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Patentable Subject Matter Under 35 U.S.C. § 101: Part 1 – An Historical Perspective

This post is the third in a series written by Nashville attorney Shane Cortesi on patent protection.

As I mentioned in my earlier article concerning the requirements for obtaining a utility patent in the U.S., in addition to being useful, novel and not obvious, an invention must constitute patentable subject matter under 35 U.S.C. § 101.  In this article, I will briefly discuss the historical context of the patentable subject matter requirement.  Next week I will discuss the application of the requirement in two fields where patent eligibility under § 101 is commonly an issue:  software and biotechnology.

35 U.S.C. § 101 contemplates four categories of patentable subject matter:  processes, machines, articles of manufacture and compositions of matter.  The statute provides:  “Whoever invents or discovers any new and useful process, machine, manufacture, or composition of matter, or any new and useful improvement thereof, may obtain a patent therefor, subject to the conditions and requirements of this title.”  Despite the broad wording of the statute, courts have engrafted exceptions to the statute such that at least not all processes and compositions of matter that satisfy the conditions and requirements of Title 35 (e.g., novelty and nonobviousness) qualify as patentable subject matter under § 101.

A good starting place to discuss the evolution of the patentable subject matter requirement is the landmark 1998 decision State Street Bank & Trust Co. v. Signature Fin. Group, Inc.   There, the U.S. Court of Appeals for the Federal Circuit held that a patent directed to a data processing system that relied on a mathematical algorithm for calculating the share price of mutual fund investments was directed to patentable subject matter.  In so holding, the court implied that any invention that produced a useful, concrete and tangible result was patentable subject matter and expressly rejected the proposition, held by some commentators, that methods of doing business as a class were unpatentable.

The State Street decision led to a tidal wave of business method patent applications being filed in the U.S. Patent and Trademark Office (USPTO) ranging from methods of training janitors to dust and vacuum using video displays to methods of using color-coded bracelets to designate dating status.  Because business methods are commonly invoked in practice without being described in printed publications, the USPTO was ill-equipped to assess the novelty and non-obviousness of business method patent applications using its traditional search procedures.  Criticism over business method patents began to mount.

Finally, in 2008, the Federal Circuit, sitting en banc, revisited the patentable subject matter requirement in the case In re Bilski.   In In re Bilski, Mr. Bilski’s invention was directed to a strategy of buying and selling commodities so as to hedge risk.  Significantly, the invention did not require the use of a machine at all, let alone any particular machine.  The Federal Circuit, speaking through Chief Judge Michel, set forth a new, bright-line “machine-or-transformation test” for determining the patent eligibility of processes.  According to the court, to qualify as patent eligible, the process must be 1) tied to a particular machine or apparatus; or 2) transform a particular article into a different state or thing.  The court further stated that processes qualifying under this test may nonetheless be ineligible if the process had no other utility than operating on the particular machine, the machine was insignificant to the claimed process, or the machine was not central to the process’s purpose.   Finding that Mr. Bilski’s invention met neither prong of the machine-or-transformation test, the court held that his patent was invalid under § 101.  In so ruling, the court made clear that a mere-field of use limitation (here, the limitation to the commodities industry) was insufficient to render an otherwise ineligible invention patent eligible.  Mr. Bilski then appealed to the U.S. Supreme Court.

On review, the Supreme Court reiterated that laws of nature, physical phenomena, and abstract ideas are not patentable. The Supreme Court then held that the Federal Circuit’s machine-or-transformation test merely provided a useful and important clue to patent eligibility under § 101, and, thus, was not the sole test for determining whether an invention is a patent-eligible process.  Reaching the facts at issue, the Supreme Court held that Mr. Bilski merely sought to patent abstract ideas, namely the concept of hedging risk and the application of the concept to energy and other commodity markets, and, thus, the invention was unpatentable under § 101.

In my view, the Supreme Court’s opinion in the Bilski case did little to clarify the law on patent eligibility under § 101.  After all, the opinion leaves open the issue of when a process is sufficiently abstract to render the process unpatentable.   Fortunately, for patent examiners and applicants, the USPTO has provided guidance on patent eligibility under § 101 to assist patent eligibility determinations in the patent application process.  In short, consistent with the Supreme Court’s Bilski opinion, the guidance from the USPTO states that the machine-or-transformation test remains an important clue to patent eligibility.  Indeed, according to the guidance, as of its publication on July 27, 2010, no court presented with the issue had ever held that a process that failed the machine-or-transformation was patent eligible under § 101.  Nonetheless, the guidance provides a number of factors, apart from whether the process transforms matter or relies on the use of a machine, that play into the patent-eligibility determination, at least from the USPTO’s perspective.

Finally, it’s important to keep in mind that whether the invention constitutes patentable subject matter is only a close question in a subset of patent cases.  Inventions in most industries (e.g., electronic hardware, medical devices and pharmaceuticals) will usually readily qualify as patentable subject matter.  The more difficult questions arise when the invention is a diagnostic method, a method of doing business or a program that can be performed in someone’s head.

Next week, I’ll discuss recent post Bilski decisions in the life science and software fields.

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This article is for general information only. The information presented should not be construed to be formal legal advice nor the formation of a lawyer/client relationship.

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Shane Cortesi

Shane Cortesi is a Nashville-based attorney who advises inventors, artists, and entrepreneurs on protecting and licensing their inventions, artwork, and other intellectual property. A 2005 graduate of The George Washington University Law School, Shane also holds a Master’s in Biotechnology from Northwestern University and a Bachelor’s in Zoology from Miami University.

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