The government has just filed a brief [PDF] stating its position in the Bilski case, and Patently O describes it like this:In its responsive brief, the Obama Administration asks the Supreme Court to confirm that a patentable process must be tethered to technology - either "directed to the operation of a particular machine or apparatus" or "involve the transformation of matter into a different state or thing." What about software, then? I read the brief as sending a mixed message, or more accurately an unfinished one, and indeed the brief states that Bilski isn't the right case to decide that issue anyway, since it's about a method of hedging commodities trading without any computer connection.
I'm afraid I can't make much sense out of what it says about software. Here's Patently O's take:Although Bilski's claim does not relate directly to software, the machine-or-transformation could be seen to limit the patentability of software processes acting on a general purpose computer (as opposed to a "particular machine"). The Government brief suggests that the Federal Circuit test leaves software substantially patentable when tied to a general purpose computer - citing favorably to In re Alappat, 33 F.3d 1526, 1545 (Fed. Cir. 1994) (en banc) (“[A] general purpose computer in effect becomes a special purpose computer once it is programmed to perform particular functions pursuant to instructions from program software.”).
In any event, the machine-or-transformation test contemplates that many forms of “software” inventions are patent-eligible. . . . [However,] software code that is claimed by itself, uncoupled from any storage medium or computer, may be nothing more than “an idea without physical embodiment,” and therefore would not be patent-eligible.
Here, the brief did not address the reality that a software process can be "technological and industrial" without be limited in its association to a particular computer.
I hope he's read it right, and indeed it specifically mentions that you can't patent mathematical formulas, abstract ideas, or an algorithm itself, so as not to "wholly pre-empt" basic tools of scientific and technological work. But what software doesn't provide programs "to perform particular functions"? By that standard, all computer software would be eligible for patents, because all computers would be magically transformed into special-purpose computers once they are turned on and running software. That can't be the right test, then, can it? Nobody seems able to explain that clearly. Maybe because it's the wrong question? The right question is, how can a software patent not preempt basic tools? It is what it is, algorithms. If you can't patent algorithms, what is it exactly in software that you are patenting?
The brief ends a section on that topic by saying that this isn't the case that should decide the software issue, since it's not about software. And in general, the brief seems to be arguing that software sometimes is and sometimes isn't patentable, its eligibility depending on "the content of that invention and the form in which it is sought to be patented". Whatever that means in real life. But I can't see where the bright line is. I have less faith than they do that the PTO examiners will get it right. And this paragraph worries me: As the Board noted below, the machine-or-transformation definition may readily encompass most software claims because such claims could be said to concern the use of a machine (i.e., the computer itself) or involve a transformation of matter (i.e., the writing and re-writing of data, represented by magnetic changes in the substrate of a hard disk or the altered energy state of transistors in a memory chip). Is there any software that *doesn't* do that? So how is that a clear line? It's not. They quote Alappat approvingly:cf. In re Alappat, 33 F.3d 1526, 1545 (Fed. Cir. 1994) (en banc) (“[A] general purpose computer in effect becomes a special purpose computer once it is programmed to perform particular functions pursuant to instructions from program software.”). In addition, “transformation of electronic data has been found when the nature of the data has been changed such that it has a different function or is suitable for a different use.” Interim Instructions 6. To be sure, questions involving the application of the machine-or-transformation definition to software claims may arise in the future. The patentability of software is subject to established limits. For example, software code that is claimed by itself, uncoupled from any storage medium or computer, may be nothing more than “an idea without physical embodiment,” and therefore would not be patent-eligible. But if you put the CD into the computer, now is it special purpose and patent eligible? If not, why not? And who would seek to patent software that doesn't run on a computer? All software is written to run on a computer. Are they suggesting special purpose computers only would qualify, like medical equipment or something? From the Alappat quote, it doesn't seem like it, but they do seem to be drawing a line somewhere. Footnote 18 says this:
18A claimant may not bring a process directed to a human activity within the machine-or-transformation definition simply by reciting that the process uses a computer to perform insignificant extra-solution activity (e.g., data storage, or transmission and receipt of data over a network). See Interim Instructions 7-8. For instance, a method composed of steps of evaluating pieces of information by sorting the information and ranking each piece of information based on certain criteria does not become a machine-oriented test simply by specifying that the person performing the process shall initially obtain the relevant information by downloading it using a computer. So software's only patentable if it does something important? Based on what? It surely is "writing and re-writing of data, represented by magnetic changes in the substrate of a hard disk or the altered energy state of transistors in a memory chip", isn't it? So how can that be the right test? See what I mean? It's like a bad marriage, where no one wants to say the obvious: they need to get a divorce. Software and patents need to make a clean break, and just get a divorce.
I'd call this a work in progress, finding the right place to draw the line with software. In my experience in writing articles for Groklaw, I've noticed that if I can't explain something clearly, it means I don't understand it yet myself fully. And I hope the government lawyers surround themselves with folks who actually write software to explain the tech to them, so as to find the correct solution. Because otherwise, it will be another mess. Reality doesn't shift, and anything not based on reality ends up causing problems. And the reality is, software is math. But let me show you everything the brief actually says about the patentability of software, beginning
on page 44, so you can reach your own conclusions:
************************************
The eligibility of a process for patent protection under Section 101 should be judged by a two-part inquiry. The first question is whether the claimed process, taken as a whole, concerns the operation of a particular machine or apparatus or effects a transformation of matter into a different state or thing. In considering this question, the caveat that a process claim must be considered “as a whole,” Diehr, 450 U.S. at 192, warrants particular emphasis. For instance, a step that involves a machine will not suffice to bring an otherwise ineligible process within the ambit of Section 101 if that step is merely insignificant extra-solution activity -— i.e., activity that is not central to the purpose of the method, such as the step of downloading search results on a computer in the context of a method for evaluating and ranking search results. See id. at 191-192; Flook, 437 U.S. at 590. Likewise insufficient to bring a method within the ambit of the machine-or-transformation definition are mere field-of-use restrictions -— for example, limiting a generic method of marketing to the field of marketing computers or software. Diehr, 450 U.S. at 191; Flook, 437 U.S. at 590.
Second, because laws of thermodynamics, mathematical formulas, abstract ideas, and other phenomena of nature are “part of the storehouse of knowledge of all men * * * free to all men and reserved exclusively to none,” Funk Bros. Seed Co. v. Kalo Inoculant Co., 333 U.S. 127, 130 (1948), every claimed process must be further examined to ensure that granting the patent would not in practical effect “wholly pre-empt” the public’s access to the “basic tools of scientific and technological work.” Benson, 409 U.S. at 72, 67. Even a process that otherwise satisfies the criteria for patent-eligibility (e.g., because it concerns the use of a machine) may pose that risk, as the computer-assisted method of calculation in Benson demonstrates. See id. at 72 (claimed method “in practical effect would be a patent on the algorithm itself”). A second inquiry is therefore required to determine whether the claim preempts all applications of the fundamental principle, rather than simply claiming the use of the fundamental principle “in conjunction with all of the other steps in [the] claimed process.” Diehr, 450 U.S. at 187. 13
In Diehr, this Court engaged in the two-step analysis described above. It first examined whether the claimed process of curing rubber constituted a “process” under Cochrane and related cases, concluding that the “claims involve the transformation of an article * * * into a different state or thing.” 450 U.S. at 184. The Court then considered whether the claimed process was nonetheless unpatentable for its use of a mathematical formula. The Court concluded that the exception to patentability did not apply because, although respondents’ “process admittedly employ[ed] a well-known mathematical equation,” it did “not seek to pre-empt the use of that equation.” Id. at 187; see id. at 185-188. 14
3. The machine-or-transformation test accommodates evolving technology
For more than a century, the machine-or-transformation test for identifying a patent-eligible “process” has provided a broad and technology-neutral framework for analyzing process claims related to constantly evolving technology. Only non-technological processes directed to the organization of human activity are categorically excluded by the machine-or-transformation standard. No extant field of technology or industry —- including software and diagnostic methods, the two fields addressed by numerous amici —- is wholly excluded from patent protection under that approach; rather, the standard provides a framework for analyzing individual claimed processes to determine whether they involve technological or industrial methods. 15
a. Petitioners and amici contend that reaffirming the machine-or-transformation test will impair the “knowledge economy” by foreclosing patent protection for today’s “electronic and photonic technologies” and other processes, particularly software, “that handle data and information in novel ways.” Pet. Br. 38; see generally Business Software Alliance Amicus Br.; Int’l Business Machines Corp. Amicus Br. That concern is misplaced.
As an initial matter, this case does not present any question as to the application of the machine-or-transformation test to software or yet more novel future forms of industrial or technological processes. As the majority below noted, petitioners do not seek to patent their method of hedging risk in the form of software or any other new information technology. Pet. App. 25a n.23. The only issue presented in this case is whether risk-management techniques, legal methods, and other modes of organizing purely human activity, wholly apart from any form of technology, are “process[es]” within the meaning of Section 101.
In any event, the machine-or-transformation test contemplates that many forms of “software” inventions are patent-eligible. As with many types of technology, the patent-eligibility of software cannot be resolved as a categorical matter. Rather, the eligibility of a claimed software invention depends on the content of that invention and the form in which it is sought to be patented. 16P>
As the Board noted below, the machine-or-transformation definition may readily encompass most software claims because such claims could be said to concern the use of a machine (i.e., the computer itself) or involve a transformation of matter (i.e., the writing and re-writing of data, represented by magnetic changes in the substrate of a hard disk or the altered energy state of transistors in a memory chip). Pet. App. 177a-178a. This conception of the machine-or-transformation test is reflected in non-binding interim examination instructions issued by the PTO in August 2009. See United States PTO, Interim Examination Instructions for Evaluating Subject Matter Eligibility Under 35 U.S.C. § 101 (Aug. 24, 2009) (Interim Instructions). 17 The Interim Instructions state that “computer implemented processes” are often disclosed as connected to a machine, i.e., a general purpose computer. Id. at 6. Such a computer, “when programmed to perform the process steps” so that it performs the specific function contemplated by the process, “may be sufficiently ‘particular’” for purposes of the machine-or-transformation test. Ibid.; cf. In re Alappat, 33 F.3d 1526, 1545 (Fed. Cir. 1994) (en banc) (“[A] general purpose computer in effect becomes a special purpose computer once it is programmed to perform particular functions pursuant to instructions from program software.”). In addition, “transformation of electronic data has been found when the nature of the data has been changed such that it has a different function or is suitable for a different use.” Interim Instructions 6.18 To be sure, questions involving the application of the machine-or-transformation definition to software claims may arise in the future. The patentability of software is subject to established limits. For example, software code that is claimed by itself, uncoupled from any storage medium or computer, may be nothing more than “an idea without physical embodiment,” and therefore would not be patent-eligible. See Microsoft Corp., 550 U.S. at 449. 19 But because petitioners’ claimed innovation is far removed from the field of software technology, this case would provide an unsuitable vehicle for clarifying the circumstances in which software is and is not patent eligible. And this Court’s reaffirmation of the machine or-transformation test for identifying patent-eligible “processes,” in a case involving only a claim for a nontechnological method of hedging financial risk, would not materially affect the circumstances in which patents for software may appropriately be issued.
_________
13 With respect to the preemption portion of the analysis, the Court in Flook had previously suggested that a claimed method that applied an abstract idea could be patent-eligible only if it contained patenteligible subject matter apart from the abstract principle. 437 U.S. at 593-594 & n.16. In Diehr, however, the Court clarified that a process should be considered as a whole. See 450 U.S. at 192.
14 The majority opinion below could be read to collapse the machine-or-transformation inquiry with the preemption analysis, implying that any claimed process that satisfies the machine-or-transformation test necessarily will comport with the settled rule against patenting, for example, mathematical formulas and phenomena of nature; and conversely, that any claimed method that fails the machine-or-transformation test necessarily preempts a fundamental principle. Pet. App. 12a13a. That approach appears to conflate two distinct inquiries. A method that concerns the operation of a machine—such as the method at issue in Benson—can still be subject to a judicial exception. And a method that does not involve a machine or transformation—and would therefore be ineligible under Section 101—may not suffer from the independent problem of preempting a fundamental principle. For example, a multi-step method for proposing marriage might not preempt the abstract concept of proposing marriage; but it is still directed to human activity and therefore is not a “process” under Section 101.
15 As the court below recognized, if “future developments in technology * * * present difficult challenges to the machine-or-transformation” definition, the inquiry could be modified. Pet. App. 17a. At present, however, no such “departure” is necessary. Ibid.
16 As this Court recently observed in Microsoft Corp. v. AT&T Corp., 550 U.S. 437 (2007), the term “software” refers generally to the “set of instructions, known as code, that directs a computer to perform specified functions or operations.” Id. at 447 (citation omitted). A claim for a software invention can be drafted in several ways, including as the “process” of accomplishing a particular task through the use of a computer; or, as in Microsoft, as a “machine” specially programmed to accomplish the task in question. See id. at 446.
17 The Interim Instructions, which “do not constitute substantive rulemaking” (Interim Instructions 1), are designed to aid examiners in considering eligibility questions in accordance with the court of appeals’ statement of the machine-or-transformation test, pending this Court’s decision in this case.
18 A claimant may not bring a process directed to a human activity within the machine-or-transformation definition simply by reciting that the process uses a computer to perform insignificant extra-solution activity (e.g., data storage, or transmission and receipt of data over a network). See Interim Instructions 7-8. For instance, a method composed of steps of evaluating pieces of information by sorting the information and ranking each piece of information based on certain criteria does not become a machine-oriented test simply by specifying that the person performing the process shall initially obtain the relevant information by downloading it using a computer. Ibid.
19 In addition, patent claims for software processes that, considered as a whole, would preempt the public’s access to basic mathematical principles are not patent-eligible. See Benson, 409 U.S. at 71-72. And even if claimed software is patent-eligible under Section 101, it may be unpatentable because it was “obvious” at the time of invention, see 35 U.S.C. 103; Dann v. Johnston, 425 U.S. 219, 227-228 (1976), or for other reasons, see 35 U.S.C. 102, 112. Those restrictions, however, would apply regardless of how the term “process” in Section 101 is defined.
************************************************
*************************************************
Update: A volunteer sent me the entire brief as text. It was done with the columns as set in the PDF, with lots of hyphenation, and I started to fix all that, but after doing the first 10 pages or so, I got worn out, so if anyone wishes to finish that chore, that would be lovely. But the main thing is that it is readable:
No. 08-964
_________________
In the Supreme Court of the United States
BERNARD L. BILSKI AND RAND A. WARSAW,
PETITIONERS
v.
DAVID J. KAPPOS, UNDER SECRETARY OF COMMERCE
FOR INTELLECTUAL PROPERTY AND DIRECTOR,
UNITED STATES PATENT AND TRADEMARK OFFICE _______________
ON WRIT OF CERTIORARI
TO THE UNITED STATES COURT OF APPEALS
FOR THE FEDERAL CIRCUIT
_________________
BRIEF FOR THE RESPONDENT
_______________
CAMERON F. KERRY
General Counsel
QUENTIN A. PALFREY
Associate General Counsel
JOAN BERNOTT MAGINNIS
Assistant General Counsel
U.S. Department of
Commerce
RAYMOND T. CHEN
Solicitor and Deputy
General Counsel
THOMAS W. KRAUSE
SCOTT C. WEIDENFELLER
Associate Solicitors
U.S. Patent and Trademark
Office
Alexandria, VA 22313
ELENA KAGAN
Solicitor General
Counsel of Record
MALCOLM L. STEWART
Deputy Solicitor General
TONY WEST
Assistant Attorney General
GINGER D. ANDERS
Assistant to the Solicitor
General
SCOTT R. MCINTOSH
MARK R. FREEMAN
Attorneys
Department of Justice
Washington, D.C. 20530-0001
[phone]
______________________________
QUESTION PRESENTED
Whether a method of hedging financial risk that neither concerns the use of a particular machine or apparatus nor effects a transformation of matter into a different state or thing is eligible for patent protection under
35 U.S.C. 101.
(I)
TABLE OF CONTENTS
Page
Opinions below . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1Jurisdiction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 Constitutional and statutory provisions involved . . . . . . . . . . . 2 Statement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 Summary of argument . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Argument:
I.
Section 101 protects industrial and technological processes, and it excludes methods directed to organizing human activity . . . . . . . . . . . . . . . . . . . . . . . . . . 11A. Section 101 sweeps broadly but imposes
meaningful limits on the scope of patent protection . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
B. The term “process” in Section 101 encompasses technological and industrial processes but excludes methods of organizing human activity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15 1. The historical meaning of the terms “process” and useful “art” demonstrates that only technological and industrial processes are patent-eligible . . . . . . . . . . . . . . . . . . . . . . . 16
2. The statutory context confirms that only
technological and industrial methods are patent-eligible “processes” . . . . . . . . . . . . . . . . 26
C. A patent-eligible “process” under Section
101 is one that concerns the operation of a particular machine or apparatus or effects a transformation of matter into a different state or thing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 291. This Court has consistently used the
machine-or-transformation test to identify patent-eligible processes . . . . . . . . . . . . . . . . . . 29
(III)
IV
Table of Contents—Continued:...............................Page
2. A process is patent-eligible if it concerns
the operation of a machine or effects a transformation of matter into a different state or thing . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
3. The machine-or-transformation test accommodates evolving technology . . . . . . . . . . . . . . 36
4. The alternative tests for patent-eligibility
proposed by petitioners and amici do not appropriately limit patent protection . . . . . . . 44
II. Section 273 does not implicitly expand the categories of patent-eligible subject matter in Section 101 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46
III. The court of appeals correctly rejected petitioners’
claimed method of hedging financial risk under Section 101 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 55
TABLE OF AUTHORITIES
Cases:
Alappat, In re, 33 F.3d 1526 (Fed. Cir. 1994) . . . . . . . . . . 39
American Fruit Growers, Inc. v. Brogdex Co.,
283 U.S. 1 (1931) . . . . . . . . . . . . . . . . . . . . . . . . . . 13, 26, 44
AT&T Corp. v. Excel Commc’ns, Inc., 172 F.3d 1352
(Fed. Cir.), cert. denied, 528 U.S. 946 (1999) . . . . . . . . . . 5
Bonito Boats, Inc. v. Thunder Craft Boats, Inc.,
489 U.S. 141 (1989) . . . . . . . . . . . . . . . . . . . . . 12, 13, 22, 44
Boulton v. Bull, 126 Eng. Rep. 651 (C.P. 1795) . . . . . . . . . 20
Chicago Sugar-Refining Co. v. Charles Pope Glucose
Co., 84 F. 977 (7th Cir. 1898) . . . . . . . . . . . . . . . . . . . . . . 30
Cochrane v. Deener, 94 U.S. 780 (1877) . . . . . . . . . . passim
V
Cases—Continued:................................Page
Comiskey, In re, 554 F.3d 967 (Fed. Cir. 2009) . . . . . . . . . 50Corning v. Burden, 56 U.S. (15 How.) 252
(1854) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13, 14, 26, 32, 43
Cowles Co. v. Frost-White Paper Mills, 174 F.2d
868 (2d Cir. 1949) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Dann v. Johnston, 425 U.S. 219 (1976) . . . . . . . . . . . . . . . . 39 Diamond v. Chakrabarty, 447 U.S. 303
(1980) . . . . . . . . . . . . . . . . . . . . . . . . . . . 11, 12, 13, 26, 28, 44
Diamond v. Diehr, 450 U.S. 175 (1981) . . . . . . . . . . . passim
eBay Inc. v. MercExchange, L.L.C., 547 U.S. 388
(2006) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
Eldred v. Ashcroft, 537 U.S. 186 (2003) . . . . . . . . . . . . . . . . 17 Expanded Metal Co. v. Bradford, 214 U.S.
366 (1909) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25, 30, 33
Festo Corp. v. Shoketsu Kinzoku Kogyo Kabushiki
Co., 535 U.S. 722 (2002) . . . . . . . . . . . . . . . . . . . . . . . 41, 43
Funk Bros. Seed Co. v. Kalo Inoculant Co.,
333 U.S. 127 (1948) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Garcia v. United States, 469 U.S. 70 (1984) . . . . . . . . . . . . 48
Gottschalk v. Benson, 409 U.S. 63 (1972) . . . . . . . . . passim
Graham v. John Deere Co., 383 U.S. 1 (1966) . . . . . . . 19, 21
Holland Furniture Co. v. Perkins Glue Co.,
277 U.S. 245 (1928) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Hotel Sec. Checking Co. v. Lorraine Co., 160 F. 467
(2d Cir. 1908) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
J.E.M. Ag Supply, Inc. v. Pioneer Hi-Bred Int’l, Inc.,
534 U.S. 124 (2001) . . . . . . . . . . . . . . . . . . . . . 12, 43, 49, 50
Jarecki v. G.D. Searle & Co., 367 U.S. 303 (1961) . . . . . . . 26
VI
Cases—Continued: ................................Page
Kewanee Oil Co. v. Bicron Corp., 416 U.S. 470
(1974) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13, 46
King, In re, 801 F.2d 1324 (Fed. Cir. 1986) . . . . . . . . . . . . 54 KSR Int’l Co. v. Teleflex Inc., 550 U.S. 398 (2007) . . . . . . 43
Laboratory Corp. of Am. Holdings v. Metabolite
Labs., Inc., 548 U.S. 124 (2006) . . . . . . . . . . . . . . . . . . . . 13
Microsoft Corp. v. AT&T Corp., 550 U.S. 437
(2007) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 38, 39
Miller v. Electro Bleaching Gas Co., 276 F. 379
(8th Cir. 1921), cert. denied, 257 U.S. 660 (1922) . . . . . 30
O’Reilly v. Morse, 56 U.S. (15 How.) 62 (1854) . . . . . . 45, 54 Parker v. Flook, 437 U.S. 584 (1978) . . . . . . . . . . . . . passim
Patton, In re, 127 F.2d 324 (C.C.P.A. 1942) . . . . . . . . . . . . 24 Paulik v. Rizkalla, 760 F.2d 1270 (Fed. Cir. 1985) . . . . . . 19 P.E. Sharpless Co. v. Crawford Farms, Inc.,
287 F. 655 (2d Cir. 1923) . . . . . . . . . . . . . . . . . . . . . . . . . . 30
Pennock v. Dialogue, 27 U.S. (2 Pet.) 1 (1829) . . . . . . . . . . 19
Pfaff v. Wells Elecs., Inc., 525 U.S. 55 (1998) . . . . . . . . . . . 25
Prometheus Labs., Inc. v. Mayo Collaborative Servs.,
No. 2008-1403, 2009 WL 2950232 (Fed. Cir. Sept. 16, 2009) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 40
Risdon Iron & Locomotive Works v. Medart,
158 U.S. 68 (1895) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30 State Street Bank & Trust Co. v. Signature Fin.
Group, Inc., 149 F.3d 1368 (Fed. Cir. 1998), cert. denied, 525 U.S. 1093 (1999) . . . . . 5, 6, 10, 40, 47, 51
Shell Dev. Co. v. Watson, 149 F. Supp. 279 (D.D.C.
1957), aff’d, 252 F.2d 861 (D.C. Cir. 1958) . . . . . . . . 14, 26
The Telephone Cases, 126 U.S. 1 (1888) . . . . . . . . . . . . 14, 30
VII
Cases—Continued: ................................Page
Tilghman v. Proctor, 102 U.S. 707 (1881) . . . . . . . . . . . 31, 32
United States v. Williams, 128 S. Ct. 1830 (2008) . . . . . . . 26
Waxham v. Smith, 294 U.S. 20 (1935) . . . . . . . . . . . . . . . . . 30
Whitman v. American Trucking Ass’ns, 531 U.S.
457 (2001) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
Yuan, In re, 188 F.2d 377 (C.C.P.A. 1951) . . . . . . . . . . 22, 30
Constitution and statutes:
U.S. Const. Art. 1, § 8, Cl. 8 (Patent Clause) . . . . . . 2, 11, 22 Act of April 10, 1790, ch. 7, 1 Stat. 110 . . . . . . . . . . . . . . . . 14 Act of Feb. 21, 1793, ch. 11, 1 Stat. 318 . . . . . . . . . . . . . . . . 11
§ 1, 1 Stat. 319 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
Act of July 4, 1836, ch. 357, 5 Stat. 117 . . . . . . . . . . . . . . . . 16 First Inventor Defense Act of 1999, Pub. L. No.
106-113, § 4302(a), 113 Stat. 1501A-555
(35 U.S.C. 273) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . passim
35 U.S.C. 273(a)(3) . . . . . . . . . . . . . . . . . . . . . . . . 46, 4935 U.S.C. 273(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 46 35 U.S.C. 273(b)(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . 47
Patent Act of 1952, 35 U.S.C. 1 et seq. . . . . . . . . . . . . . . . . . . 9
35 U.S.C. 100(b) . . . . . . . . . . . . . . . . . . . . . . . . . . . 14, 15, 27 35 U.S.C. 101 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . passim 35 U.S.C. 102 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39, 46 35 U.S.C. 103 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39, 43, 46 35 U.S.C. 112 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 39, 46 35 U.S.C. 141 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5 35 U.S.C. 283 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 43
VIII
Miscellaneous:..............................Page
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Daniel Defoe, A General History of Discoveries and
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IX
Miscellaneous—Continued: ...........................Page
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W. Kenrick, An Address to the Artists and Manufac-
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George Logan, A Letter to the Citizens of Pennsylva-
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14 The Papers of Thomas Jefferson (Julian P. Boyd
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2 The Records of the Federal Convention of 1787
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Giles S. Rich, Principles of Patentability, 28 Geo.
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X
Miscellaneous—Continued:............................Page
United States PTO, Interim Examination Instructions for Evaluating Subject matter Eligibility Under 35 U.S.C. § 101 (Aug. 24, 2009) . . . . . . . . 38, 39, 53
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In the Supreme Court of the United States
____________________ No. 08-964
BERNARD L. BILSKI AND RAND A. WARSAW,
PETITIONERS
v.
DAVID J. KAPPOS, UNDER SECRETARY OF COMMERCE
FOR INTELLECTUAL PROPERTY AND DIRECTOR,
UNITED STATES PATENT AND TRADEMARK OFFICE
________________
ON WRIT OF CERTIORARI
TO THE UNITED STATES COURT OF APPEALS
FOR THE FEDERAL CIRCUIT
_____________
BRIEF FOR THE RESPONDENT
____________
OPINIONS BELOW
The opinion of the court of appeals (Pet. App. 1a-143a) is reported at 545 F.3d 943. The decision of the
Board of Patent Appeals and Interferences (Pet. App.
146a-205a) is unreported.
JURISDICTION
The judgment of the court of appeals was entered on
October 30, 2008. The petition for a writ of certiorari
was filed on January 28, 2009, and was granted on June
1, 2009. This jurisdiction of this Court rests on 28
U.S.C. 1254(1).
(1)
2
CONSTITUTIONAL AND STATUTORY
PROVISIONS INVOLVED
Article I, Section 8, Clause 8 of the Constitution provides:
The Congress shall have Power * * * [t]o promote
the Progress of Science and useful Arts, by securing
for limited Times to Authors and Inventors the exclusive Right to their respective Writings and Discoveries[.]
35 U.S.C. 101 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.
STATEMENT
This case arises from a decision of the United States
Patent and Trademark Office (PTO) rejecting all claims
in petitioners’ patent application for lack of patent-eligible subject matter under 35 U.S.C. 101. Pet. App. 2a.
The en banc court of appeals affirmed. Id . at 1a-143a.
1. Petitioners seek to patent a method of hedging
various consumer cost risks in the purchase and sale of
commodities. Pet. App. 2a-3a; see J.A. 10-23 (U.S. Patent Application No. 08/833,892). Petitioners’ claims describe a “risk management method” that would offset
consumer cost risks associated with, for example, fluctuations in weather during the winter, “essentially guarantee[ing] the customer a normal winter [by] lock[ing]
in a payment stream (a fixed energy bill) for whatever
period the consumer wishes.” J.A. 11 (Summary of the
Invention). This reduction of risk would be accom-
3
plished by arranging offsetting transactions with “counterparties,” such as energy utilities, “that have an opposite appetite for the risk” of weather-related costs. J.A.
14-15.
Claim 1 of petitioners’ application encompasses a
method for hedging risk in any commodities transaction:
A method for managing the consumption risk costs of
a commodity sold by a commodity provider at a fixed
price comprising the steps of:
(a) initiating a series of transactions between said
commodity provider and consumers of said commodity wherein said consumers purchase said
commodity at a fixed rate based upon historical
averages, said fixed rate corresponding to a risk
position of said consumer;
(b) identifying market participants for said commodity having a counter-risk position to said
consumers; and
(c) initiating a series of transactions between said
commodity provider and said market participants at a second fixed rate such that said series
of market participant transactions balances the
risk position of said series of consumer transactions[.]
Pet. App. 2a-3a. The other 10 claims in the application
recite more specific variations on this hedging method.
Ibid.
Although entitled “Energy Risk Management Method,” J.A. 10, the patent application’s claim language is broad, and stresses that the claimed method is not limited to energy prices or weather risks. “[I]t is to be distinctly understood that the present method can be used
4
for any commodity to manage consumption risk in a fixed bill price product.” J.A. 11. In addition, as the court of appeals observed, nothing in the claimed method requires actual commodities to change hands, so that the method can be carried out using options, Pet. App. 3a; nor does the method specify steps for identifying counterparties or carrying out the transactions.
2. The PTO examiner rejected the application for lack of patent-eligible subject matter under 35 U.S.C. 101. Pet. App. 4a. An expanded five-judge panel of the PTO’s Board of Patent Appeals and Interferences (Board) affirmed the examiner’s decision. Id. at 146a-205a. The Board emphasized that petitioners’ claims “do not recite any specific way of implementing the steps; do not expressly or impliedly recite any physical transformation of physical subject matter, tangible or intangible, from one state into another; do not recite any electrical, chemical, or mechanical acts or results; * * * and do not involve making or using a machine, manufacture, or composition of matter.” Id. at 150a. Rather, the claimed method involves only the manipulation of “financial risks and legal liabilities of the commodity provider, the consumer, and the market participants having a counter-risk position to the consumer.” Id. at 182a. The Board concluded that a process claim of this kind is not patent-eligible under 35 U.S.C. 101. Pet. App. 182a. The Board also found petitioners’ hedging method unpatentable on the independent ground that the claimed method is so broad as to preempt “any and every possible way of performing the steps of the plan” for managing consumption risk. Pet. App. 184a. Stressing that the claims involve no specific physical steps or other concrete limitations, the Board concluded that the claim
5
is “directed to the ‘abstract idea’ [of hedging consumption risk] itself, rather than a practical implementation
of the concept.” Ibid.
3. a. Petitioners appealed to the United States Court of Appeals for the Federal Circuit. See 35 U.S.C. 141. After briefing and argument before a three-judge panel, but before the panel issued a decision, the court of appeals sua sponte ordered that the appeal be heard en banc. Pet. App. 144a. The court directed the parties to file supplemental briefs addressing, inter alia, whether the court should reconsider or overrule State Street Bank & Trust Co. v. Signature Financial Group, Inc., 149 F.3d 1368 (Fed. Cir. 1998), cert. denied, 525 U.S. 1093 (1999), and AT&T Corp. v. Excel Communications, Inc., 172 F.3d 1352 (Fed. Cir.), cert. denied, 528 U.S. 946 (1999), the cases on which many patent applicants had relied in urging that any series of steps having a “useful, concrete, and tangible result” qualifies as a patent-eligible process. Pet. App. 144a-145a.
b. The en banc court of appeals affirmed the Board’s decision. Pet. App. 1a-143a. After reviewing this Court’s precedents discussing the patent eligibility of processes, id. at 7a-12a, the court concluded that a claimed process qualifies for patent protection if “(1) it is tied to a particular machine or apparatus, or (2) it transforms a particular article into a different state or thing.” Id. at 12a; see id. at 12a-13a (citing Diamond v. Diehr, 450 U.S. 175, 192 (1981); Parker v. Flook, 437 U.S. 584, 588 n.9 (1978); Gottschalk v. Benson, 409 U.S. 63, 70 (1972); Cochrane v. Deener, 94 U.S. 780, 788 (1877)). The court of appeals observed that this Court had applied the “machine-or-transformation test” in Diehr, and that such an approach is consistent with this Court’s earlier decisions construing Section 101 and its
6
predecessor provisions. Pet. App. 14a & n.8; see id . at
15a-16a (“[t]ransformation and reduction of an article ‘to
a different state or thing’ is the clue to the patentability
of a process claim that does not include particular machines”) (quoting Benson, 409 U.S. at 70, and Cochrane,
94 U.S. at 788) (emphasis added by court of appeals); id.
at 16a-17a (same) (quoting Diehr, 450 U.S. at 184). The
court recognized that “future developments in technology and the sciences may present difficult challenges” in
applying that test, and acknowledged the possibility that
the Federal Circuit (or this Court) “may in the future
refine or augment the test or how it is applied.” Id. at
17a. The court of appeals stated, however, that “for the
present case” the machine-or-transformation test is controlling. Id . at 17a & n.12.
The court of appeals also identified two “corollary”
principles, each drawn from this Court’s cases, governing application of the machine-or-transformation test.
First, “mere field-of-use limitations are generally insufficient to render an otherwise ineligible process claim
patent-eligible.” Pet. App. 18a (citing Diehr, 450 U.S. at
191-192). Second, “insignificant post[-]solution activity
will not transform an unpatentable principle into a
patentable process.” Id. at 19a (quoting Diehr, 450 U.S.
at 191-192); ibid. (citing Flook, 437 U.S. at 590).
The court of appeals rejected statements in its own
decisions that were inconsistent with the machine-or-transformation test. Pet. App. 21a-27a. In particular,
the court revisited the oft-quoted language in State
Street Bank and related cases suggesting that any process that yields a “useful, concrete and tangible result”
is eligible for patent protection. State Street Bank, 149
F.3d at 1373; see Pet. App. 22a-23a (collecting cases).
The court explained (id . at 23a-24a) that, although that
7
formulation “may in many instances provide useful indications of whether a claim is drawn to a fundamental
principle or a practical application of such a principle”
(by which the court meant “laws of nature, natural phenomena, and abstract ideas,” id . at 8a n.5), the “result”
standard is not by itself sufficient to distinguish patent-eligible from ineligible processes.
The court of appeals concluded that petitioners’
claimed hedging method “entirely fails the machine-or-transformation test.” Pet. App. 32a. The court stressed
that the claimed process does not transform matter into
a different state or thing, but at most involves modifications “of public or private legal obligations or relationships, business risks, or other such abstractions.” Ibid.
The court further explained that petitioners’ claims do
not require the use of any particular machine or apparatus. Ibid. The court also stated that “claim 1 would effectively pre-empt any application of the fundamental
concept of hedging” the consumer cost risk of a commodity. Id . at 36a. Accordingly, the court concluded
that petitioners’ “claim is not drawn to patent-eligible
subject matter under [Section] 101.” Id . at 37a.
c. Judge Dyk, joined by Judge Linn, filed a concurring opinion reviewing the history of Section 101. Pet.
App. 38a-59a. The concurring judges concluded that
“the unpatentability of processes not involving manufactures, machines, or compositions of matter has been
firmly embedded in the statute since the time of the Patent Act of 1793.” Id . at 38a. Those judges stressed in
particular that “[t]here is no suggestion in any of this
early [history] of process patents that processes for organizing human activity were or ever had been patentable.” Id. at 50a.
8
d. Judges Newman (Pet. App. 60a-105a), Mayer
(id . at 106a-133a), and Rader (id . at 134a-143a) filed
separate dissenting opinions. Of the dissenters, only
Judge Newman would have held petitioners’ claims pat-
ent- eligible under Section 101, on the ground that they
described “a ‘process’ set out in successive steps,” and
did not preempt a fundamental principle. See id . at
100a-101a; id. at 104a. Judge Mayer would have held
that process claims “directed to a method of conducting
business,” including petitioners’ claims, are categorically
ineligible for patent protection. Id . at 106a. Judge Ra-
der would have rejected petitioners’ application solely
on the ground that it seeks to patent an abstract idea.
Id . at 134a; see id . at 139a.
SUMMARY OF ARGUMENT
This case presents the question whether petitioners’
claimed hedging method is a patent-eligible “process”
under 35 U.S.C. 101. Interpreted in light of the histori-
cal scope and development of the patent laws, as well as
the statutory context, the term “process” encompasses
all technological and industrial processes, broadly con-
ceived. But it does not extend patent-eligibility beyond
those bounds, to methods of organizing human activity
that are untethered to technology—e.g., methods by
which people conduct economic, social, or legal tasks,
such as entering into contracts, playing poker, or choos-
ing a jury. Such methods fall outside of the broad ex-
panse of technological and industrial fields that “the
statute was enacted to protect.” Parker v. Flook, 437
U.S. 584, 593 (1978). Because petitioners’ hedging meth-
od relates solely to human conduct, untethered to any
technology—any machine or transformation of mat-
ter—it falls outside the coverage of Section 101.
9
I. The historical understanding of the term “pro-
cess” and its statutory precursor “art” demonstrates
that technological and industrial processes are the
“types which have historically been eligible to receive
the protection of our patent laws.” Diamond v. Diehr,
450 U.S. 175, 184 (1981). Methods of organizing human
activity are not patent-eligible “process[es]” within the
meaning of Section 101. When Congress enacted the
initial patent statutes in 1790 and 1793, the processes
deemed eligible for patent protection were those involv-
ing the “useful arts”—namely, the fields of technology
and industry, as opposed to the fields of general knowl-
edge and economic endeavor. This Court and others ap-
plied that approach, emphasizing the technological na-
ture of patent-eligible processes, through the enactment
of the current statute, the Patent Act of 1952, 35 U.S.C.
1 et seq. The statutory context confirms this under-
standing of “process,” as the term appears together
with other categories of patent-eligible subject matter—
machines, compositions of matter, and manufactures—
that “are things made by man[,] and involve technol-
ogy.” Pet. App. 194a.
This Court has long recognized that the distinguish-
ing feature of a technological process is that it concerns
a particular machine or apparatus or effects a transfor-
mation of matter to a different state or thing. See, e.g.,
Diehr, 450 U.S. at 184; Cochrane v. Deener, 94 U.S. 780
(1877). That understanding of the term “process” in
Section 101 continues to provide an appropriate frame-
work for distinguishing methods that involve technol-
ogy—including claims concerning software and other
modern technologies—from those that do not. In con-
trast, petitioners’ proposed definition, which would en-
compass any series of steps culminating in a useful re-
10
sult, whether or not technological in nature, Pet. Br. 43-
44, would permit patents for a vast swath of human ac-
tivities far removed from the essential purposes and
historical scope of the patent laws.
II. Congress’s enactment of 35 U.S.C. 273 does not
suggest that methods of organizing human activity are
patent-eligible “processes” under Section 101. Congress
enacted Section 273 in response to State Street Bank &
Trust Co. v. Signature Financial Group, Inc., 149 F.3d
1368 (Fed. Cir. 1998), which held that inventions that
otherwise satisfy Section 101’s requirements should not
be excluded from patent protection simply because they
relate to business activities. Section 273 provides an
affirmative defense to protect businesses that had been
using methods previously regarded as unpatentable.
Congress’s decision to limit the practical impact of State
Street in that manner does not suggest that Congress
viewed State Street as extending patent protection to
non-technological methods of organizing human activity,
much less that it approved or impliedly ratified such a
drastic expansion of patent-eligible subject matter.
III. Petitioners’ method for hedging risk in the pur-
chase and sale of commodities—a technique for organiz-
ing human activity untethered to technology—is not a
“process” eligible for patent protection under 35 U.S.C.
101. Petitioners’ claimed method is not directed to the
operation of a particular machine or apparatus, nor does
it involve the transformation of matter into a different
state or thing. Petitioners’ hedging method is also ineli-
gible for a patent on the independent ground that it
would preempt the abstract idea of hedging consumption
risk.
11
ARGUMENT
I. SECTION 101 PROTECTS INDUSTRIAL AND TECHNO-
LOGICAL PROCESSES, AND IT EXCLUDES METHODS
DIRECTED TO ORGANIZING HUMAN ACTIVITY
A. Section 101 Sweeps Broadly But Imposes Meaningful
Limits On The Scope Of Patent Protection
1. The Patent Clause of the Constitution authorizes
Congress “[t]o promote the Progress of * * * useful
Arts, by securing for limited Times to * * * Inventors
the exclusive Right to their * * * Discoveries.” U.S.
Const. Art. 1, § 8, Cl. 8. Congress has exercised that
authority in the Patent Act, which provides, in relevant
part:
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 condi-
tions and requirements of this title.
35 U.S.C. 101.
Section 101 defines in “expansive terms” the catego-
ries of patent-eligible inventions. Diamond v. Chakra-
barty, 447 U.S. 303, 308 (1980). Thomas Jefferson, an
author of the Act of Feb. 21, 1793 (1793 Patent Act), ch.
11, 1 Stat. 318, desired that “ingenuity should receive a
liberal encouragement,” and broad and flexible patent
laws are integral to that goal. See Chakrabarty, 447
U.S. at 308-309 (quoting 5 Writings of Thomas Jefferson
75-76 (Washington ed. 1871)). Consistent with that in-
tent, “[t]he subject-matter provisions of the patent law
have been cast in broad terms to fulfill the constitutional
and statutory goal of promoting ‘the Progress of Science
and the useful Arts’ with all that means for the social
12
and economic benefits envisioned by Jefferson.” Id . at
315; see J.E.M. Ag Supply, Inc. v. Pioneer Hi-Bred
Int’l, Inc., 534 U.S. 124, 130 (2001) (“In choosing such
expansive terms as ‘manufacture’ and ‘composition of
matter,’ modified by the comprehensive ‘any,’ Congress
plainly contemplated that the patent laws would be
given wide scope.”) (quoting Chakrabarty, 447 U.S. at
308).
“Broad,” however, does not mean unbounded. Al-
though the prospect of patent protection may create
incentives for research and innovation that would not
otherwise occur, the restrictions imposed by the patent
laws entail social costs as well. For instance, patent pro-
tection may have the effect of excluding would-be com-
petitors who could produce a patented invention more
efficiently, thereby inhibiting post-invention competition
and innovation. The Patent Act therefore “reflects a
balance between the need to encourage innovation and
the avoidance of monopolies which stifle competition
without any concomitant advance in the ‘Progress of
Science and useful Arts.’ ” Bonito Boats, Inc. v. Thun-
der Craft Boats, Inc., 489 U.S. 141, 146 (1989).
Section 101 reflects Congress’s determination that,
for specified categories of subject matter (processes,
machines, manufactures, and compositions of matter),
the goal of fostering innovation may justify the restric-
tions on post-invention competition that the patent laws
impose. Section 101 also makes clear, however, that
inventions falling outside those broad but bounded cate-
gories are ineligible for patent protection even if they
satisfy the Patent Act’s other requirements. “[N]o pat-
ent is available for a discovery, however useful, novel,
and nonobvious, unless it falls within one of the express
categories of patentable subject matter of 35 U.S.C.
13
§ 101.” Kewanee Oil Co. v. Bicron Corp., 416 U.S. 470,
483 (1974). By “bring[ing] certain types of invention and
discovery within the scope of patentability while exclud-
ing others,” the Patent Act of 1952 “seeks to avoid the
dangers of overprotection just as surely as it seeks to
avoid the diminished incentive to invent that underpro-
tection can threaten.” Laboratory Corp. of Am. Hold-
ings v. Metabolite Labs., Inc., 548 U.S. 124, 127 (2006)
(LabCorp) (Breyer, J., dissenting from dismissal of a
writ of certiorari). In this important respect, the federal
patent laws “determine not only what is protected, but
also what is free for all to use.” Bonito Boats, 489 U.S.
at 151.
2. In applying Section 101 and its predecessors to
specific inventions, the Court has provided a concrete
definition for each of the four statutory categories. See,
e.g., Diamond v. Diehr, 450 U.S. 175, 184 (1981) (“Trans-
formation and reduction of an article ‘to a different state
or thing’ is the clue to the patentability of a process
claim that does not include particular machines.”) (quot-
ing Gottschalk v. Benson, 409 U.S. 63, 70 (1972), and
Cochrane v. Deener, 94 U.S. 780, 787-788 (1877)); Corn-
ing v. Burden, 56 U.S. (15 How.) 252, 267 (1854) (“The
term machine includes every mechanical device or com-
bination of mechanical powers and devices to perform
some function and produce a certain effect or result.”);
American Fruit Growers, Inc. v. Brogdex Co., 283 U.S.
1, 11 (1931) (“manufacture” means “anything made for
use from raw or prepared materials,” including by “giv-
ing to these materials new forms, qualities, properties,
or combinations, whether by hand-labor or by machin-
ery”); Chakrabarty, 447 U.S. at 308 (“composition of
matter” means “all compositions of two or more sub-
stances and . . . all composite articles, whether they be
14
the results of chemical union, or of mechanical mixture,
or whether they be gases, fluids, powders or solids”)
(quoting Shell Dev. Co. v. Watson, 149 F. Supp. 279, 280
(D.D.C. 1957), aff’d, 252 F.2d 861 (D.C. Cir. 1958) (citing
1 Anthony William Deller, Walker on Patents § 14, at 55
(1937))).
For more than a century, the Court has used essen-
tially the same formulation to define a patent-eligible
“process.” In Diehr, the Court “determine[d] [the]
meaning” of the term “process” in Section 101, 450 U.S.
at 182, by canvassing the Court’s historical understand-
ing of that term and its statutory precursor, “art.” The
Court observed that, “[a]lthough the term ‘process’ was
not added to 35 U.S.C. § 101 until 1952, a process has
historically enjoyed patent protection because it was
considered a form of ‘art’ as that term was used in the
1793 Act.” Ibid.1 For that reason, the Court explained,
“[a]nalysis of the eligibility of a claim of patent protec-
tion for a ‘process’ did not change with the addition of
that term to § 101.” Id. at 184. The Court summed up
its longstanding construction as follows: “Transforma-
tion and reduction of an article ‘to a different state or
thing’ is the clue to the patentability of a process claim
1 Congress first added the phrase “new and useful process” to Sec-
tion 101 in the 1952 recodification of the patent laws, substituting it for
“new and useful art.” The term “art” had appeared in the Act of April
10, 1790 (1790 Patent Act), ch. 7, 1 Stat. 110; in the 1793 Patent Act,
which encompassed “any new and useful art, machine, manufacture or
composition of matter, or any new and useful improvement [thereof],”
1793 Patent Act § 1, 1 Stat. 319; and in every subsequent patent statute
until 1952. As used in those statutes, “art” was construed to be “prac-
tically synonymous with process or method.” S. Rep. No. 1979, 82d
Cong., 2d Sess. 5 (1952); see, e.g., The Telephone Cases, 126 U.S. 1, 533
(1888); Corning, 56 U.S. (15 How.) at 267; cf. 35 U.S.C. 100(b) (“pro-
cess” means “process, art or method”).
15
that does not include particular machines.” Ibid. (cita-
tions omitted); see, e.g., Parker v. Flook, 437 U.S. 584,
588 n.9 (1978); Cochrane, 94 U.S. at 788; pp. 29-33, in-
fra.2 Such “[i]ndustrial processes,” the Court concluded,
“are the types which have historically been eligible to
receive the protection of our patent laws.” Diehr, 450
U.S. at 184.
B. The Term “Process” In Section 101 Encompasses Tech-
nological And Industrial Processes But Excludes Meth-
ods Of Organizing Human Activity
Petitioners contend that the term “process” in Sec-
tion 101 sweeps beyond innovations satisfying the
machine-or-transformation test and encompasses any
series of steps that culminates in a useful result, so long
as it is not in essence a fundamental principle or ab-
stract idea. Pet. Br. 43-44. That open-ended definition
would extend patent protection to methods, such as peti-
tioners’ claimed process for hedging consumption risk in
commodity markets, that involve the organization of
human activity alone and do not include any technologi-
cal or industrial component. Petitioners’ near-boundless
conception of “process” cannot be reconciled with the
meaning that the term takes from its history and statu-
tory context.
2 As the Diehr Court noted, 450 U.S. at 181 n.6, Section 100(b), also
added in 1952, provides a definition of “process”: “The term ‘process’
means process, art, or method, and includes a new use of a known
process, machine, manufacture, composition of matter, or material.” 35
U.S.C. 100(b); see Pet. App. 7a n.3.
16
1. The historical meaning of the terms “process” and
useful “art” demonstrates that only technological
and industrial processes are patent-eligible
a. The term “process” and its statutory precursor,
“art,” have historically been understood as limited to
technological and industrial methods. The 1790 Patent
Act was entitled “An Act to Promote the Progress of
Useful Arts,” as was the 1793 Patent Act and subse-
quent statutes. See Robert I. Coulter, The Field of the
Statutory Useful Arts: Part II, 34 J. Pat. Off. Soc’y 487,
490 (1952) (Coulter); see also Act of July 4, 1836, ch. 357,
5 Stat. 117. In eighteenth century usage, “useful arts”
referred to the activities of skilled artisans and workers,
especially in the fields of manufacturing and engineer-
ing, and stood in juxtaposition to the “liberal” and “fine”
arts. See Coulter 493-500; id . at 498 (the “fundamental
attribute of the useful arts” was that they involved “con-
trolling the forces and materials of nature and putting
them to work in a practical way for utilitarian ends serv-
ing mankind’s physical welfare”).
Noah Webster’s first American dictionary, for exam-
ple, defined “art” as “[t]he disposition or modification of
things by human skill, to answer the purpose intended,”
such as “the art of building or engraving.” 1 Noah Web-
ster, An American Dictionary of the English Language
(1828) (Webster). Webster appended the following com-
ment: “Arts are divided into useful or mechanic, and
liberal or polite. The mechanic arts are those in which
the hands and body are more concerned than the mind;
as in making clothes, and utensils. These arts are called
trades. The liberal or polite arts are those in which the
mind or imagination is chiefly concerned; as poetry, mu-
sic and painting.” Ibid. Consistent with Webster’s defi-
nition, numerous writings at the time used the phrase
17
“useful arts” to refer to manufacturing processes and
other applied trades.3
The drafters of the early patent statutes and other
influential figures in early patent law sometimes con-
trasted the useful arts with the field of general knowl-
edge and learning, which at the time was known as “sci-
ence.”4 See, e.g., Arthur H. Seidel, The Constitution
and a Standard of Patentability, 48 J. Pat. Off. Soc’y 5,
11-12 & n.14 (1966) (Seidel) (citing contemporaneous
editions of Samuel Johnson’s A Dictionary of the Eng-
lish Language); Johnson’s Dictionary of the English
Language, in Miniature 192 (Joseph Hamilton ed., C.
Whittingham 1818). Tench Coxe, an early proponent of
manufacturing, described as separate fields the “useful
arts and manufactures” and the “sciences and the fine
arts.” See A Statement of the Arts and Manufactures of
the United States of America for the Year 1810, at xlix
3 See, e.g., Daniel Defoe, A General History of Discoveries and Im-
provements in Useful Arts (1727) (providing history of technological
developments); Tench Coxe, An Address to an Assembly of the Friends
of American Manufactures 17 (1787) (describing manufactured goods
and processes as “useful arts”); id. at 18 (describing progress in the
“useful arts” as having produced improvements in various manufac-
tures, from ships to whips to watches); George Logan, A Letter to the
Citizens of Pennsylvania, on the Necessity of Promoting Agriculture,
Manufactures, and the Useful Arts 12-13 (1800) (referring to manufac-
turing processes as “useful arts,” and emphasizing the relationship of
a country’s prosperity to its progress in the useful arts); W. Kenrick,
An Address to the Artists and Manufacturers of Great Britain 21-38
(1774) (contrasting the “useful arts” with the “polite arts”).
4 The useful “arts” are the domain of patent law, while the promotion
of “science”—general knowledge and learning—is the constitutional
object of copyright law. See Eldred v. Ashcroft, 537 U.S. 186, 192-193
(2003); H.R. Rep. No. 1923, 82d Cong., 2d Sess. 4 (1952); Karl B. Lutz,
Patents and Science: A Clarification of the Patent Clause of the U.S.
Constitution, 18 Geo. Wash. L. Rev. 50, 51 (1949) (Lutz).
18
(1814) (Coxe); see also Webster, “art.” Similarly,
Thomas Jefferson described two “inventions” patented
in England—an iron bridge and steam power—as falling
within the field of “arts,” while describing “science” as
encompassing more general fields of knowledge. 14 The
Papers of Thomas Jefferson 697-699 (Julian P. Boyd ed.,
Princeton University Press 1958) (letter to Joseph Wil-
lard, Mar. 24, 1789).
Notably, the fields of pure finance and business, un-
connected to technology or industry, were viewed as
falling within the “sciences,” but not within the “useful
arts.” In a discussion of progress in industrial fields as
well as the surrounding political and economic system,
Tench Coxe described “the mechanical and chemical
branches” as separate from “the system of labor and
political economy.” Coxe at l. He also noted that for-
eign investors were now comfortable investing in the
“manufactures and the useful arts,” just as they had
long invested in the realms of “commerce, navigation,
stocks, banks and insurance companies.” Ibid. Simi-
larly, Alexander Hamilton distinguished in The Federal-
ist No. 8 between “the arts of industry, and the science
of finance.” The Federalist No. 8, at 69 (Alexander
Hamilton) (Clinton Rossiter ed., 1961).
In sum, because the initial patent statutes were in-
tended to foster the “useful arts,” they were directed to
technological and industrial inventions, as opposed to
fields of purely human activity—including financial and
economic activity unconnected to technology—which fell
within the sciences or liberal arts. See Lutz 54 (“The
term ‘useful arts,’ as used in the Constitution and in the
titles of the patent statutes is best represented in mod-
ern language by the word ‘technology.’”); see also Coul-
ter 499 (“‘useful arts’ must be understood to include not
19
only [contemporaneous] industrial and manufacturing
arts,” but also innovations in other evolving “technologi-
cal fields”); Paulik v. Rizkalla, 760 F.2d 1270, 1276
(Fed. Cir. 1985) (en banc) (“The exclusive right, consti-
tutionally derived, was for the national purpose of ad-
vancing the useful arts—the process today called tech-
nological innovation.”); Pet. App. 193a-194a (noting peti-
tioners’ concession before the Board that “technological
arts” and “useful arts” are synonymous). The term
“art,” as the statutory precursor to the “process” cate-
gory of patent-eligible inventions, should be understood
in that light.
b. The historical development of American patent
law confirms that the patent system, in extending pro-
tection to the useful arts, was not understood to encom-
pass non-technological methods directed to organizing
human activity. See generally Pet. App. 38a-59a (Dyk,
J., concurring); id. at 106a-110a (Mayer, J., dissenting).
Early American patent laws, including the 1790 and
1793 Patent Acts, were enacted against the backdrop of
the English patent system and borrowed extensively
from its principles and practice. See Pennock v. Dia-
logue, 27 U.S. (2 Pet.) 1, 18 (1829) (Story, J.); Graham v.
John Deere Co., 383 U.S. 1, 5 (1966); see also Pet. App.
41a-42a (Dyk, J., concurring). The pertinent terms of
the English Statute of Monopolies authorized patents
only for the “working or making of any manner of new
manufactures within this realm.” Id. at 45a (Dyk, J.,
concurring) (quoting statute). That provision left no
room in English practice for patents on methods of orga-
nizing human activity. Id . at 46a (Dyk, J., concurring).
To the extent that process patents were granted in
England in the late eighteenth century—the permissi-
bility of process patents under the Statute of Monopolies
20
was an unsettled question, see Pet. App. 45a-50a (Dyk,
J., concurring)—they overwhelmingly involved manufac-
turing processes. For example, James Watt received a
patent in 1769 for a method of reducing the amount of
steam required to operate a steam engine. See gener-
ally Boulton v. Bull, 126 Eng. Rep. 651 (C.P. 1795). An
index of contemporaneous English patents later pub-
lished by Bennet Woodcroft, a prominent figure in Eng-
lish patent law, included a wide variety of manufacturing
methods but essentially no examples of patents on busi-
ness strategies or other human activities.5 See generally
Bennet Woodcroft, Alphabetical Index of Patentees of
Inventions, from March 2, 1617 (14 James I) to October
1, 1852 (16 Victoriae) (2d ed. 1857) (Woodcroft); Pet.
App. 46a-47a (Dyk, J., concurring) (citing Woodcroft);
see also Malla Pollack, The Multiple Unconstitutional-
ity of Business Method Patents: Common Sense, Con-
gressional Consideration, and Constitutional History,
28 Rutgers Computer & Tech. L.J. 61, 95-96 (2002) (Pol-
lack).
5 Patents may occasionally have been granted on non-technological
processes. For example, a few patents were granted for lotteries, but
it is unclear whether these patents simply authorized the conduct of the
lotteries. See Pollack 94-95 & n.126. The primary known example of a
process patent directed to a human activity appears to have been a
patent granted in England in 1778 to John Knox for a “[p]lan for assur-
ances on lives of persons from 10 to 80 years of age.” Woodcroft 324;
see Pollack 95; Pet. App. 53a (Dyk, J., concurring). As the concurring
judges below noted, however, “[t]here is no indication that Knox’s
patent was ever enforced or its validity tested, or that this example led
to other patents or efforts to patent similar activities.” Id. at 54a (Dyk,
J., concurring). The existence of so few patents of this kind in the an-
nals of English patent law strongly suggests that such matters were
considered unpatentable.
21
The English antecedents of early American patent
law thus did not suggest that methods of organizing hu-
man activity were eligible for patent protection. See
Pet. App. 45a-50a (Dyk, J., concurring). Nor is there
any evidence that the drafters of the 1790 Act, in using
the phrase “useful arts,” intended to depart from Eng-
lish practice by extending patent protection to monopo-
lies for such methods, unconnected to any machine or
manufacturing process. To be sure, as petitioners em-
phasize (Br. 47-49), the Framers of the Constitution
gave American patent law a broader scope than English
law by adopting the term “useful arts” rather than
“manufacture,” the limitation used in the English Stat-
ute of Monopolies. But this formulation was likely de-
signed principally to eliminate doubt as to the patent-
ability of technological and industrial processes—a ques-
tion that was unsettled in English law in 1789. See Pet.
App. 45a-46a (Dyk, J., concurring).
Indeed, the opposition of the drafters of early Ameri-
can patent statutes to English business monopolies
would have made them reluctant to extend patents to
methods of organizing human economic and social activ-
ity, unconnected to any technology. The federal patent
laws were “written against the backdrop of the prac-
tices—eventually curtailed by the Statute of Monopo-
lies—of the Crown in granting monopolies to court fa-
vorites in goods or businesses.” Graham, 383 U.S. at 5.
These monopolies vested grantees with the sole right to
supervise or engage in a trade. See Edward C. Walter-
scheid, The Early Evolution of the United States Patent
Law: Antecedents (Part 2), 76 J. Pat. & Trademark Off.
Soc’y 849, 863-864 (1994). Like many of the Framers of
the Constitution, Thomas Jefferson was deeply opposed
to government-granted trade monopolies—so much so
22
that he only slowly came to support the idea of limited
protection for the creators of inventions. Bonito Boats,
489 U.S. at 147; see P.J. Federico, Operation of the Pat-
ent Act of 1790, 18 J. Pat. Off. Soc’y 237, 239-242 (1936).
It is difficult to imagine that Jefferson, who once ex-
pressed disappointment at the lack of a constitutional
prohibition on monopolies, see id. at 240, would have
understood the 1793 Patent Act (which he helped to
draft) to authorize patents for non-industrial, non-tech-
nological processes, including business strategies and
financial schemes as such. Patents on these items would
simply have seemed too close to granting monopolies
over the practice of business itself.6 See In re Yuan, 188
F.2d 377, 380 (C.C.P.A. 1951) (the Framers “were famil-
iar with the long struggle over monopolies so prominent
in English history, where exclusive rights to engage
even in ordinary business activities were granted so fre-
quently by the Crown”).
The historical record of eighteenth-century Ameri-
can patent practice reveals no pattern of granting pat-
ents for methods of organizing human activity, divorced
from any kind of technology. No human-activity patents
6 Similarly, had the Framers understood patent protection to con-
template broad monopolies on methods directed to business-related
techniques and other human activities, untethered to any technological
or industrial innovation, the inclusion of the Patent Clause in the Con-
stitution likely would have been hotly debated. But the Clause was
adopted without debate or dissent. See Edward C. Walterscheid, To
Promote the Progress of Science and Useful Arts: The Background
and Origin of the Intellectual Property Clause of the United States
Constitution, 2 J. Intell. Prop. L. 1, 26 & n.88 (1994) (citing 2 The
Records of the Federal Convention of 1787 at 509-510 (Max Farrand
ed., 1966)). Given the Framers’ suspicion of government-sanctioned
business monopolies, that silence is telling. See id. at 37-38; Pollack
111-112.
23
were granted by the first Congress itself or approved by
the “Patent Board” under the Patent Act of 1790, of
which Jefferson was a member and the de facto adminis-
trator.7 See Pet. App. 54a-55a (Dyk, J., concurring);
Edward C. Walterscheid, To Promote the Progress of
Useful Arts: American Patent Law and Administra-
tion, 1798-1836, at 173-178 (1998) (Progress of Useful
Arts (1998)); Pollack 107-108. Between 1793 and 1836,
patents were granted based on registration rather than
examination, and thus are not reflective of any system-
atic interpretation of patent-eligible subject matter, see
Progress of Useful Arts (1998), at 195, 243; but after
1836, examples of human-activity patents are similarly
rare.8 See Pet. App. 54a-55a & n.18 (Dyk, J., concur-
ring).
Thus, patents directed to the organization of human
activities, including novel business and financial tech-
niques, were rarely if ever issued during the eighteenth
7 Although petitioners rely (Br. 50-51) on a 1789 application for
“spheres, hemispheres, maps, charts, and tables, on * * * principles of
magnetism,” in which the inventor asserted that he had discovered
methods of using magnetism to determine longitude, that application
sought the exclusive right to sell products made using those methods.
See P.J. Federico, The First Patent Act, 14 J. Pat. Off. Soc’y 237, 239-
240 (1932); Progress of Useful Arts (1998), at 82.
8 In the court of appeals, petitioners and their amici relied on an 1840
patent involving lottery schemes. As Judge Dyk noted in his concur-
ring opinion, however, that patent involved a method for manufacturing
lottery tickets, and similar examples—including an “insurance policy”
written on two cards— also involved either manufacturing processes or
articles. See Pet. App. 54a-55a & n.18 (Dyk, J., concurring). Although
occasional patents may have been granted for claimed inventions direc-
ted to non-technological financial methods, cf. Double Rock Amicus Br.
30-32, there is no indication that such patents were the norm, or that
they were ever tested through litigation or licensing.
24
and nineteenth centuries. That absence is especially
telling because entrepreneurial enterprises, and with
them myriad financial innovations, flourished in the
early republic and thereafter. See Pollack 105-106; Pet.
App. 53a-54a (Dyk, J., concurring). Among these were
new methods of risk management, and in particular, new
methods for providing insurance against various risks.
See Eric Wertheimer, Underwriting: The Poetics of
Insurance in America, 1722-1872, at 3-6 (Stanford Uni-
versity Press 2006). In view of the explosion of com-
merce in the late eighteenth century and the continuing
evolution and creation of financial and risk-management
methods over the next century, the lack of any corre-
sponding wave of patents on methods of commerce, in-
surance, and other human activities suggests that sub-
jects not related to any technological or industrial pro-
cess were simply not considered the province of patent
law.c. In accordance with the established understanding
of the term “useful art” as limited to technological pro-
cesses, courts prior to 1952 rejected efforts to obtain or
enforce patents on an “art” of organizing human activity
or business, when that art was unconnected to any spe-
cific apparatus or industrial process. See, e.g., Hotel
Sec. Checking Co. v. Lorraine Co., 160 F. 467, 469 (2d
Cir. 1908) (“A system of transacting business discon-
nected from the means for carrying out the system is
not, within the most liberal interpretation of the term,
an art.”); see also, e.g., In re Patton, 127 F.2d 324, 327-
328 (C.C.P.A. 1942); see Pet. App. 108a-109a (Mayer, J.,
dissenting).
This Court repeatedly expressed a similar under-
standing. In 1876, the Court defined “an art” “[i]n the
language of the patent law” as “an act, or a series of
25
acts, performed upon the subject-matter to be trans-
formed and reduced to a different state or thing.” Coch-
rane, 94 U.S. at 788. The Court subsequently clarified
that the operation of particular machines and the gener-
ation of useful mechanical results were also patent-eligi-
ble processes, quoting a treatise for the proposition that
“an art cannot be practised except by means of physical
agents, through which the force is brought in contact
with or directed toward its object.” See Expanded
Metal Co. v. Bradford, 214 U.S. 366, 383, 385-386 (1909)
(quoting 1 William C. Robinson, The Law of Patents for
Useful Inventions § 167, at 250 (1890)); The Telephone
Cases, 126 U.S. at 533-537 (1888). The Court’s early in-
terpretation of the phrase “new and useful art” in the
patent statute thus reflected its understanding that
“art” had a practical, technological scope.
d. Against the backdrop of this settled understand-
ing, Congress recodified the patent laws in 1952, substi-
tuting the word “process” for “art” in Section 101. Be-
cause “[a]nalysis of the eligibility of a claim of patent
protection for a ‘process’ did not change with the addi-
tion of that term to § 101,” Diehr, 450 U.S. at 184, Sec-
tion 101 in its current form should be read to incorpo-
rate the established understanding, reflected in histori-
cal practices and in this Court’s decisions, that processes
lacking any industrial or technological application are
ineligible for patent protection. See id. at 182-184; see
also, e.g., Pfaff v. Wells Elecs., Inc., 525 U.S. 55, 63
(1998) (patent system is designed to encourage “the cre-
ation and the public disclosure of new and useful ad-
vances in technology”).
26
2. The statutory context confirms that only technologi-
cal and industrial methods are patent-eligible “pro-
cesses”
The other categories of patent-eligible subject mat-
ter listed in Section 101 confirm that the term “process”
does not encompass non-technological methods of orga-
nizing human activity. Under the “commonsense” canon
of noscitur a sociis, “a word is given more precise con-
tent by the neighboring words with which it is associ-
ated.” United States v. Williams, 128 S. Ct. 1830, 1839
(2008) (citing Jarecki v. G.D. Searle & Co., 367 U.S. 303,
307 (1961)). This interpretive tool, the Court has ob-
served, “is often wisely applied where a word is capable
of many meanings in order to avoid the giving of unin-
tended breadth to the Acts of Congress.” Jarecki, 367
U.S. at 307.
The other three statutory categories of patent-eligi-
ble subject matter identified in Section 101—“machine,
manufacture, or composition of matter”—all “are things
made by man[,] and involve technology.” Pet. App.
194a.9 The focus of Section 101 as a whole thus reinforc-
es the understanding that the term “process” is limited
to technological and industrial methods and excludes
fundamentally dissimilar methods directed to such hu-
man activities as sports moves, marketing techniques,
9 See Corning, 56 U.S. (15 How.) at 267 (a machine is a “mechanical
device * * * to perform some function and produce a certain effect or
result”); American Fruit Growers, 283 U.S. at 11 (“manufacture”
means “anything made for use from raw or prepared materials”);
Chakrabarty, 447 U.S. at 308 (“composition of matter” means “all com-
positions of two or more substances and . . . all composite articles”
that can result from, among other things, “chemical union” or “mechan-
ical mixture” (quoting Shell Dev. Co., 149 F. Supp. at 280)).
27
and estate planning strategies.10 Petitioners’ construc-
tion of “process” as any series of steps culminating in a
useful result thus would unmoor the term from the other
categories listed in Section 101.
Had Congress intended patent-eligibility to be so
open-ended, it could have provided simply: “Whoever
makes any new and useful invention or discovery, or any
improvement thereof, may obtain a patent therefor, sub-
ject to the conditions and requirements of this title.”
Congress chose instead to identify discrete categories of
patent-eligible subject matter that, while broad, share
a technological focus. As Judge Giles Rich, one of the
principal authors of the 1952 Patent Act, observed:
Invaluable though it may be to individuals, the pub-
lic, and national defense, the invention of a more ef-
fective organization of the materials in, and the tech-
niques of teaching a course in physics, chemistry, or
Russian is not a patentable invention because it is
outside of the enumerated categories of “process,
machine, manufacture, or composition of matter, or
any new and useful improvement thereof.” Also out-
side that group is one of the greatest inventions of
our times, the diaper service.
Giles S. Rich, Principles of Patentability, 28 Geo. Wash.
L. Rev. 393, 393-394 (1960).
10 This textual inference is underscored by the definition of “process”
in the Patent Act, which states that “process” “includes a new use of a
known process, machine, manufacture, composition of matter, or ma-
terial.” 35 U.S.C. 100(b). This definition suggests the kinds of proces-
ses that Congress expected would be eligible for patent protection and
implies that Congress did not intend the same definition to embrace
fundamentally dissimilar subject matter.
28
b. In arguing that the term “process” extends be-
yond industrial and technological methods, petitioners
and numerous amici contend that Congress intended the
1952 Patent Act to encompass “anything under the sun
that is made by man.” Pet. Br. 19, 27 (quoting Chakra-
barty, 447 U.S. at 309, and S. Rep. No. 1979, 82d Cong.,
2d Sess. 5 (1952); H.R. Rep. No. 1923, 82d Cong., 2d
Sess. 6 (1952)). But as several members of the court
below observed (Pet. App. 58a (Dyk, J., concurring); id.
at 110a-111a (Mayer, J., dissenting); id . at 156a-157a &
n.5 (Board)), the cited legislative history, when read in
context, cannot bear the weight that petitioners place on
it. The House and Senate committee reports state:
A person may have “invented” a machine or a manu-
facture, which may include anything under the sun
that is made by man, but it is not necessarily
patentable under [S]ection 101 unless the conditions
of the title are fulfilled.
S. Rep. No. 1979, supra, at 5; H.R. Rep. No. 1923, supra,
at 6. But as the context makes clear, the phrase “any-
thing under the sun” in these reports refers not to pa-
tentable processes but rather to “machines” and “manu-
factures.” The reports provide no support for petition-
ers’ contention that the term “process” encompasses
every useful series of steps “conceived by man.” Pet.
App. 157a; id . at 58a (Dyk, J., concurring) (“[The state-
ment] refers to things ‘made by man,’ not to methods of
organizing human activity.”). Indeed, the Court in
Diehr acknowledged the reports’ reference to “anything
under the sun that is made by man,” 450 U.S. at 182, just
before concluding that “[i]ndustrial processes such as”
the rubber-curing method at issue in that case “are the
29
types which have historically been eligible” for patent
protection, id. at 184.
C. A Patent-eligible “Process” Under Section 101 Is One
That Concerns The Operation Of A Particular Machine
Or Apparatus Or Effects A Transformation Of Matter
Into A Different State Or Thing
Construed in accordance with its history and context,
the term “process” in Section 101 encompasses indus-
trial and technological methods, broadly conceived, but
does not extend to methods of organizing human activ-
ity. In identifying processes that “involve technology”
in the relevant sense, this Court has focused on whether
a patent applicant’s claimed method either (1) concerns
the operation of a particular machine or apparatus or (2)
has the effect of transforming matter. Pet. App. 194a;
see, e.g., Diehr, 450 U.S. at 184; pp. 13-15, supra. That
definition of “process” provides an effective means of
differentiating between the industrial and technological
methods that have historically been eligible for patent
protection, and human-activity methods that have not
traditionally been viewed as patent-eligible. The
machine-or-transformation definition, in other words,
provides a framework for analyzing patent claims in
every extant field of technology and industry.
1. This Court has consistently used the machine-or-
transformation test to identify patent-eligible pro-
cesses
More than a century ago, this Court recognized in
Cochrane that processes eligible for patent protection
involve the manipulation, treatment, or transformation
of matter. Cochrane concerned a patent for an improved
method of manufacturing superfine flour. In rejecting
the argument that a process patent is limited to the spe-
30
cific instruments employed by the inventor to perform
the process, the Court explained that “[a] process is a
mode of treatment of certain materials to produce a
given result. It is an act, or a series of acts, performed
upon the subject-matter to be transformed and reduced
to a different state or thing.” 94 U.S. at 788. The Court
subsequently made clear that, under Cochrane and later
cases, a process is also patent-eligible if it “involv[es]
mechanical operations,” including the operation of a ma-
chine to achieve a useful result. See Expanded Metal,
214 U.S. at 383-386; The Telephone Cases, 126 U.S. at
533-537.
In later decisions, the Court treated the definition of
a “patentable process” explicated in Cochrane and re-
lated cases as definitive. See, e.g., Holland Furniture
Co. v. Perkins Glue Co., 277 U.S. 245, 255 (1928) (“A
patentable process is a method of treatment of certain
materials to produce a particular result or product.”);
Waxham v. Smith, 294 U.S. 20, 22 (1935) (“By the use of
materials in a particular manner he secured the perfor-
mance of the function by a means which had never oc-
curred in nature, and had not been anticipated by the
prior art; this is a patentable method or process.”); Ex-
panded Metal Co., 214 U.S. at 383-384; Risdon Iron &
Locomotive Works v. Medart, 158 U.S. 68, 75-76 (1895).
The courts of appeals likewise understood Cochrane and
its progeny to define the circumstances in which pro-
cesses were eligible for patent protection. Pet. App.
57a; see, e.g., In re Yuan, 188 F.2d at 381-382; Cowles
Co. v. Frost-White Paper Mills, 174 F.2d 868, 870 & n.6
(2d Cir. 1949) (L. Hand, J.); P.E. Sharpless Co. v. Craw-
ford Farms, Inc., 287 F. 655, 658-659 (2d Cir. 1923);
Miller v. Electro Bleaching Gas Co., 276 F. 379, 381 (8th
Cir. 1921), cert. denied, 257 U.S. 660 (1922); Chicago
31
Sugar-Refining Co. v. Charles Pope Glucose Co., 84 F.
977, 982 (7th Cir. 1898).11
The Court’s more recent decisions under the 1952
Patent Act uniformly follow, and build on, the definition
of patent-eligible processes developed in Cochrane and
its progeny. In Benson, which held unpatentable a
method of converting binary-coded decimal numerals
into pure binary numerals, the Court quoted at length
from Cochrane and concluded that “[t]ransformation
and reduction of an article ‘to a different state or thing’
is the clue to the patentability of a process claim that
does not include particular machines.” Benson, 409 U.S.
at 70 (citation omitted). “So it is,” the Court continued,
that a process for manufacturing fatty acids and glycer-
ine using high temperature water and pressure was held
patent-eligible in Tilghman v. Proctor, 102 U.S. 707
(1881). Benson, 409 U.S. at 70 (citing Tilghman, 102
U.S. at 721). Similarly, in Flook, the Court recognized
that “[a]n argument can be made * * * that this Court
has only recognized a process as within the statutory
definition when it either was tied to a particular appara-
tus or operated to change materials to a ‘different state
or thing.’ ” See Flook, 437 U.S. at 588 n.9 (citing
Cochrane, 94 U.S. at 788).
11 Although petitioners do not acknowledge the Court’s definition of
“process” in Cochrane, cf. Br. 23, Judge Newman urged in dissent be-
low that Cochrane did not purport to set out the Court’s first statement
of the definition of a patent-eligible process, but intended only to illus-
trate the difference between process and machine patents. Pet. App.
76a-78a (Newman, J., dissenting). Amici likewise would distinguish
Cochrane and related cases as outdated and illustrative only. E.g., 20
Law and Business Professors Amicus Br. 6. These objections are refu-
ted by the Court’s treatment of Cochrane in subsequent cases as estab-
lishing a controlling definition of “process,” and the courts of appeals’
adherence to it.
32
To be sure, in both Benson and Flook, the Court de-
clined to decide the precise outer boundaries of the uni-
verse of patent-eligible processes. Rather, the Court
“assume[d] that a valid process patent may issue even if
it does not meet one of these qualifications of our earlier
precedents.” Flook, 437 U.S. at 588 n.9; see Benson, 409
U.S. at 71. The Court found it unnecessary to decide
whether a patent could ever be issued for a process that
did not involve the operation of a machine or transfor-
mation of matter because it rejected the claims on other
grounds—namely, that the claimed inventions fell within
the exclusion for abstract ideas and mathematical for-
mulae. See Flook, 437 U.S. at 594-595; Benson, 409 U.S.
at 67 (“abstract intellectual concepts are not patent-
able,” because they “are the basic tools of scientific and
technological work”). The Court did not cast doubt on
the status of the machine-or-transformation test as the
generally applicable standard, much less retreat from its
longstanding emphasis on the technological or industrial
nature of patent-eligible processes.
In its most recent decision construing the term “pro-
cess” in Section 101, the Court reiterated (this time
without qualification) its previous statement that, under
Cochrane and later cases, “[t]ransformation and reduc-
tion of an article ‘to a different state or thing’ is the clue
to the patentability of a process claim that does not in-
clude particular machines.” Diehr, 450 U.S. at 184 (quo-
ting Benson, 409 U.S. at 70). Describing Cochrane as
“defining the nature of a patentable process,” id. at 182,
the Court also quoted at length from decisions describ-
ing as patent-eligible “manufacturing process[es],” id. at
184 n.8 (quoting Tilghman, 102 U.S. at 722), and other
technological inventions, id. at 182-183 & n.7 (quoting
Corning, 56 U.S. (15 How.) at 267-268). The Court then
33
concluded that the rubber-curing process at issue was
patent-eligible because it “involve[d] the transformation
of an article, in this case raw, uncured synthetic rubber,
into a different state or thing.”12 Id . at 184. “Indus-
trial processes such as this,” the Court noted, “are the
types which have historically been eligible to receive the
protection of our patent laws.” Ibid. Thus, the Court’s
most recent exposition of the definition of “process” re-
affirmed its longstanding reliance on the principle that
a patent-eligible process should concern a machine or
effect a transformation of matter.
2. A process is patent-eligible if it concerns the opera-
tion of a machine or effects a transformation of mat-
ter into a different state or thing
Taken together, this Court’s decisions from Coch-
rane through Diehr establish a controlling definition of
the term “process” in Section 101 that is appropriately
broad but bounded and comports with the historical un-
derstanding of the scope of the patent laws. A process
may be eligible for patent protection if, taken as a whole,
it concerns the operation of a particular machine or ap-
paratus or effects a transformation of matter into a dif-
ferent state or thing. Diehr, 450 U.S. at 184; Cochrane,
94 U.S. at 788; see Pet. App. 12a-13a. By excluding
12 Petitioners attempt to downplay Diehr’s significance by pointing
(Br. 21) to the Court’s parenthetical use of the signal “e.g.” in the state-
ment that “when a claim containing a mathematical formula * * * is
performing a function which the patent laws were designed to protect
(e.g., transforming or reducing an article to a different state or thing),
then the claim satisfies the requirements of § 101.” 450 U.S. at 192.
The signal “e.g.” simply reflects the Court’s omission from the paren-
thetical of the other class of process claims: those that concern the
operation of a particular machine or apparatus. See Expanded Metal
Co., 214 U.S. at 383-386.
34
methods that are not directed to technological or indus-
trial advances, that test ensures that a claimed process
is the “kind of ‘discover[y]’ that the statute was enacted
to protect.” Flook, 437 U.S. at 593. As the Board ob-
served in this case, a method that falls within this defini-
tion “involve[s] technology” and therefore is “a ‘process’
under § 101.” Pet. App. 194a.
The eligibility of a process for patent protection un-
der Section 101 should be judged by a two-part inquiry.
The first question is whether the claimed process, taken
as a whole, concerns the operation of a particular ma-
chine or apparatus or effects a transformation of matter
into a different state or thing. In considering this ques-
tion, the caveat that a process claim must be considered
“as a whole,” Diehr, 450 U.S. at 192, warrants particular
emphasis. For instance, a step that involves a machine
will not suffice to bring an otherwise ineligible process
within the ambit of Section 101 if that step is merely
insignificant extra-solution activity—i.e., activity that is
not central to the purpose of the method, such as the
step of downloading search results on a computer in the
context of a method for evaluating and ranking search
results. See id. at 191-192; Flook, 437 U.S. at 590. Like-
wise insufficient to bring a method within the ambit of
the machine-or-transformation definition are mere field-
of-use restrictions—for example, limiting a generic
method of marketing to the field of marketing comput-
ers or software. Diehr, 450 U.S. at 191; Flook, 437 U.S.
at 590.
Second, because laws of thermodynamics, mathemat-
ical formulas, abstract ideas, and other phenomena of
nature are “part of the storehouse of knowledge of all
men * * * free to all men and reserved exclusively to
none,” Funk Bros. Seed Co. v. Kalo Inoculant Co., 333
35
U.S. 127, 130 (1948), every claimed process must be fur-
ther examined to ensure that granting the patent would
not in practical effect “wholly pre-empt” the public’s
access to the “basic tools of scientific and technological
work.” Benson, 409 U.S. at 72, 67. Even a process that
otherwise satisfies the criteria for patent-eligibility (e.g.,
because it concerns the use of a machine) may pose that
risk, as the computer-assisted method of calculation in
Benson demonstrates. See id. at 72 (claimed method “in
practical effect would be a patent on the algorithm it-
self ”). A second inquiry is therefore required to deter-
mine whether the claim preempts all applications of the
fundamental principle, rather than simply claiming the
use of the fundamental principle “in conjunction with all
of the other steps in [the] claimed process.” Diehr, 450
U.S. at 187.13
In Diehr, this Court engaged in the two-step analysis
described above. It first examined whether the claimed
process of curing rubber constituted a “process” under
Cochrane and related cases, concluding that the “claims
involve the transformation of an article * * * into a
different state or thing.” 450 U.S. at 184. The Court
then considered whether the claimed process was none-
theless unpatentable for its use of a mathematical for-
mula. The Court concluded that the exception to
patentability did not apply because, although respon-
dents’ “process admittedly employ[ed] a well-known
13 With respect to the preemption portion of the analysis, the Court
in Flook had previously suggested that a claimed method that applied
an abstract idea could be patent-eligible only if it contained patent-
eligible subject matter apart from the abstract principle. 437 U.S. at
593-594 & n.16. In Diehr, however, the Court clarified that a process
should be considered as a whole. See 450 U.S. at 192.
36
mathematical equation,” it did “not seek to pre-empt the
use of that equation.” Id . at 187; see id. at 185-188.14
3. The machine-or-transformation test accommodates
evolving technology
For more than a century, the machine-or-transfor-
mation test for identifying a patent-eligible “process”
has provided a broad and technology-neutral framework
for analyzing process claims related to constantly evolv-
ing technology. Only non-technological processes di-
rected to the organization of human activity are categor-
ically excluded by the machine-or-transformation stan-
dard. No extant field of technology or industry—includ-
ing software and diagnostic methods, the two fields ad-
dressed by numerous amici—is wholly excluded from
patent protection under that approach; rather, the stan-
dard provides a framework for analyzing individual
14 The majority opinion below could be read to collapse the machine-
or-transformation inquiry with the preemption analysis, implying that
any claimed process that satisfies the machine-or-transformation test
necessarily will comport with the settled rule against patenting, for ex-
ample, mathematical formulas and phenomena of nature; and con-
versely, that any claimed method that fails the machine-or-transforma-
tion test necessarily preempts a fundamental principle. Pet. App. 12a-
13a. That approach appears to conflate two distinct inquiries. A meth-
od that concerns the operation of a machine—such as the method at
issue in Benson—can still be subject to a judicial exception. And a
method that does not involve a machine or transformation—and would
therefore be ineligible under Section 101—may not suffer from the in-
dependent problem of preempting a fundamental principle. For ex-
ample, a multi-step method for proposing marriage might not preempt
the abstract concept of proposing marriage; but it is still directed to
human activity and therefore is not a “process” under Section 101.
37
claimed processes to determine whether they involve
technological or industrial methods.15
a. Petitioners and amici contend that reaffirming
the machine-or-transformation test will impair the
“knowledge economy” by foreclosing patent protection
for today’s “electronic and photonic technologies” and
other processes, particularly software, “that handle data
and information in novel ways.” Pet. Br. 38; see gener-
ally Business Software Alliance Amicus Br.; Int’l Busi-
ness Machines Corp. Amicus Br. That concern is mis-
placed.
As an initial matter, this case does not present any
question as to the application of the machine-or-trans-
formation test to software or yet more novel future
forms of industrial or technological processes. As the
majority below noted, petitioners do not seek to patent
their method of hedging risk in the form of software or
any other new information technology. Pet. App. 25a
n.23. The only issue presented in this case is whether
risk-management techniques, legal methods, and other
modes of organizing purely human activity, wholly apart
from any form of technology, are “process[es]” within
the meaning of Section 101.
In any event, the machine-or-transformation test
contemplates that many forms of “software” inventions
are patent-eligible. As with many types of technology,
the patent-eligibility of software cannot be resolved as
a categorical matter. Rather, the eligibility of a claimed
15 As the court below recognized, if “future developments in technol-
ogy * * * present difficult challenges to the machine-or-transforma-
tion” definition, the inquiry could be modified. Pet. App. 17a. At pres-
ent, however, no such “departure” is necessary. Ibid.
38
software invention depends on the content of that inven-
tion and the form in which it is sought to be patented.16
As the Board noted below, the machine-or-transfor-
mation definition may readily encompass most software
claims because such claims could be said to concern the
use of a machine (i.e., the computer itself ) or involve a
transformation of matter (i.e., the writing and re-writing
of data, represented by magnetic changes in the sub-
strate of a hard disk or the altered energy state of tran-
sistors in a memory chip). Pet. App. 177a-178a. This
conception of the machine-or-transformation test is re-
flected in non-binding interim examination instructions
issued by the PTO in August 2009. See United States
PTO, Interim Examination Instructions for Evaluating
Subject Matter Eligibility Under 35 U.S.C. § 101 (Aug.
24, 2009) (Interim Instructions).17 The Interim Instruc-
tions state that “computer implemented processes” are
often disclosed as connected to a machine, i.e., a general
purpose computer. Id. at 6. Such a computer, “when
programmed to perform the process steps” so that it
performs the specific function contemplated by the pro-
cess, “may be sufficiently ‘particular’ ” for purposes of
16 As this Court recently observed in Microsoft Corp. v. AT&T Corp.,
550 U.S. 437 (2007), the term “software” refers generally to the “set of
instructions, known as code, that directs a computer to perform speci-
fied functions or operations.” Id. at 447 (citation omitted). A claim for
a software invention can be drafted in several ways, including as the
“process” of accomplishing a particular task through the use of a com-
puter; or, as in Microsoft, as a “machine” specially programmed to ac-
complish the task in question. See id. at 446.
17 The Interim Instructions, which “do not constitute substantive
rulemaking” (Interim Instructions 1), are designed to aid examiners in
considering eligibility questions in accordance with the court of appeals’
statement of the machine-or-transformation test, pending this Court’s
decision in this case.
39
the machine-or-transformation test. Ibid.; cf. In re
Alappat, 33 F.3d 1526, 1545 (Fed. Cir. 1994) (en banc)
(“[A] general purpose computer in effect becomes a spe-
cial purpose computer once it is programmed to perform
particular functions pursuant to instructions from pro-
gram software.”). In addition, “transformation of elec-
tronic data has been found when the nature of the data
has been changed such that it has a different function or
is suitable for a different use.” Interim Instructions 6.18
To be sure, questions involving the application of the
machine-or-transformation definition to software claims
may arise in the future. The patentability of software is
subject to established limits. For example, software
code that is claimed by itself, uncoupled from any stor-
age medium or computer, may be nothing more than “an
idea without physical embodiment,” and therefore would
not be patent-eligible. See Microsoft Corp., 550 U.S. at
449.19 But because petitioners’ claimed innovation is far
18 A claimant may not bring a process directed to a human activity
within the machine-or-transformation definition simply by reciting that
the process uses a computer to perform insignificant extra-solution ac-
tivity (e.g., data storage, or transmission and receipt of data over a net-
work). See Interim Instructions 7-8. For instance, a method composed
of steps of evaluating pieces of information by sorting the information
and ranking each piece of information based on certain criteria does not
become a machine-oriented test simply by specifying that the person
performing the process shall initially obtain the relevant information by
downloading it using a computer. Ibid.
19 In addition, patent claims for software processes that, considered
as a whole, would preempt the public’s access to basic mathematical
principles are not patent-eligible. See Benson, 409 U.S. at 71-72. And
even if claimed software is patent-eligible under Section 101, it may be
unpatentable because it was “obvious” at the time of invention, see 35
U.S.C. 103; Dann v. Johnston, 425 U.S. 219, 227-228 (1976), or for other
reasons, see 35 U.S.C. 102, 112. Those restrictions, however, would ap-
ply regardless of how the term “process” in Section 101 is defined.
40
removed from the field of software technology, this case
would provide an unsuitable vehicle for clarifying the
circumstances in which software is and is not patent-
eligible. And this Court’s reaffirmation of the machine-
or-transformation test for identifying patent-eligible
“processes,” in a case involving only a claim for a non-
technological method of hedging financial risk, would
not materially affect the circumstances in which patents
for software may appropriately be issued.
The same is true of medical diagnostic techniques,
whose eligibility for patent protection is also discussed
by several amici. See, e.g., Novartis Corp. Amicus Br.
Methods of diagnosing a condition by testing, or assay-
ing, for a characteristic that correlates to the condition
may be claimed in any number of ways, and therefore
patentability cannot be determined as a categorical mat-
ter. If the claimed process effects a transformation of
matter in a manner that is more than insignificant extra-
solution activity, the method may satisfy Section 101.
See, e.g., Prometheus Labs., Inc. v. Mayo Collaborative
Servs., No. 2008-1403, 2009 WL 2950232, at *8-*10 (Fed.
Cir. Sept. 16, 2009). For example, the PTO has gener-
ally treated a transformation of blood occurring in the
assaying step as involving a sufficient transformation for
purposes of the machine-or-transformation test.
b. Dicta in the Federal Circuit’s decision in State
Street Bank & Trust Co. v. Signature Financial Group,
Inc., 149 F.3d 1368 (1998), cert. denied, 525 U.S. 1093
(1999), could be read to suggest that any series of steps
that yields a “useful, concrete, and tangible result” is
patent-eligible. See Pet. App. 22a-24a. In the years fol-
lowing that decision, applicants sought to patent non-
technological methods for a wide variety of human social
activities and endeavors, including not only risk-man-
41
agement and legal methods (sometimes employing soft-
ware) but also “methods of mediation, dating, [and]
physical sports moves.” Id. at 151a. During that period,
the PTO sometimes issued patents for marketing strate-
gies, tax avoidance and estate planning methods, meth-
ods of playing poker, and even a method of conducting
a mock jury exercise.20 See also id. at 119a (Mayer, J.,
dissenting) (additional examples).21
Because those methods do not concern a particular
machine or effect a transformation of matter, they are
not patent-eligible “processes” under a proper under-
standing of Section 101. Petitioners are wrong, how-
ever, in suggesting that reaffirmation of the machine-or-
transformation test would “disrupt the settled expecta-
tions of the inventing community.” Pet. Br. 39 (quoting
Festo Corp. v. Shoketsu Kinzoku Kogyo Kabushiki Co.,
535 U.S. 722, 739 (2002)). Although patents inconsistent
with the machine-or-transformation test have been is-
sued during the decade since State Street, this Court has
20 E.g., U.S. Patent No. 6,457,317 (“Method of Selling Merchandise on
a Golf Course”); U.S. Patent No. 6,292,788 (“Methods and Investment
Instruments for Performing Tax-Deferred Real Estate Exchanges”);
U.S. Patent No. 6,567,790 (“Establishing and Managing Grantor
Retained Annuity Trusts Funded by Nonqualified Stock Options”); U.S.
Patent No. 6,206,374 (“Methods of Playing Poker Games”); U.S. Patent
No. 6,070,873 (“Card Game and Method of Playing Card Game”); U.S.
Patent No. 6,607,389 (“Systems and Methods for Making Jury Selection
Determinations”).
21 The holding of State Street was simply that no “business methods”
exception to patent-eligibility exists—i.e., that if an invention is other-
wise encompassed by Section 101 (e.g., as a “machine” or “process”), it
is not rendered ineligible for patent protection because its utility lies in
the realm of business. During the years after State Street, however, the
PTO sometimes issued patents that appear to have been premised on
a broader view of the decision’s import.
42
not cast doubt on the applicability of that test. Nor has
this Court ever suggested that claimed methods directed
to organizing human activity, untethered to technology,
are patent-eligible. See, e.g., Benson, 409 U.S. at 68-71
(canvassing history of processes found patent-eligible).
Abandonment of that century-old approach would con-
stitute a far more significant deviation from historical
practice than would a disavowal of the more extreme
applications of the State Street decision during the past
decade.
Petitioners contend (Br. 38-40) that a decision fore-
closing patent protection for processes directed to
purely human activity, including business and financial
processes, would have adverse economic effects. Such
arguments cannot be evaluated, however, without refer-
ence to the other legal doctrines that protect non-tech-
nological commercial activities. These doctrines—inclu-
ding antitrust, trade secret, trade dress, and trademark
law, as well as common-law principles of contract, tort,
and unfair competition—were developed specifically to
regulate the economic and legal rights of businesses
engaged in competition, and they reflect careful consid-
eration of the degree to which business properties
should be protected and commercial intercourse should
be encouraged.22 Reaffirming that business-related
methods untethered to technology are not “process[es]”
under Section 101 would thus leave these patent-ineligi-
ble business innovations with substantial protection—as
has been true throughout the history of this nation’s
commercial development.
22 Software is additionally protected by copyright law. See Interna-
tional Business Machines Amicus Br. 24 (copyright law provides “im-
portant protections” for the expression involved in computer software).
43
c. Petitioners and amici contend that the Federal
Circuit’s adoption of the machine-or-transformation def-
inition of “process” reflects that court’s alleged tendency
to utilize impermissibly rigid approaches in an area of
the law that should be characterized by flexibility. Peti-
tioners analogize this case to KSR International Co. v.
Teleflex Inc., 550 U.S. 398 (2007), eBay Inc. v. MercEx-
change, L.L.C., 547 U.S. 388 (2006), and Festo Corp.,
supra, in which this Court corrected what petitioners
regard as similar errors. Pet. Br. 27-28; 20 Law and
Business Professors Amicus Br. 15 & n.8. That analogy
is flawed. Section 101 is fundamentally unlike the non-
obviousness requirement in 35 U.S.C. 103, the grant of
equity jurisdiction in 35 U.S.C. 283, or the judicial doc-
trine of equivalents. In each of the decisions on which
petitioners rely, this Court rejected a rigid general rule
adopted by the Federal Circuit because in each area this
Court’s own precedents eschewed rules of broad applica-
bility, insisting on case-specific, factually intensive in-
quiries. See eBay, 547 U.S. at 391-393; Festo, 535 U.S.
at 737-739; KSR, 550 U.S. at 415-418.
Section 101, by contrast, establishes the threshold
conditions for eligibility for patent protection. Its four
classes of statutory subject matter, though “extremely
broad” in scope, J.E.M. Ag Supply, Inc., 534 U.S. at 130,
are nonetheless definite and bounded in content. This
Court therefore has not hesitated to adopt concrete defi-
nitions of the relevant statutory terms.23 See Corning,
23 For this reason, petitioners’ assertion (Br. 20, 22-23) that courts
lack the authority to impose limits on patent-eligible subject matter
that have not been expressed by Congress misses the mark. Congress
restricted the scope of the Patent Act by limiting patent-eligibility to
four defined categories of inventions. The question presented by this
case is whether the term “process” in Section 101 embraces purely
44
56 U.S. (15 How.) at 267 (machine); American Fruit
Growers, 283 U.S. at 11 (manufacture); Chakrabarty,
447 U.S. at 308 (composition of matter); pp. 13-15, su-
pra. The court of appeals here articulated a similarly
concrete—and similarly broad—definition of the fourth
and final category of subject matter in Section 101. Un-
like the rules at issue in eBay, Festo, and KSR, the
machine-or-transformation test is drawn from this
Court’s precedents and is consistent with the proper,
and indeed necessary, approach to analyzing threshold
patent-eligibility issues. Clear definitions of the classes
of subject matter in Section 101 provide critical guid-
ance to the public, inventors, and the PTO regarding the
boundaries of the patent laws—and, by implication, the
scope of “what is free for all to use.” Bonito Boats, 489
U.S. at 151.
4. The alternative tests for patent-eligibility proposed
by petitioners and amici do not appropriately limit
patent protection
The alternative tests advocated by petitioners and
amici would sweep within their scope vast swaths of
American economic and social life that have never been
regarded as the proper domain of patent law. Petition-
ers urge that Section 101 should embrace any series of
steps that produces a useful result, so long as it is a
“practical application” of a law of nature, natural phe-
nomenon, or mathematical formula. Br. 42-52. Amici
propose a variety of similar formulations. E.g., Accen-
human methods of the kind petitioners seek to patent. In its repeated
articulations of the machine-or-transformation test, this Court has not
added a restriction to those Congress imposed, but has simply
construed the pertinent statutory language. See Chakrabarty, 447 U.S.
at 315.
45
ture Amicus Br. 3; Business Software Alliance Amicus
Br. 11-12. While these formulations state necessary
preconditions for patent-eligibility—a claimed process
that lacks any “practical application” or “useful” result
is a paradigmatic unpatentable abstract idea, cf. Benson,
409 U.S. at 67—these approaches are seriously deficient
as definitions of patent-eligible subject matter.
In addition to divorcing the term “process” from its
historical understanding and statutory context, see pp.
16-25, supra, petitioners’ “practical application” test
provides no limiting principle to exclude from patent
protection the wide array of innovations that have never
“historically been eligible to receive the protection of
our patent laws.” Diehr, 450 U.S. at 184. The annals of
useful human knowledge abound with particularized
methods of pitching baseballs, singing arias, delivering
lectures, running election campaigns, minimizing taxes,
defending lawsuits, buying and selling property, and
resisting corporate takeovers. Each of these “proces-
ses” is practical and useful, and may be nonobvious.
None is unpatentably abstract, see O’Reilly v. Morse, 56
U.S. (15 How.) 62, 113 (1854), and none is merely a
mathematical equation in disguise, see Flook, 437 U.S.
at 594-595. Yet none embodies the sort of invention that
the patent laws were designed to protect.24 See Diehr,
450 U.S. at 184, 192; Flook, 437 U.S. at 593. Petitioners’
test therefore does not perform the crucial differentiat-
ing function that Congress intended the subject-matter
24 In contrast, the machine-or-transformation standard recognizes
that the mere presence of a “practical application” does not suffice to
make a claimed method patent-eligible, if it is not the type of invention
that patent law is intended to protect.
46
categories in Section 101 to perform.25 See Kewanee Oil
Co., 416 U.S. at 483; Diehr, 450 U.S. at 182.
II. SECTION 273 DOES NOT IMPLICITLY EXPAND THE
CATEGORIES OF PATENT-ELIGIBLE SUBJECT MAT-
TER IN SECTION 101
Petitioners contend that the First Inventor Defense
Act of 1999, Pub. L. No. 106-113, 113 Stat. 1536, which
added 35 U.S.C. 273 to the Patent Act, reflects Con-
gress’s endorsement of the patentability of methods di-
rected to organizing human activity. Section 273, which
Congress enacted the year after the Federal Circuit’s
decision in State Street, provides an affirmative defense
against infringement for prior users of patented busi-
ness methods. See 35 U.S.C. 273(b); see also 35 U.S.C .
273(a)(3) (“For purposes of this section * * * the term
‘method’ means a method of doing or conducting busi-
ness.”). Contrary to petitioners’ argument, Section 273
does not reflect any congressional understanding that
Section 101 extends to all business methods, including
those directed solely to human activity.
25 Acknowledging that the “practical application” test provides no
basis for excluding even the most out-of-left-field methods of organizing
human activity, petitioners suggest that other requirements for patent-
ability—namely, novelty, 35 U.S.C. 102; non-obviousness, 35 U.S.C. 103;
and definiteness, 35 U.S.C. 112—will provide the limiting principles that
the “practical application” test lacks. Pet. Br. 41-42. But if Congress
had intended these other requirements to be the sole limits on patent-
ability, it would not have provided the subject-matter categories in Sec-
tion 101. In any event, these requirements are insufficient standing
alone to limit patent protection to the scope that Congress intended:
a particularized, non-abstract method for pitching a curveball may be
novel, nonobvious, and definitely stated. But it should not be the sub-
ject of a patent.
47
In State Street, the Federal Circuit held that a
claimed invention—which the court found to be patent-
eligible as a “machine” under Section 101—was not ex-
cepted from patent-eligibility simply because it per-
formed certain stock-valuation functions and therefore
concerned a “business method.” 149 F.3d at 1371-1372,
1375; Pet. App. 23a n.18; see id. at 195a. The court thus
repudiated the “business method exception,” which some
lower courts had used to hold that inventions falling
within Section 101’s categories of patent-eligible subject
matter were nonetheless ineligible for patent protection
when they concerned business activities.
Congress understood State Street as allowing patent
protection for some inventions related to financial and
business services that, under the “business method ex-
ception,” had not previously been thought to be patent-
eligible. See H.R. Rep. No. 287, 106th Cong., 1st Sess.
46-47 (1999) (stating that State Street confirmed a “very
broad scope of subject matter that qualifies for patent
protection” by “clarif[ying] that the characterization of
subject matter as a method of doing business does not
render it unpatentable”); H.R. Rep. No. 464, 106th
Cong., 1st Sess. 122 (1999) (“As the Court noted, the ref-
erence to the business method exception had been im-
properly applied.”). Concerned that many businesses
had been using inventions implicating business methods
on the assumption that such inventions were not patent-
eligible, ibid., Congress acted to protect such firms from
patent suits by later “inventors.” Section 273 accord-
ingly provides that—contrary to the ordinary rule in
patent law—the good faith prior use of a patented busi-
ness method is a defense to infringement. See 35 U.S.C.
273(b)(1). Nothing in Section 273 purports to amend or
48
interpret the categories of patent-eligible subject matter
in Section 101.26
Thus, neither the text nor the history of Section 273
suggests that Congress understood State Street as ex-
tending patent protection to non-technological processes
that are directed solely to the organization of human
activity, much less that Congress approved or ratified,
sub silentio, such a radical departure from the historical
scope of patent law.27 Congress surely would have spo-
ken with greater clarity if it had intended Section 273 to
ratify an expansion of the boundaries of patent-eligible
subject matter so far beyond those established in 1793
and consistently articulated in this Court’s decisions.
Cf. Whitman v. American Trucking Ass’ns, 531 U.S.
457, 468 (2001) (Congress “does not alter the fundamen-
tal details of a regulatory scheme in vague terms or an-
26 Petitioners construe various statements by individual Members of
Congress as evidence that Congress understood State Street to permit
a patent for any useful series of steps directed to human business
activity. Pet. Br. 30-32. These statements, however, provide no evi-
dence that the relevant Members so understood State Street. See, e.g.,
145 Cong. Rec. 30,634 (1999) (statement of Sen. Schumer) (in response
to State Street, Section 273 should apply to “[n]ew technologies” that
employ “both methods of doing business and physical apparatus”)
(emphasis added). And even if some individual legislators had ex-
pressed that understanding, floor statements of individual Members of
Congress are entitled to little weight because they do not represent the
understanding of Congress as a whole. See Garcia v. United States,
469 U.S. 70, 76 (1984).
27 As discussed above, dicta in State Street subsequently was invoked
by applicants seeking patents for “processes” that would not have been
patent-eligible under the machine-or-transformation test. But as the
committee reports indicate, Congress, acting within a year of the State
Street decision, was responding to the decision’s actual holding—that
inventions that otherwise fall within Section 101 remain patent-eligible
even if their usefulness relates to business and financial activities.
49
cillary provisions—it does not, one might say, hide ele-
phants in mouseholes.”).
Section 273’s general reference to “method[s] of do-
ing or conducting business,” 35 U.S.C. 273(a)(3), does
not suggest that Congress intended all such methods to
be patent-eligible. Cf. Pet. Br. 31-33. Section 273 was
not enacted to ratify the Federal Circuit’s decision in
State Street, let alone to ratify the broadest possible
reading of that decision. Rather, Section 273 was en-
acted to limit a potential effect of State Street by provid-
ing protection for businesses that, in the wake of that
decision, unexpectedly faced infringement suits. Con-
gress’s unqualified reference to “method[s] of * * *
conducting business” thus is most naturally read to re-
flect the understanding that the “business method ex-
ception” that State Street rejected had previously ap-
plied across Section 101’s subject-matter categories.
The breadth of the special defense enacted in Section
273 reflects the breadth of the business method excep-
tion to patent eligibility on which Congress feared busi-
nesses had relied. And the enactment of that defense
demonstrated congressional concern over the potential
impact of granting patents for even those business prac-
tices falling within the established understanding of Sec-
tion 101’s terms—not any desire to expand that under-
standing to encompass still additional business prac-
tices.
For much the same reasons, petitioners’ reliance (Br.
34-37) on J.E.M. Ag Supply is misplaced. In that case,
the parties who contested the validity of the relevant
patents did not dispute that the inventions (certain hy-
brid plants) were encompassed by Section 101’s lan-
guage. See 534 U.S. at 131-132. Rather, they argued
that two more specific statutes impliedly excluded the
50
plants from the ambit of Section 101. See id. at 132. In
holding that no such exclusion applied, the Court relied
in part on Congress’s enactment of a separate provision
of Title 35 that assumed such plants were patent-eligible
under Section 101. Id. at 145. Here, by contrast, Sec-
tion 273 reflects Congress’s understanding that “busi-
ness methods” are not categorically ineligible for patent
protection; but it does not logically suggest that Con-
gress understood Section 101 to encompass non-techno-
logical business methods that are ineligible for a patent
under the machine-or-transformation test.
Petitioners also note (Br. 34-35) that in J.E.M. Ag
Supply, the Court relied in part on the PTO’s longstand-
ing practice of issuing hybrid plant patents and Con-
gress’s apparent acceptance of that practice. 534 U.S. at
144-145. No similar inference of congressional approval
is warranted in this case, however, because the PTO has
in recent years sought judicial guidance as to the proper
treatment of process claims under Section 101. See, e.g.,
In re Comiskey, 554 F.3d 967, 973 (Fed. Cir. 2009). And
because the Board unanimously found petitioner’s
claimed hedging method to be ineligible for patent pro-
tection, the J.E.M. Ag Supply Court’s reference to the
Board’s “specific expertise in issues of patent law,” 534
U.S. at 145, provides no comfort to petitioner here.
Finally, contrary to petitioners’ contention (Br. 34),
reaffirming the machine-or-transformation definition of
“process” would not render Section 273 “meaningless.”
The machine-or-transformation test does not reinstate
the “business methods exception”; to the contrary, it
accords patent eligibility to technological innovations
regardless of whether they concern financial or other
business activities. See Pet. App. 25a (refusing to hold
that processes concerning business activities are cate-
51
gorically patent-ineligible). As the court of appeals
noted, patent applications directed to business-related
methods “are ‘subject to the same legal requirements
for patentability as applied to any other process or
method.’” Ibid. (quoting State Street, 149 F.3d at 1375-
1376). That conclusion is both correct and consistent
with Section 273.
III. THE COURT OF APPEALS CORRECTLY REJECTED
PETITIONERS’ CLAIMED METHOD OF HEDGING FI-
NANCIAL RISK UNDER SECTION 101
A. For the foregoing reasons, the court of appeals
correctly held that petitioners’ method for hedging risk
in the purchase and sale of commodities—a technique
for organizing human economic activity only—is not eli-
gible for patent protection under 35 U.S.C. 101. Indeed,
the court of appeals was nearly unanimous in that con-
clusion, voting 11-1 that petitioners’ claimed method is
ineligible for a patent.28 The PTO examiner and the five
expert administrative judges on the Board were unani-
mous in concluding that petitioners’ application is not
directed to patent-eligible subject matter. Pet. App. 4a,
146a.
Petitioners’ claimed process is not directed to the
operation of a particular machine or apparatus, nor does
it involve the transformation of matter into a different
state or thing. As the Board explained, petitioners’
claims
28 Nine of the twelve judges on the en banc court joined the majority
opinion. Pet. App. 1a. Of the three dissenting judges, only one would
have held that petitioners’ hedging method qualifies as a patent-eligible
“process” under the Patent Act. Id. at 60a-105a (Newman, J., dis-
senting).
52
do not recite any electrical, chemical, or mechanical
acts or results; do not directly or indirectly recite
transforming data by a mathematical or non-mathe-
matical algorithm; are not required to be performed
on a machine, such as a computer, either as claimed
or disclosed; * * * and do not involve making or
using a machine, manufacture, or composition of
matter.
Pet. App. 150a. Even the “Monte Carlo simulations” and
“one-tail tests” that petitioners highlight in their brief
(at 5-6) involve well-known statistical techniques to
which petitioners do not claim to have made any contri-
bution.29 Rather, as the court of appeals found, petition-
ers seek to patent “[p]urported transformations or ma-
nipulations simply of public or private legal obligations
or relationships, [or] business risks.” Pet. App. 32a.
The court thus correctly rejected petitioners’ claimed
process as patent-ineligible.
The ineligibility of petitioners’ claimed hedging
method under the machine-or-transformation test is
particularly clear because petitioners’ patent application
did not identify any machine to be used in the implemen-
tation of that method. It should be emphasized, how-
ever, that petitioners could not have brought their hedg-
ing method within Section 101’s coverage simply by stat-
ing that a computer would be used to calculate a con-
tractual term for use in a step in petitioners’ method, or
that a telephone would be used for communications be-
tween the contracting parties and the intermediary.
29 See B.S. Everitt, The Cambridge Dictionary of Statistics 262 (3d
ed. 2006) (“Monte Carlo methods”); Michael O. Finkelstein & Bruce
Levin, Statistics for Lawyers 124-126 (1990) (discussing “one-tailed
tests”).
53
Consistent with this Court’s decision in Diehr, see 450
U.S. at 191-192, the PTO’s Interim Instructions state
(at 5) that, in order for a claimed method to qualify as a
patent-eligible “process” under Section 101, “the use of
the particular machine or the transformation of the par-
ticular article must involve more than insignificant
‘extra-solution’ activity.” (emphasis omitted.) The In-
terim Instructions further explain (at 6) that “[i]nsignif-
icant ‘extra-solution’ activity means activity that is not
central to the purpose of the method invented by the
applicant.”
Under that standard, merely adding the extra detail
that a computer would be used to calculate the fixed
rates required by petitioners’ claim would be “insignifi-
cant.” Similarly, even if carrying out the hedging trans-
actions required some type of communication, the speci-
fication that a telephone should be used would be insig-
nificant extra-solution activity. The nature of the hedg-
ing technique—the method of identifying the risk and
counterparties in order to hedge—would not change if e-
mail were used instead of a telephone, or if the commu-
nications took place in person.30
B. Petitioners’ hedging method is also unpatentable
on the independent ground that it would preempt the
abstract idea of hedging consumption risk. See Benson,
409 U.S. at 67. Petitioners’ application stresses that the
claimed method “can be used for any commodity to man-
age consumption risk in a fixed bill price product.” J.A.
30 In contrast, petitioners’ claims might satisfy the machine-or-trans-
formation definition if they involved a machine implementation central
to the process of hedging. For example, the method might be patent-
eligible if it conducted hedging transactions online, using a computer
network to identify counterparties and initiate the transactions, and a
microprocessor to calculate the fixed purchase price.
54
11. Because the claimed method does not include any
steps that meaningfully circumscribe the way in which
it is performed—the claim describes no more than “a
purely mental process” of performing the required cal-
culations, followed by the unremarkable post-solution
step of consummating the transactions (in which no com-
modities need change hands), id. at 36a—the claim
“would effectively pre-empt any application of the fun-
damental concept of hedging and mathematical calcula-
tions inherent in hedging” consumption risk.31 Ibid.;
see, e.g., id. at 139a (Rader, J., dissenting) (“[T]he hedg-
ing claim at stake in this appeal is a classic example of
abstractness.”); id. at 184a (Board opinion) (“Because
the steps cover (‘preempt’) any and every possible way
of performing the steps of the plan, by human or by any
kind of machine or by any combination thereof, we con-
clude that the claim is so broad that it is directed to the
‘abstract idea’ itself.”). This Court has consistently held
that abstract claims of this kind are not patentable un-
der Section 101. See, e.g., Diehr, 450 U.S. at 185-187;
Benson, 409 U.S. at 71-72; Morse, 56 U.S. (15 How.) at
113.32
31 As the court of appeals noted, Pet. App. 18a-19a, 36a, it is immate-
rial for these purposes that petitioners’ claim is limited to hedging
consumption risk in the field of commodity sales, or that it requires
minor post-solution physical acts (i.e., consummating the hedging
transactions). See Diehr, 450 U.S. at 191-192.
32 Petitioners’ belated effort to distinguish Claim 4 of the application
as non-abstract, Pet. Br. 58-59, is unavailing. Because petitioners did
not separately argue the patentability of Claim 4 before the Board or
the court of appeals, they have waived any such distinction. E.g., In re
King, 801 F.2d 1324, 1325 (Fed. Cir. 1986).
55
CONCLUSION
The judgment of the court of appeals should be af-
firmed.
Respectfully submitted.
ELENA KAGAN
CAMERON F. KERRY
Solicitor General
General Counsel
MALCOLM L. STEWART
QUENTIN A. PALFREY
Deputy Solicitor General
Associate General Counsel
TONY WEST
JOAN BERNOTT MAGINNIS
Assistant Attorney General
Assistant General Counsel
GINGER D. ANDERS
U.S. Department of
Assistant to the Solicitor
Commerce
General
SCOTT R. MCINTOSH
RAYMOND T. CHEN
MARK R. FREEMAN
Solicitor and Deputy
Attorneys
General Counsel
THOMAS W. KRAUSE
SCOTT C. WEIDENFELLER
Associate Solicitors
U.S. Patent and Trademark
Office
SEPTEMBER 2009
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