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01.10

What Does the Bilski Hearing Tell Us?
By Nathan J. Bailey and Jill M. Browning

On 9 November 2009, the Supreme Court of the United States heard oral arguments in Bilski v. Kappos, a case that could have — and most likely will have — an impact on all IEEE members. Just how important is this case? Well, should this be your first encounter with the case, Today’s Engineer has already provided a discussion of the problem [1], an overview of the case [2], and a discussion of an amicus brief filed by Professor Lee Hollaar and joined by IEEE-USA [3]. If you are not familiar with the Bilski case, these articles provide a thorough explanation of the issues it presents. This article provides a brief discussion of how the case may affect IEEE members and a brief synopsis of what took place during oral arguments before the Supreme Court.

So, why has Today’s Engineer provided such extensive coverage of this case? Well, it’s because, as Steven Rubin [4] noted, what’s at stake is no less than a determination, in certain areas of technology, as to “what is patentable?” For patent practitioners, inventors and all advocates of the progress of science and the useful arts, the answer to this general question has at times, if not at all times, been elusive, and interested parties are holding out hope that the Supreme Court will provide a more concrete answer to this question [5].

With respect to how Bilski may impact members of IEEE, the questions presented by the Bilski case, and either their answers or their continued existence, will likely have the greatest impact in the context of software patents [6]. Software designers, software companies, and others who have an interest in whether software can be patented and the extent of its patentability, will be paying close attention to any answer or guidance the Supreme Court provides regarding these questions.

The reason why the software industry may be the most directly impacted industry is because the particular patent claims involved in the Bilski case are directed to a business method — a method of hedging risk in the field of commodities trading. Under Federal Circuit jurisprudence, business method patents have been closely linked to software patents because both are often considered processes. For instance, in State Street Bank v. Signature Financial Group, Inc. [7], the patent at issue involved both software and business methods and the language in that decision has been widely applied to both types of patents — which have been tied together, and at times, characterized as patents that relate to “abstract ideas.” Further, the question of whether these types of patents can be viewed as patents protecting the “useful arts” has often been tied together.

At the Supreme Court hearing, the link between software patents and business patents was recognized by the Court and also counsel for the United States Patent and Trademark Office (USPTO):

Justice Breyer: [with respect to the link between a computer and a business method] . . . All you do is just have a set of instructions for saying how to set a computer to do it. Anyone can do that. Now, it’s a machine.

Counsel for the USPTO: [following up on Justice Breyer’s questions] . . . we recognize that there are difficult problems out there in terms of patentability of software innovations . . .

[W]e don’t want the Court, for instance, in the area of software innovations . . . to use this case as the vehicle for identifying the circumstances in which innovations of that sort would and would not be patent eligible . . .

And the questions the Supreme Court Justices asked suggested that this link was on the Court’s mind. Following is a brief synopsis of what took place at the hearing.

During the hearing, Justices Sotomayor, Kennedy and Breyer were particularly active, closely followed by Justices Scalia and Ginsburg and Chief Justice Roberts. Throughout the hearing, the Justices appeared to be struggling to find the “right” answers and appeared to be mindful of the potential consequences their ruling may have on various industries.

The hearing started out with a focus on the “useful arts,” and what constituted “useful arts.” Justice Scalia began by indicating that such arts included the manufacturing arts, but should not include a book on “how to win friends and influence people.” Justice Sotomayor followed up with a question regarding the difficulty in where to draw the line when an invention is not tied to “technology” or “the sciences” and recited the parade of horrors of potentially patentable methods for estate plans or tax avoidance that could follow should there be no limit to the “useful arts.” In the same context, Justice Breyer questioned whether it was the framers of the Constitution’s intent that every “new” and useful business method be patentable, intimating that Bilski’s proposed test could be too encompassing. Justice Sotomayor further asked whether a method to cure someone that involves only human activity would fall within the intent of the patent law. In response to these questions, Bilski’s counsel responded that yes, many of these things, if they were new and useful, should be patentable, assuming they met other statutory requirements — appearing to suggest that 35 U.S.C. § 101 should be broadly construed to encompass as potentially patentable any process that is new and useful.

Justice Breyer asked Bilski’s counsel to propose a back-up test if the Court hypothetically decided to reject the broad suggestion that any set of steps could be patentable, and while Bilski’s counsel agreed that “abstract ideas per se are not patentable,” he maintained his prior broad position. Chief Justice Roberts and Justice Kennedy both followed this line of questioning with comments indicating that certain ideas that are abstract should not be patentable, with Justice Kennedy indicating that it would be difficult to think that the actuarial tables used in the insurance industry could have been monopolized by one person.

Justice Ginsburg, like Justice Sotomayor, suggested that an invention should be tied to “science or technology,” and asked Bilski’s counsel to explain why such a requirement, as she understood European laws to also require, would not be consistent with the fundamentals of our patent system. Bilski’s counsel pointed out that the U.S. patent system was unique and that defining what constituted “technology” would be difficult in terms of U.S. patent jurisprudence and also due to the changing landscape of technology. To follow-up on this questioning, Justice Scalia asked why, in a horse-based economy (in the 1800s) there were no patents directed to methods of training horses, as this would certainly have been useful at the time. Justice Sotomayor further indicated that “how” to approach a problem can’t be enough to make it patentable.

After some discussion with Justice Breyer regarding the positives and negatives of patent monopolies, Justice Sotomayor commented that it might be sufficient to patent useful knowledge if it were tied to some transformation, indicating that she might be open to adopting the Federal Circuit’s machine or transformation test [8] or a close adaptation of the same. Just before Bilski’s counsel finished his argument, several of the Justices began a conversation with him concerning the Morse code patent and Alexander Graham Bell’s telegraph patent, asking questions relating to what types of transformations were occurring, and appearing to see the fit between the Federal Circuit’s test and these earlier granted patents.

Counsel for the USPTO defended the Federal Circuit’s test and responded to criticisms that the test was not “inflexible” by asserting that it only required some link between the method and the transformation. Counsel for the USPTO also indicated during the argument that there would be many difficult questions to answer in the future, but that the Federal Circuit’s test could accommodate difficult questions and allow for exceptions. Justice Sotomayor expressed concern regarding applying a rigid exclusive test, in that potential patentable subject matter would be excluded from the patenting process.

Next, the State Street Bank decision was discussed and Justices Stevens, Scalia and Breyer questioned whether this case would have the same end result if the Federal Circuit’s current “machine or transformation” test were utilized. Counsel for the USPTO indicated that State Street would have ended with the same result because the claims were directed to a machine (a computer). This answer led to a discussion regarding the USPTO’s apparent position, set forth in its last footnote on its brief, which Chief Justice Roberts was troubled about — that if the method is simply tied to a calculator or a computer, then it would be patentable, and this seemed to place form over substance. Both Justices Kennedy and Stevens were curious with respect to what was “transformed” by the State Street computer program, indicating that it appeared to be merely a new process on an old machine. The USPTO did not have a ready answer, deflecting the question by indicating that hardware could be present that would transform the machine. During these discussions, the questions linking software to business methods arose, as noted above, and the USPTO appeared to disfavor tying any decision in this case to a decision that would impact software technologies.

In rebuttal, Bilski’s counsel stressed its position against a rigid test, such as the “machine or transformation” test, which could be avoided by simply looking at whether the invention is attempting to patent an abstract idea.

Overall, it is hard to determine which way the Court will rule, but there is a good chance that the Court’s ruling will have an impact on software patents and those interested should keep reading Today’s Engineer to get the latest news on the aftermath of the Bilski decision.

References:

[1] Lee Hollaar, “What should be patentable?,” Today’s Engineer, [online], (April 2009), Available http://www.todaysengineer.org/2009/Apr/patents.asp.

[2] Steven Rubin, “Here’s an Idea, Why not Patent It? A Brief Summary of the Issues and Complexities of Bilski v. Doll,” Today’s Engineer, [online], (September 2009), Available http://www.todaysengineer.org/2009/Sep/Bilski.asp.

[3] Lee Hollaar, “IEEE-USA Joins Bilski Amicus Brief,” Today’s Engineer, [online], (October 2009), Available http://www.todaysengineer.org/2009/Oct/Bilski.asp.

[4] See Supra, n.2.

[5] No pun intended.

[6] Specifically, the questions presented to the Supreme Court are:
(1) Whether the Federal Circuit erred by holding that a “process” must be tied to a particular machine or apparatus, or transform a particular article into a different state or thing (“machine-or-transformation” test), to be eligible for patenting under 35 U.S.C. § 101, despite this Court’s precedent declining to limit the broad statutory grant of patent eligibility for “any” new and useful process beyond excluding patents for “laws of nature, physical phenomena, and abstract ideas.”
(2) Whether the Federal Circuit’s “machine-or-transformation” test for patent eligibility, which effectively forecloses meaningful patent protection to many business methods, contradicts the clear Congressional intent that patents protect “method[s] of doing or conducting business.” 35 U.S.C. § 273.

[7] See State Street Bank and Trust Co. v. Signature Financial Group, Inc., 149 F.3d 1368 (Fed. Cir. 1998).

[8] The United States Court of Appeals for the Federal Circuit held, in the appellate proceedings below, that “[a] claimed process is surely patent-eligible under § 101 if: (1) it is tied to a particular machine or apparatus, or (2) it transforms a particular article into a different state or thing.” See In re Bilski, 545 F.3d 943, 954 (Fed. Cir. 2008).

Nathan J. (“Nate”) Bailey is a member of IEEE-USA’s Intellectual Property Committee. He holds a J.D. from Southern Illinois University School of Law and an M.S. in Electrical and Computer Engineering from Southern Illinois University. He currently practices as an intellectual property attorney with the law firm Greenblum & Bernstein, P.L.C., mainly focusing on patent litigation. He can be reached at nbailey@gbpatent.com.

Jill M. Browning is an intellectual property attorney with the law firm Greenblum & Bernstein, P.L.C., and is a regular contributor to various publications on the latest intellectual property decisions by the Supreme Court. She holds a J.D. from the University of Virginia and has over thirteen years of experience assisting clients in obtaining patent rights and protecting and enforcing those rights. She can be reached at jbrowning@gbpatent.com.

Comments may be submitted to todaysengineer@ieee.org.