Monday, November 9, 2009

Bilski -- The Oral Argument

Here are my thoughts on the Bilski v. Kappos oral argument held today, which is better informed by also having watched Pamela Samuelson, John Duffy, Kevin Collins, and John Whealan discuss the argument late this afternoon at George Washington University. The argument was fascinating, and the Justices were very well prepared and were a very hot bench (particularly Justice Sotomayor).

Surprisingly, but from my perspective happily, Justice Scalia focused very early into the Petitioner’s argument on the “useful arts” language from the Constitution (or on similar language from early patentable subject matter statutes -- “new and useful art” -- as Justice Scalia did not explicitly reference the Constitution) and whether patent eligible inventions must fall within manufacturing and similar industries. Michael Jakes did a very good job responding – and holding his ground when pushed under substantial questioning from many Justices to define a limit to what qualifies as patent eligible – by adverting to examples of patentable business inventions from his brief and reasons why “technologies” have and should continue to be viewed broadly and why the patent system is not limited to traditional industrial inventions. Jakes to his credit (and as a testament to zealous advocacy on behalf of a client with a possibly losing position) also refused to provide any helpful response to the Justices when pressed to offer a fall-back position in case his basic position was rejected. This was particularly notable in his responses to Justice Breyer’s repeated requests for more guidance, after Justice Breyer clearly signaled that the Court might not agree that patentable subject matter is as broad as Jakes was arguing. Justice Roberts also pressed Jakes on the issue of why Claim 1 was not merely an abstract idea, and Justice Stevens pressed Jakes on the difference of the claim at issue from that in Diehr (particularly in regard to its physicality). Jakes made clear why he believed his clients’ claim was both practical and physical, focusing in particular on the step of entering into transactions. He also articulated why his clients are entitled to have their claim reviewed on the other patentability criteria, although some of the Justices may believe that the claim also may not be new or at least is obvious. Although his clients’ invention provided little in the way of physicality like that of traditional industrial processes, Jakes nevertheless presented a strong (maximalist) approach to patentable subject matter to justify treating the invention as potentially eligible, the scope of which appeared to be limited only by the Court’s historic, articulated exclusions for science, nature, and abstract ideas (understood narrowly but applied to all four categories of statutory subject matter, i.e., processes, machines, manufactures, and compositions of matter). Thus, when pressed by Chief Justice Roberts, Jakes argued that an alphabet could be patented, which led to an unproductive exchange with Justice Sotomayor about Morse’s code claim, which was in fact found patentable as Jakes articulated but which raises unanswered questions of claim interpretation regarding how closely “tethered” that claim was to Morse’s apparatus. This argument may not have been the best strategic choice by Jakes, as his clients’ position could readily have been sustained without trying to uphold alphabet patents. Curiously, Jakes also argued that the Bell telephone patent would not pass the Federal Circuit’s transformation test, which led to an unproductive exchange with Justice Scalia about whether the Bell telephone patent involved a physical transformation (of sound into electrical signals and back again). Jakes also conceded (at no cost to his clients’ position) that mental processes and data (by itself), literature and fine arts are not patentable subject matter.

Many of the Justices appeared concerned over certain types of inventions being considered patent eligible, although their reasons for wanting to keep them outside the system were not entirely clear. For example, Justice Breyer express concern over hypothetical claims directed to teaching antitrust courses; Justice Ginsberg expressed concern over tax and estate planning method inventions; Justice Kennedy expressed concern over inventions relating to insurance risks determined from actuarial tables; Justice Stevens expressed concern over the invention at issue in the State Street Bank case – a programmed computer performing calculations for use in business; Chief Justice Roberts expressed concern over the patenting of alphabets; Justice Scalia expressed concern over the method of winning friends and influencing people; and Justice Sotomayor expressed concern over patents for speed dating. All of the Justices clearly understood that the case would have implications for software and medical diagnostic inventions, so the myriad amicus briefs were at least successful in getting this point across. The issue of the effects of the machine or transformation test on such inventions became a focus for discussion of the kinds of line drawing that the Court should adopt – and that the claim at issue did not require. As Samuelson put it in a discussion after the argument – perhaps with J.R.R. Tolkein’s masterpiece in mind – the question is whether there will be “one test to rule them all.”

Malcolm Stewart for the Government also did a good job articulating the Government’s basic position, which was that they are hoping to establish the “machine or transformation” test in this case as the baseline, and to leave questions about what that means and how it applies to subsequent development in cases where some machines are employed or more substantial physical transformations are at issue. However, serious concerns were expressed – particularly by Justice Stevens -- about whether implementing a process like the claim at issue (or software) on a computer was sufficient for patentability. Various Justices pressed Stewart on the patentability of the State Street Bank machine claim and whether the Court’s holding in this case can and should be limited to “processes,” given the ability to draft process claims in programmed computer (machine) formats, even though the process or software is the real invention. Thus, after expressing skepticism about the patentability of claim at issue, Chief Justice Roberts took serious issue with a footnote in the Government’s brief that stated that if Bilski’s claim included implementation by an interactive website or calculations performed by a computer it might be patentable. Justice Alito in contrast focused on whether the Court should avoid ruling on the broader (but more important) grounds of the “machine or transformation” test, given the Government’s alternative argument that the claim would not survive the “preemption” test (articulated in Gottschalk v. Benson, where a claim preempts all uses of the abstract idea). Stewart responded that the Government would much prefer the machine or transformation grounds for the holding, so as to give the PTO and the Federal Circuit the opportunity to develop further rules on eligibility elaborating the test. Stewart also provided two very helpful arguments that support Petitioners (and others seeking broader protection). Stewart argued against alternative bases for the Court's holding that were suggested by Justice Ginsberg, i.e., finding that business methods are entirely outside of the patent system or that claims like the one at issue are not technological (like in foreign jurisdictions). Stewart sought to warn the Court off the broad business method holding by arguing that some business-related computer-implemented inventions (particularly software inventions) have been held patentable by the Federal Circuit and should be held patentable. Similarly, he sought to warn the Court off a holding based on limiting the definition of technology, because of the difficulty of defining technology and because of the consequent need to determine whether a claim is sufficiently technological when it incorporates particular machines or achieves some physical transformations. (Implicit in these arguments and in the Justices concern over line drawing is the point at the heart of the amicus brief that I filed, that the Court must confront point-of-novelty analysis and determine what the “invention” is; otherwise, it cannot determine whether the machine implementations or physical transformations are mere additions to the claimed invention or are integral to it.) Justice Ginsburg also asked about the origins of the machine or transformation test and Justice Kennedy tried to get Stewart to provide clarity over what constituted a transformation, referring to the State Street Bank invention. Stewart noted the origins of the test in the Government’s Benson brief (written by Richard Stern, when he was at the Department of Justice, who also filed an amicus brief in the Bilski case tat focused on the historic meaning of “useful arts”) and acknowledged that it was asserted by the Government below in the Bilski case. Stewart argued that the Government now clearly supports the State Street Bank holding; in contrast, the Government had hesitated at Court of Appeals to approve of the invention at issue in the State Street Bank case. This led Justice Stevens to make cogent points about machine claims not being materially different from process claims, and Justice Roberts then noted that the State Street Bank invention did not transform anything physical. Possibly, some other Justices also may want to assure that whatever restrictions their holding imposes, it will not be avoided simply by changing claim formats.

Surprisingly, there was little discussion of statutory construction of the term “process,” of the 1952 Act, or of the later-enacted Section 273. Stewart did focus briefly on the “anything under the sun” language from the 1952 Act’s legislative history, noting that it applied only to machines or manufactures and not to processes. The lack of discussion of the statutory language may suggest that the Court is likely to follow its prior holdings of not reading “process” literally and then providing judge-made limits on what can be patented. There was also little discussion over the historical meaning of “useful arts,” although Justice Scalia made a humorous point about the importance of horses to the American economy. Nor was there any discussion of the other potential constitutional limits on the patent power, i.e., “promoting the Progress” or “Inventors … for their … Discoveries,” although Jakes did refer on a few occasions to the benefits of both invention and disclosure accomplished by granting patents. Nevertheless, again as Samuelson put it, the “spirit” of the Constitution and the beliefs at the time of its framing were clearly “in the air” from the Justices discussions of numerous old technologies (including Justice Kennedy’s references to the discoveries of calculus and of life expectancy and actuarial tables in 1680). Stewart also made the point about the “dog that didn’t bark,” arguing that American economic history would have looked very different if business methods such as the method of allocating risk at issue would have been considered patent eligible. Thus, although a strong constitutional holding that would limit or strike down legislation is unlikely, the Court clearly was concerned about the constitutional purposes and may read the statutory term “process” narrowly in light of those purposes (as I argued it should in my brief, citing the constitutional conflicts that would result from a broad interpretation that should be avoided by statutory construction under the Ashwander doctrine).

Although some of the discussion focused on examples of transformations and whether they were sufficient for patentability, there was almost no discussion of what kind of “particular” machine may have been needed for patentability. This is not particularly surprising, given that the claim at issue did not present any question of machine implementation. But it forced the Court to resort to hypotheticals (and the State Street Bank invention) to try to draw out the implications of the various potential holdings. Jakes was not willing to offer up lines that would help the Court restrict subject matter, and Stewart similarly was trying to avoid any ruling that would prejudge such line drawing in future cases. The discussion of how to draw the lines thus was less than edifying for the Court, and at least Justice Stevens and possibly Justice Kennedy appeared unconvinced that the invention at issue in State Street Bank – even though it was claimed in machine format – should have been patent eligible.

If I were to make a prediction, it would be that the Court is likely to do what it did in the eBay v. MercExchange case. There will be a unanimous, core holding of nine Justices that the claim at issue is not patent eligible, and the Court will thus affirm the PTO’s rejection of it. And there will also be a series of concurrences (perhaps with more factions than the two in eBay) articulating different perspectives on what lines of distinction the future cases should consider. The core holding will be very narrow – likely limited to saying that the claim at issue (and others like it) that are not tied to any physical technology and that are not traditional physical processes (like industrial or chemical production) are not the kind of processes that the patent system was designed to encompass. The Court may also distinguish the claim at issue from the industrial process at issue in Diamond v. Diehr (which the Court found to be eligible). The decision will probably mention the constitutional language of “useful arts,” and possibly even mention “promote the Progress” (although it is unlikely to focus on “Inventors … for their … Discoveries,” which was the focus of my brief), but in doing so may not imply any actual limitation on legislative power. Rather, it may imply that Congress would not have lightly meant to extend the patent system beyond the traditional limits to apply to such “abstract” inventions, and may briefly mention and dismiss as not dispositive the recognition by Congress in Section 273 that business methods had become patent eligible as a result of the State Street Bank decision – suggesting that the history does not signal a legislative intent to expand the patent system beyond its traditional contours. The Court may also indicate (contrary to the Government’s desire) that the machine or transformation test has never been framed as a strict limit, and more importantly that the machine or transformation test is not helpful to deciding what is eligible as it provides no test for what kind of machine implementation or physical transformation is sufficient. And thus the hard issues will be left for future cases – and the bar will have lots of continued work advising clients in prosecution and litigating these issues until the next time the Court provides more guidance.

The concurrences, in contrast, will articulate very different potential tests of patent eligibility and thus very different routes to reaching the core “holding.” Justice Stevens will likely write a concurrence – possibly joined by Justices Kennedy and Breyer -- reasserting his position in Parker v. Flook that patent eligibility requires a different inventive concept than the mere application of science, nature, or abstract ideas to a particular context without significant post-solution activity (on which grounds the claim at issue should fail). Chief Justice Roberts – possibly joined by Justice Alito – may write a concurrence based on the “abstract” v. “applied” approach to eligibility and suggesting why the claim at issue is abstract even though it requires some physical activity. Justice Ginsburg – possibly joined by Justices Scalia and Sotomayor -- may write a concurrence based on excluding business methods from the patent system or holding that such methods are not technological and that nothing in the claim requires technology so as to bring the claim back within the scope of the patent system. That leaves Justices Thomas, who having (as usual) asked no questions remains an enigma.

P.S. Justice Breyer clearly understood the potential takings concerns of a broad holding of patent eligibility, noting that Congress had never taken out of the patent system any technologies or activities found by the Court to fall within it. This will supply further grounds to rule narrowly, particularly if the Court is reluctant to reach software claims in this case that does not present them (as articulated as the major concern of the Government). Although Jakes coherently responded that Congress had in fact responded to the Federal Circuit's expansions of patentable subject matter by limiting enforcement of business methods and medical and surgical procedures, it is not a full response to Justice Breyer's concern--as it does not take such patents out of the system and (as evidenced in the Laboratory Corp. v. Metabolite case) they still may provide the basis for secondary liability (and for business methods, which were not at issue in LabCorp, for extensive direct liability).