By Kevin E. Noonan —

Although long-anticipated, the Supreme Court's
opinion in Bilski v. Kappos did not
provide much in terms of "pellucid" teachings regarding the metes and
bounds of patent-eligible subject matter.  Against this backdrop, the Court decided on Tuesday to grant certiorari, vacate the Federal Circuit's
decision below, and remand to the appellate court two cases related to medical
diagnostic claims:  Prometheus Laboratories, Inc.  v. Mayo Collaborative Services and Classen Immunotherapies, Inc. v. Biogen Idec.  On earlier appeals, the Federal Circuit
decided that the claims in Prometheus
were patent-eligible under the "machine-or-transformation" (MOT) test, and
that the claims in Classen were
not.  How the Federal Circuit
decides these cases on remand, and whether its decision(s) change, will provide
the first inklings of how the CAFC will implement whatever insights the Bilski decision may provide.

The types of claims in these cases and the grounds
for the Federal Circuit's disparate decisions may be informative.  In Prometheus,
the claims recited methods for determining whether treatment for immune-related
gastrointestinal disorders needed adjustment, i.e., whether the amount of a drug administered to treat the
disorder should be changed.  The
asserted claims of the patents-in-suit specifically relate to methods for
identifying the administered drug, thiopurine, or metabolites thereof, in red
blood cells of a patient.  Claim 1
of the '623 patent was cited in the Federal Circuit opinion as being
representative:

A method of optimizing therapeutic
efficacy for treatment of an immune- mediated gastrointestinal disorder,
comprising:
    (a) administering
a drug providing 6-thioguanine to a subject having said immune-mediated
gastrointestinal disorder; and
    (b) determining the level
of 6-thioguanine in said subject having said immune-mediated gastrointestinal
disorder,
    wherein the level of
6-thioguanine less than about 230 pmol per 8×10⁸ red blood cells
indicates a need to increase the amount of said drug subsequently administered
to said subject and
    wherein the level of
6-thioguanine greater than about 400 pmol per 8×10⁸ red blood cells
indicates a need to decrease the amount of said drug subsequently administered
to said subject.

The Federal Circuit reversed a finding by the District Court on summary judgment that the claims were not patent-eligible
under 35 U.S.C. § 101 (as expressly influenced by Justice Breyer's dissent in Laboratory
Corp. v. Metabolite Labs., Inc. ("LabCorp")).  The Federal Circuit (in an opinion by Judge Lourie, joined
by (then) Chief Judge Michel and the
Honorable Ron Clark, District Judge of the U.S. District Court for the Eastern
District of Texas, sitting by designation) held that the administering and determining steps, dismissed by the
District Court as constituting mere "necessary data-gathering steps,"
were instead transformative and thus satisfied the transformation prong of the Bilski
MOT test.  Judge Lourie's opinion stated that "[t]he transformation
is of the human body following administration of a drug and the various
chemical and physical changes of the drug's metabolites that enable their
concentrations to be determined."  The Court found that these steps
were essentially "method of treatment" steps, "which are always
transformative when a defined group of drugs is administered to a body to
alleviate the effects of an undesired condition" (emphasis added).  A human body to which drugs such as
thiopurines are administered "necessarily undergoes a transformation,"
the Court said, since "the drugs do not pass through the body untouched
without affecting it," something the Court characterized as "the
entire purpose of administering the drugs."  The opinion rejected
Mayo's contention that the transformations are the result of "natural
processes" because "quite literally every transformation of physical
matter can be described as occurring according to natural processes and natural
law."  But this transformation encompassing the administering step of
the asserted claims are not "natural processes" according to the Court:  "[i]t is virtually self-evident that a process for a chemical or physical
transformation of physical objects or substances is patent-eligible
subject matter (emphasis in the original text).  Finally, the Federal Circuit opined
that the District Court erred in deciding that Prometheus' asserted claims "wholly
preempted" the use of correlations between metabolites of thiopurine drugs
and their toxicity and efficacy.  Rather, according to the Court, the
claims utilize, not preempt, the correlations of natural processes "in a
series of specific steps" that are patent-eligible subject matter
according to the statute, citing Diehr and its analogous use of the
Arrhenius equation for curing rubber (a transformative step).  "Regardless"
of this issue, the Court held, satisfaction of the MOT test renders the claims
patent-eligible and thus "they do not preempt a fundamental principle."

In Classen,
on the other hand, the Federal Circuit summarily rejected the claims based on failure to
satisfy the Bilski MOT test (in a
69-word opinion that was shorter than the claims at issue).  The claims in Classen's U.S. Patent No. 5,723,283 were directed to methods
for determining whether an immunization schedule affects the incidence or
severity of a chronic immune-mediated disorder in a treatment group of mammals,
relative to a control group of mammals.  Although the Classen claims
recited "immunizing" steps (that could be considered to be analogous
to the "administering" steps in the Prometheus claims), they also recited a step of "comparing"
the "incidence, prevalence, frequency or severity" of the
immune-mediated disorder between the experimental and control groups, making it
easier to characterize the immunization step as a mere "data-gathering"
step.

The use of the "comparing" language was reminiscent
of the claims in the LabCorp case, which was criticized by Justice Breyer in his dissent from
the Court's decision not to decide the patent-eligibility of claims for
determining whether a patient had a vitamin deficiency.  In LabCorp, the claim at issue was directed to a method for
detecting a deficiency of cobalamin (vitamin B12) or folate having the steps of
assaying a body fluid for an elevated level of total homocysteine and
correlating an elevated level of total homocysteine in said body fluid with a
deficiency of cobalamin or folate.  There are clear parallels between the structure of the LabCorp claim and the Classen
claim.  Each recites a preamble directed to identifying a biological
phenomenon (a vitamin deficiency in LabCorp, a chronic immune-related
disorder related to a acute immunization schedule in Classen),
comprising an unambiguous diagnostic/tangible step (assaying a bodily fluid to
detect elevated homocysteine levels in LabCorp, immunizing mammals
with one or more doses of one or more immunogens, according to an immunization
schedule in Classen), followed by an interpreting step (correlating
elevated homocysteine with the vitamin deficiency in LabCorp,
comparing the incidence, prevalence, frequency or severity of chronic
immune-mediated disorders in mammals immunized according to the immunization
schedule in Classen).

The Supreme Court's Bilski decision provides no clear instruction for resolving the
different results in the Prometheus and
Classen cases; indeed, the Court (for the first time
since the Hilton Davis case) appears
content to let the Federal Circuit develop its case law on the extent to which
tests other than the MOT test are used to determine patent-eligibility.  For biotechnology, it remains the case
that including active, technology-dependent steps in method claims is prudent,
and to draft claims that minimize the likelihood that the invention will be
characterized as merely an "abstract idea."  In this regard, dicta
from the Bilski opinion provides a
certain level of comfort that the Court (or at least some members of the Court)
understand the proper protocol for performing claim analysis.  For example, the opinion noted that the
judiciary "does not have carte
blanche to impose other limitations that are inconsistent with the text and
the statute's purpose and design."  And in a portion of the "majority" opinion joined by Justice
Scalia, Justice Kennedy reminds us that a court "needs to consider 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,'" citing Diamond v. Diehr.  However, this is arguably just the
analytic mistake Justice Breyer made in his LabCorp
dissent, where he argued that:

[H]ere, aside from the unpatented test, [the claims] embody
only the correlation between homocysteine and vitamin deficiency that the
researchers uncovered.  In my view, that correlation is an unpatentable "natural phenomenon," and I can find nothing in claim 13 that adds anything
more of significance.

(emphasis
added).  On the other hand, the four "concurring"
Justices clearly believe that the scope of patent eligibility is (and must be)
limited by the Constitutional prescription that a patent "Promote the
Progress of . . . the Useful Arts," and that Justice Breyer's antipathy to
medical diagnostic patents retains some currency on the Court:

For even when patents encourage
innovation and disclosure, "too much patent protection can impede
rather than 'promote the Progress of . . . useful Arts.'" Laboratory
Corp. of America Holdings v. Metabolite Laboratories, Inc., 548 U.
S. 124, 126–127 (2006) (BREYER, J., dissenting from
dismissal of certiorari).  . . .  Patents "can discourage research by
impeding the free exchange of information," for example, by forcing people
to "avoid the use of potentially patented ideas, by leading them to
conduct costly and time-consuming searches of existing or pending patents, by
requiring complex licensing arrangements, and by raising the costs of using the
patented" methods.  Id., at 127.

Thus, even as the Federal Circuit develops
additional tests for patent-eligibility of method claims, it is incumbent on
patent applicants and their lawyers to recognize these tensions in the High
Court's attitudes about patenting and to ensure that their claims are clearly
directed to patent-eligible subject matter.  This is difficult to do prospectively, and there is little
comfort that the Federal Circuit will soon provide more concrete standards for
satisfying the rather nebulous test enunciated by the Supreme Court (at least
until the Court decides the time has come to once again administer some
corrective patent jurisprudence to the appellate court).  However, unless the Supreme Court (by
inclination or constitution of new Justices) changes its rather 19th Century attitude regarding patents (something that Justice Kennedy's
distinctions between patents from the Industrial Age and those from the
(current) Information Age suggests may be possible), applicants will continue
to need to use the few distinctions the Court has provided to protect
biotechnology inventions.

    By
Donald Zuhn —

The
Supreme Court waited until the eleventh hour to issue its long-awaited decision
in Bilski v. Kappos, affirming the
Federal Circuit's determination that an application directed to hedging risk in
energy commodities was not patent eligible while determining that the Federal
Circuit's machine-or-transformation test is not the sole test for assessing patent
eligibility under 35 U.S.C. § 101 (see Patent Docs report on decision).  Reaction to the Supreme Court's
decision in Bilski has, not
surprisingly, come much quicker.

In
a brief statement posted on the
U.S. Patent and Trademark Office website, the Office noted that:

The Supreme Court [on Monday] affirmed the
USPTO's decision that Mr. Bilski's invention was not patentable subject matter
as his claims were drawn to an abstract idea.  Significantly, the Court ruled that the "machine or
transformation" test is not the sole determinant of patent eligible
subject matter for process claims, but is nevertheless an important "investigative
tool" for evaluating their patent eligibility.  The Court also indicated that a business method is, at least
in some circumstances, eligible for patenting under Section 101.

The USPTO will be issuing guidance
further interpreting the decision as soon as possible.  The USPTO is distributing interim
guidance for the examining corps today.

The
Biotechnology Industry Organization (BIO), which along with the Advanced
Medical Technology Association, Wisconsin Alumni Research Foundation (WARF),
and the Regents of the University of California, submitted an amici brief
in the case, issued a press release in which BIO President and CEO Jim
Greenwood said the organization was "pleased that the Justices crafted a
narrow opinion" in which the Court "overturn[ed] the lower court's rigid
new test for determining whether a method or process is eligible for patenting."  Noting that this was the position BIO
had advocated for in its amici brief,
Mr. Greenwood stated that "[t]he Court was clearly conscious of the
potential negative and unforeseeable consequences of a broad and sweeping
decision" and "recognized that the lower court's ruling could have
created uncertainty in fields such as advanced diagnostic medicine techniques."

Pointing
to the Supreme Court's decision in Diamond
v. Chakrabarty — which coincidentally celebrated its thirtieth anniversary
on June 16th (see "BIO
Celebrates Anniversary of Chakrabarty Decision")
— Mr. Greenwood observed that in that case the Court had "defined
patent-eligible subject matter in a flexible and inclusive way that has
fostered the tremendous growth of biotechnology for the benefit of millions of
patients, farmers, and other consumers around the world."  Mr. Greenwood offered that in Bilski, "the
Court made it clear . . . that the patent system was designed to be broad and
inclusive in order to promote innovation."

In
a release issued by the American Intellectual Property Law Association
(AIPLA), the national bar association, which also submitted an amicus brief
in the case, said it was "gratified that the Supreme Court in its Bilski
decision . . . continues to interpret the Patent Act as open to the broadest
range of subject matter, preserving the incentives for yet unknown areas of
innovation."  AIPLA Executive
Director Q. Todd Dickinson stated that the organization was "generally
pleased that the Court's majority today confirmed that broad patent protection
is critical to innovation and economic growth," and that "[t]hey
recognized that the patentability of next generation technology should not be
judged by a last century view of the law."  Mr. Dickinson noted that this was the position that the
AIPLA had advocated for in its own amicus
brief.  The AIPLA release also notes
that "like many others filing amicus (i.e., "friend of the court")
briefs, [the AIPLA] believes that excluded subject matter must be kept to a
minimum because this is the only way to keep the patent system open to crucial
but unforeseen innovations of the future," adding that "because the
course of technology can take an unexpected path, the threshold test for
patentable subject matter ought not become a barrier to the next life-altering
innovation."

The
Licensing Executives Society (LES) offered its comments on the "long-awaited"
decision in a release issued on Monday.  Noting that "[t]he decision has important implications
for industries from health care to high tech," the professional society whose
members are engaged in the transfer, use, development, and marketing of
intellectual property, said that "[m]any throughout the industry,
including a strong representation of our membership, have expressed the view
that a rigid application of that test might stifle both innovation and business
on a global scale, particularly in the Information Age."  LES Public Policy Chair Brian O'Shaughnessy
stated that "[o]verall, we believe the Supreme Court's decision represents
an important step towards maintaining a balanced, effective patent system that
promotes innovation and opportunity for both inventors and consumers."

    By Kevin E. Noonan —

The Supreme Court decided Bilski v. Kappos today and, as anticipated, agreed with the Federal Circuit that Bilski's claims to methods for "hedging" risk in commodities trading are not patent-eligible subject matter.  After that, the opinion elevates the analysis to nothing short of advanced tea-leaf reading (including ample evidence regarding the prejudices and opinions of the various members of the Court on the topic of patent-eligibility).

The "majority" (comprising Justice Kennedy, who wrote the opinion, joined by the Chief Justice and Justices Alito, Thomas, and Scalia, the latter parting company on one aspect of the decision) takes the more conservative approach, deciding narrowly as to the claims before the Court.  Somewhat predictably, and consistent with the Court's treatment of other "bright line" rules crafted by the Federal Circuit (KSR, eBay, Quanta), the Court teaches that while the "machine or transformation" test is a useful test, it is not the only test for patent-eligibility of process claims.  The Court notes that while this test may have been sufficient for determining patent-eligibility in the "Industrial Age," it may be less useful in the (present) "Information Age" (although Justice Scalia not joining this part of the opinion robs it of any precedential value).  As a consequence, the Court believes it best to be cautious in crafting preclusive tests that could prevent patenting new, unforeseen technologies.  The Court does provide a measure of clarity in one aspect:  it states that "nothing in today's opinion should be read as endorsing interpretations of §101 that the Court of Appeals for the Federal Circuit has used in the past," specifically the "useful, concrete and tangible result" test enunciated by the Federal Circuit in State Street Bank & Trust Co. v. Signature Financial Group, Inc. and repudiated by the en banc court in Bilski (while particularly recommending to "[s]tudents of patent law" that they would be "well advised to study the [Federal Circuit's five] scholarly opinions" in Bilski).

In its analysis, the Court's opinion follows the well-established framework of starting with the expansive language of § 101, as limited by earlier precedent to exclude "laws of nature, physical phenomena, and abstract ideas," citing Diamond v. Chakrabarty.  These categories are "'part of the storehouse of knowledge of all men . . . free to all men and reserved exclusively to none,'" the Court reiterates using the language from Funk Bros. Seed Co. v. Kalo Inoculant Co.  And the opinion notes that patent-eligibility is merely a threshold inquiry, patentability depending on satisfaction of the other statutory requirements.  In the case of processes, what Congress meant is defined by § 100(b), which the opinion says should be interpreted using the "ordinary, contemporary, common meaning" of the words of the statute.  Accordingly, the opinion rejects the "atextual" categorical exclusion of business method patents from patent eligibility, as well as exclusive use of the Federal Circuit's "machine or transformation" test.  In doing so, the opinion rejects alternative canons of statutory interpretation advanced by the government in favor of the "ordinary, contemporary, common meaning" standard.  And the Court expressly characterized as "incorrect" the Federal Circuit's reasoning that prior precedent established the "machine or transformation" test as the exclusive test.  Indeed, the Court used its "more recent" decisions in Gottschalk v. Benson, Parker v. Flook, and Diamond v. Diehr as establishing that the Federal Circuit's test was not the exclusive test (ironically citing statements in those cases cited in dissent by Judge Newman below).  Expressly:

This Court's precedents establish that the machine-or-transformation test is a useful and important clue, an investigative tool, for determining whether some claimed inventions are processes under §101.  The machine-or-transformation test is not the sole test for deciding whether an invention is a patent-eligible "process."

In making distinctions between the "Industrial Age" and the "Information Age," the Court seemed to credit several amici who made this argument, and to be convinced that the more prudent approach was to avoid setting forth exclusionary rules based on current or foreseeable technology.  The Court was careful, however, to avoid any implication that its opinion endorsed the "patentability of any particular invention" or that any of the putative Information Age technologies "should or should not receive patent protection."

On the other hand, the opinion did firmly reject the idea that business method patents should be outside the scope of patent-eligibility per se, saying that "at least some" business method patents could be patent-eligible (although Bilski's was not).  The Court based this conclusion in part on consistency in statutory interpretation, in view of Congressional recognition of business method patents in the "prior user defense" provisions of 35 U.S.C. § 273.  Instead, the opinion turned to prior precedent on the patent-ineligibility of abstract ideas to provide "useful tools" for its analysis (Justice Scalia did not join this part of the opinion, either).  Here, the Court suggested that the Federal Circuit could use such tools to distinguish business method claims on grounds "in accord with controlling precedent."  But the Court provided no further guidance on how the Federal Circuit might achieve that goal.

The Court dispatched the Bilski claims in the final portion of its opinion, using the Benson/Flook/Diehr cases to determine that Bilski's claims were directed to "an unpatentable abstract idea" and that "[a]llowing petitioners to patent risk hedging would preempt use of this approach in all fields, and would effectively grant a monopoly over an abstract idea."

The "minority" (comprising Justice Stevens, who wrote a concurring opinion joined by Justices Breyer, Ginsberg, and Sotomayor) believe that business methods are not patent-eligible subject matter and would have overruled the Federal Circuit's State Street Bank decision expressly.  In an extensive opinion, Justice Stevens reviews the history of the Patent Act, both in this country and under the Statute of Monopolies in England, to find no basis for including business methods as patent-eligible subject matter.  Indeed, the opinion cites commentators and judicial decisions alike as believing (prior to State Street) that business methods were not patent-eligible.  The opinion asserts that such a decision by the Court would "restore patent law to its historical and constitutional moorings" which have been loosed by consideration of business methods as being patent-eligible.  These four Justices take a much more restrictive view of patent-eligibility than the "majority," stating that "it would be a grave mistake to assume that anything with a 'useful, concrete and tangible result' . . . may be patented."  Justice Stevens warns that insofar as the Court's opinion may be read to conclude that "any series of steps that is not itself an abstract idea or law of nature may constitute a 'process' within the meaning of §101" it can "only cause mischief."  For this group of Justices, the determination is definitional:  business methods are not patent-ineligible per se, they are patent-ineligible because they describe a method of doing business that is not a process under § 101.

Justice Stevens criticizes the Court's opinion for construing the statute based on the "ordinary, contemporary, common" meaning of the words, which is "a deeply flawed approach to a statute that relies on complex terms of art developed against a particular historical background."  In this regard, the concurrence cites a number of "comical" types of methods that could be patent-eligible under the Court's approach, including "[a] process for training a dog, a series of dance steps, a method for shooting a basketball, maybe even words, stories or songs if framed as the steps of typing letters or uttering sounds."  Justice Stevens believes it improper to make the "industrial":"information" distinctions, which introduces an unprecedented disparate application of the law to different technologies.  He also believes that the Court's opinion does not provide "a satisfying account of what constitutes an unpatentable abstract idea," which analysis ("or lack thereof") he says "may have led to the correct outcome in this case but . . . means that the Court's musings on this issue stand for very little."

The concurrence further makes a constitutional argument related to the requirement that patents "promote the Progress of the Useful Arts."  Justice Stevens opines that business methods by their nature are "sequential and complementary," intended to stimulate imitation as a "spur to innovation," citing Bessen & Maskin ("Sequential Innovation, Patents and Imitation," 2009, 40 RAND J. Econ. 611, 613).  The concurrence posits the case of frequent-flyer miles offered by airlines, imitation of which could have been prevented if the first airline to offer them had obtained a patent (presumably on a method for engendering customer loyalty by providing this perk).  Citing Dreyfuss ("Are Business Method Patents Bad for Business?," 2000, 16 Santa Clara Computer & High Tech. L.J. 263, 274-277), business methods are closer to the "top" of a hypothetical pyramid of ideas where exclusivity incurs greater social cost and hinders innovation.  This, the concurrence states, makes these methods more akin to phenomena of nature, mental processes and abstract ideas that should not be patent-eligible.  And the danger lurks that "many business decisions, no matter how small, could be potential patent violations" (emphasis in original) should business method claims get the Court's imprimatur as patent-eligible subject matter.

In perhaps the most interesting part of the Court's decision, Justice Breyer writes separately, joined in part by Justice Scalia, to set forth the "substantial agreement among many Members of the Court on many of the fundamental issues of patent law raised by this case" (emphasis in original).  These include:

• First, "although the test of §101 is broad, it is not without limit," citing Chakrabarty, Benson, and Diehr.

• Second, the "machine-or-transformation" test "has repeatedly helped the Court to determine what is 'a patentable process.'"

• Third, while the "machine-or-transformation" test "has always been a 'useful and important clue,' it has never been the 'sole test' for determining patentability."  It is rather "an important example of how a court can determine patentability under 101"; the Federal Circuit's mistake was in treating it as the "exclusive test" (emphases in original).

• Fourth, "although the machine-or-transformation test is not the only test for patentability, this by no means indicates that anything which produces a "useful, concrete and tangible result' . . . is patentable."  Indeed, Justice Breyer states that insofar as the Federal Circuit repudiated that standard from State Street, "nothing in today's decision should be taken as disapproving of that determination."

With these insights in mind, it is clear that the Court as currently constructed will continue to apply a patent-limiting approach to these types of questions.  It is equally evident that the Court is not inclined to make sweeping pronouncements or establish bright-line tests on patenting matters, preferring to take a case-by-case approach to developments in this area and to restrict the Federal Circuit when it strays from this path.

Bilski v. Kappos (2010)
Opinion of the Court by Justice Kennedy, joined in full by Chief Justice Roberts and Justices Thomas and Alito and in part by Justice Scalia;
Opinion concurring in the judgment by Justice Stevens, joined by Justices Ginsberg, Breyer, and Sotomayor;
Opinion concurring in the judgment by Justice Breyer, joined in part by Justice Scalia.