The scope of patentable subject matter has continued to generate fierce debate even after Congress created the Federal Circuit in 1982 to promote uniformity and predictability in the nation's patent laws. (1) Section 101 of the Patent Act of 1952 (Section 101) defines patentable subject matter as "any new and useful process, machine, manufacture, or composition of matter." (2) In 1972, the Supreme Court explained in Gottschalk v. Benson that "[the t]ransformation and reduction of an article 'to a different state or thing' is the clue to the patentability of a process claim that does not include particular machines." (3) In 2008, the Federal Circuit held that Benson's "machine-or-transformation test," was "the sole test governing [section] 101 analyses." (4) Last Term, in Bilski v. Kappos, (5) the Supreme Court rejected both the Federal Circuit's "machine-or-transformation" holding and the suggestion of an alternative categorical ban on business method patents. (6) Instead, the Court denied Bilski's application on the finding that it was an unpatentable abstract idea. (7) Although the Court purported to decide the case narrowly to avoid "impos[ing] limitations on the Patent Act that are inconsistent with the Act's text," (8) the Court's interpretation of Section 101 all but guarantees increased uncertainty in an already convoluted area of patent law because it denies the Federal Circuit the ability to create a clear and predictable patentable subject matter standard and encourages the Federal Circuit to experiment with the doctrine through case-by-case analysis.
In the initial patent application Bernard Bilski and Rand Warsaw filed on April 10, 1997 they described "how buyers and sellers of commodities in the energy market can protect, or hedge, against the risk of price changes." (9) Bilski's invention required only three steps: first, selling commodities to consumers at a fixed rate based on historical averages and corresponding to the risk position of the consumers; second, identifying market participants for that commodity having a counter-risk position to the consumers; and third, initiating a series of transactions between the commodity seller and the market participants at a second fixed rate that balances the risk position of the series of consumer transactions. (10) Bilski's application focused on using this process in energy markets. (11) The patent examiner rejected Bilski's application, stating that because it was not limited to a practical application of the abstract idea of hedging risk, it was not directed to the technological arts. (12) In 2006, the Board of Patent Appeals and Interferences affirmed the rejection, concluding that Bilski's application "involved only mental steps that do not transform physical matter and was directed to an abstract idea." (13)
In 2008, the United States Court of Appeals for the Federal Circuit heard the case en banc and affirmed. (14) The majority opinion rejected the "useful, concrete and tangible result" test that had governed patentable subject matter since Slate Street Bank (15) in 1998. (16) The court held that, "[a] claimed process is surely patent eligible under Section 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." (17) According to the court, this "machine-or-transformation test" was "the sole test governing [section] 101 analyses" of patentable processes. (18) Applying the machine-or-transformation test, the court held that Bilski's method claimed nonpatentable subject matter. (19) The Federal Circuit hearing also produced four other opinions, (20) but only one judge concluded that the application claimed only patentable subject matter. (21)
The Supreme Court affirmed the judgment (22) in an opinion by Justice Kennedy. (23) Justice Kennedy's opinion purported to defend the plain meaning of Section 101 from efforts to restrict the reach of the patent laws by reading new limitations into the statute. …