By Kevin E. Noonan —

The highest form of tea leaf-reading is guessing
how the Supreme Court will rule based on oral argument.  Yet occasionally the Court's questioning
suggests general trends and tendencies, and today's argument in Bilski v. Kappos may be one of those
times.

The claims at issue are directed to a method for
hedging risk in a commodities trade, and are broadly directed to such methods (i.e., there is no requirement that the
method be performed using a computer or other particular machine).  The claims were rejected by the Patent
Office and appealed to a Federal Circuit panel, but before the panel decision
was issued, the CAFC sua sponte
ordered rehearing en banc.  In its en banc decision, the Federal Circuit promulgated a new, exclusive
test for patent eligibility of method claims, requiring that a method either be
tied to a machine or transform a particular article into a different state or
thing (the "machine or transformation" test).  The Supreme Court granted certiorari to consider whether this test
was contrary to the Court's "precedent
declining to limit the broad statutory grant of patent eligibility for 'any'
new and useful process beyond excluding patents for 'laws of nature, physical
phenomena, and abstract ideas'."

In today's
argument, it became clear that the Justices thought little of the argument that
Bilski's claim should be patent-eligible.  Bilski's advocate, J.
Michael Jakes, staunchly kept to his position that what should be considered a
patent-eligible process be broadly construed, refusing to concede that any
method posed as a hypothetical by the Court should be per se ineligible.  These far-fetched hypothetical methods included methods for teaching
antitrust law without putting students to sleep (Justice Breyer), speed-dating
(Justice Sotomayor), horse-whispering (Justice Scalia), as well as more
concrete examples ("an estate plan, tax avoidance, how to resist a
corporate takeover [or] how to choose a jury," by Justice Ginsberg).  The Court was clearly concerned about
conferring the broadest scope to method claims, such as "anything that
helps any businessman succeed is patentable because we reduce it to a number of
steps," according to Justice Breyer.  To each of these instances, Mr. Jakes argued that such a claim was "potentially
patentable," subject to the other requirements of the statute.  To Justice Sotomayor's question about
how to limit patent eligibility to "something reasonable" if it is
not limited to technology or the sciences, Mr. Jakes argued that the useful
arts excludes "[s]peaking, literature, poems" and that "a
corporation [or] a human being" were not included in the statutory
categories of the useful arts.  However, Mr. Jakes did not specifically assert that Bilski's claim
should be patent-eligible, merely that the Federal Circuit's test was without
support in the plain language of the statute or any of the Court's earlier
precedent.

The Chief
Justice asked how the claim was not disqualified as being a mere abstract idea,
in the process conflating what may not be patentable ("classic commodity
hedging that has been going on for centuries") with what should be
patent-eligible.  Justice Kennedy,
citing the development of actuarial tables and methods for calculating risk by
the nascent insurance industry in the 17th Century, asked whether
Congress would have intended that "only one person [would have] the capacity
to issue insurance."  Mr.
Jakes did not directly answer this question, but maintained that such methods
could be patent-eligible, falling within the ambit of the statutory definitions
of patent-eligible inventions.

Justice
Ginsburg was concerned about the practices in other countries, which do not
include methods like the Bilski method within the scope of patent-eligible
subject matter.  Mr. Jakes
responded by reminding the Court that other countries have defined "technology"
differently than the U.S. has, and it was these definitions that provide the
basis for excluding types of inventions patent-eligible under 35 U.S.C. § 101.  Mr. Jakes also challenged the
assertion by Justice Sotomayor that "a patent limits the free flow of
information," asserting (correctly) that patents promote disclosure of
inventions, so that "information gets to the public generally," while
conceding Justice Scalia's point that the public cannot use an invention until
the patent expires.

Justice Stevens
asked two interesting jurisprudential questions.  The first was for Mr. Jakes to identify the "strongest
case" from the Court's jurisprudence that supported his position, and
without apparent irony (in view of the Federal Circuit majority's reliance upon
it) he answer Diamond v. Diehr.  (Justice Stevens did not appear to
think the Diehr case provided much
support for Mr. Jakes's position.)  Second, the Justice asked whether Judge Rich had
ever written on the scope of patent-eligibility for process claims, to which
Mr. Jakes answered that he had written the Alappat
decision as well as the State Street
decision.

Turning to the Diehr decision, the Court seemed to
grapple with the similarities and distinctions between methods for curing rubber
("an industrial process of the conventional type," as characterized
by Mr. Jakes) and methods for manipulating information or electronic signals
(although Justice Sotomayor drew a distinction between manipulation of
electronic signals and manipulation of information as being "different in
kind").  Justice Breyer
made the distinction explicit, saying that there are "four things in
patent law that everyone accepts."  These include "two that are a plus" (increased innovation and
disclosure) and "two that are a minus" (higher prices and "having
to get permission [that] can really slow things down and destroy advance").  (Despite the negative tone, he
characterized this situation as "a balance.")  In the 19th Century, he
said, methods were directed towards machines, whereas Mr. Jakes's position is
that today patent-eligible methods should include those performed on information.  To that proposition and how the
appropriate balance should be drawn the Justice candidly admitted "I don't
know.  And I don't know whether
across the board or in this area or that area patent protection would do no
harm or more harm than good."

The Court also
considered the Morse and Bell patents, with Justice Scalia arguing that the Bell
claims would pass the "transformation" prong of the Federal Circuit's
test, since sound was transformed into electrical signals and vice versa in the
practice of the claimed method for transmitting sound over a distance.

The Court closely
questioned the government's position as articulated by Deputy Solicitor General
Malcolm Stewart.  Speaking
for the first time, Justice Alito asked whether the Court should render a
decision on the "very broad issue" raised by Bilski, to which Mr.
Stewart answered that the government would prefer to prevail more
narrowly.  In doing so, Mr. Stewart
asserted that the Federal Circuit's "machine or transformation" test
was not "rigid or inflexible" based in large part in the questions
left unanswered in the opinion (such
as the extent to which a process is "tied to a particular machine").  Justice Sotomayor asked the fundamental question of whether
the Court should simply declare that business methods are unpatentable and
avoid the issues of destroying the computer or biomedical industries as had
been argued by various amici.  This wouldn't solve the
problem, according to Mr. Stewart, because the basis for business method
patents (the State Street case) involved a machine rather than a process
(Justice Sotomayor impliedly agreeing by saying "[n]o ruling in this case
is going to change State Street").  Justice Breyer characterized the Federal Circuit's
decision as a "pull back" on the scope of patent-eligible methods,
but with little guidance from the Federal Circuit on the scope of how far they CAFC has "pulled back," in view of the failure to define the extent
of transformation or ties to a particular machine that would satisfy the
standard.

The Chief
Justice took Mr. Stewart to task for "the last footnote" of the
government's brief, which he understood to assert that the use of a computer in
Bilski's method might make the process patentable — he characterized this as
the equivalent of saying that using a typewriter to type out a method would
make a process patentable.  Mr. Stewart attempted to distinguish this interpretation using a
hypothetical involving an interactive website for practicing the method but with
little success; the Chief Justice
said that the government's hypothetical "involves the most tangential and
insignificant use of a machine."  Importantly, Mr. Stewart then indicated that the government did not want
the Court to opine broadly in its decision:

I
guess the point I'm trying to make is simply that we don't want the Court, for
instance, in the area of software innovations or medical diagnostic techniques
to be trying to use this case as the vehicle for identifying the circumstances
in which innovations of that sort would and would not be patent eligible,
because the case really doesn't present any — any question regarding those
technologies.

Justice
Sotomayor agreed with this sentiment, saying in response that "by saying that we exclusively
rely on the machine-or-transformation test, that we're precluding applications
of the patent law in those fields, the things we can't imagine.  Once you
announce an exclusive test, you're shoe-horning technologies that might be
different."  She also
asked the Deputy's help in fashioning a test "that doesn't go to the
extreme the Federal Circuit did" with regard to having to reverse earlier
precedent that did not preclude methods that would fail the "machine or
transformation" test.  Justice Ginsburg asked whether Judge Mayer's calculus in his concurrence — "if it's technology, then it's within the realm of patent, and if it's
not technology, it isn't" — wasn't the simplest test to be used, and Mr.
Stewart answered that "our test . . . has a shorthand version of that,"
suggesting at least an acquiescence to a "technology arts"
standard.  He went on to say however
that this was not the simple solution it appeared to be, based on the
definition of "technology" and what should be "properly regarded
as technological advances," as well as whether the "technology"
component was "sufficiently substantial" to render a process claim
patent-eligible.  Several of
the Justices also voiced the view that merely programming a computer to perform
a new process did not convert the computer into a "new" machine, again
seeming to conflate patent eligibility with patentability.

Returning
to the government's view of the appropriate scope of the Court's decision in
this case, the Deputy argued:

We thought that this case would provide an unsuitable vehicle for
resolving the hard questions because the case doesn't involve computer software
or medical diagnostic techniques, and therefore, we thought the Court would
arrive at the position that I think, at least some members are feeling that you
have arrived at, that you will decide this case, and most of the hard questions
remain unresolved.  And, frankly, we think that's true.

To
Justice Steven's remark following this statement that "[w]e know that
things that we haven't yet contemplated may be around the corner, and when they
happen, we will deal with them," Mr. Stewart responded that the government
"would be entirely content with a ruling like that."

In
his brief rebuttal, Mr. Jakes appeared to agree with this sentiment:

The Federal Circuit did announce this test as the sole test for
all processes.  It said it applied no matter what the process was, so we do have
to face these difficult questions.  I think the question can be avoided, because we don't need a rigid test
of this type based on machine-or-transformation.  The question we are looking at
and should be looking at is:  Are we trying to patent an abstract idea?

It appears evident that the Court does not believe
that Bilski's claims are patentable, but that this case is not the case to make
any broad pronouncements on subject matter eligibility for computer software or
diagnostic methods claims.  While
it is reassuring to believe that the Court is thus disinclined to "shoehorn"
the patent-eligibility of these types of method claims into its decision on Bilski's
claims (and the Federal Circuit's "machine or transformation" test),
it also suggests that the Court (or at least Justices Breyer and Stevens, whose
views are on record in the Metabolite dissent)
may recognize that a more appropriate occasion to consider diagnostic method
claims is available with the certiorari petition in Prometheus Laboratories, Inc. v. Mayo Collaborative Services case.  Until the Court decides whether it will
hear that case, the status of diagnostic method claims will remain in doubt no
matter how the Court rules in Bilski.

A transcript of today's oral argument is available here.