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.