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Here's Bilski: It's Affirmed, But . . .No Decision on Software Patentability - Updated
Monday, June 28 2010 @ 10:04 AM EDT

Here's the US Supreme Court's opinion [PDF] in Bilski v. Kappos, at last. The lower court's decision is affirmed, and so no patent for Bilski. However, business methods are not found totally ineligible for patents, just this one. But the door is not swung wide open. From the Syllabus:
Finally, while §273 appears to leave open the possibility of some business method patents, it does not suggest broad patentability of such claimed inventions.
I think the State Street and AT&T interpretations of Section 101 by the Federal Circuit just got tossed overboard, as I'll show you in a minute, in favor of Benson, Flook, and Diehr. That's a good thing, if so, since it was State Street that opened the floodgates for software patents. If you recall, one dissent to the US Court of Appeals for the Federal Circuit's opinion in Bilski, the one by Justice Mayer, thought the court had not gone far enough. Why? "State Street has launched a legal tsunami....Patents granted in the wake of State Street have ranged from the somewhat ridiculous to the truly absurd." This Supreme Court opinion acknowledges a need to find a limiting principle. And Benson, Flook and Diehr were the three cases cited as technically correct in the article Groklaw published last year, An Explanation of Computation Theory for Lawyers.

Not everyone on the court agrees in all particulars. So it's complicated, and obviously not all we hoped for. But it's encouraging in some respects as to the future. What is clear is that the "machine or transformation test," while useful, is not the *sole* test for eligibility to obtain a patent. That was what the US Court of Appeals for the Federal Circuit had decided was the sole test. The US Supreme Court decided not to decide today about the patentability of software as a category, but they did provide some guidelines, and they didn't slam the door.

Yes, Justice Ruth Ginsburg is on the bench, despite losing her husband in death yesterday. All the other decisions will be listed here.

Here's a snip mentioning software, beginning on page 13 of the PDF, 9 of the opinion:

The machine-or-transformation test may well provide a sufficient basis for evaluating processes similar to those in the Industrial Age—for example, inventions grounded in a physical or other tangible form. But there are reasons to doubt whether the test should be the sole criterion for determining the patentability of inventions in the Information Age. As numerous amicus briefs argue, the machine-or-transformation test would create uncertainty as to the patentability of software, advanced diagnostic medicine techniques, and inventions based on linear programming, data compression, and the manipulation of digital signals. See, e.g., Brief for Business Software Alliance 24–25; Brief for Biotechnology Industry Organization et al. 14–27; Brief for Boston Patent Law Association 8–15; Brief for Houston Intellectual Property Law Association 17–22; Brief for Dolby Labs., Inc., et al. 9–10.

In the course of applying the machine-or-transformation test to emerging technologies, courts may pose questions of such intricacy and refinement that they risk obscuring the larger object of securing patents for valuable inventions without transgressing the public domain. The dissent by Judge Rader refers to some of these difficulties. 545 F. 3d, at 1015. As a result, in deciding whether previously unforeseen inventions qualify as patentable “process[es],” it may not make sense to require courts to confine themselves to asking the questions posed by the machine-or-transformation test. Section 101’s terms suggest that new technologies may call for new inquiries. See Benson, supra, at 71 (to “freeze process patents to old technologies, leaving no room for the revelations of the new, onrushing technology[,] . . . is not our purpose”).

It is important to emphasize that the Court today is not commenting on the patentability of any particular invention, let alone holding that any of the above-mentioned technologies from the Information Age should or should not receive patent protection. This Age puts the possibility of innovation in the hands of more people and raises new difficulties for the patent law. With ever more people trying to innovate and thus seeking patent protections for their inventions, the patent law faces a great challenge in striking the balance between protecting inventors and not granting monopolies over procedures that others would discover by independent, creative application of general principles. Nothing in this opinion should be read to take a position on where that balance ought to be struck.

So, no blanket decision on categories. Sadly. But notably there is no confirmation of patentability of any categories here either, other than business methods. Here's the explanation, in part, on page 16 of the PDF:
At the same time, some business method patents raise special problems in terms of vagueness and suspect validity. See eBay Inc. v. MercExchange, L. L. C., 547 U. S. 388, 397 (2006) (KENNEDY, J., concurring). The Information Age empowers people with new capacities to perform statistical analyses and mathematical calculations with a speed and sophistication that enable the design of protocols for more efficient performance of a vast number of business tasks. If a high enough bar is not set when considering patent applications of this sort, patent examiners and courts could be flooded with claims that would put a chill on creative endeavor and dynamic change.

In searching for a limiting principle, this Court’s precedents on the unpatentability of abstract ideas provide useful tools. See infra, at 12–15.

Indeed, if the Court of Appeals were to succeed in defining a narrower category or class of patent applications that claim to instruct how business should be conducted, and then rule that the category is unpatentable because, for instance, it represents an attempt to patent abstract ideas, this conclusion might well be in accord with controlling precedent. See ibid. But beyond this or some other limitation consistent with the statutory text, the Patent Act leaves open the possibility that there are at least some processes that can be fairly described as business methods that are within patentable subject matter under §101.

What they did is pull back some from the lower court's decision slightly. They don't get the tech, I'm afraid. And they believed the BSA, which in my view is a mistake. And they think patents are a good thing. They didn't specifically address software patentability. They passed on that question. So, this will require more work, later cases. But I find it significant that they searched for a *limiting* principle, even if not ruling today on certain categories, like software patents. They did not say everything under the sun is patentable. And they are clearly aware that patents can get out of control to the point where they hinder, rather than foster, innovation. Have we seen that before in a Supreme Court opinion? They seem to think they are describing a future problem, though, not one already happening, as far as chilling innovation. That is already happening in software development, particularly for Free and Open Source software development. Presumably future cases may open opportunities to further explain the problem.

But although they didn't specifically decide about software patentability as a category, they did provide some strong hints and some guidance that I view as helpful overall. So, this will require more work, later cases, if software patents are to be recognized as the problem that they are. That's how law usually works, incrementally, like turning an ocean liner, not a car or a bike.

So where is the line to be drawn for business methods?

Finally, even if a particular business method fits into the statutory definition of a “process,” that does not mean that the application claiming that method should be granted. In order to receive patent protection, any claimed invention must be novel, §102, nonobvious, §103, and fully and particularly described, §112. These limitations serve a critical role in adjusting the tension, ever present in patent law, between stimulating innovation by protecting inventors and impeding progress by granting patents when not justified by the statutory design.
Why then doesn't Bilski qualify?
Even though petitioners’ application is not categorically outside of §101 under the two broad and atextual approaches the Court rejects today, that does not mean it is a “process” under §101. Petitioners seek to patent both the concept of hedging risk and the application of that concept to energy markets. App. 19–20. Rather than adopting categorical rules that might have wide-ranging and unforeseen impacts, the Court resolves this case narrowly on the basis of this Court’s decisions in Benson, Flook, and Diehr, which show that petitioners’ claims are not patentable processes because they are attempts to patent abstract ideas. Indeed, all members of the Court agree that the patent application at issue here falls outside of §101 because it claims an abstract idea.
That's a start. What they don't realize yet is that software is abstract ideas. They do sort of get it, actually:
In Benson, the Court considered whether a patent application for an algorithm to convert binary-coded decimal numerals into pure binary code was a “process” under §101. 409 U. S., at 64–67. The Court first explained that “‘[a] principle, in the abstract, is a fundamental truth; an original cause; a motive; these cannot be patented, as no one can claim in either of them an exclusive right.’” Id., at 67 (quoting Le Roy, 14 How., at 175). The Court then held the application at issue was not a “process,” but an unpatentable abstract idea. “It is conceded that one may not patent an idea. But in practical effect that would be the result if the formula for converting . . . numerals to pure binary numerals were patented in this case.” 409 U. S., at 71. A contrary holding “would wholly pre-empt the mathematical formula and in practical effect would be a patent on the algorithm itself.” Id., at 72.
The opinion traces the history of all this in the major cases that discuss mathematical algorithms:
In Flook, the Court considered the next logical step after Benson. The applicant there attempted to patent a procedure for monitoring the conditions during the catalytic conversion process in the petrochemical and oil-refining industries. The application’s only innovation was reliance on a mathematical algorithm. 437 U. S., at 585–586. Flook held the invention was not a patentable “process.” The Court conceded the invention at issue, unlike the algorithm in Benson, had been limited so that it could still be freely used outside the petrochemical and oil-refining industries. 437 U. S., at 589–590.

Nevertheless, Flook rejected “[t]he notion that post-solution activity, no matter how conventional or obvious in itself, can transform an unpatentable principle into a patentable process. Id., at 590. The Court concluded that the process at issue there was “unpatentable under §101, not because it contain[ed] a mathematical algorithm as one component, but because once that algorithm [wa]s assumed to be within the prior art, the application, considered as a whole, contain[ed] no patentable invention.” Id., at 594. As the Court later explained, Flook stands for the proposition that the prohibition against patenting abstract ideas “cannot be circumvented by attempting to limit the use of the formula to a particular technological environment” or adding “insignificant postsolution activity.” Diehr, 450 U. S., at 191–192.

Finally, in Diehr, the Court established a limitation on the principles articulated in Benson and Flook. The application in Diehr claimed a previously unknown method for “molding raw, uncured synthetic rubber into cured precision products,” using a mathematical formula to complete some of its several steps by way of a computer. 450 U. S., at 177. Diehr explained that while an abstract idea, law of nature, or mathematical formula could not be patented, “an application of a law of nature or mathematical formula to a known structure or process may well be deserving of patent protection.” Id., at 187. Diehr emphasized the need to consider the invention as a whole, rather than “dissect[ing] the claims into old and new elements and then . . . ignor[ing] the presence of the old elements in the analysis.” Id., at 188. Finally, the Court concluded that because the claim was not “an attempt to patent a mathematical formula, but rather [was] an industrial process for the molding of rubber products,” it fell within §101’s patentable subject matter. Id., at 192–193.

In light of these precedents, it is clear that petitioners’ application is not a patentable “process.”

By that reasoning, I think there is hope that they may see eventually that software is algorithms, and if the above reasoning is applied to software patents, they all have to go in due time, even if processes including them may survive, meaning the process remains patentable but not the math used. Obviously, the court knows you can't patent math. It's processes that might include math in the process, but not in the patent, as I read this. But that would, I think, have to exclude the math from the patent, because software is math, algorithms. For sure, abstract ideas can't be patented, they say, nor mathematical algorithms. What else is there in software, by the way? For example, here's more on why Bilski didn't qualify:
The concept of hedging, described in claim 1 and reduced to a mathematical formula in claim 4, is an unpatentable abstract idea, just like the algorithms at issue in Benson and Flook. Allowing petitioners to patent risk hedging would preempt use of this approach in all fields, and would effectively grant a monopoly over an abstract idea.
And here's the most encouraging part, to me:
Today, the Court once again declines to impose limitations on the Patent Act that are inconsistent with the Act’s text. The patent application here can be rejected under our precedents on the unpatentability of abstract ideas. The Court, therefore, need not define further what constitutes a patentable “process,” beyond pointing to the definition of that term provided in §100(b) and looking to the guideposts in Benson, Flook, and Diehr.

And nothing in today’s opinion should be read as endorsing interpretations of §101 that the Court of Appeals for the Federal Circuit has used in the past. See, e.g., State Street, 149 F. 3d, at 1373; AT&T Corp., 172 F. 3d, at 1357. It may be that the Court of Appeals thought it needed to make the machine-or-transformation test exclusive precisely because its case law had not adequately identified less extreme means of restricting business method patents, including (but not limited to) application of our opinions in Benson, Flook, and Diehr. In disapproving an exclusive machine-or-transformation test, we by no means foreclose the Federal Circuit’s development of other limiting criteria that further the purposes of the Patent Act and are not inconsistent with its text.

Is that not saying that they reject the interpretations of §101 in State Street? If I'm reading it right, I'd call that a win. If you recall, Microsoft asked that the court agree with State Street and AT&T and set the bar at anything "useful, concrete and tangible":
The cases in which the "useful, concrete and tangible" phrase originated -- Alappat, State Street, and AT&T Corp. v. Excel Comms., Inc., 172 F.3d 1352 (Fed. Cir. 1999) -- all involved claims with physical limitations that satisfied the essential requirement of Section 101 as articulated by the Supreme Court. As the Supreme Court also made clear, however, physical limitations do not necessarily satisfy Section 101, if the practical effect of allowing the claim, viewed as a whole, would be to grant patent rights on an abstract idea or fundamental principle. See, e.g., Diehr, 450 U.S. at 191; Flook, 437 U.S. at 590; Benson, 409 U.S. at 72-73. Thus, where a process claim incorporates an abstract idea or fundamental principle, Section 101 requires confirmation that the claim is not simply a dressed-up version of that idea or principle -- that is, does the claimed process, viewed as a whole, have specific, practical utility? See, e.g., Diehr, 450 U.S. at 187. This Court's "useful, concrete and tangible" formulation is a useful analytical tool to confirm that an invention that is sufficiently physical in nature is indeed patent-eligible under Section 101. It does not, however, function as a stand-alone test or alternative to the requirement that a patent-eligible invention have a physical foundation.
I read today's decision as declining Microsoft's invitation to adopt that standard, and in fact rejecting it. So a mixed day. Definitely not as bad as it could have been, but not all we hoped for. But a step forward, in my view, even if only slightly.

That's how I read it, but as lawyers begin to analyze and post their interpretations and conclusions, I'll update this article so you can get a broad view of how the world sees this, not just me.

Update: Statements from Eben Moglen and Dan Ravicher of Software Freedom Law Center:

Attributable to Eben Moglen: "The landscape of patent law has been a cluttered, dangerous mess for almost two decades," said Eben Moglen, Chairman of the Software Freedom Law Center. "The confusion and uncertainty behind today's ruling guarantees that the issues involved in Bilski v. Kappos will have to return to the Supreme Court after much money has been wasted and much innovation obstructed."

Attributable to Daniel Ravicher: "For over a decade we've seen patents on ideas, thoughts, and even genes," said Daniel Ravicher, the legal director of the Software Freedom Law Center. "Today the Court missed an opportunity to send a strong signal that ideas are not patentable subject matter. The Court's rejection of Bilski's patent application got rid of a symptom of the disease, but failed to treat the real cause by reconfirming that thought and thought processes are not patentable."

So. A missed opportunity, from their perspective. Mine too. The court didn't address the Constitutional First Amendment issue raised in the SFLC's amicus brief, so they will have to do that again for a future case, which is disappointing. But I'm sure they'll do it.

Here's Tony Mauro on Law.com:

Justice Anthony Kennedy read from Bilski v. Kappos (pdf), in which the Court majority struck down the specific patent at issue, but did not rule out patent eligibility for other kinds of business methods. Stevens read from his concurrence, criticizing the Court ruling which he said will "cause mischief" by leaving open the possibility of patentability for intangible methods and processes.
Tomorrow is Justice Stevens' last day on the court. I'll post his dissent and the entire opinion as soon as I can get it done as text. If you can help, please sing out.

Bilski's lawyer, believe it or not, says he likes the decision overall for patent owners, according to AP, and even hopes for wiggle room for his client:

Michael Jakes, the lawyer who represented Bilski and Warsaw, said it may just mean a rewording of the patent application to “make the claims less abstract.”

“For most patent owners, it’s a very good decision,” Jakes, a lawyer at Finnegan Henderson in Washington, said in a telephone interview. “It eliminates the federal circuit’s very restrictive test and leaves open patents for things that are not physical” inventions.

The pro patents guys never give in or give up. They just reword.

Ashby Jones at the Wall St. Journal Law Blog got more reactions from patent attorneys, all of whom express relief:

To Shearman & Sterling’s Michael Bednarek, the ruling comes a “big relief.” Bednarek says that “there was a big possibility that the patent system was going to get gutted, that the court would go too far and put up too many hurdles to getting anything patented.”

Had the court clung to the “machine-or-transformation test,” in Bednarek’s opinion, lower courts would have been forced to wipe out many, many patents, and that would have hurt the U.S. economy. “Look, the smartest people are going into financial services, medical technologies, computer technologies,” he said. “This isn’t the industrial age anymore, and the innovation in this country isn’t solely in the rust belt. To hold that would be to help foreign economies at our own expense.”

Jones Day’s John Biernacki thinks the ruling affords courts “greater flexibility” when looking at business-method patents. “The district courts were using the Federal Circuit’s ruling to strike down a lot of patents, especially those pertaining to e-commerce,” said Biernacki. “Patentees and courts now will have greater latitude.”

Indeed. That's a bug, not a feature. Patent lawyers love to talk about the economy, but I never see them factor in the damage to FOSS and what that does to the economy. It's no doubt quantifiable. Someone should probably work on that for the next case, I'm thinking.

More on that, and some more lawyers' reactions, from the Wall Street Journal's news coverage:

Bank of America Corp. (BAC), Google Inc. (GOOG) and a group of Internet retailers are among those who argued in friend-of-the court briefs that the explosion of questionable business-method patents has harmed innovation and led to a wave of costly litigation.

The pharmaceutical and biotechnology industries, along with high-tech companies like International Business Machines Corp. (IBM) and Yahoo Inc. (YHOO) had argued that a lower court's legal test limiting business-method patents did not adequately protect technological innovations.

Edward Reines, a patent lawyer with the Weil Gotshal law firm, said the court largely punted in the case. "This appeared to be based on a lack of confidence that it could determine rules in this tough terrain with such high-stakes and rapidly evolving technology," Reines said.

Alex Hadjis, a patent attorney with Morrison & Foerster, said the Supreme Court's decision to disavow the appeals court's restrictive test could actually benefit some method patents. "Business method patents in view of this opinion appear to clearly be in business," he said.

Here's Google's amicus brief [PDF] and Bank of America's [PDF], if you'd like to know why patents harm the economy and innovation, if that's a new thought to you. Here's IBM's [PDF]. More on Groklaw's permanent Bilski resource page. The complete collection of amicus briefs is available on the ABA's website.

Two more lawyers from Stephen Shankland's coverage on CNET:

Advocates for software patents hailed the ruling. Tom Sydnor, a fellow at the free-market Progress and Freedom Foundation, called it a "moderate, sensible position" that "rejected implausible bright-line rules that would prohibit" patenting software or business methods.

"This is not the bright-line test anybody was hoping for," said Steven Bauer, an intellectual-property attorney and co-head of the Proskauer Patent Law Group. Instead, it will add another layer to every software patent case, requiring defendants to show their patents aren't abstract ideas, he said.

Steven J. Vaughan-Nichols at ComputerWorld spoke to Peter Brown at FSF, just prior to the opinion being published:
Peter Brown, executive director of the FSF (Free Software Foundation) told me before the decision that, "Whatever the Supreme Court decides, it's clear that this issue won't end anytime soon. Congress is considering a patent reform bill, and the US government has been working to push its software patent laws to other countries through treaties like ACTA [Anti-Counterfeiting Trade Agreement]." In other words, after this decision, we're as far away from the complete overhaul of the U.S. patent system that we, software developers and users alike, need as ever.
I'm not as agitated and upset as some, because I didn't really expect this to be the final word. And it's not. And I'm optimistic by nature. Maybe covering SCO gave me a thick skin, with all the ups and downs, so I don't get thrown by either too much. But as I view it, now it's just time to begin looking for the next, better case involving software patents directly to push the court toward technical reality. They have left that door open. That's what's significant to me in what happened today. Now it's time for me to read it all more carefully and slowly and work on the text. -- End Update.]

Meanwhile, here are the Syllabus section and Opinion as text, so you can read it all and form your own impressions. As always, for anything that matters, check the PDF itself. We strive for accuracy, but we are only human:

*****************************

(Slip Opinion)

OCTOBER TERM, 2009

Syllabus

NOTE: Where it is feasible, a syllabus (headnote) will be released, as is being done in connection with this case, at the time the opinion is issued. The syllabus constitutes no part of the opinion of the Court but has been prepared by the Reporter of Decisions for the convenience of the reader. See United States v. Detroit Timber & Lumber Co., 200 U. S. 321, 337.

SUPREME COURT OF THE UNITED STATES

Syllabus

BILSKI ET AL. v. KAPPOS, UNDER SECRETARY OF
COMMERCE FOR INTELLECTUAL PROPERTY AND
DIRECTOR, PATENT AND TRADEMARK OFFICE

CERTIORARI TO THE UNITED STATES COURT OF APPEALS FOR
THE FEDERAL CIRCUIT

No. 08964. Argued November 9, 2009--Decided June 28, 2010

Petitioners' patent application seeks protection for a claimed invention that explains how commodities buyers and sellers in the energy market can protect, or hedge, against the risk of price changes. The key claims are claim 1, which describes a series of steps instructing how to hedge risk, and claim 4, which places the claim 1 concept into a simple mathematical formula. The remaining claims explain how claims 1 and 4 can be applied to allow energy suppliers and consumers to minimize the risks resulting from fluctuations in market demand. The patent examiner rejected the application on the grounds that the invention is not implemented on a specific apparatus, merely manipulates an abstract idea, and solves a purely mathematical problem. The Board of Patent Appeals and Interferences agreed and affirmed. The Federal Circuit, in turn, affirmed. The en banc court rejected its prior test for determining whether a claimed invention was a patentable "process" under Patent Act, 35 U. S. C. §101 -- i.e., whether the invention produced a "useful, concrete, and tangible result," see, e.g., State Street Bank & Trust Co v. Signature Financial Group, Inc., 149 F. 3d 1368, 1373 -- holding instead that a claimed process is patent eligible if: (1) it is tied to a particular machine or apparatus, or (2) it transforms a particular article into a different state or thing. Concluding that this "machine-or-transformation test" is the sole test for determining patent eligibility of a "process" under §101, the court applied the test and held that the application was not patent eligible.

Held: The judgment is affirmed.

545 F. 3d 943, affirmed.

JUSTICE KENNEDY delivered the opinion of the Court, except as to Parts IIB2 and IIC2, concluding that petitioners' claimed invention is not patent eligible. Pp. 48, 1011, 1216.
(a) Section 101 specifies four independent categories of inventions or discoveries that are patent eligible: "process[es]," "machin[es]," "manufactur[es]," and "composition[s] of matter." "In choosing such expansive terms, . . . Congress plainly contemplated that the patent laws would be given wide scope," Diamond v. Chakrabarty, 447 U. S. 303, 308, in order to ensure that "'ingenuity should receive a liberal encouragement,'" id., at 308309. This Court's precedents provide three specific exceptions to §101's broad principles: "laws of nature, physical phenomena, and abstract ideas." Id., at 309. While not required by the statutory text, these exceptions are consistent with the notion that a patentable process must be "new and useful." And, in any case, the exceptions have defined the statute's reach as a matter of statutory stare decisis going back 150 years. See Le Roy v. Tatham, 14 How. 156, 174. The §101 eligibility inquiry is only a threshold test. Even if a claimed invention qualifies in one of the four categories, it must also satisfy "the conditions and requirements of this title," §101(a), including novelty, see §102, nonobviousness, see §103, and a full and particular description, see §112. The invention at issue is claimed to be a "process," which §100(b) defines as a "process, art or method, and includes a new use of a known process, machine, manufacture, composition of matter, or material." Pp. 45.
(b) The machine-or-transformation test is not the sole test for patent eligibility under §101. The Court's precedents establish that although that test may be a useful and important clue or investigative tool, it is not the sole test for deciding whether an invention is a patent-eligible "process" under §101. In holding to the contrary, the Federal Circuit violated two principles of statutory interpretation: Courts "'should not read into the patent laws limitations and conditions which the legislature has not expressed,'" Diamond v. Diehr, 450 U. S. 175, 182, and, "[u]nless otherwise defined, 'words will be interpreted as taking their ordinary, contemporary, common meaning,'" ibid. The Court is unaware of any ordinary, contemporary, common meaning of "process" that would require it to be tied to a machine or the transformation of an article. Respondent Patent Director urges the Court to read §101's other three patentable categories as confining "process" to a machine or transformation. However, the doctrine of noscitur a sociis is inapplicable here, for §100(b) already explicitly defines "process," see Burgess v. United States, 553 U. S. 124, 130, and nothing about the section's inclusion of those other categories suggests that a "process" must be tied to one of them.

2

Finally, the Federal Circuit incorrectly concluded that this Court has endorsed the machine-or-transformation test as the exclusive test. Recent authorities show that the test was never intended to be exhaustive or exclusive. See, e.g., Parker v. Flook, 437 U. S. 584, 588, n. 9. Pp. 58.
(c) Section 101 similarly precludes a reading of the term "process" that would categorically exclude business methods. The term "method" within §100(b)'s "process" definition, at least as a textual matter and before other consulting other Patent Act limitations and this Court's precedents, may include at least some methods of doing business. The Court is unaware of any argument that the "ordinary, contemporary, common meaning," Diehr, supra, at 182, of "method" excludes business methods. Nor is it clear what a business method exception would sweep in and whether it would exclude technologies for conducting a business more efficiently. The categorical exclusion argument is further undermined by the fact that federal law explicitly contemplates the existence of at least some business method patents: Under §273(b)(1), if a patent-holder claims infringement based on "a method in [a] patent," the alleged infringer can assert a defense of prior use. By allowing this defense, the statute itself acknowledges that there may be business method patents. Section 273 thus clarifies the understanding that a business method is simply one kind of "method" that is, at least in some circumstances, eligible for patenting under §101. A contrary conclusion would violate the canon against interpreting any statutory provision in a manner that would render another provision superfluous. See Corley v. United States, 556 U. S. ___, ___. Finally, while §273 appears to leave open the possibility of some business method patents, it does not suggest broad patentability of such claimed inventions. Pp. 1011.
(d) Even though petitioners' application is not categorically outside of §101 under the two atextual approaches the Court rejects today, that does not mean it is a "process" under §101. Petitioners seek to patent both the concept of hedging risk and the application of that concept to energy markets. Under Benson, Flook, and Diehr, however, these are not patentable processes but attempts to patent abstract ideas. Claims 1 and 4 explain the basic concept of hedging and reduce that concept to a mathematical formula. This is an unpatentable abstract idea, just like the algorithms at issue in Benson and Flook. Petitioners' remaining claims, broad examples of how hedging can be used in commodities and energy markets, attempt to patent the use of the abstract hedging idea, then instruct the use of well-known random analysis techniques to help establish some of the inputs into the equation. They add even less to the underlying abstract principle than the invention held patent ineligible in Flook. Pp. 12-

3

15.
(e) Because petitioners' patent application can be rejected under the Court's precedents on the unpatentability of abstract ideas, the Court need not define further what constitutes a patentable "process," beyond pointing to the definition of that term provided in §100(b) and looking to the guideposts in Benson, Flook, and Diehr.

Nothing in today's opinion should be read as endorsing the Federal Circuit's past interpretations of §101. See, e.g., State Street, 49 F. 3d, at 1373. The appeals court may have thought it needed to make the machine-or-transformation test exclusive precisely because its case law had not adequately identified less extreme means of restricting business method patents. In disapproving an exclusive machine-or-transformation test, this Court by no means desires to preclude the Federal Circuit's development of other limiting criteria that further the Patent Act's purposes and are not inconsistent with its text. P. 16.

KENNEDY, J., delivered the opinion of the Court, except for Parts II B2 and IIC2. ROBERTS, C. J., and THOMAS and ALITO, JJ., joined the opinion in full, and SCALIA, J., joined except for Parts IIB2 and IIC 2. STEVENS, J., filed an opinion concurring in the judgment, in which GINSBURG, BREYER, and SOTOMAYOR, JJ., joined. BREYER, J., filed an opinion concurring in the judgment, in which SCALIA, J., joined as to Part II.

1

Cite as: 561 U. S. ____ (2010)

Opinion of the Court

NOTICE: This opinion is subject to formal revision before publication in the preliminary print of the United States Reports. Readers are requested to notify the Reporter of Decisions, Supreme Court of the United States, Washington, D. C. 20543, of any typographical or other formal errors, in order that corrections may be made before the preliminary print goes to press.

SUPREME COURT OF THE UNITED STATES

_________________

No. 08964

_________________

BERNARD L. BILSKI AND RAND A. WARSAW,
PETITIONERS v. DAVID J. KAPPOS, UNDER
SECRETARY OF COMMERCE FOR INTEL-
LECTUAL PROPERTY AND DIRECTOR,
PATENT AND TRADEMARK OFFICE

ON WRIT OF CERTIORARI TO THE UNITED STATES COURT OF
APPEALS FOR THE FEDERAL CIRCUIT

[June 28, 2010]

JUSTICE KENNEDY delivered the opinion of the Court, except as to Parts IIB2 and IIC2.*

The question in this case turns on whether a patent can be issued for a claimed invention designed for the business world. The patent application claims a procedure for instructing buyers and sellers how to protect against the risk of price fluctuations in a discrete section of the economy. Three arguments are advanced for the proposition that the claimed invention is outside the scope of patent law: (1) it is not tied to a machine and does not transform an article; (2) it involves a method of conducting business; and (3) it is merely an abstract idea. The Court of Appeals ruled that the first mentioned of these, the so-called machine-or-transformation test, was the sole test to be used for determining the patentability of a "process" under the Patent Act, 35 U. S. C. §101.

1

BILSKI v. KAPPOS

Opinion of the Court

I

Petitioners' application seeks patent protection for a claimed invention that explains how buyers and sellers of commodities in the energy market can protect, or hedge, against the risk of price changes. The key claims are claims 1 and 4. Claim 1 describes a series of steps instructing how to hedge risk. Claim 4 puts the concept articulated in claim 1 into a simple mathematical formula. Claim 1 consists of the following steps:
"(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 consumers;

"(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." App. 1920.

The remaining claims explain how claims 1 and 4 can be applied to allow energy suppliers and consumers to minimize the risks resulting from fluctuations in market demand for energy. For example, claim 2 claims "[t]he method of claim 1 wherein said commodity is energy and said market participants are transmission distributors." Id., at 20. Some of these claims also suggest familiar statistical approaches to determine the inputs to use in claim 4's equation. For example, claim 7 advises using well-known random analysis techniques to determine how much a seller will gain "from each transaction under each

2

historical weather pattern." Id., at 21.

The patent examiner rejected petitioners' application, explaining that it "'is not implemented on a specific apparatus and merely manipulates [an] abstract idea and solves a purely mathematical problem without any limitation to a practical application, therefore, the invention is not directed to the technological arts.'" App. to Pet. for Cert. 148a. The Board of Patent Appeals and Interferences affirmed, concluding that the application involved only mental steps that do not transform physical matter and was directed to an abstract idea. Id., at 181a-186a.

The United States Court of Appeals for the Federal Circuit heard the case en banc and affirmed. The case produced five different opinions. Students of patent law would be well advised to study these scholarly opinions.

Chief Judge Michel wrote the opinion of the court. The court rejected its prior test for determining whether a claimed invention was a patentable "process" under §101 -- whether it produces a "'useful, concrete, and tangible result'" -- as articulated in State Street Bank & Trust Co. v. Signature Financial Group, Inc., 149 F. 3d 1368, 1373 (1998), and AT&T Corp. v. Excel Communications, Inc., 172 F. 3d 1352, 1357 (1999). See In re Bilski, 545 F. 3d 943, 959960, and n. 19 (CA Fed. 2008) (en banc). The court held that "[a] claimed process is surely patent-eligible under §101 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 954. The court concluded this "machine-or-transformation test" is "the sole test governing §101 analyses," id., at 955, and thus the "test for determining patent eligibility of a process under §101," id., at 956. Applying the machine-or-transformation test, the court held that petitioners' application was not patent eligible. Id., at 963966. Judge Dyk wrote a separate concurring opinion, providing historical support for the

3

court's approach. Id., at 966-976.

Three judges wrote dissenting opinions. Judge Mayer argued that petitioners' application was "not eligible for patent protection because it is directed to a method of conducting business." Id., at 998. He urged the adoption of a "technological standard for patentability." Id., at 1010. Judge Rader would have found petitioners' claims were an unpatentable abstract idea. Id., at 1011. Only Judge Newman disagreed with the court's conclusion that petitioners' application was outside of the reach of §101. She did not say that the application should have been granted but only that the issue should be remanded for further proceedings to determine whether the application qualified as patentable under other provisions. Id., at 997.

This Court granted certiorari. 556 U. S. ___ (2009).

II

A

Section 101 defines the subject matter that may be patented under the Patent Act:
"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."
Section 101 thus specifies four independent categories of inventions or discoveries that are eligible for protection: processes, machines, manufactures, and compositions of matter. "In choosing such expansive terms . . . modified by the comprehensive 'any,' Congress plainly contemplated that the patent laws would be given wide scope." Diamond v. Chakrabarty, 447 U. S. 303, 308 (1980). Congress took this permissive approach to patent eligibility to ensure that "'ingenuity should receive a liberal encouragement.' " Id., at 308-309 (quoting 5 Writings of Thomas

4

Jefferson 7576 (H. Washington ed. 1871)).

The Court's precedents provide three specific exceptions to §101's broad patent-eligibility principles: "laws of nature, physical phenomena, and abstract ideas." Chakrabarty, supra, at 309. While these exceptions are not required by the statutory text, they are consistent with the notion that a patentable process must be "new and useful." And, in any case, these exceptions have defined the reach of the statute as a matter of statutory stare decisis going back 150 years. See Le Roy v. Tatham, 14 How. 156, 174-175 (1853). The concepts covered by these exceptions are "part of the storehouse of knowledge of all men . . . free to all men and reserved exclusively to none." Funk Brothers Seed Co. v. Kalo Inoculant Co., 333 U. S. 127, 130 (1948).

The §101 patent-eligibility inquiry is only a threshold test. Even if an invention qualifies as a process, machine, manufacture, or composition of matter, in order to receive the Patent Act's protection the claimed invention must also satisfy "the conditions and requirements of this title." §101. Those requirements include that the invention be novel, see §102, nonobvious, see §103, and fully and particularly described, see §112.

The present case involves an invention that is claimed to be a "process" under §101. Section 100(b) defines "process" as:

"process, art or method, and includes a new use of a known process, machine, manufacture, composition of matter, or material."
The Court first considers two proposed categorical limitations on "process" patents under §101 that would, if adopted, bar petitioners' application in the present case: the machine-or-transformation test and the categorical exclusion of business method patents.

5

B

1

Under the Court of Appeals’ formulation, an invention is a “process” only if: “(1) it is tied to a particular machine or apparatus, or (2) it transforms a particular article into a different state or thing.” 545 F. 3d, at 954. This Court has “more than once cautioned that courts 'should not read into the patent laws limitations and conditions which the legislature has not expressed.’” Diamond v. Diehr, 450 U. S. 175, 182 (1981) (quoting Chakrabarty, supra, at 308; some internal quotation marks omitted). In patent law, as in all statutory construction, “[u]nless otherwise defined, 'words will be interpreted as taking their ordinary, contemporary, common meaning.’” Diehr, supra, at 182 (quoting Perrin v. United States, 444 U. S. 37, 42 (1979)). The Court has read the §101 term “manufacture” in accordance with dictionary definitions, see Chakrabarty, supra, at 308 (citing American Fruit Growers, Inc. v. Brogdex Co., 283 U. S. 1, 11 (1931)), and approved a construction of the term “composition of matter” consistent with common usage, see Chakrabarty, supra, at 308 (citing Shell Development Co. v. Watson, 149 F. Supp. 279, 280 (DC 1957)).

Any suggestion in this Court’s case law that the Patent Act’s terms deviate from their ordinary meaning has only been an explanation for the exceptions for laws of nature, physical phenomena, and abstract ideas. See Parker v. Flook, 437 U. S. 584, 588–589 (1978). This Court has not indicated that the existence of these well-established exceptions gives the Judiciary carte blanche to impose other limitations that are inconsistent with the text and the statute’s purpose and design. Concerns about attempts to call any form of human activity a “process” can be met by making sure the claim meets the requirements of §101.

Adopting the machine-or-transformation test as the sole

6

test for what constitutes a "process" (as opposed to just an important and useful clue) violates these statutory interpretation principles. Section 100(b) provides that "[t]he term 'process' means process, art or method, and includes a new use of a known process, machine, manufacture, composition of matter, or material." The Court is unaware of any "'ordinary, contemporary, common meaning,'" Diehr, supra, at 182, of the definitional terms "process, art or method" that would require these terms to be tied to a machine or to transform an article. Respondent urges the Court to look to the other patentable categories in §101 -- machines, manufactures, and compositions of matter -- to confine the meaning of "process" to a machine or transformation, under the doctrine of noscitur a sociis. Under this canon, "an ambiguous term may be given more precise content by the neighboring words with which it is associated." United States v. Stevens, 559 U. S. ___, ___ (2010) (slip op., at 12) (internal quotation marks omitted). This canon is inapplicable here, for §100(b) already explicitly defines the term "process." See Burgess v. United States, 553 U. S. 124, 130 (2008) ("When a statute includes an explicit definition, we must follow that definition" (internal quotation marks omitted)).

The Court of Appeals incorrectly concluded that this Court has endorsed the machine-or-transformation test as the exclusive test. It is true that Cochrane v. Deener, 94 U. S. 780, 788 (1877), explained that a "process" is "an act, or a series of acts, performed upon the subject-matter to be transformed and reduced to a different state or thing." More recent cases, however, have rejected the broad implications of this dictum; and, in all events, later authority shows that it was not intended to be an exhaustive or exclusive test. Gottschalk v. Benson, 409 U. S. 63, 70 (1972), noted that "[t]ransformation and reduction of an article 'to a different state or thing' is the clue to the pat-

7

entability of a process claim that does not include particular machines." At the same time, it explicitly declined to "hold that no process patent could ever qualify if it did not meet [machine or transformation] requirements." Id., at 71. Flook took a similar approach, "assum[ing] that a valid process patent may issue even if it does not meet [the machine-or-transformation test]." 437 U. S., at 588, n. 9.

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

2

It is true that patents for inventions that did not satisfy the machine-or-transformation test were rarely granted in earlier eras, especially in the Industrial Age, as explained by Judge Dyk’s thoughtful historical review. See 545 F. 3d, at 966–976 (concurring opinion). But times change. Technology and other innovations progress in unexpected ways. For example, it was once forcefully argued that until recent times, “well-established principles of patent law probably would have prevented the issuance of a valid patent on almost any conceivable computer program.” Diehr, 450 U. S., at 195 (STEVENS, J., dissenting). But this fact does not mean that unforeseen innovations such as computer programs are always unpatentable. See id., at 192–193 (majority opinion) (holding a procedure for molding rubber that included a computer program is within patentable subject matter). Section 101 is a “dynamic provision designed to encompass new and unforeseen inventions.” J. E. M. Ag Supply, Inc. v. Pioneer Hi-Bred Int’l, Inc., 534 U. S. 124, 135 (2001). A categorical rule denying patent protection for “inventions in areas not

8

contemplated by Congress . . . would frustrate the purposes of the patent law." Chakrabarty, 447 U. S., at 315.

The machine-or-transformation test may well provide a sufficient basis for evaluating processes similar to those in the Industrial Age -- for example, inventions grounded in a physical or other tangible form. But there are reasons to doubt whether the test should be the sole criterion for determining the patentability of inventions in the Information Age. As numerous amicus briefs argue, the machine-or-transformation test would create uncertainty as to the patentability of software, advanced diagnostic medicine techniques, and inventions based on linear programming, data compression, and the manipulation of digital signals. See, e.g., Brief for Business Software Alliance 24-25; Brief for Biotechnology Industry Organization et al. 14-27; Brief for Boston Patent Law Association 8-15; Brief for Houston Intellectual Property Law Association 17-22; Brief for Dolby Labs., Inc., et al. 9-10.

In the course of applying the machine-or-transformation test to emerging technologies, courts may pose questions of such intricacy and refinement that they risk obscuring the larger object of securing patents for valuable inventions without transgressing the public domain. The dissent by Judge Rader refers to some of these difficulties. 545 F. 3d, at 1015. As a result, in deciding whether previously unforeseen inventions qualify as patentable "process[es]," it may not make sense to require courts to confine themselves to asking the questions posed by the machine-or-transformation test. Section 101's terms suggest that new technologies may call for new inquiries. See Benson, supra, at 71 (to "freeze process patents to old technologies, leaving no room for the revelations of the new, onrushing technology[,] . . . is not our purpose").

It is important to emphasize that the Court today is not commenting on the patentability of any particular inven-

9

tion, let alone holding that any of the above-mentioned technologies from the Information Age should or should not receive patent protection. This Age puts the possibility of innovation in the hands of more people and raises new difficulties for the patent law. With ever more people trying to innovate and thus seeking patent protections for their inventions, the patent law faces a great challenge in striking the balance between protecting inventors and not granting monopolies over procedures that others would discover by independent, creative application of general principles. Nothing in this opinion should be read to take a position on where that balance ought to be struck.

C

1

Section 101 similarly precludes the broad contention that the term “process” categorically excludes business methods. The term “method,” which is within §100(b)’s definition of “process,” at least as a textual matter and before consulting other limitations in the Patent Act and this Court’s precedents, may include at least some methods of doing business. See, e.g., Webster’s New International Dictionary 1548 (2d ed. 1954) (defining “method” as “[a]n orderly procedure or process . . . regular way or manner of doing anything; hence, a set form of procedure adopted in investigation or instruction”). The Court is unaware of any argument that the "'ordinary, contemporary, common meaning,'" Diehr, supra, at 182, of “method” excludes business methods. Nor is it clear how far a prohibition on business method patents would reach, and whether it would exclude technologies for conducting a business more efficiently. See, e.g., Hall, Business and Financial Method Patents, Innovation, and Policy, 56 Scottish J. Pol. Econ. 443, 445 (2009) (“There is no precise definition of . . . business method patents”).

The argument that business methods are categorically

10

outside of §101's scope is further undermined by the fact that federal law explicitly contemplates the existence of at least some business method patents. Under 35 U. S. C. §273(b)(1), if a patent-holder claims infringement based on "a method in [a] patent," the alleged infringer can assert a defense of prior use. For purposes of this defense alone, "method" is defined as "a method of doing or conducting business." §273(a)(3). In other words, by allowing this defense the statute itself acknowledges that there may be business method patents. Section 273's definition of "method," to be sure, cannot change the meaning of a prior-enacted statute. But what §273 does is clarify the understanding that a business method is simply one kind of "method" that is, at least in some circumstances, eligible for patenting under §101.

A conclusion that business methods are not patentable in any circumstances would render §273 meaningless. This would violate the canon against interpreting any statutory provision in a manner that would render another provision superfluous. See Corley v. United States, 556 U. S. ___, ___ (2009) (slip op., at 9). This principle, of course, applies to interpreting any two provisions in the U. S. Code, even when Congress enacted the provisions at different times. See, e.g., Hague v. Committee for Industrial Organization, 307 U. S. 496, 529530 (1939) (opinion of Stone, J.). This established rule of statutory interpretation cannot be overcome by judicial speculation as to the subjective intent of various legislators in enacting the subsequent provision. Finally, while §273 appears to leave open the possibility of some business method patents, it does not suggest broad patentability of such claimed inventions.

2

Interpreting §101 to exclude all business methods simply because business method patents were rarely issued

11

until modern times revives many of the previously discussed difficulties. See supra, at 89. At the same time, some business method patents raise special problems in terms of vagueness and suspect validity. See eBay Inc. v. MercExchange, L. L. C., 547 U. S. 388, 397 (2006) (KENNEDY, J., concurring). The Information Age empowers people with new capacities to perform statistical analyses and mathematical calculations with a speed and sophistication that enable the design of protocols for more efficient performance of a vast number of business tasks. If a high enough bar is not set when considering patent applications of this sort, patent examiners and courts could be flooded with claims that would put a chill on creative endeavor and dynamic change.

In searching for a limiting principle, this Court's precedents on the unpatentability of abstract ideas provide useful tools. See infra, at 1215. Indeed, if the Court of Appeals were to succeed in defining a narrower category or class of patent applications that claim to instruct how business should be conducted, and then rule that the category is unpatentable because, for instance, it represents an attempt to patent abstract ideas, this conclusion might well be in accord with controlling precedent. See ibid. But beyond this or some other limitation consistent with the statutory text, the Patent Act leaves open the possibility that there are at least some processes that can be fairly described as business methods that are within patentable subject matter under §101.

Finally, even if a particular business method fits into the statutory definition of a "process," that does not mean that the application claiming that method should be granted. In order to receive patent protection, any claimed invention must be novel, §102, nonobvious, §103, and fully and particularly described, §112. These limitations serve a critical role in adjusting the tension, ever

12

present in patent law, between stimulating innovation by protecting inventors and impeding progress by granting patents when not justified by the statutory design.

III

Even though petitioners' application is not categorically outside of §101 under the two broad and atextual approaches the Court rejects today, that does not mean it is a "process" under §101. Petitioners seek to patent both the concept of hedging risk and the application of that concept to energy markets. App. 1920. Rather than adopting categorical rules that might have wide-ranging and unforeseen impacts, the Court resolves this case narrowly on the basis of this Court's decisions in Benson, Flook, and Diehr, which show that petitioners' claims are not patentable processes because they are attempts to patent abstract ideas. Indeed, all members of the Court agree that the patent application at issue here falls outside of §101 because it claims an abstract idea.

In Benson, the Court considered whether a patent application for an algorithm to convert binary-coded decimal numerals into pure binary code was a "process" under §101. 409 U. S., at 6467. The Court first explained that "'[a] principle, in the abstract, is a fundamental truth; an original cause; a motive; these cannot be patented, as no one can claim in either of them an exclusive right.'" Id., at 67 (quoting Le Roy, 14 How., at 175). The Court then held the application at issue was not a "process," but an unpatentable abstract idea. "It is conceded that one may not patent an idea. But in practical effect that would be the result if the formula for converting . . . numerals to pure binary numerals were patented in this case." 409 U. S., at 71. A contrary holding "would wholly pre-empt the mathematical formula and in practical effect would be a patent on the algorithm itself." Id., at 72.

In Flook, the Court considered the next logical step after

13

Benson. The applicant there attempted to patent a procedure for monitoring the conditions during the catalytic conversion process in the petrochemical and oil-refining industries. The application's only innovation was reliance on a mathematical algorithm. 437 U. S., at 585586. Flook held the invention was not a patentable "process." The Court conceded the invention at issue, unlike the algorithm in Benson, had been limited so that it could still be freely used outside the petrochemical and oil-refining industries. 437 U. S., at 589590. Nevertheless, Flook rejected "[t]he notion that post-solution activity, no matter how conventional or obvious in itself, can transform an unpatentable principle into a patentable process." Id., at 590. The Court concluded that the process at issue there was "unpatentable under §101, not because it contain[ed] a mathematical algorithm as one component, but because once that algorithm [wa]s assumed to be within the prior art, the application, considered as a whole, contain[ed] no patentable invention." Id., at 594. As the Court later explained, Flook stands for the proposition that the prohibition against patenting abstract ideas "cannot be circumvented by attempting to limit the use of the formula to a particular technological environment" or adding "insignificant postsolution activity." Diehr, 450 U. S., at 191192.

Finally, in Diehr, the Court established a limitation on the principles articulated in Benson and Flook. The application in Diehr claimed a previously unknown method for "molding raw, uncured synthetic rubber into cured precision products," using a mathematical formula to complete some of its several steps by way of a computer. 450 U. S., at 177. Diehr explained that while an abstract idea, law of nature, or mathematical formula could not be patented, "an application of a law of nature or mathematical formula to a known structure or process may well be deserving of patent protection." Id., at 187. Diehr emphasized

14

the need to consider the invention as a whole, rather than "dissect[ing] the claims into old and new elements and then . . . ignor[ing] the presence of the old elements in the analysis." Id., at 188. Finally, the Court concluded that because the claim was not "an attempt to patent a mathematical formula, but rather [was] an industrial process for the molding of rubber products," it fell within §101's patentable subject matter. Id., at 192-193.

In light of these precedents, it is clear that petitioners' application is not a patentable "process." Claims 1 and 4 in petitioners' application explain the basic concept of hedging, or protecting against risk: "Hedging is a fundamental economic practice long prevalent in our system of commerce and taught in any introductory finance class." 545 F. 3d, at 1013 (Rader, J., dissenting); see, e.g., D. Chorafas, Introduction to Derivative Financial Instruments 75-94 (2008); C. Stickney, R. Weil, K. Schipper, & J. Francis, Financial Accounting: An Introduction to Concepts, Methods, and Uses 581-582 (13th ed. 2010); S. Ross, R. Westerfield, & B. Jordan, Fundamentals of Corporate Finance 743-744 (8th ed. 2008). The concept of hedging, described in claim 1 and reduced to a mathematical formula in claim 4, is an unpatentable abstract idea, just like the algorithms at issue in Benson and Flook. Allowing petitioners to patent risk hedging would pre-empt use of this approach in all fields, and would effectively grant a monopoly over an abstract idea.

Petitioners' remaining claims are broad examples of how hedging can be used in commodities and energy markets. Flook established that limiting an abstract idea to one field of use or adding token postsolution components did not make the concept patentable. That is exactly what the remaining claims in petitioners' application do. These claims attempt to patent the use of the abstract idea of hedging risk in the energy market and then instruct the

15

use of well-known random analysis techniques to help establish some of the inputs into the equation. Indeed, these claims add even less to the underlying abstract principle than the invention in Flook did, for the Flook invention was at least directed to the narrower domain of signaling dangers in operating a catalytic converter.

* * *

Today, the Court once again declines to impose limitations on the Patent Act that are inconsistent with the Act's text. The patent application here can be rejected under our precedents on the unpatentability of abstract ideas. The Court, therefore, need not define further what constitutes a patentable "process," beyond pointing to the definition of that term provided in §100(b) and looking to the guideposts in Benson, Flook, and Diehr.

And nothing in today's opinion should be read as endorsing interpretations of §101 that the Court of Appeals for the Federal Circuit has used in the past. See, e.g., State Street, 149 F. 3d, at 1373; AT&T Corp., 172 F. 3d, at 1357. It may be that the Court of Appeals thought it needed to make the machine-or-transformation test exclusive precisely because its case law had not adequately identified less extreme means of restricting business method patents, including (but not limited to) application of our opinions in Benson, Flook, and Diehr. In disapproving an exclusive machine-or-transformation test, we by no means foreclose the Federal Circuit's development of other limiting criteria that further the purposes of the Patent Act and are not inconsistent with its text.

The judgment of the Court of Appeals is affirmed.

It is so ordered.

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[PJ: For the concurring opinions by Justices Stevens and Breyer, go to this page.]


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