Source: https://supreme.justia.com/cases/federal/us/561/593/
Timestamp: 2019-07-16 00:02:27
Document Index: 425442970

Matched Legal Cases: ['§101', '§101', '§101', '§101', '§101', '§102', '§103', '§112', '§100', '§101', '§101', '§101', '§100', '§100', '§273', '§101', '§273', '§101', '§101', '§100', '§101', '§101', '§101', '§101', '§101', '§101', '§112', '§101', '§101', '§102', '§8', '§101', '§102', '§103', '§101', '§1', '§6', '§8', '§18', '§22', '§39', '§5', '§101', '§100', '§101', '§101', '§101', '§101', '§101', '§273', '§273', '§8', '§8', '§101', 'Arts 12', '§26', '§101', '§101', '§101', '§101', '§4301', '§273']

Bilski v. Kappos :: 561 U.S. 593 (2010) :: Justia US Supreme Court Center
Justia › US Law › US Case Law › US Supreme Court › Volume 561 › Bilski v. Kappos
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.
(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 308–309. 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. 4–5.
(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. 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. 5–8.
(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. 10–11.
(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. 12–15.
(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.
The Court correctly holds that the machine-or-transformation test is not the sole test for what constitutes a patentable process; rather, it is a critical clue.[Footnote 1] But the Court is quite wrong, in my view, to suggest that any series of steps that is not itself an abstract idea or law of nature may constitute a “process” within the meaning of §101. The language in the Court’s opinion to this effect can only cause mischief. The wiser course would have been to hold that petitioners’ method is not a “process” because it describes only a general method of engaging in business transactions—and business methods are not patentable. More precisely, although a process is not patent-ineligible simply because it is useful for conducting business, a claim that merely describes a method of doing business does not qualify as a “process” under §101.
Petitioners appealed to the United States Court of Appeals for the Federal Circuit. After briefing and argument before a three-judge panel, the court sua sponte decided to hear the case en banc and ordered the parties to address: (1) whether petitioners’ “claim 1 … claims patent-eligible subject matter under 35 U. S. C. §101”; (2) “[w]hat standard should govern in determining whether a process is patent-eligible subject matter”; (3) “[w]hether the claimed subject matter is not patent-eligible because it constitutes an abstract idea or mental process”; (4) “[w]hether a method or process must result in a physical transformation of an article or be tied to a machine to be patent-eligible subject matter”; and (5) whether the court’s decisions in State Street Bank & Trust Co. v. Signature Financial Group, Inc., 149 F. 3d 1368 (1998) (State Street), and AT&T Corp. v. Excel Communications, Inc., 172 F. 3d 1352 (1999), should be overruled in any respect. App. to Pet. for Cert. 144a–145a.
First, the Court suggests that the terms in the Patent Act must be read as lay speakers use those terms, and not as they have traditionally been understood in the context of patent law. See, e.g., ante, at 6 (terms in §101 must be viewed in light of their “ ‘ordinary, contemporary, common meaning’ ”); ante, at 10 (patentable “method” is any “orderly procedure or process,” “regular way or manner of doing anything,” or “set form of procedure adopted in investigation or instruction” (internal quotation marks omitted)). As I will explain at more length in Part III, infra, if this portion of the Court’s opinion were taken literally, the results would be absurd: Anything that constitutes a series of steps would be patentable so long as it is novel, nonobvious, and described with specificity. But the opinion cannot be taken literally on this point. The Court makes this clear when it accepts that the “atextual” machine-or-transformation test, ante, at 12, is “useful and important,” ante, at 8, even though it “violates” the stated “statutory interpretation principles,” ante, at 6; and when the Court excludes processes that tend to pre-empt commonly used ideas, see ante, at 14–15.
Second, in the process of addressing the sole issue presented to us, the opinion uses some language that seems inconsistent with our centuries-old reliance on the machine-or-transformation criteria as clues to patentability. Most notably, the opinion for a plurality suggests that these criteria may operate differently when addressing technologies of a recent vintage. See ante, at 8–9 (machine-or-transformation test is useful “for evaluating processes similar to those in the Industrial Age,” but is less useful “for determining the patentability of inventions in the Information Age”). In moments of caution, however, the opinion for the Court explains—correctly—that the Court is merely restoring the law to its historical state of rest. See ante, at 8 (“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 ”). Notwithstanding this internal tension, I understand the Court’s opinion to hold only that the machine-or-transformation test remains an important test for patentability. Few, if any, processes cannot effectively be evaluated using these criteria.
The Court construes petitioners’ claims on processes for pricing as claims on “the basic concept of hedging, or protecting against risk,” ante, at 14, and thus discounts the application’s discussion of what sorts of data to use, and how to analyze those data, as mere “token postsolution components,” ante, at 15. In other words, the Court artificially limits petitioners’ claims to hedging, and then concludes that hedging is an abstract idea rather than a term that describes a category of processes including petitioners’ claims. Why the Court does this is never made clear. One might think that the Court’s analysis means that any process that utilizes an abstract idea is itself an unpatentable, abstract idea. But we have never suggested any such rule, which would undermine a host of patentable processes. It is true, as the Court observes, that petitioners’ application is phrased broadly. See ante, at 14–15. But claim specification is covered by §112, not §101; and if a series of steps constituted an unpatentable idea merely because it was described without sufficient specificity, the Court could be calling into question some of our own prior decisions.[Footnote 2] At points, the opinion suggests that novelty is the clue. See ante, at 14. But the fact that hedging is “ ‘long prevalent in our system of commerce,’ ” ibid., cannot justify the Court’s conclusion, as “the proper construction of §101 … does not involve the familiar issu[e] of novelty” that arises under §102. Flook, 437 U. S., at 588. At other points, the opinion for a plurality suggests that the analysis turns on the category of patent involved. See, e.g., ante, at 12 (courts should use the abstract-idea rule as a “too[l]” to set “a high enough bar” “when considering patent applications of this sort”). But we have never in the past suggested that the inquiry varies by subject matter.
Pursuant to its power “[t]o promote the Progress of … useful Arts, by securing for limited Times to … Inventors the exclusive Right to their … Discoveries,” U. S. Const., Art. I, §8, cl. 8, Congress has passed a series of patent laws that grant certain exclusive rights over certain inventions and discoveries as a means of encouraging innovation. In the latest iteration, the Patent Act of 1952 (1952 Act), Congress has provided that “[w]hoever 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,” 35 U. S. C. §101, which include that the patent also be novel, §102, and nonobvious, §103. The statute thus authorizes four categories of subject matter that may be patented: processes, machines, manufactures, and compositions of matter. Section 101 imposes a threshold condition. “[N]o patent is available for a discovery, however useful, novel, and nonobvious, unless it falls within one of the express categories of patentable subject matter.” Kewanee Oil Co. v. Bicron Corp., 416 U. S. 470, 483 (1974).
I am, of course, mindful of the fact that §101 “is a dynamic provision designed to encompass new and unforeseen inventions,” and that one must therefore view historical conceptions of patent-eligible subject matter at an appropriately high level of generality. J. E. M. Ag Supply, 534 U. S., at 135; see also Chakrabarty, 447 U. S., at 315–316. But it is nonetheless significant that while people have long innovated in fields of business, methods of doing business fall outside of the subject matter that has “historically been eligible to receive the protection of our patent laws,” Diehr, 450 U. S., at 184, and likely go beyond what the modern patent “statute was enacted to protect,” Flook, 437 U. S., at 593. It is also significant that when Congress enacted the latest Patent Act, it did so against the background of a well-settled understanding that a series of steps for conducting business cannot be patented. These considerations ought to guide our analysis. As Justice Holmes noted long ago, sometimes, “a page of history is worth a volume of logic.” New York Trust Co. v. Eisner, 256 U. S. 345, 349 (1921).
The Constitution’s Patent Clause was written against the “backdrop” of English patent practices, Graham v. John Deere Co. of Kansas City, 383 U. S. 1, 5 (1966), and early American patent law was “largely based on and incorporated” features of the English patent system, E. Walterscheid, To Promote the Progress of Useful Arts: American Patent Law and Administration, 1789–1836, p. 109 (1998) (hereinafter Walterscheid, To Promote the Progress).[Footnote 7] The governing English law, the Statute of Monopolies, responded to abuses whereby the Crown would issue letters patent, “granting monopolies to court favorites in goods or businesses which had long before been enjoyed by the public.” Graham, 383 U. S., at 5. The statute generally prohibited the Crown from granting such exclusive rights, 21 Jam. 1, c. 3, §1 (1623), in 4 Statutes of the Realm 1213 (reprint 1963), but it contained exceptions that, inter alia, permitted grants of exclusive rights to the “working or making of any manner of new Manufacture.” §6.
Also noteworthy is what was not patented under the English system. During the 17th and 18th centuries, Great Britain saw innovations in business organization,[Footnote 17] business models,[Footnote 18] management techniques,[Footnote 19] and novel solutions to the challenges of operating global firms in which subordinate managers could be reached only by a long sea voyage.[Footnote 20] Few if any of these methods of conducting business were patented.[Footnote 21]
At the Constitutional Convention, the Founders decided to give Congress a patent power so that it might “promote the Progress of … useful Arts.” Art. I, §8, cl. 8. There is little known history of that Clause.[Footnote 22] We do know that the Clause passed without objection or debate.[Footnote 23] This is striking because other proposed powers, such as a power to grant charters of incorporation, generated discussion about the fear that they might breed “monopolies.”[Footnote 24] Indeed, at the ratification conventions, some States recommended amendments that would have prohibited Congress from granting “ ‘exclusive advantages of commerce.’ ” [Footnote 25] If the original understanding of the Patent Clause included the authority to patent methods of doing business, it might not have passed so quietly.
During the first years of the patent system, no patents were issued on methods of doing business.[Footnote 30] Indeed, for some time, there were serious doubts as to “the patentability of processes per se,” as distinct from the physical end product or the tools used to perform a process. Id., at 581–582.[Footnote 31]
By the early 20th century, it was widely understood that a series of steps for conducting business could not be patented. A leading treatise, for example, listed “ ‘systems’ of business” as an “unpatentable subjec[t].” 1 A. Deller, Walker on Patents §18, p. 62 (1937).[Footnote 34] Citing many of the cases listed above, the treatise concluded that a “method of transacting business” is not an “ ‘art.’ ” Id., §22, at 69; see also L. Amdur, Patent Law and Practice §39, p. 53 (1935) (listing “Methods of doing business” as an “Unpatentable [A]r[t]”); Berman 718 (“[C]ases have been fairly unanimous in denying patentability to such methods”); Tew, Method of Doing Business, 16 J. Pat. Off. Soc. 607 (1934) (“It is probably settled by long practice and many precedents that ‘methods of doing business,’ as these words are generally understood, are unpatentable”). Indeed, “[u]ntil recently” it was still “considered well established that [business] methods were non-statutory.” 1 R. Moy, Walker on Patents §5:28, p. 5–104 (4th ed. 2009).[Footnote 35]
By the mid-1900’s, many courts were construing the term “art” by using words such as “method, process, system, or like terms.” Berman 713; see Expanded Metal Co. v. Bradford, 214 U. S. 366, 382 (1909) (“The word ‘process’ has been brought into the decisions because it is supposedly an equivalent form of expression or included in the statutory designation of a new and useful art”).[Footnote 36] Thus in 1952, when Congress updated the patent laws as part of its ongoing project to revise the United States Code, it changed the operative language in §101, replacing the term “art” with “process” and adding a definition of “process” as a “process, art or method,” §100(b).
As discussed above, by this time, courts had consistently construed the term “art” to exclude methods of doing business. The 1952 Act likely captured that same meaning.[Footnote 38] Cf. Graham, 383 U. S., at 16–17 (reasoning that because a provision of the 1952 Act “paraphrases language which has often been used in decisions of the courts” and was “added to the statute for uniformity and definiteness, ” that provision should be treated as “a codification of judicial precedents”).[Footnote 39] Indeed, Judge Rich, the main drafter of the 1952 Act, later explained that “the invention of a more effective organization of the materials in, and the techniques of teaching a course in physics, chemistry, or Russian is not a patentable invention because it is outside of the enumerated categories of ‘process, machine, manufacture, or composition of matter, or any new and useful improvement thereof.’ ” Principles of Patentability, 28 Geo. Wash. L. Rev. 393, 394 (1960). “Also outside that group,” he added, was a process for doing business: “the greatest inventio[n] of our times, the diaper service.” Ibid.[Footnote 40]
Despite strong evidence that Congress has consistently authorized patents for a limited class of subject matter and that the 1952 Act did not alter the nature of the then-existing limits, petitioners and their amici emphasize a single phrase in the Act’s legislative history, which suggests that the statutory subject matter “ ‘include[s] anything under the sun that is made by man.’ ” Brief for Petitioners 19 (quoting Chakrabarty, 447 U. S., at 309, in turn quoting S. Rep. 1979, at 5). Similarly, the Court relies on language from our opinion in Chakrabarty that was based in part on this piece of legislative history. See ante, at 4, 6.
Moreover, even if the language in the Committee Reports was meant to flesh out the meaning of any portion of §101, it did not purport to define the term “process.” The language refers only to “manufacture[s]” and “machine[s],” tangible objects “made by man.” It does not reference the “process” category of subject matter (nor could a process be comfortably described as something “made by man”). The language may also be understood merely as defining the term “invents” in §101. As Judge Dyk explained in his opinion below, the phrase “made by man” “is reminiscent” of a 1790’s description of the limits of English patent law, that an “invention must be ‘made by man’ ” and cannot be “ ‘a philosophical principle only, neither organized or capable of being organized’ from a patentable manufacture.” 545 F. 3d, at 976 (quoting Hornblower v. Boulton, 8 T. R. 95, 98 (K. B. 1799)).
Our recent case law reinforces my view that a series of steps for conducting business is not a “process” under §101. Since Congress passed the 1952 Act, we have never ruled on whether that Act authorizes patents on business methods. But we have cast significant doubt on that proposition by giving substantial weight to the machine-or-transformation test, as general methods of doing business do not pass that test. And more recently, Members of this Court have noted that patents on business methods are of “suspect validity.” eBay Inc. v. MercExchange, L. L. C., 547 U. S. 388, 397 (2006) (Kennedy, J., concurring).
Despite the strong historical evidence that a method of doing business does not constitute a “process” under §101, petitioners nonetheless argue—and the Court suggests in dicta, ante, at 10–11—that a subsequent law, the First Inventor Defense Act of 1999, “must be read together” with §101 to make business methods patentable. Brief for Petitioners 29. This argument utilizes a flawed method of statutory interpretation and ignores the motivation for the 1999 Act.
Put another way, we ordinarily assume, quite sensibly, that Congress would not in one statute include two provisions that are at odds with each other. But as this case shows, that sensible reasoning can break down when applied to different statutes.[Footnote 42] The 1999 Act was passed to limit the impact of the Federal Circuit’s then-recent statements on the 1952 Act. Although repudiating that judicial dictum (as we should) might effectively render the 1999 Act a nullity going forward, such a holding would not mean that it was a nullity when Congress enacted it. 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.[Footnote 43] 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,” ante, at 11. That is not a sound method of statutory interpretation.
The Constitution allows Congress to issue patents “[t]o promote the Progress of … useful Arts,” Art. I, §8, cl. 8. This clause “is both a grant of power and a limitation.” Graham, 383 U. S., at 5. It “reflects a balance between the need to encourage innovation and the avoidance of monopolies which stifle competition without any concomitant advance in the ‘Progress of Science and useful Arts.’ ” Bonito Boats, 489 U. S., at 146. “This is the standard expressed in the Constitution and it may not be ignored. And it is in this light that patent validity ‘requires reference to [the] standard written into the Constitution.’ ” Graham, 383 U. S., at 6 (quoting Great Atlantic & Pacific Tea Co. v. Supermarket Equipment Corp., 340 U. S. 147, 154 (1950) (Douglas, J., concurring) (emphasis deleted)); see also Grant v. Raymond, 6 Pet. 218, 241–242 (1832) (explaining that patent “laws which are passed to give effect to this [constitutional] purpose ought, we think, to be construed in the spirit in which they have been made”).[Footnote 44]
Without any legislative guidance to the contrary, there is a real concern that patents on business methods would press on the limits of the “standard expressed in the Constitution,” Graham, 383 U. S., at 6, more likely stifling progress than “promot[ing]” it. U. S. Const., Art. I, §8, cl. 8. I recognize that not all methods of doing business are the same, and that therefore the constitutional “balance,” Bonito Boats, 489 U. S., at 146, may vary within this category. Nevertheless, I think that this balance generally supports the historic understanding of the term “process” as excluding business methods. And a categorical analysis fits with the purpose, as Thomas Jefferson explained, of ensuring that “ ‘every one might know when his actions were safe and lawful,’ ” Graham, 383 U. S., at 10; see also Festo Corp. v. Shoketsu Kinzoku Kogyo Kabushiki Co., 535 U. S. 722, 730–731 (2002) (“The monopoly is a property right; and like any property right, its boundaries should be clear. This clarity is essential to promote progress”); Diehr, 450 U. S., at 219 (Stevens, J., dissenting) (it is necessary to have “rules that enable a conscientious patent lawyer to determine with a fair degree of accuracy” what is patentable).
On one side of the balance is whether a patent monopoly is necessary to “motivate the innovation,” Pfaff v. Wells Electronics, Inc., 525 U. S. 55, 63 (1998). Although there is certainly disagreement about the need for patents, scholars generally agree that when innovation is expensive, risky, and easily copied, inventors are less likely to undertake the guaranteed costs of innovation in order to obtain the mere possibility of an invention that others can copy.[Footnote 45] Both common sense and recent economic scholarship suggest that these dynamics of cost, risk, and reward vary by the type of thing being patented.[Footnote 46] And the functional case that patents promote progress generally is stronger for subject matter that has “historically been eligible to receive the protection of our patent laws,” Diehr, 450 U. S., at 184, than for methods of doing business.
In any event, even if patents on business methods were useful for encouraging innovation and disclosure, it would still be questionable whether they would, on balance, facilitate or impede the progress of American business. For even when patents encourage innovation and disclosure, “too much patent protection can impede rather than ‘promote the Progress of … useful Arts.’ ” Laboratory Corp. of America Holdings v. Metabolite Laboratories, Inc., 548 U. S. 124, 126–127 (2006) (Breyer, J., dissenting from dismissal of certiorari). Patents “can discourage research by impeding the free exchange of information,” for example, by forcing people to “avoid the use of potentially patented ideas, by leading them to conduct costly and time-consuming searches of existing or pending patents, by requiring complex licensing arrangements, and by raising the costs of using the patented” methods. Id., at 127. Although “[e]very patent is the grant of a privilege of exacting tolls from the public,” Great Atlantic, 340 U. S., at 154 (Douglas, J., concurring), the tolls of patents on business methods may be especially high.
These many costs of business method patents not only may stifle innovation, but they are also likely to “stifle competition,” Bonito Boats, 489 U. S., at 146. Even if a business method patent is ultimately held invalid, patent holders may be able to use it to threaten litigation and to bully competitors, especially those that cannot bear the costs of a drawn out, fact-intensive patent litigation.[Footnote 57] That can take a particular toll on small and upstart businesses.[Footnote 58] Of course, patents always serve as a barrier to competition for the type of subject matter that is patented. But patents on business methods are patents on business itself. Therefore, unlike virtually every other category of patents, they are by their very nature likely to depress the dynamism of the marketplace.[Footnote 59]
Even if the machine-or-transformation test may not define the scope of a patentable process, it would be a grave mistake to assume that anything with a “ ‘useful, concrete and tangible result,’ ” State Street Bank & Trust v. Signature Financial Group, Inc., 149 F. 3d 1368, 1373 (CA Fed. 1998), may be patented.
For example, a rule that broadly-phrased claims cannot constitute patentable processes could call into question our approval of Alexander Graham Bell’s famous fifth claim on “ ‘[t]he method of, and apparatus for, transmitting vocal or other sounds telegraphically, as herein described, by causing electrical undulations, similar in form to the vibrations of the air accompanying the said vocal or other sounds, substantially as set forth,’ ” The Telephone Cases, 126 U. S. 1, 531 (1888).
The Court quotes our decision in Diamond v. Chakrabarty, 447 U. S. 303 (1980), for the proposition that, “ ‘[i]n choosing such expansive terms … modified by the comprehensive “any,” Congress plainly contemplated that the patent laws would be given wide scope.’ ” Ante, at 4. But the Court fails to mention which terms we were discussing in Chakrabarty: the terms “manufacture” and “composition of matter.” See 447 U. S., at 308 (“In choosing such expansive terms as ‘manufacture’ and ‘composition of matter,’ modified by the comprehensive ‘any,’ Congress plainly contemplated that the patent laws would be given wide scope”). As discussed herein, Congress’ choice of the term “process” reflected a background understanding of what sorts of series of steps could be patented, and likely reflected an intentional design to codify that settled, judicial understanding. This may not have been the case with the terms at issue in Chakrabarty.
For example, if this Court were to interpret the Sherman Act according to the Act’s plain text, it could prohibit “the entire body of private contract,” National Soc. of Professional Engineers v. United States, 435 U. S. 679, 688 (1978).
The Court attempts to avoid such absurd results by stating that these “[c]oncerns” “can be met by making sure that the claim meets the requirements of §101.” Ante, at 6. Because the only limitation on the plain meaning of “process” that the Court acknowledges explicitly is the bar on abstract ideas, laws of nature, and the like, it is presumably this limitation that is left to stand between all conceivable human activity and patent monopolies. But many processes that would make for absurd patents are not abstract ideas. Nor can the requirements of novelty, nonobviousness, and particular description pick up the slack. Cf. ante, at 12–13 (plurality opinion). A great deal of human activity was at some time novel and nonobvious.
Curiously, the Court concedes that “these exceptions are not required by the statutory text,” but urges that “they are consistent with the notion that a patentable process must be ‘new and useful.’ ” Ante, at 5 (emphasis added). I do not see how these exceptions find a textual home in the term “new and useful.” The exceptions may be consistent with those words, but they are sometimes inconsistent with the “ordinary, contemporary, common meaning,” ante, at 6, 10 (internal quotation marks omitted), of the words “process” and “method.”
See Pennock v. Dialogue, 2 Pet. 1, 18 (1829) (“[M]any of the provisions of our patent act are derived from the principles and practice, which have prevailed in the construction of that of England”); Proceedings in Congress During the Years 1789 and 1790 Relating to the First Patent and Copyright Laws, 22 J. Pat. Off. Soc. 352, 363 (1940) (explaining that the 1790 Patent Act was “framed according to the Course of Practice in the English Patent Office”); see also Walterscheid, The Early Evolution of the United States Patent Law: Antecedents, 76 J. Pat. & Trademark Off. Soc. 697, 698 (1994) (describing the role of the English backdrop).
See Hornblower v. Boulton, 8 T. R. 95 (K. B. 1799).
See, e.g., Roebuck and Garbett v. William Stirling & Son (H. L. 1774), reprinted in 1 T. Webster, Reports and Notes of Cases on Letters Patent for Inventions 45 (1844) (“method of making acid spirit by burning sulphur and saltpetre, and collecting the condensed fumes”); id., at 77 (“ ‘method of producing a yellow colour for painting in oil or water, making white lead, and separating the mineral alkali from common salt, all to be performed in one single process’ ”); see also C. MacLeod, Inventing the Industrial Revolution: The English Patent System, 1660–1800, pp. 84–93, 100–104, 109–110, 152–155 (1988) (listing patents) (hereinafter MacLeod).
Some English cases made reference to the permissibility of patents over new “trades.” But so far as I can tell, the term “trade” referred not to the methods of conducting business but rather to methods of making and using physical items or to the object of the trade. See, e.g., Clothworkers of Ipswich Case, 78 Eng. Rep. 147, 148 (K. B. 1603) (“[I]f a man hath brought in a new invention and a new trade within the kingdom … [the King] may grant by charter unto him”).
See also Pollack, The Multiple Unconstitutionality of Business Method Patents: Common Sense, Congressional Consideration, and Constitutional History, 28 Rutgers Computer & Tech. L. J. 61, 94–96 (2002) (hereinafter Pollack) (describing English practice).
See id., at 95; B. Woodcroft, Alphabetical Index of Patentees of Inventions, from March 2, 1617 (14 James I) to October 1, 1852 (16 Victoriae) 383, 410 (2d ed. 1969) (hereinafter Woodcroft).
See also Renn, John Knox’s Plan for Insuring Lives: A Patent of Invention in 1778, 101 J. Inst. Actuaries 285, 286 (1974) (hereinafter Renn) (describing the patent).
“The English patent system” at that time “was one of simple registration. Extensive scrutiny was not expected of the law officers administering it.” MacLeod 41. Thus, as one scholar suggested of the patent on life insurance, “perhaps the Law Officer was in a very good humour that day, or perhaps he had forgotten the wording of the statute; most likely he was concerned only with the promised ‘very considerable Consumption of [Revenue] Stamps’ which [the patent holder] declared, would ‘contribute to the increase of the Public Revenues.’ ” Renn 285.
See Markman v. Westview Instruments, Inc., 517 U. S. 370, 381 (1996) (“[T]he state of patent law in the common-law courts before 1800 led one historian to observe that ‘the reported cases are destitute of any decision of importance’ ” (quoting Hulme, On the Consideration of the Patent Grant, Past and Present, 13 L. Q. Rev. 313, 318 (1897))); MacLeod 1, 61–62 (explaining the dearth of clear case law); see also Boulton v. Bull, 2 H. Bl. 463, 491, 126 Eng. Rep. 651, 665 (C. P. 1795) (Eyre, C. J.) (“Patent rights are no where that I can find accurately discussed in our books”).
See Pollack 97–100. For example, those who held patents on oil lamps developed firms that contracted to provide street lighting. See M. Falkus, Lighting in the Dark Ages of English Economic History: Town Streets before the Industrial Revolutions, in Trade, Government, and Economy in Pre-Industrial England 249, 255–257, 259–260 (D. Coleman & A. John eds. 1976).
See, e.g., Carlos & Nicholas, Agency Problems in Early Chartered Companies: The Case of the Hudson’s Bay Company, 50 J. Econ. Hist. 853, 853–875 (1990).
Walterscheid, Background and Origin 26; 2 Records of the Federal Convention of 1787, pp. 509–510 (M. Farrand ed. 1966).
J. Madison, Notes of Debates in the Federal Convention of 1787, pp. 638–639 (Ohio Univ. Press ed. 1966).
Some scholars suggest that Webster’s “close proximity to the Constitutional Convention coupled with his familiarity with the delegates makes it likely that he played some indirect role in the development” of the Constitution’s Intellectual Property Clause—a Clause that established not only the power to create patents but also copyrights, a subject in which Webster had great interest. Donner, Copyright Clause of the U. S. Constitution: Why Did the Framers Include It With Unanimous Approval? 36 Am. J. Legal. Hist. 361, 372 (1992). But there is no direct evidence of this fact. See Walterscheid, Background and Origin 40–41.
See, e.g., 1 S. Johnson, Dictionary of the English Language (1773) (reprint 1978) (listing as definitions of an “art”:“[t]he power of doing something not taught by nature and instinct,” “[a] science; as, the liberal arts,” “[a] trade,” “[a]rtfulness; skill; dexterity,” “[c]unning,” and “[s]peculation”). One might question the breadth of these definitions. This same dictionary offered as an example of “doing something not taught by nature and instinct,” the art of “dance”; and as an example of a “trade,” the art of “making sugar.” Ibid.
For examples of this usage, see Book of Trades or Library of Useful Arts (1807) (describing in a three-volume work 68 trades, each of which is the means of creating a product, such as feather worker or cork cutter); 1 J. Bigelow, The Useful Arts Considered in Connexion with the Applications of Science (1840) (surveying a history of what we would today call mechanics, technology, and engineering). See also D. Defoe, A General History of Discoveries and Improvements, in Useful Arts (1727); T. Coxe, An Address to an Assembly of the Friends of American Manufactures 17–18 (1787); G. Logan, A Letter to the Citizens of Pennsylvania, on the Necessity of Promoting Agriculture, Manufactures, and the Useful Arts 12–13 (2d ed. 1800); W. Kenrick, An Address to the Artists and Manufacturers of Great Britain 21–38 (1774); cf. Corning v. Burden, 15 How. 252, 267 (1854) (listing the “arts of tanning, dyeing, making water-proof cloth, vulcanizing India rubber, [and] smelting ores”).
See, e.g., 1 D. Chisum, Patents G1–23 (2010); Lutz, Patents and Science: A Clarification of the Patent Clause of the U. S. Constitution, 18 Geo. Wash. L. Rev. 50, 54 (1949–1950); Samuelson, Benson Revisited: The Case Against Patent Protection for Algorithms and Other Computer-Related Inventions, 39 Emory L. J. 1025, 1033, n. 24 (1990); Seidel 10, 13; see also Great Atlantic & Pacific Tea Co. v. Supermarket Equipment Corp., 340 U. S. 147, 154 (1950) (Douglas, J., concurring) (explaining that in the Framers’ view, an “invention, to justify a patent, had to serve the ends of science—to push back the frontiers of chemistry, physics, and the like; to make a distinctive contribution to scientific knowledge”); In re Waldbaum, 457 F. 2d 997, 1003 (CCPA 1972) (Rich, J., concurring) (“ ‘The phrase “technological arts,” as we have used it, is synonymous with the phrase “useful arts” as it appears in Article I, Section 8 of the Constitution’ ”); Paulik v. Rizkalla, 760 F. 2d 1270, 1276 (CA Fed. 1985) (explaining that “useful arts” is “the process today called technological innovation”); Thomas, The Post-Industrial Patent System, 10 Fordham Intell. Prop. Media & Ent. L. J. 3, 32–55 (1999) (cataloguing early understandings of technological arts). This view may be supported, for example, by an 1814 grant to Harvard University to create a “Professorship on the Application of Science to the Useful Arts,” something that today might be akin to applied science or engineering. See M. James, Engineering an Environment for Change: Bigelow, Peirce, and Early Nineteenth-Century Practical Education at Harvard, in Science at Harvard University: Historical Perspectives 59 (C. Elliott & M. Rossiter eds. 1992).
These doubts ended by the time of Cochrane v. Deener, 94 U. S. 780 (1877), in which we held that “a process may be patentable irrespective of the particular form of the instrumentalities used,” and therefore one may patent “an act, or series of acts, performed upon the subject matter to be transformed and reduced to a different state or thing.” Id., at 788.
A skeptic of patents, Jefferson described this as “drawing a line between things which are worth to the public the embarrassment of a patent, and those which are not.” 13 Writings of Thomas Jefferson 335 (Memorial ed. 1904).
See, e.g., Expanded Metal Co. v. Bradford, 214 U. S. 366, 383, 385–386 (1909); The Telephone Cases, 126 U. S., at 533–537; Cochrane, 94 U. S., at 787–788; Burden, 15 How., at 267–268.
See also 1 A. Deller, Walker on Patents §26, p. 152 (2d ed. 1964) (A “ ‘system’ or method of transacting business is not [a process], nor does it come within any other designation of patentable subject matter”).
Although a few patents issued before 1952 that related to methods of doing business, see United States Patent and Trademark Office, Automated Financial or Management Data Processing Methods, online at http://www.uspto.gov/web/menu/busmethp/index.html (all Internet materials as visited June 26, 2010, and available in Clerk of Court’s case file), these patents were rare, often issued through self-registration rather than any formalized patent examination, generally were not upheld by courts, and arguably are distinguishable from pure patents on business methods insofar as they often involved the manufacture of new objects. See In re Bilski, 545 F. 3d 943, 974, and n. 18 (CA Fed. 2008) (case below) (Dyk, J., concurring); Pollack 74–75; Walterscheid, To Promote the Progress 243.
For examples of such usage, see The Telephone Cases, 126 U. S., at 533, and Burden, 15 How., at 267.
See also 98 Cong. Rec. A415 (1952) (remarks of Rep. Bryson) (describing, after the fact, the 1952 Patent Act, and explaining that “[t]he word ‘art’ was changed to ‘process’ in order to clarify its meaning. No change in substance was intended”).
As explained in Part II, supra, the Court engages in a Jekyll-and-Hyde form of interpretation with respect to the word “process” in §101. It rejects the interpretation I proffer because the words “process” and “method” do not, on their face, distinguish between different series of acts. Ante, at 10. But it also rejects many sorts of processes without a textual basis for doing so. See ante, at 4–5, 7, 12–15. And while the Courts rests a great deal of weight on Parker v. Flook, 437 U. S. 584 (1978), for its analysis of abstract ideas, the Court minimizes Flook’s rejection of “a purely literal reading of §101,” as well as Flook’s reliance on the historical backdrop of §101 and our understanding of what “the statute was enacted to protect,” id., at 588–590, 593; see also Diamond v. Diehr, 450 U. S. 175, 192 (1981) (explaining that a “claim satisfies the requirements of §101” when it “is performing a function which the patent laws were designed to protect”).
Forty years later, Judge Rich authored the State Street opinion that some have understood to make business methods patentable. But State Street dealt with whether a piece of software could be patented and addressed only claims directed at machines, not processes. His opinion may therefore be better understood merely as holding that an otherwise patentable process is not unpatentable simply because it is directed toward the conduct of doing business—an issue the Court has no occasion to address today. See State Street, 149 F. 3d, at 1375.
See also 145 Cong. Rec. 30985 (1999) (remarks of Sen. Schumer) (explaining that “[i]n State Street, the Court did away with the so-called ‘business methods’ exception to statutory patentable subject matter,” and “[t]he first inventor defense will provide … important, needed protections in the face of the uncertainty presented by … the State Street case”); id., at 31007 (remarks of Sen. DeWine) (“Virtually no one in the industry believed that these methods or processes were patentable”); id., at 19281 (remarks of Rep. Manzullo) (“Before the State Street Bank and Trust case … it was universally thought that methods of doing or conducting business were not patentable items”).
The Court opines that “[t]his principle, of course, applies to interpreting any two provisions in the U. S. Code, even when Congress enacted the provisions at different times.” Ante, at 11 (emphasis added). The only support the Court offers for this proposition is a 1937 opinion for three Justices, in Hague v. Committee for Industrial Organization, 307 U. S. 496, 528–530 (1939) (opinion of Stone, J.). But that opinion is inapposite. Although Justice Stone stated that two provisions “must be read together,” id., at 530, he did so to explain that an ambiguity in a later-in-time statute must be understood in light of the earlier-in-time framework against which the ambiguous statute was passed, id., at 528–530, particularly because the later statute explicitly stated that it “shall not be construed to apply” to the provision created by an earlier Act, id., at 528.
I am not trying to “overcome” an “established rule of statutory interpretation” with “judicial speculation as to the subjective intent of various legislators,” ante, at 11, but, rather, I am explaining why the Court has illogically expanded the canon upon which it relies beyond that canon’s logical underpinnings.
See also Quanta Computer, Inc. v. LG Electronics, Inc., 553 U. S. 617, 626 (2008) (“ ‘[T]he primary purpose of our patent laws is not the creation of private fortunes for the owners of patents but is “to promote the progress of science and useful arts” ’ ” (quoting Motion Picture Patents Co. v. Universal Film Mfg. Co., 243 U. S. 502, 511 (1917))); Pfaff v. Wells Electronics, Inc., 525 U. S. 55, 63 (1998) (“[T]he patent system represents a carefully crafted bargain that encourages both the creation and the public disclosure of new and useful advances in technology”).
See, e.g., Burk & Lemley, Policy Levers in Patent Law, 89 Va. L. Rev. 1575, 1577–1589 (2003) (hereinafter Burk & Lemley).
See, e.g., Burk & Lemley 1618; Carrier, Unraveling the Patent-Antitrust Paradox, 150 U. Pa. L. Rev. 761, 826 (2002) (hereinafter Carrier); Dreyfuss, Are Business Methods Patents Bad for Business? 16 Santa Clara Computer & High Tech. L. J. 263, 274–277 (2000) (hereinafter Dreyfuss); Posner, The Law and Economics of Intellectual Property, 131 Daedalus 5 (Spring 2002).
See also Pollack 75–76 (“Since business methods are ‘useful’ when they directly earn revenue, they are inherently unlikely to be underproduced”).
See Burk & Lemley 1618; Dreyfuss 275; see generally Carrier 821–823. Concededly, there may some methods of doing business that do not confer sufficient first-mover advantages. See Abramowicz & Duffy, Intellectual Property for Market Experimentation, 83 N. Y. U. L. Rev. 337, 340–342 (2008).
See Burk & Lemley 1618; Carrier 826; Olson, Taking the Utilitarian Basis for Patent Law Seriously: The Case For Restricting Patentable Subject Matter, 82 Temp. L. Rev. 181, 231 (2009).
See Dreyfuss 276; Merges & Nelson, On the Complex Economics of Patent Scope, 90 Colum. L. Rev. 839, 873–878 (1990).
See also Raskind, The State Street Bank Decision, The Bad Business of Unlimited Patent Protection for Methods of Doing Business, 10 Fordham Intell. Prop. Media & Ent. L. J. 61, 102 (1999) (“Interactive emulation more than innovation is the driving force of business method changes”).
There is substantial academic debate, moreover, about whether the normal process of screening patents for novelty and obviousness can function effectively for business methods. The argument goes that because business methods are both vague and not confined to any one industry, there is not a well-confined body of prior art to consult, and therefore many “bad” patents are likely to issue, a problem that would need to be sorted out in later litigation. See, e.g., Dreyfuss 268–270; Eisenberg, Analyze This: A Law and Economics Agenda for the Patent System, 53 Vand. L. Rev. 2081, 2090 (2000); Merges 589–590.
See also J. Bessen & M. Meurer, Patent Failure: How Judges, Bureaucrats, and Lawyers Put Innovators at Risk 46–72 (2008) (hereinafter Bessen & Meurer); P. Menell & S. Scotchmer, Intellectual Property Law, in 2 Handbook of Law and Economics 1500–1501, 1506 (M. Polinsky & S. Shavell eds. 2007). Concededly, alterations in the remedy structure, such as the First Inventor Defense Act of 1999, §4301 et seq., 113 Stat. 1536, codified at 35 U. S. C. §273, mitigate these costs.
See generally Farrell & Shapiro, How Strong Are Weak Patents? 98 Amer. Econ. Rev. 1347 (2008); Meurer, Controlling Opportunistic and Anti-Competitive Intellectual Property Litigation, 44 Boston College L. Rev. 509 (2003); Moore, Populism and Patents, 82 N. Y. U. L. Rev. 69, 90–91 (2007).
See Bessen & Meurer 176; Lessig, The Death of Cyberspace, 57 Wash. & Lee L. Rev. 337, 346–347 (2000).