By Lawrence Hoffman
In Part I of the Article, we discussed two recent proposals for amendment of patent eligibility §101 of the U.S. Patent Law and the history leading to the 2010 Supreme Court decision in Bilski v. Kappos in which patent eligibility of business method inventions was first addressed.
I argued that the drafters of the Constitution did not regard methods of conducting commerce as being within the scope of the “useful arts” requirement of the IP Clause of Art. 1, §8 of the Constitution.
Nevertheless, I suggested that a process should not categorically be ineligible because it has application to commerce as long it can be claimed as a useful art, and promised to suggest a way to amend §101 to bring that about.
Bilski v. Kappos – The Runup:
Like the other modern cases discussed in Part I, the case arose out of a final rejection, in this instance of a business method application. The claims were directed to a method of hedging risk in the field of commodities trading”. The Examiner had rejected the claims because:
The invention is not implemented on a specific apparatus and merely manipulates [an] abstract idea and solves a purely mathematical problem without any limitation to a practical application, therefore, the invention is not directed to the technological arts.
The Board of Appeals rejected a “technological arts” test on the ground that it lacked support in the case law. Instead, it considered “if there [was] a transformation of physical subject matter from one state to another.” Finding no such transformation, it sustained the rejection.
Bilski appealed, and in In re Bilski, the CAFC affirmed the rejection. However, the court, relying on Diamond v. Diehr, stated that method claims are patent eligible if, and only if, (1) it they are tied to a particular machine or apparatus, or (2) directed to transformation of a particular article into a different state or thing. The opinion did not consider the relationship of the claimed subject matter to technology per se or a constitutional basis for business method patents.
Reading its opinion, the CAFC was clearly influenced by the statement in Diamond that “while a claim drawn to a fundamental principle”, i.e., an abstract idea or a mental process, is unpatentable, “an application of a law of nature or mathematical formula to a known structure or process may well be deserving of patent protection.” Nevertheless, by finding that the claims were not an application to a known structure, it probably did not need to enshrine the machine-or-transformation test as the exclusive test for eligibility.
Foreshadowing future problems, the case resulted in five separate opinions. In a concurring opinion, Judge Dyk looked to historical support for the court’s approach. In a dissenting opinion, Judge Mayer argued that petitioners’ application was “not eligible for patent protection because it is directed to a method of conducting business”, arguing for a “technological standard for patentability” as suggested by the Examiner. Judge Rader would have affirmed on the basis that the claims were directed to an abstract idea. Only Judge Newman argued that the claims met the requirements of §101.
Judge Dyk’s opinion is interesting in many ways. He cites, for example, the language of the Patent Act of 1793 under which a patent may be granted “for any new and useful art, machine, manufacture or composition of matter, or any new and useful improvement on any art, machine, manufacture or composition of matter”. He notes that this remained essentially unchanged until 1952, when Congress amended § 101 by replacing the word “art” with “process” and by defining “process” in § 100(b) as meaning “process, art or method, and includes a new use of a known process, machine, manufacture, composition of matter, or material”. He further pointed out that the Supreme Court had held that this did not alter the substantive understanding of the statute; it did not broaden the scope of patentable subject matter.
Judge Dyk then proceeded to consider what the drafters of the early patent statutes understood to be the scope of patent eligibility, and concluded that the understanding of “art” would have been derived from the English Statute of Monopolies which largely influenced early U.S. patent law.
Here, use of the term “working…of any manner of new manufactures” indicated that only processes that related to “manufactures” (including machines or compositions of matter) could be patented. He supported this in part by reference to a listing of process patents published in the mid-1800s by Bennet Woodcroft, the first head of the English Patent Office. Judge Dyk noted that except for a single aberration, whose validity was never tested, this is:
No suggestion in any of this early consideration of process patents that processes for organizing human activity were or ever had been patentable. Rather, the uniform assumption was that the only processes that were patentable were processes for using or creating manufactures, machines, and compositions of matter.
Turning next to U.S. Patent Office and Supreme Court practice over the years, he found that there was no evidence that patents were granted under the 1793 Act on methods of organizing human activity not involving manufactures, machines or the creation of compositions of matter. Any seemingly contrary cases, he said, “are plainly distinguishable”.
For example, in its 1853 opinion in Corning v. Burden, the Supreme Court stated:
A process, or nomine, is not made the subject of a patent in our act of Congress. It is included under the general term ‘useful art.’ An art may require one or more processes or machines in order to produce a certain result or manufacture one. The term machine includes every mechanical device or combination of mechanical powers and devices to perform some function and produce a certain effect or result. But where the result or effect is produced by chemical action, by the operation or application of some element or power of nature, or of one substance to another, such modes, methods, or operations, are called ‘processes.’ A new process is usually the result of discovery; a machine, of invention. The arts of tanning, dyeing, making water-proof cloth, vulcanizing India rubber, smelting ores, and numerous others are usually carried on by processes, as distinguished from machines. . . . It is for the discovery or invention of some practicable method or means of producing a beneficial result or effect that a patent is granted, and not for the result or effect itself. It is when the term process is used to represent the means or method of producing a result that it is patentable, and it will include all methods or means which are not effected by mechanism or mechanical combinations.
Although he did not say so in those terms, Judge Dyk saw the constitutional purpose reflected in the 1793 and 1952 Acts and consequently, that processes (or methods, or arts) had to be useful arts to be patent eligible.
Note that the Examiner in his rejection was following what was then standard practice, i.e., effectively looking at method claims for a connection to technology. Judge Mayer deserves kudos for his reference to technology as the modern equivalent of the useful arts, and his attempt to base his rejection on Constitutional intent.
It is interesting to speculate how the Board would have treated the rejection had the Examiner said, “…therefore, the invention is not directed to the useful arts as required by the Constitution”. Had the Board sustained the rejection on such a ground, the CAFC might also have taken a Constitution-centric approach and so might have the Supreme Court. The outcome would likely have been the same, but the body of §101 jurisprudence might have been entirely different.
Bilski v. Kappos – The Supreme Court Opinion:
- Enough wishful thinking about what might have been. Let’s look at what happened when the case got to the Supreme Court.
The Court was offered three theories under which to find the claims not to be patent eligible: (1) failure to satisfy the machine or transformation requirement; (2) categorical ineligibility of business methods; and (3) categorical ineligibility of claims directed solely to an abstract idea.
Regarding the first theory, as the Court has often done, it rejected the CAFC’s effort to create clarity through an objective test as unduly rigid. The Court held that the machine-or-transformation test “is a useful and important clue, an investigative tool, for determining whether some claimed inventions are processes under §101”, but it found nothing in its past decisions to support the machine-or–transformation test as the sole test for deciding whether an invention is a patent-eligible “process.”
As to the second theory, the Court held that patents for business methods are not categorically excluded from patent eligibility. It based this on the fact that the definition of “process” in §100(b) of the Patent Act specifically included methods, and the lack of any dictionary definition or other indication that a common contemporary understanding would exclude methods of doing business from the general category of methods. As an example, the Court cited the definition of “method” in the 1954 Edition of Webster’s New International Dictionary as “[a]n orderly procedure or process … regular way or manner of doing anything; hence, a set form of procedure adopted in investigation or instruction”.
The Court also cited the original (1999) version of §273 which established a prior user defense for business methods as demonstrating that Congress did not regard business methods as categorically as beyond the scope of §101.
Turning finally to the third theory, relying on Benson, Flook, and Diehr, the Court held that the claims were not patent eligible because they were directed solely to abstract ideas.
Characterizing the claims as directed to an abstract idea was certainly correct, but why didn’t the Court just say that and be done with the matter. Everything else was dicta, and frustratingly bad dicta at that.
No tests for process eligibility (other than the discredited “technology” test) had ever been articulated except in terms of relationship to a machine or transformation of matter, so it can be said that these were in fact the “sole tests”. An even though the Court’s concern about validity of the test in the Information Age us certainly valid, , given its decision, there was no reason for it to address the machine or transformation test at all.
Nevertheless, having done so, the Court frustratingly gave no indication of what else should inform a decision as to patent eligibility of a process. It made this clear by stating:
It is important to emphasize that the Court today is not…holding that any… technologies from the Information Age should or should not receive patent protection….[T]he patent law faces a great challenge in striking the balance between protecting inventors and not granting monopolies over procedures that others would discover by independent, creative application of general principles. Nothing in this opinion should be read to take a position on where that balance ought to be struck.
As to categorical ineligibility of business methods, we have demonstrated in Part I the likelihood that methods of commerce are not within the useful arts understood in the 18th Century. Yet even if my view on this is incorrect, given the decision, the question of patent eligibility for business methods did not need to be addressed. But if the Court felt it had to address the issue, it would have been much more constructive to say something like, “just because a process has applicability to commerce does not make it ineligible if it otherwise involves the useful arts”. That would at least have opened a dialog box, as it were, for consideration of how to determine which business methods were patent eligible.
Justice Stevens Gets it Right:
Justice Stevens, in his opinion concurring in the judgment, saw the problem clearly. While he agreed with the majority’s declaring that the machine or transformation test should not be treated as an exclusive test, he argued:
Rather than making any broad statements about how to define the term “process” in §101 or tinkering with the bounds of the category of unpatentable, abstract ideas, I would restore patent law to its historical and constitutional moorings.
Justice Stevens’ opinion is a classic of clarity and insight, and to do it justice would lengthen this article beyond reason. I strongly recommend that everyone interested in improving §101 who has not read it or has not read it recently, do so.
That being said, I will only say that, in my view, he recognizes and discusses all the deficiencies in the majority opinion and that I fully agree with his discussion of how he would have decided the case. In essence, he says that history supports the conclusion that a method of doing business is not a “process” under §101.
Apart from his historical analysis, to me, his most persuasive argument that the term “useful arts” was widely understood to encompass the fields that we would now describe as relating to technology or “technological arts”. This part of his analysis may be found beginning at page 21 of the Slip Opinion.
Before we consider my proposed revision of §101, I will just note that I am mindful of the CCPA’s opinion in the State Street case and of the misreading of the “everything under the sun” statement. I choose not to discuss them since neither is really relevant to the need to make explicit in any amendment to §101 the connection between the useful arts and what we now call technology.
Nor will I discuss the mess created by Alice Corp. v. CLS Bank since any rational proposal to amend §101 must render the Alice test as nothing but a bad memory.
Let’s Put Technology Where it Belongs in Patent Law:
Can we justify use of “technology” as a constitutionally valid filter to determine patent eligibility? If we Google the phrase “what does technology mean”, the first reference states:
The application of scientific knowledge for practical purposes, especially in industry; “advances in computer technology”, machinery and equipment developed from the application of scientific knowledge’; the branch of knowledge dealing with engineering or applied sciences.
The next reference is from dictionary.com:
- the branch of knowledge that deals with the creation and use of technical means and their interrelation with life, society, and the environment, drawing upon such subjects as industrial arts, engineering, applied science, and pure science.
- The application of this knowledge for practical ends.
- The terminology of an art, science, etc.; technical nomenclature.
- A scientific or industrial process, invention, method, or the like.
- The sum of the ways in which social groups provide themselves with the material objects of their civilization. (Based on the Random House Dictionary, © Random House, Inc. 2017)
Don’t you think that if the Constitution were being written today the IP Clause would have said “…to promote the progress…of technology”?
So how would I amend §101? First, I would add a definition of “technology” to §100, for example, “the application of the laws of nature to create material objects, machines or compositions of matter and the resulting creations”. We could even add a definition “technical” as something like “pertaining to technology”.
I would then incorporate the terms “technology” and “technical” into §101. Using the IPO proposal as a base, I would say something like:
101(a) ELIGIBLE SUBJECT MATTER. Whoever invents or discovers, and claims as an invention, any useful process, machine, manufacture, composition of matter, or any useful improvement thereto, shall be entitled to a patent thereon, subject only to the exceptions, conditions, and requirements set forth in this Title.
101(b) SOLE EXCEPTION TO SUBJECT MATTER ELIGIBILITY. A claimed invention is ineligible under subsection (a) if and only if the claimed invention as a whole, as understood by a person having ordinary skill in the art to which the claimed invention pertains, (i) is directed to a law of nature and not to application of such a law using technology or technical means, or (ii) exists in nature in its claimed form independently of and prior to any human activity, or (iii) is directed to an organization of human activity that is not achieved by application of technology or technical means. A process within the scope of sub-part (iii) shall not be excluded from eligibility simply because it has application to commerce or other endeavor not constituting technology.
101(c) SOLE ELIGIBILITY STANDARD
The eligibility of a claimed invention under subsections (a) and (b) shall be determined without regard as to the requirements or conditions of sections 102, 103, and 112 of this Title, the manner in which the claimed invention was made or discovered, or the claimed invention’s inventive concept.
These suggestions, which I regard solely as a basis for discussion, seem to cover what I believe the Constitution intends to be patent eligible. I am sure some of you can think of better ways to say what I have in mind.
Some Final Words:
Let me leave you with a further thought, and something else I think you should read. As you can see from above, I am hardly the first one to suggest a technological test for patent eligibility. In fact, it is already part of the Chinese Patent Law and in the EPC, to say nothing of its use in the definition of a “covered business method” in 37 CFR 42.301.
Finally, I refer you to a thoughtful criticism of Bilski v. Kappos which also advocates a renewed emphasis on technology: Forty Years of Wondering in the Wilderness and No Closer to the Promised land: Bilski’s Superficial Textualism and the Missed Opportunity to Ground Patent Law Interpretation and Return Patent Law to its Technology Mooring (here) by Peter S. Menell, Professor of Law, University of California at Berkeley School of Law and Director, Berkeley Center for Law & Technology. That, like the Pollack paper, and Justice Steven’s concurring opinion, are almost essential reading.