The debate over patents and intellectual property doesn’t excite me the way it does many other participants here, so please consider this post a mere relaying of information on my part. Yesterday the U.S. Supreme Court received a petition to reconsider a Federal Circuit Court of Appeals decision limiting the scope of what subject matter may receive federal patents. The petitioners, who lost in the Federal Circuit, claimed a patent for “a method of hedging the consumption risk associated with a commodity sold at a fixed price for a given period.” (Stephan Kinsella discussed the earlier Federal Circuit case in this post.)
Below is the introduction from the Supreme Court petition in the case, captioned Bilski v. Doll:
This case raises the most fundamental question in patent law: what can be patented? Are patents only for manufacturing processes that are tied to a particular machine or produce some physical transformation? Or do patents also embrace modern business processes that do not depend on a particular machine or device?
A primary strength of the Patent Act is that it does not limit what can be patented by subject matter, thereby adapting to and encouraging innovation at the forefront of technology. 35 U.S.C. Â§ 101 provides that “any” new and useful process, machine, manufacture, or composition of matter may be patented, so long as the other requirements for patentability are met. There is no exclusion for business methods or any other field of invention. The only limit this Court has imposed on the broad statutory grant is that patents may not be obtained for “laws of nature, natural phenomena, and abstract ideas.” Indeed, natural laws and phenomena can never qualify for patent protection because they cannot be invented at all. And abstract ideas are not eligible because they are not “useful” and thus must be applied to a practical use before they can be patented.
Beyond that, however, this Court has not placed restrictions on the types of inventions that can be patented, consistent with the broad statutory grant of patent eligibility in Â§ 101. The Court has twice expressly declined to hold that a process must be tied to a particular machine or produce some physical transformation to be eligible for patenting. And the Court of Appeals for the Federal Circuit seemed to agree. While refusing patents for abstract ideas and laws of nature, the court allowed patenting of inventions that produced a “useful, concrete and tangible result.” By adhering to the statute, which was designed to accommodate and encourage innovation, the Federal Circuit made patent protection available to such diverse fields as internet commerce, information technology, and business methods.
Tens of thousands of process patents have now issued in reliance on the Patent Act’s lack of subject matter restrictions and the decisions of both this Court and the Federal Circuit refusing to restrict patent eligibility except to exclude abstract ideas and laws of nature. The Federal Circuit has abruptly changed course, however, and held that the “machine-or-transformation” test, which this Court has never said is required for patent eligibility, is in fact not optional or merely advisory but rather “the only applicable test” for patent-eligible processes. In doing so, the Federal Circuit has essentially confined all
process patents to manufacturing methods, using a test that may have been appropriate during the Industrial Age but no longer fits our modern information-based economy. Not only is the test backward-looking, but it is also inconsistent with the patent statute’s recognition that business methods are eligible for patenting. And while directed to a business method, the Federal Circuit’s decision threatens other industries as well, such as software and biotechnology, which are important to the nation’s economy. The decision has disrupted the settled expectations of patent owners and cast doubt on tens of thousands of issued patents.
This Court has not considered what is patentable subject matter since 1981, when computers were just becoming part of daily life. It is now time to do so again to prevent the Federal Circuit’s outmoded “machine-or-transformation” test, while ostensibly rooted
in this Court’s decisions, from stifling innovation in our most vital industries and frustrating Congress’ intent as expressed in the Patent Act. The Court should grant the petition so that it can instruct the Federal Circuit to return to first principles and restore the law of patent eligibility for processes under Â§ 101.