Section 273 is NOT a Red Herring: Stevens’ Disingenuous Concurrence in Bilski

By Eric Guttag
June 30, 2010

After days, weeks, and months of anxious waiting, the U.S. Supreme Court (finally) issued its ruling in Bilski v. Kappos.  Not surprisingly (and as many predicted, including me), the Federal Circuit’s “machine or transformation” test was relegated to “second class” status as too inflexible, much like the “teaching, suggestion and motivation” (TSM) test in KSR International v. Teleflex.  Also not surprising (and as predicted), the U.S. Supreme Court affirmed the PTO ruling that Bilski’s claimed method for hedging risks was not “patent-eligible” under 35 U.S.C. § 101 because it was an “abstract idea,” as was suggested by Judge (now Chief Judge) Rader’s dissent in Bilski.

So much for the easy (and predictable) part of Justice Kennedy’s opinion for the Supreme Court in Bilski.  Where this decision takes on a surreal quality is how the various Justices viewed the impact of 35 U.S.C. § 273 in determining whether “business methods” (which Bilski’s claimed method was characterized as) are patent-eligible.  (After all, Bilski, asked this very question in his petition for certiorari.)  In my view, Justice Kennedy and 4 other Justices (Roberts, Alito, Thomas, as well as Scalia by implication) were very CORRECT that 35 U.S.C. § 273 is an implicit, if not explicit, recognition and acceptance by Congress that “business methods” (however you characterize them) ARE patent-eligible subject matter under 35 U.S.C. § 101.  Conversely, Justice Stevens and 3 other Justices (Ginsburg, Breyer and Sotomayor) are completely WRONG in treating 35 U.S.C. § 273 as if this statute doesn’t exist.

Justice Stevens’ concurrence (actually a partial dissent) is disingenuous, sophistry in the extreme, and has logic, to use my dad’s favorite expression, that “won’t hold soap.”  Even Scalia, who obviously doesn’t like patents on “business methods” (by his refusal to join Part II B-2 of Kennedy’s opinion) couldn’t stomach rendering the language of 35 U.S.C. § 273 a nullity.

So why does the enactment of 35 U.S.C. § 273 (on prior user rights) impact how 35 U.S.C. § 101 should be interpreted with regard to “business methods” being patent-eligible?  Very simply:  why would Congress bother to enact a law to recognize a defense (i.e., prior user rights) if patents on “business methods” (a term which Congress admittedly never bothers to define in 35 U.S.C. § 273) were considered to be ineligible under 35 U.S.C. § 101.  As put succinctly by Justice Kennedy:

The argument that business methods are categorically outside of [35 U.S.C.] § 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 [35 U.S.C] § 101.  (Emphasis added.)

Very straightforward, logical reasoning.  In fact, Justice Kennedy points out another problem with not giving 35 U.S.C. § 273 its due in interpreting what is patent-eligible under 35 U.S.C. § 101:  violation of a cardinal canon of statutory construction (i.e., statutes shall not be interpreted to be meaningless):

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, 529–530 (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.  (Emphasis added.)

Again, a straightforward, logical application of statutory construction of one statute (i.e., 35 U.S.C. § 101) in view of another, subsequently enacted statute (i.e., 35 U.S.C. § 273).

Now we jump into the “Alice in Wonderland” world of Justice Stevens’ concurring/partially dissenting opinion.  Stevens’ opinion runs on for 47 pages (of the total 71 pages in the combined Bilski opinions).  In Part IV, he spends a mind-numbing 19 or so pages doing a treatise for “why business methods historically were never intended to be patent-eligible subject matter” that dances all around the American, and yes, even British “mulberry bush” in its historical development of patent law.  We are even referred to the oft told, but nonetheless fictional tale of “The Jeffersonian Story of Patent Law” from Graham v. John Deere Co.  (see Adam Mossoff, “Who Cares What Thomas Jefferson Thought About Patents?:  Reevaluating The Patent Privilege In The Historical Context,” 92 Cornell Law Review 953 (2007)).

After this longish “historical tale,” Stevens’ opinion asserts it is “strong historical evidence that a method of doing business does not constitute a ‘process’ under 35 U.S.C. §101.”  Strong historical evidence?  Excuse me.  With all due respect, Stevens’ “historical tale” does not address WHY Congress would enact a statute (35 U.S.C. § 273) which provides for a DEFENSE (prior use rights) against PATENT INFRINGEMENT if “business methods” (which is the subject matter of those prior use rights in 35 U.S.C. § 273) weren’t considered by that same Congress to be PATENT-ELIGIBLE under 35 U.S.C. §101.

In Part V of his opinion, Stevens’ rebuttal as to the impact of what 35 U.S.C. § 273 says about the patent-eligibility of “business methods” under 35 U.S.C. § 101 begins by asserting Kennedy’s opinion “ignores the motivation for” what became 35 U.S.C. § 273.  So what “motivation” was that?  “To limit the potential fallout” from the Federal Circuit’s decision in State Street “that intimated business methods could be patented” says Stevens’ opinion.  (In fact, we get an early taste of this sophistry when Stevens’ opinion asserts the following:  “Congress quickly responded to a Federal Circuit decision [i.e., State Street] with a stop gap measure designed to limit a potentially significant new problem for the business community (emphasis added).”)  But doesn’t that say Congress intended (i.e., was “motivated”) in 35 U.S.C. § 273 to “limit” the impact of patented “business methods,” not completely do away with such patents (which Congress could have done by saying so directly in 35 U.S.C. § 273 or even 35 U.S.C. § 101 but did not)?  Now who is “ignoring the motivation” of Congress here?

Part V of Stevens’ opinion next asserts that 35 U.S.C. § 273 “appears to reflect surprise and perhaps dismay that business methods might be patented.”  But in enacting 35 U.S.C. § 273 in response to this alleged “surprise” and “dismay,” Congress didn’t simply do away with the patenting of “business methods.”  Instead, Congress addressed its “surprise and perhaps dismay” by granting a defense (prior user rights) against such patented business methods.  Why isn’t that implicit recognition and acceptance by Congress (even grudgingly as Justice Scalia might say) that “business methods” were considered patent-eligible under 35 U.S.C. § 101 prior to enactment of 35 U.S.C. § 273?

Stevens’ reasoning in Part V for why 35 U.S.C. § 273 didn’t confirm the patent-eligibility of “business methods” further departs from reality in asserting the following:  “The fact that Congress decided it was appropriate to create a new defense to claims that business method patents were being infringed merely demonstrates recognition that such claims could create a significant new problem for the business community (emphasis in the original).”  But again, why would Congress create a “new defense” against a right (i.e., “business method” patents) that it believes doesn’t exist in the first place?  Something (called “logic”) just doesn’t add up here in Steven’s opinion.

Part V of Stevens’ opinion finally “jumps the shark” in asserting the following:  “Section 273 may have been a technically unnecessary response to confusion about patentable subject matter, but it appeared necessary in 1999 in light of what was being discussed in legal circles at the time (emphasis added).”  In other words, in Stevens’ view, 35 U.S.C. § 273 was an “unnecessary” nullity from the outset.  But why doesn’t that “violate the canon against interpreting any statutory provision in a manner that would render another provision superfluous” as Kennedy points out?  At this point, Part V of Stevens’ opinion has completely backed itself into an intellectual “cul-de-sac” from which it can no longer escape.

Part V of Stevens’ opinion concludes by saying:  “Section 273 is a red herring; we should be focusing our attention on § 101 itself.”  But it is the distorted logic of Part V which is the real “red herring.”  How can you, with intellectual honesty, say “focus exclusively” on what 35 U.S.C. § 101 says to determine the patent-eligibility of “business methods,” yet argue that you should “completely ignore” what 35 U.S.C. § 273 says (in plain language) about a “defense” against infringement of such patents?

Contrary to what Stevens’ opinion asserts, it is not Kennedy’s but Stevens’ strained, “we must jump through the hoops to get there,” logic that “is not a sound method of statutory interpretation.”  That it took most of Stevens’ long opinion to “spin” this judicial “fairy tale” just highlights how convoluted its reasoning is.  Only by completely ignoring what 35 U.S.C. § 273 says (which is what Part V of Stevens’ opinion necessitates) can you avoid the implicit, if not explicit, recognition (and acceptance) by Congress that “business methods” were considered patent-eligible under 35 U.S.C. § 101.  Sadly and regrettably, three other Supreme Court justices bought into this sophistry “hook, line, and sinker.”

© 2010 Eric W. Guttag.

The Author

Eric Guttag

Eric Guttag  
Mr. Guttag has over 38 years of corporate and private intellectual property law experience on patent, trademark, copyright, trade secret and unfair competition matters, computer and Internet law, including patent application drafting, prosecution, and patentability studies; infringement and validity studies; international patent prosecution; patent and know-how licensing; consulting, confidentiality, clinical study and research agreements; trademark searches and opinions; trademark registration and prosecution; trademark freedom-to-use studies and trademark litigation and dispute resolution.

Warning & Disclaimer: The pages, articles and comments on IPWatchdog.com do not constitute legal advice, nor do they create any attorney-client relationship. The articles published express the personal opinion and views of the author and should not be attributed to the author’s employer, clients or the sponsors of IPWatchdog.com. Read more.

Discuss this

There are currently 36 Comments comments.

  1. patent leather June 30, 2010 11:49 pm

    I knew Stevens (fortunately no longer “Justice Stevens”!) would be up to no good. He is the type of justice that predisposes of a case immediately in his mind, then crafts a long diatribe to justify his opinion. I think his argument is basically that it was a different Congress in 1952 that enacted the Patent Act than the Congress that enacted 273, therefore the latter is irrelevant as to the intent of the former. I suppose he may have a point.

    But the big problem with his “dissent” is that he doesn’t give an adequate definition of “business methods.” Does a Google server serving their pay per click ads (in a quite complicated fashion I might add) a business method? What about an improved security device to prevent shoplifting? Not to mention the violation of stare decisis as well as the retroactivity problem. I’m disgusted that the other justices (especially Sotomayor whom I had high hopes for) sided with him. At least the 5 justices in the majority got it right (although Scalia gets half credit).

    Stevens is much more ideological than practical. Good riddance!!

  2. step back July 1, 2010 6:15 am

    At least the 5 justices in the majority got it right (although Scalia gets half credit).

    PL,

    If I were to draw a picture of the 9 Justices circling the Bilski elephant, I would place each one outside the 3 point basketball circle relative to the elephant and put a Geiger counter or compass in the hand of each blind Justice whereby each senses the “spin” around the Bilski claims but none of them actually touches and “gets it” directly.

    In this hypothesized cartoon, one Justice would be saying, “My Geiger counter says it ‘feels’ that the Bilski elephant is too “abstract”. I say the physical steps in Bilski were never there to begin with and certainly I don’t see them.”

    Another would say, “My sun dial is foreshadowed by an ancient sun and indicates that the Founding Fathers would have frowned on this sort of progress. The business of patents is not business –irrespective of whatever the word “business” might mean”.

    A third would say, “My MRI spin machine indicates this creature is a teacher or lecturer much like a horse whisperer or a dog obedience trainer and therefore the creature “explains” the abstract conceptualizations revolving around the hedging thing.”

    A fourth would say, “I hate 4 of you and I don’t care which way my compass needle is pointing. It’s all gobbledygook. But to spite the 4 I hate, I’m going to cast my vote in a direction opposite to my expressed beliefs. So there. Gobbledygook on that one you subhuman foursome.”

    And a 5th one would say, “I love you anyway Spartacus and therefore I’m going to pretend I am concurring with you. Come here and give me a big hug.”

  3. step back July 1, 2010 7:05 am

    Off topic.

    I know I sometimes show irreverence towards the wise, benevolent and irreproachable Justices who people our highest judicial edifice.

    But is not because of lack of information.

    You might want to educate yourself on the following, out-of-mainstream piece of news:
    http://www.commondreams.org/view/2010/06/29-8

    These are the same folk who dance around the elephant with their Geiger counters.
    They dance with them that brung ’em to the ballroom.
    That should be a clue.

  4. John Spevacek July 1, 2010 7:48 am

    Seems like Stevens came not to praise Caesar, but to bury Caesar.

    Here is my PHOSITA perspective.: Three separate opinions were published, one supported by 5 justices except that 4 justices support all of it while Scalia supported most of it except for a couple of sections. Then there was the second opinion, supporting the first opinion and this was signed by the remaining 4 justices. And then there is a third opinion written by Breyer, who already had supported the second opinion, but apparently not well enough that he still didn’t have more to say. This last opinion was also supported by Scalia in lieu of his non-support of the two sections in the first opinion that he didn’t agree with. So in the end, it was a 9 – 0 decision, except that at no point did all 9 sign on the the same opinion, and 2 justices signed on to 2 opinions. So does that make it 11 – 0?

  5. EG July 1, 2010 7:59 am

    SB,

    Great image! I almost fell over laughing as I read your description of the “Bilski Elephant.” The trouble is that the elephant in political terms signifies Republicans and I’m sure some of those “donkey leaning” Justices may take umbrage at you for your characterization.

    PL,

    I’m with that we are better off (at least in the patent world) without Stevens. This is the same man that said in Parker v. Flook that that which is unknown (even if it is an algorithm) is prior art under 35 USC 103. I knew then that Stevens was anti-patnet. I had some hope from his dissent in Microsoft v. AT&T that he might be finally more friendly to technology. (He characterized software as being similar to a player piano roll which is close to what a Jacquard loom is, the predecessor of the IBM punch cards, and far better analogy than the “architectural blueprint” nonsense the other Justices used.). But Bilski showed that this “leopard” hadn’t really changed his “spots.”

    My biggest disappointment in Bilski was Justice Sotamayor. With her IP background, I thought she might know better than to buy into such drivel from Stevens. We can only hope and pray that she sees the error of this “anti-patent way” and changes course later as she gets her SCOTUS feet under her. Anyway, thanks for the comment.

  6. Blind Dogma July 1, 2010 8:01 am

    EG,

    One minor correction: “(a term which Congress admittedly never bothers to define in 35 U.S.C. § 273)

    The term is defined, but in an extremely broad manner:

    35 U.S.C. 273 (a)(3): the term “method” means a method of doing or conducting business.

    If anything else, this should show that the section 101 was meant to be a welcoming, wide open door and not a cloistered, exclusive speak-easy door. The majority of the Supremes could only muster the pre-exisiting guidance of the three no-no’s.

    Last I checked, Section 8 still gave Congress (not Justice Stevens) the authority to write the Patent Laws. And since none of the Justices ventured forth with an argument that Section 273 was unconstitutional (the only way to nullify the power of Congress’es Law), Business Methods are fully patent-eligible. As to patentable (and yes, there is an important distinction), only some (hence the proper use of this word) will pass the remaining requirements such as 102 and 103. But this is true of all patent-eligible matter. For example, there are plenty of purely mechanical inventions that are patent eligible, but are not patentable because of novelty and obviousness reasons.

  7. EG July 1, 2010 8:12 am

    BD,

    Point well taken. I should have said Congress didn’t define what a “business method” is very well. And yes, you cannot ignore the impact of 35 USC 273 as Stevens’ disingenuously suggests if you are to understand what 35 USC 101 means and what subject matter is patent-eligible; clearly a “results-oriented” piece of tripe from our now (thankfully) retired SCOTUS Justice.

  8. EG July 1, 2010 8:14 am

    To all:

    My apologies for the unclear last sentence in the first paragraph which should read as follows:

    Also not surprising (and as predicted), the U.S. Supreme Court affirmed the PTO ruling that Bilski’s claimed method for hedging risks was not “patent-eligible” under 35 U.S.C. § 101 because it was an “abstract idea,” as was suggested by Judge (now Chief Judge) Rader’s dissent in Bilski.

    I hope it now makes more sense.

  9. Just visiting July 1, 2010 9:23 am

    EG —

    Very nice article. You raised many points that crossed my mind as I was readying the decision.

    All us pro-patent folk can hope that Kagan cannot be more anti-patent than Stevens. As for the other justices joining Stevens, my thoughts are this. Ginsburg probably won’t be sitting the next time a 101 case comes to the court. Although she wants to hang on despite her health, I wouldn’t be surprised if she steps down while Obama is still in the White House. As for Sotomayor and Breter, given that this opinion was Stevens last hurrah, they may have feel impelled to support their ideological-comrade-in-arms one last time knowing that this was in essence a “9-0” affirmance of the judgment and that their support for any particular opinion really wouldn’t have mattered (see e.g., Breyer’s separate concurring opinion).

    FYI — I just put Bilski into Google and I stumbled across the freesoftware website (i.e., http://www.fsf dot org). I don’t know what crack they’ve been smoking, but to call Bilski a win reflects a failure to read the opinions. Contrary to their belief, State Street Bank did not open the flood gates for software patents, which had already been patented for years (if not decades) prior to that decision. State Street Bank could be best said as highlighting (to those who already didn’t known) that software/business methods were patentable.

  10. Devil's Advocate July 1, 2010 9:29 am

    patent leather,

    “I knew Stevens (fortunately no longer “Justice Stevens”!)”

    I don’t think so. I believe that Justice O’Connor is still addressed as Justice O’Connor, even when she sits occasionally on an federal appellate court. It is safer to state that he is no longer an Associate Justice.

    Now for a contrary opinion. Justice Stevens’ view of Congressional intent makes more sense, and his argument would have been more convincing if he had also mentioned that Congress intended to limited the definitin of business method to only Section 273:

    “For the purposes of THIS SECTION [273] … the term ‘method’ means a method of doing or conducting business[.]” My emphasis using all caps.

    Not much ambiguity in the words THIS SECTION it there? Pretty clear to me. To include “”business method” as a method in Section 101 goes against the intent of Congress to keep “business methods” as a defense to infringement.

    Second, Congress could have easily included the same definition in Section 100.

    Clearly, there is [that is, there was] ambiguity in the Patent Act which the Court fixed.

  11. Devil's Advocate July 1, 2010 10:10 am

    patent leather,

    Need to clarify…from the following link, it appears that Justice Stevens would still be called a “Associate Justice” but with the added “(Ret.)” added:

    http://www.ca9.uscourts.gov/datastore/memoranda/2009/12/11/08-15905.pdf

  12. Mike July 1, 2010 11:30 am

    It is a red herring if you realize that Congress enacted the statute in response to an appeals court case broadening the scope of subject matter and that, rather than broadening the level of protection for business methods, it actually grants RELIEF from infringement.

    I actually think it takes more mental gymnastics to think that Congress’ enactment of 273 is an affirmation of business method patents. It is much easier to view it as a simple Congressional “fix” to something that had not been previously considered within the scope of the patent law. Simple because it does not require rewriting fundamental patent law, but grants some relief to those that would otherwise be caught off guard. Viewed this way, the SCOTUS really ought not to consider it any more than it has to consider the Fed. Cir.’s 101 jurisprudence… that is without deference.

    My real view of this case is that it is a punt to Congress to really clarify. Something that Congress might actually consider but for the fact that it has taken on a huge number of other things.

  13. IANAE July 1, 2010 11:54 am

    “it actually grants RELIEF from infringement.”

    Infringement of what?

  14. Blind Dogma July 1, 2010 1:50 pm

    Devil’s Advocate,

    I believe that you are misreading the section. The “for the purposes” language is not limiting as to whether business methods are included in any particular statutory class; but rather, the limitation is for the defense purpose that the section entails. The fact that business methods exist independent of section 273 is indicated by answering IANAE’s question.

  15. Devil's Advocate July 1, 2010 3:46 pm

    IANAE and Blind Dogma,

    “Infringement of what?”

    Those post-State Street patents comprising business methods as Stevens as written. Congress saw what the CAFC did and decided to provide the class of persons who could be considered “earlier inventors” a defense. I doubt that this statement can be disputed.

    Please keep in mind one thing. Sections 100 and 101 (as far as I know) have never been written to be exceptionary or exclusionary; that is, it has never been written to say “whoever invents EXCEPT for those who invent business method patents” or “whoever invents EXCLUDING those inventions involving business methods”…. The categories of excludable patentable inventions (e.g., math formulas) have been defined by the Supreme Court through prior decisions — not Congress. Thus, to expect Congress to come out and exclude the business method from 100 and 101 would not be reasonable.

    The fact that Congress acknowledges the acceptance of business methods created by State Street and its decision to create a defense for earlier inventors falls short of making a definitive showing of an intent to include the business method in 100 and 101. In my opinion, a lack of exclusion in 101 does not infer an intent of inclusion in 101. That’s too big of a gap and/or leap in reasoning to make such conclusion. A clear intent for inclusion of business methods could have only been shown by adding the definition of the business method to 100 just as Congress did for 273. Because they did not add the language of 273 to 100 and 101, I can only definitively include that Congress intended to provide a defense to earlier inventors — and nothing more.

  16. IANAE July 1, 2010 3:58 pm

    “Those post-State Street patents comprising business methods as Stevens as written.”

    Right. Infringement of patents directed to business methods. The amendment is a partial defense to infringement of otherwise valid and enforceable patents directed to business methods. It follows, or so I would think, that Congress thinks there are some valid and enforceable patents directed to business methods out there.

    “Thus, to expect Congress to come out and exclude the business method from 100 and 101 would not be reasonable.”

    It would be perfectly reasonable, and wholly expected, if that was what they were trying to accomplish. Congress can make any amendment to any statute, subject to the Constitution, and even Bilski doesn’t say anything about the Constitution. If they wanted to fully exclude business method patents, section 101 is the simplest and most obvious way to do that.

    “A clear intent for inclusion of business methods could have only been shown by adding the definition of the business method to 100”

    That’s ridiculous. Section 101 doesn’t specifically mention cars. Did Congress intend to allow patents on cars? Of course they did, because cars are machines and section 101 mentions machines. Well, business methods are processes, and section 101 mentions processes.

  17. Devil's Advocate July 1, 2010 4:31 pm

    IANAE,

    “If they wanted to fully exclude business method patents, section 101 is the simplest and most obvious way to do that.”

    To paraphrase your words, if they wanted to fully include business method patents, section 100 is the simplest and most obvious way to do that. They could have simply added the language of 273 to 100.

    Why do you think Congress decided to include the business method in 273 and not 100? What was Congress’ intent by including business methods in 273 and not 100?

    If it had importance to be included in 273, then you would think it had importance to be included in 100.

    In my opinion, the only way of showing a CLEAR intent of Congress — especially when Congress went out of its way to provide a defintion of a business method in 273 — was for Congress to include the business method in the definition in 100. Because they didn’t, the intent is not clear. Congress displayed an intent by specifically mentioning the business method in 273 and not specifically mentioning it in 100.

  18. step back July 1, 2010 4:38 pm

    EG,

    I was hoping you would not see my blind men allegory as merely a reverse coffee snorting jibe.

    There is a little more to it than would meet the blind man’s prod and walk along stick.
    We have already seen the the Justices are clueless when it comes to pagers and email (in another case).

    However, your topic here is 35 USC 273.

    My blind men jibe is somewhat off topic –maybe not totally. So I’ve instead started expanding on it here:
    http://patentu.blogspot.com/2010/07/nine-blind-bilski-justices-none-with.html
    (Still a work-in-progress)

    (( p.s. I don’t know how you and Gene find time to post so much stuff … mine comes in drips and drops as the in between time slots allow. ))

  19. IANAE July 1, 2010 4:41 pm

    “if they wanted to fully include business method patents, section 100 is the simplest and most obvious way to do that.”

    Section 101 already includes business methods. One of the statutory classes is “process”. There was no need to add or change anything.

    I’m still waiting for you to show me how sections 100 and 101 show that Congress meant to “fully include” patents on cars. The statute doesn’t mention cars at all. How can we be so sure that cars are statutory subject matter?

    “Why do you think Congress decided to include the business method in 273 and not 100? What was Congress’ intent by including business methods in 273 and not 100? ”

    Clearly their intent was to make those patents a little less painful for infringers, but not to define them completely out of existence. Since that’s exactly what they did.

  20. Non Sequitur July 1, 2010 5:02 pm

    Here is the reason why Section 273 is in fact a Red Herring.

    Assuming that business methods were not patentable subject matter before State Street and that Congress did not like the State Street decision, it had several options, including: (1) It could have directly overruled State Street by carving out an explicit exception to Section 101 or (2) it could minimize the effect of business method patents by adding a new defense, which it did in Section 273. However, there is no reason to infer that Congress was actually endorsing the State Street decision by enacting Section 273. Sure, Congress must have recognized that business methods were patentable according to the State Street decision, but that doesn’t mean that Congress agreed with that decision. This is why the majority opinion’s reliance on section 273 was misplaced. Mike (post #12) is absolutely correct.

  21. Devil's Advocate July 1, 2010 5:04 pm

    “Section 101 already includes business methods. One of the statutory classes is “process”. There was no need to add or change anything.”

    If Section 101 already included business methods, then why did Congress need to add or change “method” to include the business method in 273?

    “Section 101 already includes business methods.”

    Your statement is conclusory and premised on the assumption that 101 had already been included when 273 was amended. The history discussed by Stevens presumes otherwise.

    “I’m still waiting for you to show me how sections 100 and 101 show that Congress meant to “fully include” patents on cars.”

    I agree with you to the extent that cars doesn’t need to be specifically mentioned in 100 to be patenable subject matter under 101. However, Stevens’ discussion of the historical context of patents as they relate to ways of doing business convinces me that methods of doing business have long since been understood as being unpatentable until State Street.

    “Clearly their intent was to make those patents a little less painful for infringers, but not to define them completely out of existence. Since that’s exactly what they did.”

    I am having trouble understanding how defining the business method into existence in 273 defines them out of existence.

    This is probably my final word because neither of us is going to persuade the other. The last word is yours my friend.

  22. scrappy July 1, 2010 5:13 pm

    Your (2) is a red herring Non-sequitor, because Section 273 explicitly says (2) will not invalidate any business method patent. Hence the patent is still enforceable against all others, except the prior user. Clearly that is what Congress wanted, enforceable business method patents even where prior (secret) use was established.

    (9) INVALIDITY.- A patent shall not be deemed to be invalid under section 102 or 103 of this title solely because a defense is raised or established under this section.

    (AIPA 99 was widely lobbied by many forces – business method patents were becoming a booming business; Section 273 merely reflected that lobby, nothing more, nothing less. The “problem” that Congress saw was not the “business method patents” themselves, but rather lay in the fact that all companies had previously held/practiced business methods as trade secrets since these methods were thought/known to be unpatentable. After State Street, business methods were now patentable by a later inventor who promptly filed an application (due to lack of public prior art), and many companies thus faced liability for their continued secret use of well-established though closely-held business practices. It was this business liability in the brave new world of business method patents that Section 273 meant to address, not business method patents as a whole.)

  23. IANAE July 1, 2010 5:16 pm

    “Sure, Congress must have recognized that business methods were patentable according to the State Street decision, but that doesn’t mean that Congress agreed with that decision.”

    If Congress didn’t like State Street, Congress could have easily legislated it away. What matters is not what Congress liked, but what Congress understood the law to mean.

    “If Section 101 already included business methods, then why did Congress need to add or change “method” to include the business method in 273?”

    That definition was for section 273 only, so that the section could talk about business methods without saying “method of doing business” every single time. Maybe ink was expensive that year. They could have defined “banana” to mean “method of doing business” for the purposes of section 273, and it would have meant the exact same thing. The definition of “process” in 101 still includes every kind of process.

    “Stevens’ discussion of the historical context of patents as they relate to ways of doing business convinces me that methods of doing business have long since been understood as being unpatentable until State Street.”

    It’s been after State Street for some time now. I realize Stevens is pretty old and probably pines for the good old days, but what matters is the state of the law today.

    “I am having trouble understanding how defining the business method into existence in 273 defines them out of existence.”

    Exactly. It doesn’t. Amending section 101 to say “process doesn’t include methods of doing business” would define them out of existence. Amending section 273 to talk about business method patents says “it is our understanding that they exist, and here’s how we want them to act”.

  24. EG July 1, 2010 7:28 pm

    IANAE,

    I’m in your corner completely. All this “heming and hawing” I see about how Congress never intended 35 USC 273 to reflect Congress’ view that “business methods” were already patent-eligible won’t hold up. Saying that Congress only went half way even though they believed “business methods” weren’t patent-eligible under 35 USC 101 is unsupported speculation. The same argument could be made about any law made by Congress that appears to go only half way.

    The following facts for why 35 USC 273 confirms the patent-eligibility of “business methods” under 35 USC 101 have yet to refuted by the naysayers: (1) why would Congress recognize a defense against patent rights they felt didn’t already exist?; (2) as Kennedy rightly said 35 USC 273 becomes meaningless (in violation of a primary canon of statutory construction) if you view it’s explicit language as not recognizing “business methods” as being patent-eligible under 35 USC 101; and (3) most siginificantly and as you correctly point out, if Congress didn’t believe “business methods” were patent-eligible and intended to do away with such patents, they would have, could have and should have said so directly and could have done it easily, including by amending 35 USC 101/101. Congress didn’t choose to do so in 35 USC 273 or 35 USC 101/100, so that’s how this cookie crumbles.

  25. Non Sequitur July 1, 2010 9:50 pm

    EG,

    I think you are overlooking a very important distinction. By enacting 35 USC 273, Congress was not recognizing that business methods were within Congress’ view of 35 USC 101. Instead, Congress was recognizing that “business methods” were within the Federal Circuit’s view of 35 USC 101 according to the State Street decision. Had Congress enacted 273 prior to State Street, you might have a point. However, you can’t assume that because Congress responded to State Street with less than a complete reversal, that it endorsed the rest. Just because Congress chose not to do away with business methods, doesn’t mean that Congress wanted business methods patents either.

  26. EG July 2, 2010 7:35 am

    “I don’t know how you and Gene find time to post so much stuff.”

    SB,

    I like to write to right about this “stuff” so I make the time. I’m at a stage in my IP career where I do tihs job because it interests me, not because I’m trying to get a paycheck (which helps but isn’t the reason for me now to do IP law). I also enjoy the debate, even when agreement can’t be reached (that happens and is OK).

  27. EG July 2, 2010 7:42 am

    “I think you are overlooking a very important distinction.”

    NS,

    I’m not and we may have to agree to disagree of this point. We have to consider what Congress did, not what they might have/could have/should have done or how they might have felt about “business methods” as patent-eligible subject matter. What Congress did was to enact a defense against a right, and by implication, that acknowledges that the right must have already existed. Again, you could make your argument about any piece of legislation that Congress passed which appears to go only part way. But thanks for your comment, I do acknowledge that there are two different sides to this story.

  28. Blind Dogma July 2, 2010 8:03 am

    Stevens indicates that his (would-be) treatment of nullifying 273 would not violate the canons of statutory construction because the two parts of the statute were enacted at different times.

    I find this legal reasoning to be a bit frightening, and opens the door for originalists to discount any advance in law (and understanding) by justifying the elimination of all legal refinements. I understand when the Supreme Court strikes laws for being unconstitutional (e.g. McDonald v. Chicago), but unconstitutionality was not part of the argument (at least not in any substantive form) for the nullifying of 273.

    The only reason for nullifying 273 was the post-hoc rationalization that if Steven’s view were enforced, then 273 would not be needed. While this view may be true, it highlights the fact that Congress’es actions speak differently. No matter how much speculation Stevens engages in, he cannot change what Congress actually did, and no matter how much misdirection and spin with labels of colorful fish, he cannot change the actual legal implications of the law in such casual post-hoc manner.

    I have trouble understanding not only the fact that a Supreme court justice (and those others that signed up with this thought don’t see this implication of drastic legislative power stripping), but that such judicial overreach and its pernicious implications are ignored by the legal commentators who remain convinced that such an action would be OK, because that inconvenient section of law is just a red herring.

  29. scrappy July 2, 2010 11:32 am

    A little Congressional Intent, as preserved in the Congressional Record – Senate, November 17, 1999, pages 29969, 29970 (bracketed text and emphasis added).

    It sure looks like Congress wanted to protect the business method patent owner, while balancing those rights against the interests of earlier inventors who had relied on trade secrets.

    SUBTITLE C.FIRST INVENTOR DEFENSE

    Subtitle C strikes an equitable balance between the interests of U.S. inventors who have invented and commercialized business methods and processes, many of which until recently were thought not to be patentable, and U.S. or foreign inventors who later patent the methods and processes. The subtitle creates a defense for inventors who have reduced an invention to practice in the U.S. at least one year before the patent filing date of another, typically later, inventor and commercially used the invention in the U.S. before the filing date. A party entitled to the defense must not have derived the invention from the patent owner. The bill protects the [business method] patent owner by providing that the establishment of the defense by such an inventor or entrepreneur does not invalidate the patent.

    The subtitle clarifies the interface between two key branches of intellectual property law – patents and trade secrets. Patent law serves the public interest by encouraging innovation and investment in new technology, and may be thought of as providing a right to exclude other parties from an invention in return for the inventor making a public disclosure of the invention. Trade secret law, however, also serves the public interest by protecting investments in new technology. Trade secrets have taken on a new importance with an increase in the ability to patent all business methods and processes. It would be administratively and economically impossible to expect any inventor to apply for a patent on all methods and processes now deemed patentable. In order to protect inventors and to encourage proper disclosure, this subtitle focuses on methods for doing and conducting business, including methods used in connection with internal commercial operations as well as those used in connection with the sale or transfer of useful end results – whether in the form of physical products, or in the form of services, or in the form of some other useful results; for example, results produced through the manipulation of data or other inputs to produce a useful result.

    The earlier-inventor defense is important to many small and large businesses, including financial services, software companies, and manufacturing firms – any business that relies on innovative business processes and methods. The 1998 opinion by the U.S. Court of Appeals for the Federal Circuit in State Street Bank and Trust Co. v. Signature Financial Group,[citation omitted] which held that methods of doing business are patentable, has added to the urgency of the issue. As the Court noted, the reference to the business method exception had been improperly applied to a wide variety of processes, blurring the essential question of whether the invention produced a “useful, concrete, and tangible result”. In the wake of State Street, thousands of methods and processes used internally are now being patented. In the past, many businesses that developed and used such methods and processes thought secrecy was the only protection available. Under established law, any of these inventions which have been in commercial use- public or secret – for more than one year cannot now be the subject of a valid U.S. patent.

    Subsection (b)(9) specifies that the successful assertion of the defense does not mean that the affected patent is invalid. Paragraph (9) eliminates a point of uncertainty under current law, and strikes a balance between the rights of an inventor who obtains a patent after another inventor has taken the steps to qualify for a prior use defense. The bill provides that the commercial use of a method in operating a business before the patentee’s filing date, by an individual or entity that can establish a section 273 defense, does not invalidate the patent. For example, under current law, although the matter has seldom been litigated, a party who commercially used an invention in secrecy before the patent filing date and who also invented the subject matter before the patent owner’s invention may argue that the patent is invalid under section 102 (g) of the Patent Act. Arguably, commercial use of an invention in secrecy is not suppression or concealment of the invention within the meaning of section 102(g), and therefore the party’s earlier invention could invalidate the patent. [citing Dunlop Holdings v. Ram Golf Corp., 1975]

  30. Blind Dogma July 2, 2010 12:37 pm

    scrappy,

    Why that’s just a school of brightly colored fish swimming through the rather large pitcher of Kool-aid that I have on display.

    😉

  31. step back July 2, 2010 3:39 pm

    Scrappy,

    Thank you for digging deep and presenting a few inconvenient truths to them who don’t like patents very much and would like to see the United States of America descend into a Dark age of non-inventiveness rather than boldly going forward into new areas of technology where no man (or woman) may have gone before.

    Of course, there are those who are obsessed with destroying the Golden Goose that laid America’s Technology eggs (the Progressive Patent System). Folk of such ilk do not like to be confused by the facts. They’ve made up their minds and they are going to stick to the void within no matter what. 😉

  32. EG July 2, 2010 10:51 pm

    Scrappy,

    Sure looks to me like the legislative intent behind 35 USC 273 backs what the actual language says/implies, i.e., “business methods” are patent-eligible. Thanks! (And take that now retired Justice Stevens!)

  33. scrappy July 5, 2010 7:56 am

    Justice Stevens:

    “Consider the logical implications of the Court’s approach to this question: If, tomorrow, Congress were to conclude that patents on business methods are so important that the special infringement defense in §273 ought to be abolished, and thus repealed that provision, this could paradoxically strengthen the case against such patents because there would no longer be a §273 that acknowledges . . . business method patents.”

    I wonder if he thinks that the special infringement defense in §273 was passed originally because Congress concluded that business method patents were so unimportant? If so, then he is factually mistaken. If not, then his question is logically meaningless.

    The ironic thing about this Stevens interpretation of Section 273 is that Congress has, in almost every session or term, considered expanding the “prior user” rights in Section 273 to cover all classes of patents, not just business method patents, e.g. by deleting paragraph (a)(3) and the references to “method[s].” (See e.g. HR1908 or S1150 as introduced in 2007.)

    Had the Patent Reform Act of 2007 passed with expanded prior user rights (or if expanded prior user rights pass next term), might Justice Stevens infer Congressional intent from that enough to do away with all classes of patents?? If not, why on earth would he draw his inference from the more limited prior user rights passed by Congress in 1999, especially when the stated Congressional intent at the time was to protect business method patent owners while accommodating prior trade secret users?

    (I could venture a guess that Justice Steven’s “logical reasoning” was based solely on his feeling that business method patents are bad, and by golly, if Congress is just going to sit on its hands then someone needs to do something about it! Well, with all respect for Justices Stevens, Breyer, Ginsubrg, and Sotomayor and thankfulness for their service, that sort of judicial vigilantism is certainly the poorest possible adornment for any Supreme Court Justice. It makes a mockery of the Constitution they both are empowered by and were sworn in to uphold… and when acted upon, moreover, it could cause immeasurably more damage to our Republic than any business method patent ever would.)

    Meanwhile, as the Constitution is again relegated to the status of a historical document by so many of those with power in Washington, Rome continues to burn….

    Let’s hope the CACF (sadly, perhaps Judge Newman in one of her dissents) educates the Supreme Court on this issue before the next go-round.

  34. The Mad Hatter July 5, 2010 4:09 pm

    Of course Business Method patents are illegal in Canada, just as software patents are. Possibly this is part of the reason that the Canadian economy is in much better shape than the American economy.

    Wayne

  35. Blind Dogma July 6, 2010 7:33 am

    It’s a good thing then that we are not talking about Canadian Law here then, is it not, eh?

  36. step back July 6, 2010 3:01 pm

    Scrappy @33:

    Justice Steven’s “logical reasoning” [in B.v.K] was based solely on his “feeling” that business method patents are bad

    I concur with your analysis Scrappy.

    (OMFG, something is wrong in the universe if I’m agreeing with Scrappy.)

    As a matter of further observation, it seems that the B.v.K majority opinion was based entirely on their “feelings” that whatever it is that constitutes Bilski and Ward’s “invention” under 35 USC 101 was too “abstract”. No methodology is given for how one goes about dividing between the “abstract” arts and the non-abstract arts. I wonder if we need a curator from one of the top recognized museums of modern art to act as an expert witness in patent cases from this day forward?