. Both deal with patent claims for medical diagnostic methods.

In Prometheus Laboratories v. Mayo Collaborative Services, the Federal Circuit previously found that the claims, for methods of determining whether gastrointestinal treatments needed adjusting, were patent-eligible under the machine or transformation test, reversing a district court ruling.

In Classen Immunotherapies v. Biogen Idec, the Federal Circuit decided that method claims for working out the effect of an immunisation programme on the incidence of immune disorders in mammals were not patentable, partly because they relied on comparing results with a control group rather than undertaking anything that met the Federal Circuit’s definition of transformation.

How the Federal Circuit will decide these two cases in light of Bilski is difficult to predict, but they seem to provide an opportunity for it to develop the “other limiting criteria” that the Supreme Court alluded to.

Winners and losers

For a case that seemed to have so much riding on it, it is surprisingly difficult to pick out winners and losers. Clearly, Messrs Bilski and Warsaw look to have failed in their attempt to patent their method of hedging risks in commodities trading. But even that may not be as set in stone as it sounds.

Michael Jakes, partner at Finnegan, Henderson, Farabow, Garrett & Dunner LLP in Washington, DC, argued the case for Bilski at the Supreme Court. After the judgment, he said: “We are disappointed by today’s decision because we believed the Bilski/Warsaw claims should be patentable under the broad language of the Patent Act.

We are pleased, however, that the court rejected the Federal Circuit’s very limiting machine or transformation test and confirmed that business methods are not excluded from patenting...We will work within the guidance provided by the court to revise the Bilski/Warsaw claims and obtain the patent protection our client has sought for more than 10 years.”

If, as Jakes says, it may be possible to revise the Bilski claims to a patentable form, does that just mean that the trick is in the drafting? What should savvy patent attorneys be doing to ensure that their clients’ claims are on the right side of the not so ‘bright line’ drawn by the Supreme Court?

The first place to look is probably the US Patent and Trademark Office (USPTO). Soon after the judgment, a memo was circulated to USPTO examiners explaining the position post-Bilski. It suggests that the machine or transformation test will still be a key standard for patentees to meet:

“Examiners should continue to examine patent applications for compliance with section 101 using the existing guidance concerning the machine-or- transformation test as a tool for determining whether the claimed invention is a process under section 101,” the memo reads.

“At a time when many of society’s most significant technological advances involve electronic signals and magnetic impulses, the inquiry into whether there has been a change of tangible materials to a ‘different state or thing’ is no longer exhaustive. Similarly, in the realm of computer-executed processes, the line between a ‘machine’ and a ‘process’ is indistinct at best.”

“If a claimed method meets the machine-or-transformation test, the method is likely patent-eligible under section 101 unless there is a clear indication that the method is directed to an abstract idea. If a claimed method does not meet the machine-ortransformation test, the examiner should reject the claim under section 101 unless there is a clear indication that the method is not directed to an abstract idea. If a claim is rejected under section 101 on the basis that it is drawn to an abstract idea, the applicant then has the opportunity to explain why the claimed method is not drawn to an abstract idea.”

William West, partner at Howrey LLP in Washington, DC, drafted the American Intellectual Property Lawyers Association’s (AIPLA) amicus brief to the Supreme Court. “Because of its high turnover rate of examiners and their relative lack of experience, the [US]PTO is looking for bright line tests to make it easier for examiners to do their job,” he says.

“The Federal Circuit may have been trying to develop a bright line test... The Patent Office is continuing to tell examiners that, in the first instance, they should look to the machine or transformation test.”

So while it looks like process claims that don’t meet the machine or transformation test may be patentable, those that do meet the test will almost certainly be so. The safe option, therefore, is surely to draft the claims to give them the best chance of meeting the test.

According to Robert Faber, partner at Ostrolenk Faber LLP, who was speaking during an Association of Patent Law Firms seminar, there are certainly some things that patent attorneys should consider doing. Currently, “one way to avoid the Bilski decision...is to write a product claim, or to write the claim in product form”, he says, though future court cases will have an impact on whether that remains possible.

“When you prepare a patent application...you try to provide a broad range of claims. For example, you can write a product claim where each element of that claim performs a function,” he adds.

There is also the possibility of using a ‘means plus function’ claim under 35 U.S.C. 112, paragraph 6, to avoid the need to satisfy the machine or transformation test, he adds.

That paragraph says that “[a]n element in a claim for a combination may be expressed as a means or step for performing a specified function without the recital of structure, material, or acts in support thereof, and such claim shall be construed to cover the corresponding structure, material, or acts described in the specification and equivalents thereof ”.

Faber says that while means plus function claims cannot be as broad in scope as other product claims, they nonetheless can help. “A method claim stops being a method claim and becomes an apparatus claim if you use means plus function elements,” he says. “I would recommend writing a process claim by referring to the element of the machine or apparatus that performs the function.”

As for the Bilski claims, Jakes is confident that they can be reworked to pass muster with the patent office. “We will look at making our claims more concrete,” he says. “We will probably take several different approaches. I think that most people would be wise to do that.” Jakes underlines that in the initial USPTO examination, “some of the claims were allowed over the prior art”.

Future battles

Although the Supreme Court encouraged the Federal Circuit to develop new limiting criteria for process claims, there is no consensus on how quickly, or even if, it will develop any bright line tests anytime soon. Jakes says: “I don’t think things will be that much different 10 years from now.” He adds that while claims were probably too broadly drafted over the last decade, there are unlikely to be significant changes beyond patentees being more careful over how they present their claims.

West says that the Supreme Court’s decision leaves a lot of room for future articulation in individual cases for what is or is not an abstract idea or what is or is not a patent-eligible business method.

“Clearly, the Supreme Court left open the concept of patentable business methods, but at the same time, it made it clear that it is not enamoured of all business methods, and clearly invited the Federal Circuit to further define ways of what could and could not be patenteligible business methods. The decision leaves room for a lot of interpretation and arguments by attorneys.”

This, it seems, was the best course of action for all concerned. For the Supreme Court to have articulated its own test, either for patentable processes or abstract ideas, “would have led the court into the same error as the AIPLA saw in the Federal Circuit’s decision in Bilski”, West says. “The principle objective was to avoid any attempt at definitive tests that will be too rigid and limiting as far as future innovation was concerned, and to avoid a chilling effect on whatever avenues innovation may take.”

Perhaps in a decade’s time, a new case will have been and gone, new rules will apply, and the issue of business methods will be clear-cut. Perhaps in a decade’s time, Bilski and Warsaw will have their patent. For now though, the Supreme Court has spoken, and spoken clearly. In a world where no one knows what will emerge in the next decade, the most important thing is that patent law encourages innovation and progress. Limiting the future is a risky business.

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