June 28, 2010

Executive Summary
This morning, the U.S. Supreme Court issued its long-awaited opinion in Bilski v. Kappos, a patent case further defining the boundaries of what constitutes patentable subject matter.  In today’s opinion, the Court reaffirmed that the “machine or transformation test” promulgated by the Court of Appeals for the Federal Circuit remains a valid test for determining patent eligibility.  However, the Supreme Court held that this is not the sole test for determining whether a process is eligible for patenting.  The Court also did not rule out software and business methods as being categorically unpatentable, as some had anticipated. 



Background – what can be patented?
Title 35 of the U.S. Code, Section 101, authorizes patents for:

• Machines
• Compositions of Matter
• Articles of Manufacture
• Processes 

These categories have generally been construed very broadly by the courts.  In its 1980 opinion in Diamond v. Chakrabarty, the U.S. Supreme Court stated the general proposition that “anything under the sun that is made by man” may be patented.

The U.S. Supreme Court has also previously held that the following are not patentable:

• Abstract ideas (e.g., mathematical algorithms)
• Natural phenomena
• Laws of nature

The Section 101 patent-eligibility inquiry is only a threshold test.  Even if an invention qualifies as a process, machine, manufacture, or composition of matter, in order to receive the Patent Act’s protection the claimed invention must also satisfy the other conditions and requirements of Title 35. Those requirements include that the invention be novel under Section 102, nonobvious under Section 103, and fully and particularly described under Section 112.

Under the above construction of Section 101, various forms of software, business methods, gene sequences and methods of isolating them, medical diagnostic tests, therapeutic methods and telemedicine innovations have been patented in the U.S.  The patentability of innovations in these areas of technology, among others, has been called into question by the Bilski case.  A fundamental question raised by Bilski is where is the dividing line between patentable processes and unpatentable abstract ideas?  In attempting to clarify this issue, today’s opinion does not significantly disrupt the commonly held belief of where this boundary generally lies.

The Bilski application
The patent claims in dispute in Bilski are directed to a method for hedging risk in the field of commodities trading.  The claims were first rejected by the examiner assigned to the application at the U.S. Patent and Trademark Office (PTO) as being directed to non-statutory subject matter under Section 101.  This rejection was appealed and affirmed by the Board of Patent Appeals and Interferences at the PTO.  The case was then appealed to the Court of Appeals for the Federal Circuit and heard by the full 12 judge court.  In its 2008 decision, the Federal Circuit affirmed the rejection of Bilski’s claims, and promulgated an exclusive test for patent eligibility of process claims.  The test requires that a method either be tied to a machine, or transform a particular article into a different state or thing.  This has become known as the "machine or transformation" test.  The Supreme Court took up the case to consider whether this test is contrary to the Court's previous holdings.  More than 40 amicus curiae (“friend of the court”) briefs were filed on all sides of the issue.  In previous cases, the Court has declined to limit the broad statutory grant of patent eligibility beyond the above exclusions.

The Supreme Court has now affirmed the rejection of the Bilski claims.  It did so, however, not by finding that the claims did not qualify as a “process” under either prong of the machine or transformation test, but instead by finding that the claims fall outside of Section 101 because they claim abstract ideas.

How will Bilski affect medical device patents?
In very general terms, the Bilski decision will not impact the vast majority of medical device patents and applications, since most medical device claims are directed to subject matter that clearly falls under Section 101.  However, today’s decision makes clear that just because a medical device claim passes at least one prong of the machine or transformation test does not necessarily mean that is constitutes patentable subject matter under Section 101.  Conversely, a claim that fails both prongs of the test is not necessarily outside the scope of patentable subject matter.  Under Bilski, the PTO and courts are free to employ other criteria consistent with Supreme Court precedent for determining patent eligibility under Section 101.

For patent or application owners having method claims that broadly cover assay tests, telemedicine, particular medical treatments, or other subject matter that may push the envelope of patent eligibility, the Bilski opinion provides little guidance as to whether such claims are eligible for patenting under Section 101.  Medical device companies and institutions should continue to develop their claim strategies in light of the machine or transformation test until such time that the courts offer further guidance.  Continuing to have claim coverage of varying degrees of scope, and keeping patent families alive with continuing applications remains sound practice, particularly for these situations.

In August, the PTO issued “Interim Examination Instructions For Evaluating Subject Matter Eligibility Under 35 U.S.C. § 101.”  Applicants should continue to take these interim instructions into account when drafting and prosecuting patent applications.  The interim instructions indicate that if a claim is directed to a process, it must satisfy at least one of the two prongs of the machine or transformation test to ensure that it is limited to a particular practical application. Additionally, examiners are instructed to consider two corollaries.  First, the use of a particular machine or the transformation of a particular article must impose a meaningful limit on the claim’s scope.  For example, a recited machine cannot merely appear in a field-of-use limitation.  Second, the use of a particular machine or a transformation of a particular article must involve more than insignificant “extra-solution” activity.  In other words, the activity should be central to the purpose of the claimed method rather than an insignificant step tacked onto the end of the process.  In the PTO’s view, it is no longer sufficient to insert a step such as presenting a result on a display.

It is clear that the mere recognition or observation of a natural phenomenon is not patentable under the machine or transformation test. For the transformation prong, "physical objects or substances" must be involved, as opposed to such things as legal obligations, organizational relationships, or business risks.  It remains an open question as to whether electronic transformation of data representing physical objects is sufficient.  Under the machine prong, it is unclear whether reciting a computer sufficiently ties a process to a particular machine.

Please contact us if you would like further information about the Bilski opinion and how it may affect your particular situation.  Feel free to forward this information to others using the "Share This" links above.

A copy of the Court’s slip opinion can be found at www.supremecourt.gov/opinions/slipopinions.aspx. 

(The opinions expressed in this brief are solely those of the author and should not be misconstrued as legal advice.)