To prepare a submission for the USPTO’s Bilski consultation (deadline: 27 sept), I’ve been reviewing the various analyses of the Bilski decision. I think the best was Dan Ravicher’s (of SFLC and PubPat). It was an audio presentation, so below is a transcript I made. You can find the audio on softwarefreedom.org.
I’ve skipped the intro by Karen M. Sandler and Bradley M. Kuhn. They ask Dan what people should think about the Bilski decision:
Dan Ravicher [3:15]: Well, today was a major development in the world of patent law and the opinion handed down by the Supreme Court will dramatically impact the future of how software patents get evaluated. But, before I get to the actual decision today, I want to make sure everyone’s on the same page on how we got to the Supreme Court’s opinion that got released.
So, there were these two guys, Bernard Bilski and Rand Warsaw, and they came up with what they thought was an invention on how to help people hedge risk in a fluctuating price for a certain commodity. So they would match buyers and sellers of a certain commodity and work out a certain mathematical algorithm that would allow them to both be guaranteed a certain price for that commodity so they weren’t subject to dramatic spikes if there was a supply problem or dramatic drops in the price if there was an oversupply of the commodity. So they applied for the patent and the patent office examiner who’s desk it landed on rejected the application and said "You can’t have this because it’s not a patentable thing. This is not one of the four categories of patent eligible subject matter identified in the patent law". Particularly, the one word here that’s important is the word "process", they said that it’s not a patentable process.
So, Bernard and Rand didn’t like their application being rejected so they appealed that to the Board of Patent Appeals at the patent office, and asked the Board of Patent Appeals to reverse the examiner but the Board of Patent Appeals upheld the examiner’s decision to reject the application as not being patent eligible subject matter. They then appealed that decision to the Court of Appeals for the Federal Circuit and in a decision handed down by all of the active judges of the Federal Circuit – a pretty rare thing but it’s called a decision en banc as opposed to a panel decision which is only issued by three judges on the Federal Circuit.
The entire Federal Circuit came together in unison to rule that the application here wasn’t patentable, because it failed to pass what was known as the "machine-or-transformation" test. Because the process did not involve a special purpose machine, or it did not transform matter to a new state or thing, it was simply a manipulation of numbers, then it was not a patentable process.
Now, that en banc federal decision did have a couple of judges who disagreed with that test. One judge, judge Rader who’s now the chief judge of the Federal Circuit, said "well this is not a patentable thing because it’s on an abstract idea; the machine-or-transformation test is not the correct test to determine whether or not something is patent eligible". And another judge, Judge Pauline Newman said she wasn’t sure whether or not this patentable subject matter or not because all of the underlying issues of whether or not it was an abstract idea or a concrete idea or a concrete implementation of an abstract idea hadn’t been addressed."
So, the Supreme Court decided to hear the case…
[Bradley Kuhn [6:24] points out that the CAFC decision was discussed in SFLC’s oggcast 0x01 with Scott Peterson]
Dan Ravicher [6:50]: So, in November the Supreme Court heard oral arguments, and we hear at the Software Freedom Law Center submitted an amicus brief along with nearly a hundred other people or organisations in the case.
[Karen Sandler [7:03] points out that these briefs were discussed in the oggcast 0x18: Re Bilski’s Briefs]
Dan Ravicher: The process is there’s briefing, and then once all the briefing is submitted, then there’s oral argument, and then once oral argument is complete the case is called fully submitted and it’s left for the judges to decide. And once they decide how they’re going to rule then they have to appoint a certain judge or justice to write the opinion. If any of the other judges or justices disagree with the opinion being written for the court, they can write separately either to dissent or to technically concur – which means they agree with the result but they disagree with the reason.
(Bradley Kuhn [8:37] suggests explaining the purpose of dissenting)
Dan Ravicher [8:55]: It’s actually a very interesting question why would a judge write a dissent, especially at the Supreme Court. Sometimes at a lower court, we have multiple judges on a case, such as here in the Federal Circuit judge Rader dissented from the en banc opinion. He said "I agree with the result but the test that they’re applying is the wrong test." The reason why he’s doing that is he’s trying to signal to courts above him, the argument for a different analysis.
At the Supreme Court, there’s no one above you. And there’s no one really to plead your case to, even though you lost. Technically speaking, realistically speaking, sometimes justice write dissents in order to provoke legislative activity. Sometimes they write dissents in order to encourage a follow-on round of litigation that would press certain issues that weren’t fully addressed by the current opinion. And sometimes people just write dissents because they don’t want to be seen as agreeing with the majority opinion. They want to at least identify their separate position.
But, sometimes writing a dissent is a futile thing because it doesn’t become the law and you can’t cite it as the binding law.
(Bradley Kuhn [10:17] suggests explaining the purpose of dissenting, by which judges can agree with the decision but disagree on the reasons for reaching that decision.)
Dan Ravicher:This is kinda like in World War II, where the United States and Russia both agreed that Germany was the enemy. But, although we agreed on the answer, we did not agree on the methods or reasoning and we weren’t necessarily friends ourselves. It’s a bit of a "my enemy’s enemy, is my collegue" so some extent.
There was a lot of prediction going on in this case, because it was fully submitted in November after the argument was heard, and as of this morning [Monday 28 June 2010] – which was the last day of the term for the Supreme Court – every case heard by the Supreme Court this year, this was the last day the court was in session for the term, which means they’re going to issue all their opinions. There were only four cases that hadn’t been decided yet from the term. The Bilski decision was the oldest one. The Supreme Court doesn’t wait to issue opinions. If the case had been decided, they would have issued the opinion as soon as it was decided. So what that told us, was that this case was taking a long time to be finalised and decided. Which indicated that there wasn’t consensus among the justices on what to say in the opinion.
The other influencing consideration, the Supreme Court doesn’t usually take cases just to affirm what the lower court did. That would be a waste of time. If they want to affirm what the lower court did, they would simply deny to take the case on cert. The Supreme Court only takes about sixty cases every year. That’s a very small percentage of the number of cases that people ask them to hear. So, when they decide to hear a case, that’s a very burdensome thing that they are undertaking, and so they’re not going to do it to simply say "Yes, the lower court got it right". So most people were predicting that they were going to say that the lower court here got it wrong, but they were sure how they were going to say that, or in what way, and the fact that there was such an extended time period between the Bilski oral argument in November and the end of June when we got the decision, indicated that there was going to be a very fragmented opinion. And in fact, in reviewing the opinion, that’s exactly what we have today.
[12:33] So, what I’d like to actually do is go through the opinion, and without commenting any more than I should, at least as an initial matter, just read some of the passages that the justices wrote.
The lineup was, we have three different opinions, and we have one justice who joined part of one opinion and then joins in another opinion. So, I know that’s a bit confusing. Usually you have one opinion for the court, sometimes you can have an opinion for the court and a dissent. You frequently see 5-4 decisions from the Supreme Court on issues like abortion and gun control and government rights and things like that, where you have five justices in the majority and four in the dissent. Our situation here is even more confusing than that. We have five justices who join an opinion for the court, which is the opinion that you cite as the law, but one of those five justices, Justice Scalia, says that he does not join in two portions of the opinion. I’m going to specifically identify those for the listeners.
Then what Justice Scalia does is he joins in a concurring opinion by Justice Breyer. And we also have an opinion by Justice Stevens, which is joined by Ginsburg, Sotomayor, and Breyer, which agrees in the result but disagrees with the reasoning.
So, let’s start with the opinion for the court, and this is what the law is now. This opinion was written by Justice Kennedy. Justice Kennedy describes the background of the case, which I gave you previously. He goes into depth discussing the federal circuit opinion, and the reasoning there, he cites Judge Rader’s concurrence but for different reasoning. He then gets into the statute at issue, because patent law is all statutory, it’s technically a "statutory construction case", and the definition of the word process. One of his first quotes that I’ve marked is, he says…
As of now, this is on page 5 of the slip opinion. When the opinion gets recorded in the Federal Register, it’ll be given a full legal citation, so the page number will depend on whatever page within book of opinions it gets published, but for now if you just download the slip opinion, it’ll be on page 5. So, he says:
The Court’s precedents provide three specific exceptions
to §101
And that’s the section of the Patent Act that relates to what are patentable things.
The Court’s precedents provide three specific exceptions to §101’s broad patent-eligibility principles: “laws of nature, physical phenomena, and abstract ideas.” Chakra barty, supra, at 309. While these exceptions are not required by the statutory text, they are consistent with the notion that a patentable process must be “new and useful.”
The "new and useful" language is in quotes because that is what comes from section 101. So what he’s saying is, section 101 says the following things are patentable: machines, compositions of matter, processes. Section 101 does not say that physical phenonena, abstract ideas aren’t patent, but what Kennedy is saying is that those exceptions to the patentable categories are necessary in order to give meaning to the "new and useful" requirement of section 101.
Then Kennedy continues:
And, in any case, these exceptions have defined the reach of the statute as a matter of statutory stare decisis going back 150 years.
So, what he’s saying is, generally speaking 101 should be broadly interpreted but there are limits and those limits are defined by laws of nature, physical phonomenon, and abstract ideas.
(Bradley Kuhn [16:55]: and that comes from cases, not from statute?)
Dan Ravicher [3:15]:Well, it comes from both, it comes from cases, interpreting the statute. And so he’s saying, "our previous cases which have interpreted the statute have said that there is an exception for abstract ideas and laws of nature. Kennedy goes on to say, on page 6:
Any suggestion in this Court’s case law that the Patent Act’s terms deviate from their ordinary meaning has only been an explanation for the exceptions for laws of nature, physical phenomena, and abstract ideas.
You can see his general theme is: let’s not ask what is a process, because that’s irrelevant, what we ask is whether or not you’re trying to get a patent on a law of nature, an abstract idea.
So, when you thought the case was all about defining what’s a patentable process, he’s actually saying that a patentable process is anything that’s not an abstract idea, or a law of nature.
Then we get to a section that Justice Scalia does not join. This is a section of Kennedy’s opinion that only four justices agree with, which is Roberts, Alito, Thomas, and Kennedy. So Scalia expressly is not joining this section of the opinion, which is a pretty remarkable thing for Scalia to join most of the the opinion but not this section. In this section, Kennedy says:
It is true that patents for inventions that did not satisfy the machine-or-transformation test were rarely granted in earlier eras, especially in the Industrial Age […] But times change. […] But this fact does not mean that unforeseen innovations such as computer programs are always unpatentable.
That’s the first place where we actually see some specific discussion of software.
(Bradley Kuhn [19:33]: asks if this means that software could be patentable, thus some software is patenable…?)
Dan Ravicher:It could be patentable. I know that it sounds like a very lawyerly thing. Most common people would say, you have to either have one position. Either software’s patentable, or it’s not. But a lawyer could actually say, no, you could also have the position where you’re not saying that it is or is not patentable. It actually becomes circular because even if you say software is patentable or not, then you’re saying, well what makes something "software" as opposed to an abstract idea?
Again, the case is all about what’s a patentable process, and now we’re punting that question. Instead of trying to define what is a valid process, what we’re defining is what’s not patentable as an abstract idea. And so, what he’s saying in this section – and remember that Scalia doesn’t join, so there are only four justices of the Supreme Court that think this, which is a minority not a majority – he says that the word "computer program" could describe something that’s not just an abstract idea and therefore it could be patentable.
(Bradley kuhn [19:57]: why didn’t Scalia join that part?)
Dan Ravicher:We’ll get to that later on. Scalia did join a concurring opinion by Breyer, so we’ll see what Scalia and Breyer have to say at the end.
Kennedy continues, and this is still the section that Scalia did not join, and Kennedy says
But there are reasons to doubt whether the test should be the sole criterion for determining the patentability of inventions in the Information Age.
Now, recognise, he had just earlier talked about the Industrial Age, and now he says we are in the Information Age, and because times have changed, different rules might be applicable. And Kennedy goes on to say:
the machine-or-transformation test would create uncertainty as to the patentability of software…
Now, that’s what we had all said. I’m sure on your earlier podcasts you had said that the machine-or-transformation test of Bilski calls into question the patentability of software. And Kennedy agrees with that
(continued)…advanced diagnostic medicine techniques, and inventions based on linear programming, data compression, and the manipulation of digital signals.
And here, I’m sure this also made you sick, he cites the brief filed by the Business Software Alliance. So, he’s concerned here for exactly what you recognised, and what we all recognised was reality, which was that the Federal Circuit’s Bilski decision called into question the patentability of software. And he’s saying here that that’s something we should be concerned about as society.
Then he continues to say, Kennedy does:
In the course of applying the machine-or-transformation test to emerging technologies, courts may pose questions of such intricacy and refinement that they risk obscuring the larger object of securing patents for valuable inven tions without transgressing the public domain. […] in deciding whether previously unforeseen inventions qualify as patentable “process[es],” it may not make sense to require courts to confine themselves to asking the questions posed by the machine-or-transformation test. Section 101’s terms suggest that new technologies may call for new inquiries.
So, it’s kinda backwards to me saying that new technologies require new law. We’ve always been told, and you’re frequently told, that the law should be applicable to the society as it advances.
(Bradley Kuhn [22:25]: So, things should be more patentable the more technologies appear?)
Dan Ravicher:In the past, to be fair, the Supreme Court has tried to set down bright line tests, and then when new technology has been developed those bright line tests have proven to be either unworkable or undesirable. What I think he’s saying here is: we can’t predict the future technologies, we don’t know what tests will be applicable, so let’s not say. Some could say that that’s a cowardly thing to do, which is to just punt and wait for the future and try to let other people do it, some would say that the Supreme Court is supposed to take on these tough issues and set down precedent that can be applicable to the future to reduce uncertainty. But, for whatever reason, Kennedy chose not to do that.
So, the big line here is that "Section 101’s terms suggest that new technologies may call for new inquiries."
You have two points of ambiguity in that sentence. Whether or not this new technology deserves a new inquiry, is one question. Then, if you answer that "yes", what is that new inquiry?
There is a double layer of ambiguity here, and imprecision that makes it impossible to predict how this could be applied. He goes on to say:
It is important to emphasize that the Court today is not commenting on the patentability of any particular invention, let alone holding that any of the above-mentioned technologies from the Information Age should or should not receive patent protection. […] the patent law faces a great challenge in striking the balance between protecting inventors and not granting monopolies over procedures that others would discover by independent, creative application of general principles. Nothing in this opinion should be read to take a position on where that balance ought to be struck.
So, he’s saying that the line of what is or is not patentable is a policy decision between: do we need to protect inventors or do we need to protect the public from monopolies? Which seems to be a very unsatisfying legal stanard if you’re going to allow to fall down onto basically a policy debate.
Let’s see the glass as half full. It was completely possible that the Supreme Court could have come out 9-0 unanimously that this patent and every other patent is patent eligible. There are judges, and there are many commentators who said that that would be the correct answer, that everything under the sun made by man is patentable, there are no exclusions from patent-eligible subject matter in the statute. The court’s opinion’s grafting on those abstract ideas, laws of nature, natural phenomena exceptions were wrong. So the decision could have been very very bad, in saying that. Then there’d be no room to argue that software and other things are ineligible. But, this is a more fuzzy standard that moves away from the Federal Circuit’s Bilski test, which was a clear test that, as Kennedy concedes raised substantial doubts about whether software was patentable.
So, now we’re back to a section of the opinion… We finish that opinion where he was saying "New technologies may require new inquiries, we’re not opining about whether these new technologies are or not patentable, that’s left to be decided another day." Now we’re back into part of the opinion where Scalia joins, so, notice Scalia sat out that section, where Kennedy wrote that. Then Kennedy says:
The term “method,” which is within §100(b)’s definition of “process,” at least as a textual matter and before consulting other limitations in the Patent Act and this Court’s precedents, may include at least some methods of doing business.
So business methods are not categorically excluded.
And then, in another section of the opinion, where Kennedy goes on to discuss other issues, Scalia again withdraws his support, and in this section which is back only by four justices, Kennedy says:
If a high enough bar is not set when considering patent applications [regarding mathematical calculations and statistical analyses] patent examiners and courts could be flooded with claims that would put a chill on creative endeavor and dynamic change.
So, it seems that Kennedy is saying that one of the questions we should ask about whether something’s patentable, was whether or not it chills creative endeavour. If that’s part of the test, then we could say that software patents have a substantial chilling effect, and that would be a factor arguing that they’re not patentable.
(Bradley kuhn [27:55] asks if the court’s acknowledgement of the possibility of chilling effects, while software developers have known about that the chilling effects for years, does this mean the court is still ten years away from noticing these chilling effects?)
Dan Ravicher: Well, part of the problem this year is that the people at the Supreme Court listen to the people that submit briefs. It’s a little improper for them to just go out and do their own investigation of issues, and so, the people who have the interest and the resources to submit briefs, aren’t necessarily representative of the entire community. So, while we submitted our brief, and other pro-free-software organisations submitted their briefs, there are also briefs by BSA and other companies that have incentives to propel the patenting of computer programs. The Supreme Court may not have gotten an accurate picture of what actual software developers think. Instead they got a picture of what financial interests in the software field think.
And, I hope people are evaluating it… I don’t like, often when you ask people what courts say, and they paraphrase. I’m generally more of a: let the court’s opinion speak for itself. We’ll all discuss it in a minute, but I think it’s important to actually read the language and listen to the justices in their own words. says.
So, Kennedy continues to say… and this is a part of the opion where Scalia is back in, so he agrees with this, page 13:
Even though petitioners’ application is not categorically outside of §101 under the two broad […] approaches the Court rejects today
And the broad approaches were: 1. Machine or transformation is required. The court said no, that’s not true. 2. Business methods are excluded. The court said no, that’s not true, some business methods could be patentable. Kennedy says that does not mean it is necessarily a process under 101.
Rather than adopting categorical rules that might have wide-ranging and unforeseen impacts, the Court resolves this case narrowly on the basis of this Court’s decisions […] which show that petitioners’ claims are not patentable processes because they are attempts to patent abstract ideas.
So this goes back, remember, to what I said initially, that Kennedy was setting this all up saying this case was about what does it mean to be a process, and what it means to be a process is: something that’s not an abstract idea. So what we’re really asking is, is this a patent on an abstract idea or not? Then Kennedy says:
Indeed, all members of the Court agree that the patent application at issue here falls out side of §101 because it claims an abstract idea.
And then he goes on to discuss the court’s prior cases, and says, one way you know that a patent is on an abstract idea is if it preempts the use in all fields. So..
The concept of hedging, described in claim 1 and reduced to a mathematical formula in claim 4, is an unpatentable abstract idea, just like the algorithms at issue in Benson and Flook. Allowing petitioners to patent risk hedging would preempt use of this approach in all fields, and would effec tively grant a monopoly over an abstract idea.
So, the whole inquiry is: can we have a patent on this? And the answer is: is it a patent on an abstract idea? Well, how do you know if it’s an abstract idea? How does an idea go from being abstract, to be an idea that’s being applied in a concrete way? One of the things you could look for is whether or not it would preempt use in all fields. Kennedy goes on to say Flook, which was another case from the Supreme Court in the 70s:
Flook established that limiting an abstract idea to one field of use or adding token postsolution components did not make the concept patentable.
So, if you’re preempting the use of the formula or algorithm in all fields, that’s an abstract idea. Even if you limit it to one field of use, that’s still an abstract idea. Then, in concluding, Kennedy says:
The patent application here can be rejected under our precedents on the unpatentability of abstract ideas. The Court, therefore, 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.
And nothing in today’s opinion should be read as endorsing interpretations of §101 that the Court of Appeals for the Federal Circuit has used in the past. See, e.g., State
Street, 149 F. 3d, at 1373; AT&T Corp., 172 F. 3d, at 1357.
By that he means the State Street opinion, where the Federal Circuit had said that anything that produces a useful, concrete, and tangible result is acceptable. He said we’re not endorsing that, so we’re not going all the way back to State Street.
It may be that the Court of Appeals 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, including (but not limited to) application of our opinions in Benson, Flook, and Diehr. In disapproving an exclusive machine-or-transformation test, we by no means foreclose the Federal Circuit’s development of other limiting criteria that further the purposes of the Patent Act and are not inconsistent with its text.
Well, that’s a little bit disingenuous. They’re saying: I don’t care if the court of appeals does anything that I would say is allowed. [Ravicher rereads the last sentence of the above quote] Well, you don’t know what furthers the purpose of the Patent Act and are not inconsistent with this text unless the Supreme Court tells you. Because, obviously the Federal Circuit thought that its machine-or-transformation test did further the purpose of the Patent Act and was not inconsistent with its text. So the Supreme Court is saying "No, it is" So that’s a bit disingenuous: we don’t mind if the lower court does something that we would agree with. Well, how are they supposed to know what you would agree with if you don’t tell them?
([34:40] Bradley asks how a lower court is then supposed to use the majority opinion.)
Dan Ravicher: Well, they’re going to ask themselves questions. Question 1: is this a patent on an abstract idea? Well, how do we know that? Does it foreclose the use of an algorithm in all fields? That would seem to indicate that it is an abstract idea. It is a patent that, even though it’s limited to a particular field of use, it’s still on an abstract idea? And the plurality says that the machine-or-transformation test can be insightful, can be a clue, it can be a hint, but it’s not the conclusive outcome determinative test to be applied. So, this makes it a more subjective test, a less predictable test, a more judge-specific test. It gives more power to the decision maker to decide if their gut tells them that it is or is not a patent effectively on an abstract idea. Which, creates more uncertaintly and less predictability.
([35:48] Bradley Kuhn asks how this is any different from what we had before the Bilski cases.)
Dan Ravicher: It’s not. We’re back to basically where we were before Bilski started.
So, let’s look at the other two opinions. Stevens’ opinion is agreeing, but only in result.
WORK IN PROGRESS (THE FULL RECORDING IS 1h 14m LONG)