I know you are dying to know what happened today in oral argument in
In Re Bilski before the US Supreme Court. Here is the transcript [PDF] so you can read it for yourself and not have to depend on me or any journalist.
For sure the questions from the court to Bilski's attorney, J. Michael Jakes, and to the attorney for the government, Deputy Solicitor General Malcolm L. Stewart, are interesting. I conclude that the justices are way ahead of them on just how crazy the current patent system has become. Thank heaven there were so many amicus briefs, because reasonable, logical arguments were few and far between from either attorney, in my view, in that they each seemed to argue very much for the status quo, or in the case of Bilski's lawyer for an even broader free-for-all in patentability.
The rational questions, however, are refreshing and somewhat encouraging. Here is one question from Justice Sonia Sotomayor:
So how do we limit it to something that is reasonable? Meaning, if we don't limit it to inventions or to technology, as some amici have, or to some tie or tether, borrowing the Solicitor General's phraseology, to the sciences, to the useful arts, then why not patent the method of speed dating? This was shortly followed by Justice Breyer:
You know, I have a great, wonderful, really original method of teaching antitrust law, and it kept 80 percent of the students awake. They learned things... (Laughter) It was fabulous. And I could probably have reduced it to a set of steps and other teachers could have followed it. That you are going to say is patentable, too? To which Mr. Jakes answered: "Potentially." What else could he say, if he wants a patent for his client? But the answer was obviously not what Justice Breyer was going to accept. Breyer asked, if they were to find that position too far out there, then what was Mr. Jakes' suggestion? Jakes said that abstract ideas per se are not patentable.
Oh, lordy, let's not start with the per se language. Haven't we seen what an easy workaround *that* proved to be in Europe for computer software?
Anyway, Justice Roberts then said that he could just initiate a "series of transactions with buyers. I buy low and sell high. That's my patent for maximizing wealth. I don't see how that's different than your claim number 1."
Of course, he's mocking the position, because it is the same, and I'd say overall hedge fund patents like Bilski's did not receive a warm reception today.
Of course, you can't really predict just from questions. The most interesting question was whether the government had argued for machine or transformation, or if that was from the appeals court's brain. At least one judge, then, is at least considering, I'd think, altering what the appeals court did.
Of course, what you want to know is what about software patents? Any hints? Unfortunately, the discussion about software and patents was rather a muddle from the standpoint of the arguments from the government. The attorney argued that software that makes a computer do some new process, as in State Street is patentable, even though it's just an old computer. So if they accept that, then it was all for nothing. Well, not nothing. Education is never for nothing, and legal progress is usually incremental. But look at this exchange, when Mr. Stewart is asked how State Street would be decided under the position the government was arguing for:
MR. STEWART: Well, under our test, we would come out the same way because the computer would be a machine. The only question would be whether the programming of the computer with new software caused it to be a patentable different machine from the one that existed previously. Really? I hate to always play the little boy in the Emperor's New Clothes, but that is just not a question a rational mind would even dream up. It's only if you *want* software to be patentable that you'd even stretch your brain that far to get to the destination you crave. Riddle me this, Batman: If you put Linux on your Windows XP computer, is it now a new computer, a new machine? Take a look. Nope. Same old dent on the bottom, same stickers next to the keyboard. Latch is loose. Duh. Same machine. He nevertheless continued:
Now -- now, we do think that software innovations can have the effect of causing the computer to be a different, special purpose computer, as the phrase -- Ah! Alchemy, m'lords. We can magically turn flax into gold in our minds. To which Justices Stevens and Kennedy broke in:
JUSTICE STEVENS: I don't understand why that isn't just the application of a process, which -- which is not itself patentable subject matter, to a particular machine that can use process -- Me too.
JUSTICE KENNEDY: That's -- that's a problem I have.
Stewart then says it's comparable to a "better television or a better DVD", which don't transform anything. Justice Stevens sees a difference, saying, "It's not on a computer, which the only difference from the old computer is it's using a new program. You can't say that's a new machine." Mr. Stewart fumbles a bit, then says, but what if you improved the hardware? To which Justice Stevens says, "But that patent didn't require any change in the hardware, as I remember it correctly," referring to State Street. But, but, says Mr. Stewart, programming a computer to produce...er, to perform new functions can create a novel.... He is interrupted by Justice Breyer:
But then all we do is every example that I just gave, that I thought were examples that certainly would not be patented, you simply patent them. All you do is just have a set of instructions for saying how to set a computer to do it. Anyone can do that. Now, it's a machine. So all the business patents are all right back in. Actually, in my case it's multiple machines, according to the government's argument. Consider the following. My laptop is currently running Firefox, Okular to read the PDF, Claws mail, Bubblemon to track CPU usage, and some other things I don't want to list, now that I think of it. But right there, that's five different software applications. Do I have five special purpose computers?
Laughable, isn't it? Yet I have software all doing things to my machine to make them do processes that are useful. See how ridiculous the government's argument is when you place it against reality? Against simple truth? When you just think about it, it's obvious. Software and patents on a regular old computer like you buy in a store is not a special use computer, now, is it?
They could solve all the puzzling questions by simply acknowledging that software and patents need to get a divorce.
However, instead, Mr. Stewart later swings back to his TV and DVD comparison and tries again to make it work:
The other point I would make about the programmed computer is, to follow up on my television and DVD example, that when you claim a machine or a manufacture, as the committee reports to the 1952 act said, those words are broad. They encompass everything under the sun that is made by man. And so a television is indisputably a machine, even though its function is not to transform matter. Oops. There goes Microsoft's argument, then, if that's the way we read the tea leaves, that merely bouncing electrical switches around by software makes the computer transformed and hence the software doing it patentable, like a modern-day digital Morse code or some such. Surely a TV does as much as that, without, he says, being transformative. Yet, Mr. Stewart argues that there are lots of useful things -- "a huge array of very productive, innovative activity" -- that don't create any new physical structure, and if the statute says process, that ought to be broadly understood. What about speed dating? That was productive and innovative. Is it patentable?
In short, I'm disappointed in the arguments made by both sides, but thank heaven there were almost 70 amicus briefs to fill in the obvious blanks in the logic. Indeed, I suspect that at least some of the questions from the court reflect that the court indeed has read the briefs and I sense that they were on a different wave length than either attorney standing before them today. Exactly what that wave length turns out to be is impossible to predict, however, by me, anyway. Read the transcript, and we should know by June.
Here's a collection of lawyers' views on how the hour's argument went and what it all seems to mean.
Low point of the day, for me, was this argument by the Bilski side:
JUSTICE KENNEDY: But it would be different, it seems to me, than what you are -- let's assume you can't patent an alphabet. I assume that is true. And you can take an alphabet to make beautiful words, and -- and so forth. You -- you want to say that these -- these electronic signals can be used in a way just like the alphabet can be used. And many of the scientific briefs say that their process is different, that they are taking electronic signals and turning them into some other sort of signal. But that's not what you are doing.
Imagine. Happily, Justice Sotomayor points out that as she reads that patent, the only thing he could patent were claims "that related to the use of the code with a particular machine". And Justice Scalia noted, in connection with Bell's patent that "it was transforming sound into electrical current and then at the other end electrical current back into sound," meaning that "it met the transformation test". Mr. Jakes acknowledges that "it might have." Scalia: "It clearly did." Then they both agree that electric current is physical. But Mr. Jakes argues that sound isn't when it's transmitted over a wire. Then it's electric current. Scalia:
MR. JAKES: That may be, but those signals could also be transmitted. On -- on your question about the alphabet you said look at the Morse claim 5, which was an alphabet to Morse Code. That's exactly what it was.
CHIEF JUSTICE ROBERTS: So you reject -- you reject the substitute. You think you can patent an alphabet because it is a process of forming words.
MR. JAKES: It could be, yes.
Sound is not transmitted over the wires. Sound has been transformed into current, and current is transmitted over the wire and then transformed back at the other end into sound. That would make it covered by the machine or transformation test, he states. Jakes:
I think that's more in the nature of transmission, much like our data transmission. You might transmit data in a packet without actually changing the underlying data, and that would be allowed as well. Throw in poetry, then, why don't we? It's electrical when I think it up in my brain, and then there is a process I follow, whereby I get out my computer, start it up, and I input the data from my brain into the software that OpenOffice.org wrote for me, which transforms the laptop into a special use computer in that magical moment, and after I transform the electrical thoughts into words on the screen, voila! out comes a poem. Positively magical.
Update: Ciarán O'Riordan, Executive Director of End Software Patents, whose article on software patents was published on Patently O the other day, has the transcript up as text already.
Update 2: And here is ours, minus all the page line numbers and the index at the end. I also have removed the line "Official - Subject to Final Review" except from the first page, which in the PDF is on each and every page, so that those using screen readers won't have to read that over and over. As always though, for anything that matters, go by the PDF:
Update 3: Groklaw's ausage has done a color-coded version. It does make it easier to see who is talking, the court or the attorneys. Thank you, ausage. Enjoy, everyone.
Official - Subject to Final Review
IN THE SUPREME COURT OF THE UNITED STATES
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BERNARD L. BILSKI AND RAND A.
DAVID J. KAPPOS, UNDER
SECRETARY OF COMMERCE FOR
INTELLECTUAL PROPERTY AND
DIRECTOR, PATENT AND
- - - - - - - - - - - - - - - - - x
- - - - - - - - - - - - - - - - - - x
Monday, November 9, 2009
The above-entitled matter came on for oral
argument before the Supreme Court of the United States
at 1:00 p.m.
J. MICHAEL JAKES, ESQ., Washington, D.C.; on behalf of
MALCOLM L. STEWART, ESQ., Deputy Solicitor General,
Department of Justice, Washington, D.C.; on behalf of
C O N T E N T S
ORAL ARGUMENT OF
J. MICHAEL JAKES, ESQ.
On behalf of the Petitioners ........... 3
MALCOLM L. STEWART, ESQ.
On behalf of the Respondent .............. 26
REBUTTAL ARGUMENT OF
J. MICHAEL JAKES, ESQ.
On behalf of the Petitioners .............. 50
P R O C E E D I N G S
CHIEF JUSTICE ROBERTS: We will hear
argument this afternoon in Case 08-964,
Bilski v. Kappos.
ORAL ARGUMENT OF J. MICHAEL JAKES
ON BEHALF OF THE PETITIONERS
MR. JAKES: Mr. Chief Justice, and may it
please the Court:
The Federal Circuit's rigid and narrow
machine-or-transformation test for all patent-eligible
methods should be reversed. The requirement that any
and all methods must be either tied to a particular
machine or transform specific subject matter doesn't
find any basis in either the language of Section 101 or
anywhere in the patent statute.
It's not required by this Court's
precedence, and it's contrary to the established
principle that Section 101 should be read broadly to
accommodate unforeseen advances in the useful arts.
There are recognized exclusions from Section 101 from
that broad language, such as laws of nature, natural
phenomenon, and abstract ideas. Those may not be
But these exceptions, which are drawn from
the Court's precedent, including this Court's Diehr
case, also finds support in the statutory language,
which says that any process must be new and useful.
So the prohibition against patenting laws of
nature or abstract principles, it applies equally to all
four categories of subject matter under 101, but, here,
the Federal circuit has created a new test just for
processes that are not bound in the statute or required
by this Court's decision.
JUSTICE SCALIA: Well, if the government
says that the -- that the term on which it hangs its hat
is the term useful arts and that that meant, originally,
and still means manufacturing arts, arts dealing with
workmen, with -- you know, inventors, like Lorenzo
Jones, not -- not somebody who writes a book on how to
win friends and influence people.
What is wrong with that analysis, that
that's what "useful arts" meant, that it always --
always was thought to deal with machines and inventions?
MR. JAKES: Certainly, "useful arts"
encompasses industrial processes, manufacturing
processes, but it has never been limited just to those
types of processes. I'll admit that during the
Industrial Revolution most of the inventions concerned
machines and manufacturing processes. But we have cited
counter-examples that show that business was also within
the useful arts.
It's also up to Congress to decide how to
implement the patent system and the statutory --
JUSTICE BREYER: Well, if you leave
something out, Congress can put it back in, tailoring
the protection to what they feel is necessary. But if
it covers everything under the sun, I've never seen a
case where Congress would take something out.
Now, if we are relying on Congress, I guess
the circuit would say, let's go narrow, and we
wouldn't -- you know -- since you referred to Congress,
I thought I would bring that up and see what you think.
MR. JAKES: Congress has acted in certain
circumstances. One of them is in section 273, to
provide prior user rights for business methods. Another
area is 287(c), where medical activities are also
exempted from remedies under the statute.
There has been a bill introduced to exempt
tax avoidance methods, but that has not yet been passed.
JUSTICE GINSBURG: But you say you would say
tax avoidance methods are covered, just as the process
here is covered. So an estate plan, tax avoidance, how
to resist a corporate takeover, how to choose a jury,
all of those are patentable?
MR. JAKES: They are eligible for patenting
as processes, assuming they meet the other statutory
JUSTICE BREYER: So that would mean that
every -- every businessman -- perhaps not every, but
every successful businessman typically has something.
His firm wouldn't be successful if he didn't have
anything that others didn't have. He thinks of a new
way to organize. He thinks of a new thing to say on the
telephone. He thinks of something. That's how he made
And your view would be -- and it's new, too,
and it's useful, made him a fortune -- anything that
helps any businessman succeed is patentable because we
reduce it to a number of steps, explain it in general
terms, file our application, granted?
MR. JAKES: It is potentially patentable,
JUSTICE BREYER: Okay. Well then, if that
were so, we go back to the original purpose of the
Constitution. Do you think that the framers would have
wanted to require anyone successful in this great, vast,
new continent because he thinks of something new to have
had to run to Washington and to force any possible
competitor to do a search and then stop the wheels of
progress unless they get permission?
Is that a plausible view of the patent
MR. JAKES: No, Your Honor. I wouldn't
characterize it that way, but I do believe that --
JUSTICE SOTOMAYOR: So how do we limit it to
something that is reasonable? Meaning, if we don't
limit it to inventions or to technology, as some amici
have, or to some tie or tether, borrowing the Solicitor
General's phraseology, to the sciences, to the useful
arts, then why not patent the method of speed dating?
MR. JAKES: Well, first of all, I think,
looking at what are useful arts, it does exclude some
things. It does exclude the fine arts. Speaking,
literature, poems, I think we all agree that those are
not included, and there are other things as well. For
example, a corporation, a human being, these are things
that are not covered by the statutory categories.
JUSTICE SOTOMAYOR: So why are human
activities covered by useful arts?
MR. JAKES: Human activities are covered.
JUSTICE SOTOMAYOR: Well, you are saying
they are covered, but why should they be?
MR. JAKES: I believe the statute provides
for them to be covered by defining them as a process. I
can give you a -- one good example, which would be a
surgical method performed by a doctor. Those are
patentable. They are patent eligible. In section
287(c), Congress has carved out and said, you can't go
after the doctor for infringement, but that is an
entirely human activity, and it has long been
JUSTICE SOTOMAYOR: Do you think that there
is some benefit to society from patenting a method to
cure someone that involves just human activity, as
opposed to some machine, substance, or other apparatus
to help that process?
MR. JAKES: Yes.
JUSTICE SOTOMAYOR: Do you believe that that
was the intent of the patent law?
MR. JAKES: I believe that falls within the
useful arts, and I believe that there is an advantage to
that. There are really two advantages to the patent
system. One is encouraging people to come up with new
things, such as a surgical method or method of hedging
The other is the disclosure aspect. A
doctor might choose to keep it secret.
JUSTICE BREYER: So you are going to answer
this question yes. You know, I have a great, wonderful,
really original method of teaching antitrust law, and it
kept 80 percent of the students awake. They learned
JUSTICE BREYER: It was fabulous. And I
could probably have reduced it to a set of steps and
other teachers could have followed it. That you are
going to say is patentable, too?
MR. JAKES: Potentially.
JUSTICE BREYER: Okay. Fine. Now, suppose
I reject that view, hypothetically, and suppose I were
to take the view that this is way too far, that that is
not the purpose of the statute. Suppose for
hypothetical's sake I'm still a little nervous about
that -- that circuit's decision there. Have you any
suggestion for me?
MR. JAKES: I think that we should go back
to the first principles that were enunciated in Diehr
and other cases, that abstract ideas per se are not
patentable. That's my position, and what I would
advocate in this case and any case, as long as you're --
CHIEF JUSTICE ROBERTS: What -- I'm looking
at your Claim 1, in Joint Appendix page 19 to 20. How
is that not an abstract idea? You initiate a series of
transactions between commodity providers and commodity
consumers. You set a fixed price at the consumer end,
you set a fixed price at the other end, and that's it.
I mean, I could patent a process where I do
the same thing. I initiate a series of transactions
with sellers. I initiate a series of transactions with
buyers. I buy low and sell high. That's my patent for
I don't see how that's different than your
claim number 1.
MR. JAKES: If that was a novel and
unobvious method, then it should be patentable, but it's
eligible as subject matter --
CHIEF JUSTICE ROBERTS: Well, but your Claim
1 it seems to me is classic commodity hedging that has
been going on for centuries.
MR. JAKES: Your Honor, if that were true,
then we should run afoul of the obviousness provision
under section 103. Now, the Patent Office did initially
allow some of our claims over the prior art.
JUSTICE KENNEDY: But you know, the
insurance industry -- the insurance business, as we know
it, really began in England in 1680, when they
discovered differential calculus, and they had
expectancy and actuarial tables, actuarial for life,
expectancy for shipping, and this really created a whole
In your view, I think, clearly those would
be patentable, the -- the explanation of how to compile
an actuarial table and -- and apply it to risk. That
certainly would be patentable under your view, and
it's -- it's difficult for me to think that Congress
would want to -- would have wanted to give only one
person the capacity to issue insurance.
MR. JAKES: I think that method would be
patent eligible. But, as you said, it would have to be
reduced to a concrete set of steps, like our claim 1.
Now, claim 1 may be written in broad terms and it may
some day run into the prior art, but it does require
people to do actual things.
I think even the Patent Office agreed that
there are physical steps in our method here. And in the
insurance method --
CHIEF JUSTICE ROBERTS: I'm sorry.
Just what are the physical steps? Initiating a series
of transactions between commodity provider and market
MR. JAKES: That would be one.
CHIEF JUSTICE ROBERTS: You get on the phone
and you call the baker and you get on the phone and you
call the grocer and say: I can set up a deal for both
MR. JAKES: It could be. It could be done
that way because it does take a person acting to do
that. It's not purely --
JUSTICE KENNEDY: And so in the insurance
case it takes a person to go over to the Bureau of
Statistics and compile statistics on -- on life -- on
MR. JAKES: That could be. Now, the patent
on the data, that's another category that's not included
in the subject matter of those four categories. The
data itself is not patentable, but if it is a series of
steps, it should be eligible as long as it meets the
other statutory requirements as a process.
There is nothing in the useful arts -- now,
we have heard the word "technology." That can be a
difficult term, because technology in its broadest sense
means the application of knowledge as opposed to general
JUSTICE GINSBURG: Isn't that the basis on
which the patent law rests in Europe, in other
countries? They do not permit business method patents.
It has to be tied to technology, to science or
technology. So if other systems are able to work with
the notion of technology-based, why not ours?
MR. JAKES: I would agree, Your Honor.
There are those systems that do have a requirement like
that. Ours does not. Ours speaks in very broad
terms about having --
JUSTICE GINSBURG: But I was talking about
-- you said that technology-based, that wouldn't work
because there are so many definitions. I'm simply
asking you the question: Does it work with these other
systems? That they -- they exclude business methods,
they include technology-based --
MR. JAKES: That's right. But they have
also defined "technology" in such a way as to exclude
business methods. And I don't think we can do that.
The fields of operations research,
industrial engineering, even financial engineering,
there has been an explosion in these particular fields,
and to now call them non-technological because they
didn't exist over 100 years ago wouldn't make --
JUSTICE SOTOMAYOR: Are you suggesting they
didn't exist because we didn't give them patents
100 years ago?
MR. JAKES: No.
JUSTICE SOTOMAYOR: Or they exist because
computers have increased --
MR. JAKES: It's very much related to our
current economy and state of technology, with computers
and the Internet and the free flow of information. But
that's what --
JUSTICE SOTOMAYOR: But a patent limits the
free flow of information. It requires licensing fees
and other steps, legal steps. So you can't argue that
your definition is improving the free flow of
MR. JAKES: Your Honor, I would, because of
the disclosure requirement of the patent laws. It
requires people to disclose their inventions rather than
keeping them secret, so there is a second benefit to the
patent system just other than encouraging people to
invent, and that is to have that information get to the
public generally. And in exchange for that --
JUSTICE SCALIA: Even though the public
can't use it, right, until the patent expires?
MR. JAKES: Until the patent expires, if a
valid patent issues on that, yes.
But that's our system. We do give exclusive
rights in exchange for that information being provided
to the public.
JUSTICE STEVENS: May I ask this question?
What do you think the strongest case from our
jurisprudence is to support your position?
MR. JAKES: I would say it's the Diehr case.
JUSTICE STEVENS: Which one?
MR. JAKES: Diehr. Diamond v. Diehr.
JUSTICE STEVENS: Diehr?
MR. JAKES: Yes.
JUSTICE STEVENS: That was nothing like this
MR. JAKES: No, it's not, but I think it --
JUSTICE STEVENS: There's language in the
MR. JAKES: It outlines the general
principles and also tells us that there are only these
specific things that are not included within the subject
JUSTICE STEVENS: But is it correct that
there's none -- none of our cases have ever approved a
rule such as you advocate?
MR. JAKES: I don't think this particular
subject matter has been ruled on by the Court.
Now, in Dann v. Johnston in the 70s, there
was a case that could have been decided on the grounds
that it was a method of doing business, and instead the
Court close to decide that case based on obviousness.
And really --
JUSTICE SCALIA: You know, you mention that
there are all these -- these new areas that didn't exist
in the past because of modern business and what-not, but
there are also areas that existed in the past that don't
exist today. Let's take training horses. Don't you
think that -- that some people, horse whisperers or
others, had some, you know, some insights into the best
way to train horses? And that should have been
patentable on your theory.
MR. JAKES: They might have, yes.
JUSTICE SCALIA: Well, why didn't anybody
patent those things?
MR. JAKES: I think our economy was based on
JUSTICE SCALIA: It was based on horses, for
Pete's sake. You -- I would really have thought
somebody would have patented that.
MR. JAKES: There are also issues with
enforcement. I can't really answer why somebody
There are teaching methods that were
patented. There are a number of them that we've
included in our brief where there were patents issued
for teaching methods, and I don't think that we've had a
serious enforcement problem with people being sued for
using teaching methods. But there have been those
people who have sought to patent them rather than keep
them as secrets or just use them.
JUSTICE SCALIA: How old -- how old were
those, those cases?
MR. JAKES: They range. Some of them go
back quite a ways, to the last century.
JUSTICE STEVENS: May I ask this general
question, too? I have always admired Judge Rich, who
was very active in drafting the '52 amendments.
MR. JAKES: Yes.
JUSTICE STEVENS: Has he written anything on
this particular issue.
MR. JAKES: He has written a number of
things. And I think one of the things that the
Solicitor General quotes in their brief is from an
article that he wrote.
But he also wrote the Alappat decision and
the State Street Bank case as well. And those I think,
stand as his views, his latest views on what was
patent-eligible subject matter, looking at the State
Street Bank case.
JUSTICE KENNEDY: In the Diehr case, the
Court said that in the end the abstract idea must be in
a process that, oh, implements a proposal that the
patent laws were designed to protect, which brings you
almost back to the beginning.
MR. JAKES: It does.
JUSTICE KENNEDY: You don't -- you don't
know much from that language. But that was something
that you could touch, that you could see, that looked
like a machine, the substance was different before the
8 process and after the process. And -- and none of
that's applicable here. It's --
MR. JAKES: The Diehr invention was an
industrial process of the conventional type, because it
was a method of curing rubber. But today the raw
materials are just as likely to be information or
electronic signals, and to simply root us in the
industrial era because that's what we knew I think would
be wrong and contrary to the forward-looking aspect of
the patent law.
JUSTICE SOTOMAYOR: Well, isn't the
manipulation of electronic signals a substance that is
different in kind from just a method of how to go about
doing business or a method of how to approach a
Isn't there -- isn't that what the Federal
Circuit was trying to explain, which is that there has
to be something more substantive than the mere exchange
of information; that it has to involve -- it used the
word "transformation." It hasn't defined the outer
limits of what it means by that.
MR. JAKES: I think there is a difference.
But by rigidly looking at that transformation test, what
you do is you exclude lots of other things where the
transformation is not required --
JUSTICE BREYER: That's exactly what I --
maybe I can get you to inadvertently help my -- my
hypothesis you don't like. That's why I say it's
You said there are two things. There are
actually four things in the patent law which everyone
accepts. There are two that are plus and two that are
minus. And the two that are plus is by giving people a
monopoly, you get them to produce more. As you said,
you get them to disclose.
The two minuses are they charge a higher
price, so people use the product less; and moreover, the
act of getting permissions and having to get permission
can really slow things down and destroy advance. So
there is a balance.
In the nineteenth century, they made it one
way with respect to machines. Now you're telling us:
Make it today in respect to information. And if you ask
me as a person how to make that balance in respect to
information, if I am honest, I have to tell you: I
don't know. And I don't know whether across the board
or in this area or that area patent protection will do
no harm or more harm than good.
So that's the true situation in which I find
myself in respect to your argument. And it's in respect
to that, I would say: All right, so what do I do?
MR. JAKES: I think the answer is to follow
JUSTICE BREYER: Well, thank you. I thought
that was the issue, not the answer.
MR. JAKES: Congress has spoken in broad
terms and given us those four categories, and by looking
at those I think that answers the question.
JUSTICE SOTOMAYOR: But it doesn't, because
we don't work in a vacuum. We work in a context.
MR. JAKES: Yes.
JUSTICE SOTOMAYOR: And so it begs the
question, because we go around in a circle: What does
"process" mean in a patent law that was passed in 1952
that had one set of manufacturing and other items that
are technologically tied and this is not? So how do we
discern Congress's intent, other than by the use of the
word "process" in context?
MR. JAKES: I think that "process" is not by
itself. It says "any new and useful process." And so
we have -- we can look at those words and understand
that natural phenomena, laws of nature, which are not
really new because they are part of the storehouse of
knowledge available to everyone, and "useful," meaning
there has to be a practical application.
JUSTICE SOTOMAYOR: But the word "knowledge"
is not used in there. So it's not just useful
MR. JAKES: No.
JUSTICE SOTOMAYOR: It's useful knowledge in
relationship to something.
MR. JAKES: Practically applied, yes, in the
real world, whether that's the exchange of information
or electronic data transformation. One of the problems
with the transformation test is that it would exclude
some valuable inventions that I think everyone would
agree are technological under any test such as data
compression, such as FM radio. Even Bell's claim, the
claim to transmitting sound using undulating current,
wouldn't necessarily pass the transformation test. So I
think we need to look at --
JUSTICE KENNEDY: But it would be different,
it seems to me, than what you are -- let's assume you
can't patent an alphabet. I assume that is true. And
you can take an alphabet to make beautiful words, and --
and so forth. You -- you want to say that these --
these electronic signals can be used in a way just like
the alphabet can be used.
And many of the scientific briefs say that
their process is different, that they are taking
electronic signals and turning them into some other sort
of signal. But that's not what you are doing.
MR. JAKES: That may be, but those signals
could also be transmitted. On -- on your question about
the alphabet you said look at the Morse claim 5, which
was an alphabet to Morse Code. That's exactly what it
CHIEF JUSTICE ROBERTS: So you reject -- you
reject the substitute. You think you can patent an
alphabet because it is a process of forming words.
MR. JAKES: It could be, yes. Now, I think
you run into all kinds of other problems. And that's
really where the focus of the patent statute should be,
so that we have the fair give-and-take, the bargain that
is necessary, that we -- too much overpatenting as
opposed to too little. The test there is obviousness.
That's where it takes place, not at this threshold.
JUSTICE SOTOMAYOR: Morse's Code was not
MR. JAKES: What is that?
JUSTICE SOTOMAYOR: Morse's Code was not
obvious, and yet --
MR. JAKES: No, it wasn't.
JUSTICE SOTOMAYOR: As I understand that
case, the only thing patented was the use of his code
with respect to the telegraph machine that he proposed.
The Patent Office rejected -- maybe I am reading the
case wrong, but it rejected all of the claims except
those that related to the use of the code with a
MR. JAKES: It -- it does say used in
connection with telegraphy.
JUSTICE SOTOMAYOR: Of his claims --
MR. JAKES: Yes.
JUSTICE SOTOMAYOR: -- that was the only one
that was accepted, correct?
MR. JAKES: Right.
JUSTICE SOTOMAYOR: The same thing with --
well, Bell's patent was --
MR. JAKES: In Morse's claims, I believe it
was claim 8 was the one that was rejected, and the rest
of them were accepted. Claim 8 was the very broad claim
to transmitting information over a distance, however
JUSTICE SOTOMAYOR: Let's not skip over
that, because the rest of the claim in Bell related to
how to transmit over the wire, correct?
MR. JAKES: His disclosure did, but his
actual claim was interpreted as being using undulating
current to transmit sound, however that was
accomplished. It was very broad, and that's why --
JUSTICE SOTOMAYOR: And that was what was
MR. JAKES: No. Bell's claim was not
rejected. That one was approved, yes. The Morse claim,
claim 8, was the broad claim that really we would
probably look at today as being -- as having inadequate
disclosure because --
JUSTICE SCALIA: Well, it was -- it was
transforming sound into electrical current and then at
the other end electrical current back into sound. I
mean it met the transformation test, didn't it?
MR. JAKES: It might have. It might have.
JUSTICE SCALIA: It clearly did.
MR. JAKES: Well, it's not that clear from
the Federal Circuit's transformation test whether that
would apply or not, because although the Federal Circuit
has said transformation of data might qualify, it said
it has to represent something physical, something -- a
real object. And sound doesn't necessarily have to be
that. Sound can be generated artificially. So --
JUSTICE SCALIA: Sound -- sound is not
physical, and electric current is not physical?
MR. JAKES: I think electric current is
JUSTICE SCALIA: Yes, I think so.
MR. JAKES: Yes.
JUSTICE SCALIA: Sound is, too.
MR. JAKES: It can be, but when it's
transmitted over a wire, it's not. It's something else.
It's an electrical current then.
JUSTICE SCALIA: Sound is not transmitted
over the wires. Sound has been transformed into
current, and current is transmitted over the wire and
then transformed back at the other end into sound.
MR. JAKES: Yes, and I would agree --
JUSTICE SCALIA: I think it clearly --
clearly would have been covered by -- by the test the
MR. JAKES: I think that's more in the
nature of transmission, much like our data transmission.
You might transmit data in a packet without actually
changing the underlying data, and that should be allowed
If there are no questions, I will reserve
the rest of my time. Thank you.
CHIEF JUSTICE ROBERTS: Thank you, Mr.
ORAL ARGUMENT OF MALCOLM L. STEWART
ON BEHALF OF THE RESPONDENT
MR. STEWART: Mr. Chief Justice, and may it
please the Court:
Let me start by following up on the
discussion of the Morse and the telephone cases, because
it's certainly our view that those would come out the
same way under our test as -- as they actually did in
JUSTICE SCALIA: I certainly hope so.
MR. STEWART: And you know, Justice Scalia,
you mentioned how to win friends and influence people.
I think at a certain level of generality you could
describe both Dale Carnegie and Alexander Graham Bell as
people who devised methods of communicating more
The reason that Bell's method was patentable
was that it operated in the realm of the physical. Bell
had devised a process implemented through machines by
which sound was transformed into electronic current.
The current was then transmitted over a distance and
transformed back into sound.
Innovations as to new techniques of public
speaking, new techniques of negotiations, techniques
that go to the substance of what is said may be
innovative. They may be valuable. They are not patent
eligible because they don't deal in the realm of the
So while the industrial processes that we
discussed at some length in our brief were at the time
of the framing the paradigmatic patent eligible
processes, they were -- they are not the only processes
that can be patented.
JUSTICE ALITO: Near -- near the end of your
brief you argue that -- that the patent here is -- is
not -- is unpatentable on the independent ground that it
would preempt the abstract idea of hedging consumption
-- consumption risk. If you -- if you are right about
that, is this a good case for us to get into the -- into
the very broad issue that Petitioner has raised?
MR. STEWART: I -- I think we would
certainly prefer to win on our primary ground, and let
me say a couple of things about that. First, we would
fairly vigorously resist the notion that the rule that
was announced by the Federal circuit is rigid or
inflexible. That is, all that the Federal circuit has
really said is that to have a patent-eligible process
you have to identify some link to a machine or a
transformation of matter. And the Federal circuit has
said with respect to some processes the link to the
machine may be so attenuated, the machine part of the
process may be such a small segment of the process as a
whole, that this wouldn't be enough. But the Federal
circuit said: We leave for another day the hard
questions that will arise when part of the process is
machine-implemented and another part is not.
And in order for the PTO and the Federal
circuit to go about the business of devising more
precise rules as to when particular links to machines
are sufficient to create patent eligibility, we first
need to establish the -- the basic principle that some
link to a machine or transformation is necessary. So I
think we -- we have made the alternative argument in our
brief, and I think it is a basis for affirmance.
But if the Court decided the case on that
basis, we would lose at least the -- the limited clarity
that the Federal circuit's opinion has provided; that
is, it would still be open to people in the future to
devise new contractual arrangements designed to allocate
risks, new methods of teaching antitrust, and --
JUSTICE SOTOMAYOR: How about if we say
something as simple as patent law doesn't cover business
matters instead of what the Federal circuit has begun to
say, which is technology is tied to a machine or a
transformation of the substance, but I have no idea what
the limits of that ruling will impose in the computer
world, in the biomedical world, all of the amici who are
talking about how it will destroy industries? If we ar[e]
unsure about that, wouldn't the safer practice be simply
to say it doesn't involve business methods?
MR. STEWART: I think that would be
incorrect, and it would create problems of its own.
That is, the -- the innovation that was held to be
patent eligible in State Street Bank was not a process.
The Federal circuit was not construing the statutory
term "process." It was construing the statutory term
"machine." And it said, in essence, a computer that has
been programmed to perform various calculations in
connection with the operation of this business is a
It went on to say the opposing party in that
case had not raised any objection under section 102 or
103, and, therefore, the Federal circuit --
JUSTICE SOTOMAYOR: No ruling in this case
is going to change State Street. It wasn't looking at
process or the meaning of "process." It was looking at
MR. STEWART: Well, again, I think that the
invention that was held to be patent eligible in State
Street is commonly described as a business method, even
though it was held to be patent eligible as a machine
rather than as a process.
So to say that business methods are
categorically ineligible for patent protection would
eliminate new machines, including programmed computers,
that are useful because of their contributions to the
operation of businesses. And similarly, the court --
the Federal Circuit in other cases has held that a claim
to new and innovative computer software may be held
patentable as a process, as a method of accomplishing
particular tasks through the use of a computer and those
might be business-related tasks. So to say that
business methods were ruled out would itself be a fairly
JUSTICE SCALIA: Also you could say business
methods apart from machines are not patentable. How
MR. STEWART: If the Court said that in the
limited area of business methods, if there is no machine
or transformation there is no patent eligibility --
JUSTICE BREYER: Suppose you say this. I'm
just sort of testing things out. Start with Diehr. I
mean, and Diehr has these words in it, similar words, it
just says e.g. -- are you following me?
MR. STEWART: Yes.
JUSTICE BREYER: Now, you say what is it
they have done in this case in the Federal Circuit?
They have pulled back. That's a move. That's a move.
They pulled back insofar as they are pulling back from
business methods, not machines, dah, dah, dah, dah, dah.
Okay, we see no problem with that.
Now, they have left much unresolved. One,
transformation; how broad or narrow is that? We don't
know. Many people's problems will be solved if it's
broad on the one hand or narrow in the other.
Two, are you automatically patented -- in
the patent statute, if you just sort of reduce this to a
machine by adding a computer on at the end? They've
flagged that as a problem. They haven't answered it.
Could there ever be a situation where it doesn't meet
this test but still is patentable? We are not sure.
MR. STEWART: Let me take those points --
JUSTICE BREYER: Do you see what I'm trying
to do? I'm trying to note the things that have been
raised in these 80 briefs, insofar as possible say there
is a lot there for the future that we can't really
decide but say as a pull back, okay.
MR. STEWART: Let me address those points in
order. The first thing is that in Diehr when you had
the e.g. cite, it was "e.g. transforming an article into
a different" state of -- state or thing. And I think
the obvious inference is "e.g." was used because the
other prong of the machine-or-transformation test is use
as a machine. That is, in the context of Mr. Morse's
invention or Mr. Bell's invention, there is
transformation of a sort, but it wouldn't naturally be
characterized as transformation of matter.
Those things were held to be patent eligible
not because they transformed matter, but because they
involved the use of a machine. And so, what the Court
in Diehr said transformation of a matter or an article
into a different state or thing is the clue to the
patentability of a process that doesn't involve a
And the -- the type of process it had in
mind was the process that was described in Corning v.
Burden or the process in Cochrane v. Deener, situations
in which an individual had devised a method of, in one
sense -- one case, it was manufacturing flour, and in
another case it was rolling puddle bowls, of
manufacturing items. And that person said, here is the
series of steps that you have to go through, but it is
not essential that you use any particular tool or
machine for each of these steps. That was why the
CHIEF JUSTICE ROBERTS: Mr. Stewart, I
thought I understood your argument up until the very
last footnote in your brief. And you say this is not --
simply the method isn't patentable because it doesn't
involve a machine. But then you say but it might be if
you use a computer to identify the parties that you are
setting a price between and if you used a microprocessor
to calculate the price. That's like saying if you use a
typewriter to type out the -- the process then it is
patentable. I -- I -- it -- that takes away everything
that you spent 53 pages establishing.
MR. STEWART: Well, I guess there -- there
were two different places, I believe, at which we
identified ways in which this sort of hedging scheme
might be made patent eligible. The first is we
described a hypothetical interactive website in which
people -- parties and counterparties could essentially
find each other by the computer and could agree to terms
on that basis. And in that situation, the -- the
computer would be at the heart of the innovation. It
would be --
CHIEF JUSTICE ROBERTS: No, no. That's just
saying instead of looking at the -- in the Yellow Pages,
you look on the computer; and that makes all the
difference to you?
MR. STEWART: I think an -- an interactive
computer technique, one in which you sign on and can
find people without tracking them down specifically, can
simply identify yourself on the website as somebody
whose interested in engaging in a particular transaction
and a potential counterparty can find you, is different
from the Yellow Pages.
But I guess the fundamental point I would
make is -- and this is really responsive to the second
part of Justice Breyer's question -- I think it is both
a virtue and a vice of the test that the Federal Circuit
has announced and that we are advocating that it doesn't
solve all the hard questions. That is, the Federal
Circuit has said since this particular patent applicant
didn't identify any machine or any transformation that
would be necessary to the accomplishment of its method,
that person is out of luck, and therefore, it's
inappropriate for us to go on to decide kind of the
precise level of substantiality that a
machine-or-transformation must play --
CHIEF JUSTICE ROBERTS: But if you look at
your footnote, that involves the most tangential and
insignificant use of a machine. And yet you say that
might be enough to take something from patentability to
MR. STEWART: And all we've said is that it
might be enough; that is, hard questions will arise down
the road as to where do you draw the line, to what
extent must the machine or the transformation be
CHIEF JUSTICE ROBERTS: So you think it's a
hard question. If you develop a process that says look
to the historical averages of oil consumption over a
certain period and divide it by 2, that process would
not be patentable. But if you say use a calculator,
then it -- then it is?
MR. STEWART: I think if it's simply using a
calculator for its preexisting functionality to crunch
numbers, very likely that would not be enough. But what
we see in some analogous areas is that the computer will
be programmed with new software, it will be given
functionality it didn't have before in order to allow it
to perform a series of calculations, and that gets
closer to the line. And again --
CHIEF JUSTICE ROBERTS: Well, your
footnote -- I don't mean to dwell on it -- it says to
identify counterparties to the transactions. So that if
what you're trying to get is the -- the baker who sells
bread, because you are going to hook him up with the
grocer who sells, you know, in the grocery store, if you
punched in in your search station, you know, give me all
the bakers in Washington, that would make it patentable?
MR. STEWART: Again, we are -- we are not
saying it would be patent eligible. We would have to
review those facts, and the PTO would have to review
those facts in the context of an actual application.
I guess the point I'm trying to make is
simply that we don't want the Court, for instance, in
the area of software innovations or medical diagnostic
techniques to be trying to use this case as the vehicle
for identifying the circumstances in which innovations
of that sort would and would not be patent eligible,
because the case really doesn't present any -- any
question regarding those technologies. And therefore,
JUSTICE SOTOMAYOR: Now, if it veers the
other way, which is by saying that we exclusively rely
on the machine-or-transformation test, that we're
precluding applications of the patent law in those
fields, the things we can't imagine. Once you announce
an exclusive test, you're shoe-horning technologies that
might be different.
MR. STEWART: I guess I would say a couple
of different things. The first is that it seems
unlikely, even with new and rapidly emerging
technologies, that somebody would come up with a system
that seems for patent purposes analogous to the
inventions that have been patent eligible in the past
that didn't involve any machine and that didn't involve
Having said that, I would note that in both
Benson and inFlook the Court held open the possibility
that some unforeseen event could take place that
would -- as to which the application would be patent
eligible, even though the machine-or-transformation
JUSTICE SOTOMAYOR: So help us with a test
that doesn't go to the extreme the Federal Circuit did,
which is to preclude any other items, something we held
open explicitly in two other cases, so we would have to
backtrack and say now we are ruling that we were wrong,
and still get at something like this?
MR. STEWART: Well, I think the Court could
say -- could do essentially what was done in Benson and
Flook, namely acknowledge that there had never been a
case up to this point in which a process had been held
patent eligible that didn't involve a machine or a
transformation. It could leave open the possibility
that some new and as yet unforeseen technology could
necessitate the creation of an exception.
But -- and the point we would also make is
this seems to be a very unlikely candidate for such an
exception, because the hedging method that Petitioners
have -- for which they have sought a patent is in no
sense different in kind from risk management techniques
that have been undertaken for centuries.
JUSTICE SOTOMAYOR: Well, that -- that goes
back to, not 101 but 102 and 103. That goes back to
obviousness or the standard weeding mechanisms for
MR. STEWART: Well, this may or may not be a
novel or nonobvious method. But even if we assume that
this is obvious for purposes of Section 103, in that it
represent as sufficient advance over the prior art, that
people skilled in the art would not necessarily have
come up with it, it still is a different in kind from
risk management techniques that have taken place in this
country for -- for 200 years. It is -- it is --
JUSTICE GINSBURG: Mr. Stewart, did you --
does the government put forward this
machine-or-transformation test? Was that your test, or
was it the Federal circuit's on its own?
MR. STEWART: The Federal circuit, sua
sponte, set the case for hearing en banc. I believe the
case had been argued to a panel, but had not been
decided, and the Federal circuit set the case for
reargument en banc, posed a number of questions to
the -- the parties and the government did advocate the
JUSTICE GINSBURG: Tell me what --
CHIEF JUSTICE ROBERTS: I'm sorry. Did or
MR. STEWART: Did, it did advocate the
JUSTICE GINSBURG: You did -- and if you
read Judge Mayer's opinion, it has a simplicity to it.
It says, if it's technology, then its within the realm
of patent, and if it's not technology, it isn't, if it
is based on science or technology, and that seems to be
what is used in other places.
MR. STEWART: I don't know that our tests --
I think our test, in a sense, has a shorthand version of
that. I don't know that focusing the inquiry directly
on whether technology is involved would make the inquiry
easier, and that is so for two reasons.
First, people could dispute whether
particular advances are properly regarded as
technological advances, and second, we would still have
the difficult problems that the Chief Justice has
referred to, where you have a process that is described
as involving technology at some step along the way, and
courts will still have to make the determination, is
that sufficiently substantial step to make the process,
as a whole, a technological one.
So I don't think that, by adopting a
technological arts test, the Court would avoid the
difficulties that it has appropriately identified with
the machine-or-transformation test. The other thing I
would say about the machine-or-transformation test is
this is not a government position of recent vintage;
that is, the government's brief to this court in
Gottschalk v. Benson, or its reply brief which was filed
around 1971, basically said that, although this Court
has never announced machine-or-transformation of the
test, that is the principle that can be abstracted from
the totality of the Court's decisions.
JUSTICE KENNEDY: Was the State Street
a machine-or-transformation test?
MR. STEWART: It would.
JUSTICE KENNEDY: You talk about the State
Street case in your brief, and it's complicated because
of the Federal statute that follows it, but if you had
just the facts of State Street before us, and forgetting
the Federal statute was enacted after it, how would you
decide this case?
MR. STEWART: Oh, it would come out the same
way. I mean, State Street Bank --
JUSTICE KENNEDY: That's what I thought.
And is it -- is it machine-or-transformation, in your
MR. STEWART: Well, it was machine -- that
is, in State Street Bank, the claim was not to a process
within the meaning of Section 101. The claim was not to
a method of accomplishing things by means of a computer,
which would be, potentially, a process. It was to the
computer itself, the programmed computer, that the
innovation in State Street Bank was that the devising of
new computer programs that allowed the computer to
perform various tasks in association with the carrying
out of the hub-and-spokes investment -- investment
method. And, certainly --
CHIEF JUSTICE ROBERTS: So what did that --
what did that transform?
MR. STEWART: It didn't transform anything,
but it would fit -- the transformation part would be
irrelevant because the machine-or-transformation test
is, in our view, the appropriate rubric to apply in
construing the statutory term process, that is, when the
person doesn't say, I have invented a new machine, but,
rather, says, I've identified a new process for
If a person claims to be -- to have invented
a new machine, then that -- it is either a machine or it
isn't. A computer is certainly a machine. Really, the
only -- I think the --
JUSTICE STEVENS: I don't understand how
that can be a patent on a machine if the only thing
novel is the process that the machine is using.
Isn't -- isn't the question -- really, the question
there was whether the new process was patentable.
MR. STEWART: Well, I think what -- the
argument that the other side, the person challenging the
patent in State Street could have made, but apparently
didn't, was the person could have said, of course, the
computer is a machine, but a computer programmed with
new software to perform different functions is not a new
It's not a different machine from the one
that has always -- not always, but that has already
existed, and therefore, it doesn't satisfy Section 1 or
Section -- 102 or Section 103, but that --
JUSTICE KENNEDY: Well, that was one of the
reasons I asked you about it, I suppose. Just looking
at the whole case, do you think the State Street
holding -- the State Street invention was patentable?
MR. STEWART: It was -- the way I would put
it is: The State Street Bank analysis of the question
that was actually presented to it was correct; that is,
the argued was made, the programmed computer is
patentable as a --
JUSTICE KENNEDY: How would you come out in
the State Street case today, if all of the arguments
were made under your test?
MR. STEWART: Well, under our test, we would
come out the same way because the computer would be a
machine. The only question would be whether the
programming of the computer with new software caused it
to be a patentable different machine from the one that
Now -- now, we do think that software
innovations can have the effect of causing the computer
to be a different, special purpose computer, as the
JUSTICE STEVENS: I'm sorry. I must be
awfully stupid. You say it would come out the same way.
In the same way the court did or this way you argued?
MR. STEWART: I think the same -- the
Federal circuit's decision in State Street would come
out the same way under our test.
JUSTICE STEVENS: And you think it should?
You think it should?
MR. STEWART: Yes, but, again, the point I
would emphasize --
JUSTICE STEVENS: I don't understand why
that isn't just the application of a process, which --
which is not itself patentable subject matter, to a
particular machine that can use process --
JUSTICE KENNEDY: That's -- that's a problem
MR. STEWART: Well, I guess -- let me
backtrack. If you look at the text of the statute that
is reproduced at Page 2 of -- of the Blue Brief, and it
says -- it's right in the middle of the page. "Whoever
invents or discovers any new and useful process,
machine, manufacture, or composition of matter is
potentially entitled to" --
JUSTICE BREYER: So I thought you were
saying that the correct argument for the people
attacking the patent in that case was to say, this is
not a machine. The machine there is a computer. This
is a program that changes switches, and that is a
different process for the use of the machine.
Now, whether that process is or is not
patentable depends upon a lot of things that we don't
have to go into in this case. Is that right?
MR. STEWART: I don't -- no.
JUSTICE BREYER: Okay. Well, then what is
MR. STEWART: I don't think that's what I
saw saying. What I was saying is that -- and I guess
the -- the first point I would make is, when somebody
claims to have invented a new machine, the
transformation test really has nothing to do with the
inquiry because a -- a better television or a better DVD
player can be patented as a machine, even though
transformation of matter is no --
JUSTICE STEVENS: It's not on a computer,
which the only difference from the old computer is it's
using a new program. You can't say that's a new
MR. STEWART: Well, but my -- I think --
first, I think you can because I think if you -- if you
improved the hardware of the computer in order to enable
it to perform --
JUSTICE STEVENS: But that patent didn't
require any change in the hardware, as I remember it
MR. STEWART: But I -- but I think the
argument that has been made with success -- and PTO
agrees with this -- is that programming a computer by
means of software to produce -- to perform new functions
can create a novel --
JUSTICE BREYER: But then all we do is every
example that I just gave, that I thought were examples
that certainly would not be patented, you simply patent
them. All you do is just have a set of instructions for
saying how to set a computer to do it. Anyone can do
that. Now, it's a machine.
So all the business patents are all right
back in. Now, that -- what I think we were looking
for was -- or at least I was -- was why that isn't so,
and how you are going to later, down the road, deal with
this situation of all you do is you get somebody who
knows computers, and you turn every business patent into
a setting of switches on the machine because there are
no businesses that don't use those machines.
MR. STEWART: Well, first of all the only
ruling that we're -- backtrack a bit, to say, we oppose,
sir, in this case because we recognize that there are
difficult problems out there in terms of patentability
of software innovations and medical diagnostics.
JUSTICE KENNEDY: You thought we -- you
thought we would mess it up.
MR. STEWART: I didn't think --
MR. STEWART: We didn't think the Court
would mess it up. We thought that this case would
provide an unsuitable vehicle for resolving the hard
questions because the case doesn't involve computer
software or medical diagnostic techniques, and
therefore, we thought the Court would arrive at the
position that I think, at least some members are feeling
that you have arrived at, that you will decide this
case, and most of the hard questions remain unresolved.
And, frankly, we think that's true.
JUSTICE GINSBURG: But this case could be
decided without making any bold steps.
MR. STEWART: Again, I don't -- I don't
think it would be a bold step to say that
machine-or-transformation is the test. That is, we have
gone for --
JUSTICE GINSBURG: But even the Federal
circuit didn't say it was a retest. It said it is for
now. We know that things that we haven't yet
contemplated may be around the corner, and when they
happen, we will deal with them.
MR. STEWART: And we would -- we would be
entirely content with a ruling like that. And we would
say that the claimed hedging method here is not the sort
of Space Age innovation that might cause Justices to
say: This is just different in kind from anything that
the drafters of the patent statute could have imagined.
The other point I would make about the
programmed computer is, to follow up on my television
and DVD example, that when you claim a machine or a
manufacture, as the committee reports to the 1952 act
said, those words are broad. They encompass everything
under the sun that is made by man. And so a television
is indisputably a machine, even though its function is
not to transform matter. It's only when you get to the
term "process" that you are left with -- that the
machine-or-transformation test kicks in.
And really, the argument on the other side
is: The term "process" in ordinary speech is extremely
broad. It can literally be read to encompass any series
of steps, whether or not linked to technology, whether
or not linked to a machine or transformation. And the
other side argues you should construe it that way in the
I guess the -- the three reasons we would
say that's not so are: First, under the canon of
noscitur a sociis, it is appropriate to construe the
term "process" in conjunction with the other terms.
Those other terms are broad, but they all refer to
physical objects that don't exist in nature and are
created by man. And a huge array of very productive,
innovative activity doesn't culminate in the creation of
any new physical substance, and the word "process"
surely was intended to add something, but it would be
quite strange to construe the word "process" to
encompass the whole range of human endeavor when the
other words are limited to the creation of new things in
The second thing is that when this Court in
the past has explained the term "process," it's always
linked it to the operation of machines, as in the
telephone cases in Morse, or to the transformation of
matter in ways that may not be dependent on a particular
And the third thing I would say is that in a
sense, there is a strong dog that didn't bark in the
night quality to our argument. That is, even though the
Court has never said in so many words that a method of
allocating risk by contract is a patent-eligible
process, the economic history of this country really
would have been fundamentally different if it had been
believed from the outset that innovations of this
character could be patented and potential competitors
could be foreclosed from engaging in the same method.
If the Court has nothing further?
CHIEF JUSTICE ROBERTS: Thank you, Counsel.
Mr. Jakes, you have four minutes remaining.
REBUTTAL ARGUMENT OF J. MICHAEL JAKES
ON BEHALF OF THE PETITIONER
MR. JAKES: Thank you, Mr. Chief Justice.
The Federal Circuit did announce this test
as the sole test for all processes. It said it applied
no matter what the process was, so we do have to face
these difficult questions.
I think the question can be avoided, because
we don't need a rigid test of this type based on
machine-or-transformation. The question we are looking
at and should be looking at is: Are we trying to patent
an abstract idea?
Now, the government has gone farther than
that and really wants to exclude methods of organizing
human behavior. I think that's the way they describe
it. That's really the business method rejection in
other words. And I think that runs contrary to section
273 of the statute, which recognized that there were
business methods that could fall within the patent
statute, and as a result prior user rights should be
To speak briefly about the State Street Bank
case that was a type of business method that was
implemented on a machine. The Federal Circuit said it
didn't matter. They weren't looking at whether it was
in machine form or method form. Their reasoning would
have applied the same either way, and to do otherwise
would be to place form over substance. And in a sense,
that's what some of the transformation debate is about.
It's form over substance. Why should transformation be
the key? The key should be: Is it a practical
application of a useful result?
Our method, we believe, is a practical
application. As the patent office has said, it does
involve physical steps. I think that was one of the
clues that the patent office has relied on in saying
whether or not something is abstract. Since it is not
an abstract method, it's rooted in the real world, we
think it should be eligible to have its examination at
the patent office and it shouldn't be thrown out on an
CHIEF JUSTICE ROBERTS: The -- the physical
step that your process involves is picking -- picking up
the phone and calling people on both sides of the
MR. JAKES: It could be. It also requires
the sale of a commodity on a fixed price. That is
something that takes place in the real world as opposed
to a mental process within somebody's head. Purely
mental processes that are done just solely in someone's
mind, I think we all agree, those are not
patent-eligible. That's not our method.
CHIEF JUSTICE ROBERTS: Thank you, Counsel.
The case is submitted.
(Whereupon, at 1:55 p.m., the case in the
above-entitled matter was submitted.)