One of the perennial questions confronted by patent attorneys is just what types of inventions are patentable. The Patent Act defines a patentable invention as any new and useful “process, machine, manufacture, or composition of matter.” 35 U.S.C. § 101.
From this broad language courts have attempted to fashion specific rules that can be used by attorneys, patent examiners, and courts to define patentable inventions. Even the Supreme Court has provided guidance on the issue, declaring that laws of nature, physical phenomena, and abstract ideas are unpatentable. Diamond v. Chakrabarty, 447 U.S. 303 (1980). However, constantly evolving technology frequently raises new questions even as old ambiguities remain. Recently, the entire Federal Circuit, the court with exclusive jurisdiction over patent appeals, issued an en banc (from the full court) opinion, In re Bilski, that squarely addresses the issue of patentability and attempts to set forth clear boundaries for patentable inventions.
Mr. Bilski was seeking a patent for a method for managing commodity risk. Basically, an intermediary (“middleman”) would contract with a commodity producer to purchase a variable priced commodity at a fixed rate over time, while entering into another contract (at a slightly higher price) for the sale of the same commodity to a user for a fixed price. This would permit the seller and buyer to hedge the risk of price fluctuations while the middleman earns a profit.
The examiner rejected the application as unpatentable. The Board of Patent Appeals affirmed the examiner but rejected his rationale, saying that the invention did not produce any “useful, concrete, and tangible result.” Bilski appealed this rejection to the Federal Circuit. The court again held the invention unpatentable but rejected the “useful, concrete, and tangible” test favored by the Board.
The court notes that the invention would be considered a “process” under the “process, machine, manufacture, or composition of matter” language of the Patent Act. It then sets forth a test for evaluating whether a particular process is patentable—the “machine-or-transformation” test. The court states that, “the proper inquiry under section 101 is not whether a process claim recites sufficient ‘physical steps,’ but rather whether the claim meets the machine-or-transformation test.”
In its most concise description of the test, the court states that it is designed to ensure that claims to processes are narrowly tailored so that they encompass only applications of fundamental principles and not the principles themselves. It writes, “[a] claimed process is surely patent-eligible under section 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.”
The main issue for practitioners and patentees is just how to understand and apply the machine-or-transformation test to particular patents they file or enforce. The best clue the court gives is its statement that, “so long as the claimed process is limited to a practical application of a fundamental principle to transform specific data...there is no danger that the scope of the claim would wholly pre-empt all uses of the principle.”
While patent professionals would prefer something more concrete, it is certain that machine-or-transformation test will continue to be discussed and refined by courts, commentators, and the larger patent community in the coming months and years. Just as certain, LaRiviere, Grubman & Payne will follow these developments closely in order to provide the best possible counsel to its clients.