Thursday, November 11, 2010


Another unanimous fractured opinion has emerged from the nation's Marble Palace. The case is Bilski v. Kappos, No -08-694. Bernard Bilski and Rand Warsaw applied for a patent. They didn't invent a "thing" as much as they figured out a really complex mathematical problem. Their discovery explains how buyer and sellers of commodities in the energy market can protect, or hedge, against the risk of price changes. I wonder how Bilski and Warsaw account for fraud in their calculations. Fraud was the issue with Enron in the largest collapse of a company in the energy market to date.

The patent examiner rejected Bilski and Warsaw's application because their "invention" is not implemented on a specific apparatus, but merely manipulates an abstract idea solving a purely mathematical problem. The Board of Patent Appeals and Interferences agreed and affirmed. The Federal Circuit, in turn, affirmed.

The Federal Circuit sitting en banc rejected its prior test for determining whether a claimed invention was a patentable “process” under Patent Act, 35 U. S. C. §101— i.e., whether the invention produced a “useful, concrete, and tangible result,” — holding instead that a claimed process is patent eligible if: (1) it is tied to a particular machine or apparatus, or (2) it transforms a particular article into a different state or thing. Concluding that this “machine-or-transformation test” is the sole test for determining patent eligibility of a “process” under §101, the court applied the test and held that the application was not patent eligible.

The Supreme Court upheld the judgment of the Federal Circuit, but took that court to task for its narrow interpretation of Patent Law.

The Patent Law specifies four independent categories of inventions or discoveries that are patent eligible: “processes,” “machines,”“manufactures,” and “composition[s] of matter.” “In choosing such expansive terms, . . . Congress plainly contemplated that the patent laws would be given wide scope. Prior decisions of the Supreme Court provide precedents provide three specific exceptions to §101’s broad principles: laws of nature, physical phenomena, and abstract ideas. The Bilski/Warsaw concept is clearly an abstract idea.

Even if the Bilski/Warsaw concept had been otherwise patent eligible it would have still been required to demonstrate novelty, nonobviousness, and demonstrate a full and particular description. The invention at issue is claimed to be a “process,” which the Patent Law defines as a “process, art or method, and includes a new use of a known process, machine, manufacture, composition of matter, or material.”

The Court ruled that the Machine-or-Transformation Test was not the sole test determining patent eligibility. The Court said this test may be a useful and important clue or investigative tool, it is not the sole test for deciding whether an invention is a patent-eligible “process”.

The Federal Circuit violated two principles of statutory interpretation, the Court said. Courts should not read into the patent laws limitations and conditions which the legislature has not expressed. Unless otherwise defined, words will be interpreted as taking their ordinary, contemporary, common meaning. The Court is unaware of any ordinary, contemporary, common meaning of “process” that would require it to be tied to a machine or the transformation of an article.

The Patent Director argued that looking at all sections of the Patent Law where the term "process" was used led to the confining opinion that the "process" need be tied to the Machine-or Transformation Test. Associate Justice Kennedy said that the doctrine of noscitur a sociis does not apply here. Noscitur a sociis is a Latin phrase meaning "it is known by the company it keeps". Hence the translation is "birds of a feather flock together". This legal maxim originated in England with the dicta of Judge Stamp in the 1967 case of Bourne v. Norwich Crematorium, Ltd where he said:
"Sentences are not mere collections of words to be taken out of the sentence, defined separately by reference to the dictionary or decided cases, and then put back into the sentence with the meaning you have assigned to them as separate words."
What Kennedy is saying that there wasn't anything unclear about the word "process." It was not necessary for the Patent Office and the Federal Circuit to limit the language provided by the Congress.

Kennedy refers to the Federal Circuit's sole test as the categorical exclusion argument. He says, "The categorical exclusion argument is further undermined by the fact that federal law explicitly contemplates the existence of at least some business method patents: Under §273(b)(1) [ of the Patent Law], if a patent-holder claims infringement based on “a method in [a] patent,” the alleged infringer can assert a defense of prior use. By allowing this defense, the statute itself acknowledges that there may be business method patents. Section 273 thus clarifies the understanding that a business method is simply one kind of “method” that is, at least in some circumstances, eligible for patenting under §101. A contrary conclusion would violate the canon against interpreting any statutory provision in a manner that would render another provision superfluous."

Having corrected the Federal Circuit the Court goes on to explain that Bilski and Warsaw fail because they are trying to "patent both the concept of hedging risk and the application of that concept to energy markets". Kennedy said "these are not patentable processes but attempts to patent abstract ideas."
Abstract ideas are not patent eligible.

I called this a fractured opinion because Associate Justice Kennedy delivered the opinion of the Court except as to Parts II-B-2 and II-C-2.  The Court agreed in the outcome only. 

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