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The Federal Circuit and Patent Eligibility in the Wake of Bilski v. Kappos

By Dervis Magistre
October 28, 2011

Two questions figured most prominently when the Supreme Court granted certiorari in the case of Bilski v. Kappos, 130 S. Ct. 3218 (2010): Would the Court accept the “machine-or-transformation” test as the exclusive standard for determining patent eligibility under 35 U.S.C. ' 101, and would the Court rule that business methods are categorically excluded from patent eligibility? The Court answered “no” to both, and reaffirmed the analytical framework set forth in the Benson-Flook-Diehr trilogy of its own prior precedent. Under this framework, ' 101 is to be construed expansively, in keeping with the “permissive approach” taken by Congress when it wrote the statute as embracing “any new and useful process, machine, manufacture, or composition of matter ' ” 35 U.S.C. ' 101 (emphasis added); Bilski, at 3225. This liberal approach to patent eligibility is subject only to three narrow exceptions: laws of nature, natural phenomena, and abstract ideas. Id. The subject matter at issue in Bilski was ruled an abstract idea, and thus excluded from eligibility under ' 101, because the claims “explain the basic concept of hedging, or protecting against risk” and the “concept of hedging ' is an unpatentable abstract idea ' ” Id. at 3231. Rather than exclude all business methods from patent eligibility on the basis of the machine-or-transformation test, the Court limited its ruling to stating that the “patent application here can be rejected under our precedents on the unpatentability of abstract ideas.” Id. Although the machine-or-transformation test is not the sole basis for determining patent eligibility, the “machine-or-transformation test is a useful and important clue, an investigative tool, for determining” patent eligibility. Id. at 3227.

Certain principles guided the Bilski court. First, patent eligibility should be consistent with the text of ' 101. “[C]ourts should not read into the patent laws limitations and conditions which the legislature has not expressed,” save for the “well-established exceptions” noted above, which, although they “are not required by the statutory text, [ ] are consistent with the notion that a patentable process must be 'new and useful.'” Id. at 3225, 3226. Moreover, the “Court has not indicated that the existence of these 'well-established' exceptions gives the Judiciary carte blanche to impose other limitations that are inconsistent with the text and the statute's purpose and design.” Id. at 3226. The machine-or-transformation test fails this principle because it amounts to a “limitation[ ] on the Patent Act ' inconsistent with the Act's text.” Id. at 3231. Second, the “' 101 patent-eligibility inquiry is only a threshold test,” Id. at 3225, meaning that it is not to address concerns arising under the substantive patentability requirements articulated in ” 102 (novelty), 103 (non-obviousness), and 112 (full disclosure). Finally, patent eligibility looks to the “invention as a whole, rather than dissect[ing] the claims into old and new elements and then ' ignor[ing] the presence of the old elements in the analysis.” Id. at 3230. With regard to the Federal Circuit, the Supreme Court stated that “we by no means foreclose the Federal Circuit's development of other limiting criteria that further the purposes of the Patent Act and are not inconsistent with its text.” Id. at 3231.

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