The U.S. Supreme Court heard oral arguments on Monday in Bilski v. Kappos, which will require it to rule on the patentability of a method of hedging risks in commodities trading. Michael Jakes of Finnegan, Henderson, Farabow, Garrett & Dunner represented Petitioner Bilski, and Malcolm Stewart, assistant to the U.S. Solicitor General, represented Respondent Kappos of the Patent and Trademark Office.
Overall, the Justices pushed both sides to advance a reasonable standard for evaluating the types of applications that should be patented. Most Justices were skeptical on granting patents to business methods. Justice Ginsburg, for example, expressed concern that granting business method patents would also open the door to patenting “an estate plan, tax avoidance, how to resist a corporate takeover, [and] how to choose a jury”. At the same time, however, some Justices were dissatisfied with the narrow “machine or transformation test” issued by the Federal Circuit (according to which methods must be either tied to a particular machine or transform specific subject matter in order to be patentable). It appeared that the Justices were aware that stating too strict a standard may very likely have negative implications for industries such as computer technology and biomedicine. Regardless, judging from the criticism voiced by the Justices regarding the patentability of the business method claims in Bilski’s application, it appears likely that the Court will rule against Bilski’s claims.
The oral argument began with Jakes arguing that the Court should adopt a flexible standard as opposed to the rigid and narrow test adopted by the Federal Circuit. In particular, Jakes argued that the test should be whether there is a “practical application of a useful result” that involves “physical steps”. The Justices (including Justice Breyer and Justice Sotomayor) continuously questioned Jakes regarding what he thought would be a reasonable standard. In particular, Justice Sotomayor suggested that a proper standard should be one that is tied to something, such as inventions, technology, sciences, or the useful arts. Justice Ginsburg pushed for a standard that would base patentability on science or technology, which she argued is a standard that is used successfully in Europe and other countries.
Criticisms were expressed regarding Bilski’s claims. In particular, Justice Roberts said that he failed to see any physical steps in the patent claim at issue. In addition, Justice Kennedy was concerned that Bilski didn’t involve something that was tangible, and that the claims failed to show how the “substance” was different before the process and after the process.
When Stewart took the podium, the Justices bombarded him with questions about the “machine or transformation test”. In particular, Justice Roberts stated that the test would seemingly allow even the most tangential and insignificant use of a machine to be patentable. In addition, Justice Breyer stated his concern that a new machine test allowing a patentable process simply because the process is running on an old machine would be too broad. Justice Stevens suggests that the question should instead be whether the new process is patentable apart from the machine. Seeming to acknowledge this difficulty, Stewart responded that this case was probably not the best case to push for a broad standard on evaluating patentable subject matter (e.g., claims involving software innovations or medical diagnostics techniques). He stated that he would rather the Court rule only on the narrow issue of whether these particular claims are patentable and leave the other issues unresolved.
It is interesting to note that at one point during the arguments, Justice Sotomayor explicitly stated that the ruling in this case would be limited to statutory limitation of “process” and thus would not overrule State Street (which was limited to machines).
Based on the Justices’ questions, it seems likely that the Court will restrict future patents on business methods. The Court may also issue a rather strict standard on future software patents. However, there seems to be enough hesitancy from most of the Justices to suggest that the standard adopted will most likely not be as strict as the one issued by the Federal Circuit.
A complete transcript of the oral argument can be found here.
By Jane Wu and Brian Harley.