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No Love for Speed Dating or Abstract Business Method Claims

November 9, 2009

Business methods received serious cross fire during today’s Bilski v. Kappos oral arguments.  Justices from all sides of the bench peppered both parties regarding the extent to which broad business method claims are patent eligible subject matter. The Supreme Court continues to attack expansive business method concepts while searching for a line of demarcation between broad, abstract and mental processes and more technological-centric methods. The Justices gave numerous examples of how to define this boundary. The Justices, for instance, quizzed counsel for both parties as to whether the following methods are patent eligible subject matter:

• Speed dating? (Sotomayor)
• Horse whispering to train horses? (Scalia)
• Buy low, sell high to maximize wealth? (Roberts)
• Winning friends and influencing people? (Ginsburg)
• Resisting a corporate takeover? (Ginsburg)
• Selecting a jury? (Ginsburg)
• Estate planning and tax avoidance strategies? (Ginsburg)
• Using a new alphabet to form words? (Kennedy)
• Compiling statistics for insurance? (Kennedy)
• Calculus to create actuarial tables? (Kennedy)
• Teaching anti-trust law? (Breyer)
• Anything that helps any business man succeed? (Breyer)

Justices Scalia, Breyer, Ginsburg, and Sotomayor appeared to grasp for a clear boundary but none seemed to be forthcoming. What appeared clear, however, was that Bilski’s broad method claims of hedging business risk may be doomed.  Picking up a phone and calling a broker may not be a sufficient physical step to save Bilski’s claims from abstraction. Moreover, Justice Roberts seemed to hint that the mere use of a computer to call a local bakery (as opposed to the yellow pages) fails to push a method towards patentable subject matter.  In contrast, the Justices seemed to accept the idea of more narrow business methods that were tied to technology or useful arts and that did not claim abstract ideas or mental processes.

The acceptance of such technology-centric business methods arguably respects Congress’s implicit recognition of business methods in 35 U.S.C. § 273 following the Federal Circuit’s State Street decision (State Street Bank and Trust Co. v. Signature Financial Group, 149 F.3d 1368 (Fed. Cir. 1998)), and upholds Supreme Court precedent such as Gottschalk v. Benson (409 U.S. 63 (1972)), Parker v. Flook (437 U.S. 584 (1978)), Diamond v. Diehr (450 U.S. 175 (1981)), and Diamond v. Chakrabarty (447 U.S. 303 (1981)). For example, Ginsburg’s questions appeared to reference a technology test for patent eligible subject matter similar to that used in several European countries. Likewise, Sotomayor seemed to support such technology-tied business methods and at one point, queried whether manipulation of electronics and signals are more than business methods. Furthermore, Justice Scalia questioned the definition of the term “useful arts” as it relates to patent eligible subject matter. Scalia seemed to support tangible inventions arising out of the mechanical arts such as those “strange gadgets” created by Lorenzo Jones—a fictional inventor and garage mechanic character that appeared in a World War II era comedic radio show.

Overall, the Justices appeared dissatisfied with the machine or transformation test outlined in Bilski and critically attacked the respondent’s defense of such a test by expressing concerns as to its effect across a wide variety of industries ranging from computer software to biomedical technology. Specifically, Justice Breyer characterized the Federal Circuit’s decision in Bilski as a pullback of the previously broad scope of patentable business methods. Nonetheless, he recognized that Bilski failed to address the breadth of the transformation test and the extent to which business methods must be tied to a machine. Echoing these concerns, Roberts seemed particularly troubled with the patent office’s assertion that tying a computer to an otherwise unpatentable business method (i.e. adding a computer to Bilski’s claims) renders the resulting method patentable under Bilski’s machine or transformation test.

Although the decision is not expected until January or February of 2010, based on the oral arguments and the peppering of questions from the Justices, it appears that the court will affirm the Federal Circuit to say that the claims set forth in Bilski are not patent eligible subject matter.  It currently remains unclear whether the Justices will use their searching questions to ultimately draw a boundary between broad, abstract, and mental process and more technology-centric methods. Regardless, we will keep you informed as to the decision of the court. Stay tuned.