KEI Brownbag on Bilski case: Scope of Patentable Subject Matter

Date: September 10, 2009

On September 10, 2009 KEI hosted a brownbag lunch to discuss the scope of patentable subject matter, focusing specifically on the implications for life-science patents of the Supreme Court's forthcoming review of the Bilski Federal Circuit opinion. This is the first time since 1981 that the US Supreme Court will address the limits of patentable subject matter.

The key U.S. statue on this issue is Section 101 of the patent law:

35 USC 101. Inventions patentable

Whoever 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.

A common misunderstanding is that the Bilski case is only about patents on business methods. In fact, the Bilski case is being briefed on all aspects of patentable subject matter, including areas of the life sciences, such as medial diagnostics patents.

The lunch featured presentations and discussion by three patent experts:

  • Professor Brian Kahin, University of Michigan School of Information and Senior Fellow at Computers and Communications Industry Association (CCIA)
  • Professor John R. Thomas, Georgetown University Law Center
  • Professor Dan Ravicher, Cardozo Law School and the Public Patent Foundation

The following are my notes from the discussion:


The notice of the meeting included these points:
Many concerns have been raised in the past 15 years about the radical expansion of patentable subject matter to include all forms of software, human activities (business methods), and diagnostic information. This expansion took place with virtually no public input. As one treatise puts it:

[B]road notions of patent eligibility appear to be in the best interest of the patent bar, the PTO, and the Federal Circuit [CAFC]. Workloads increase and regulatory authority expands when new industries become subject to the appropriations authorized by the patent law. Noticeably absent from the private, administrative and judicial structure is a high regard for the public interest.[*]

As a result, virtually all human activity became subject to patenting, including established civil liberties. As Professor Thomas, Georgetown Law, has written, “the patent law allows private actors to impose more significant restraints on speech than has ever been possible through copyright.” A wide of variety of tax avoidance strategies have been patented, despite the opposition of the accounting profession. Patents disadvantage open source software and threaten the development of and use of open standards. Health care faces patents linking symptoms and conditions with treatments.

Background on the Bilski Case

In April 1997, the applicants (Bernard L. Bilski and Rand A. Warsaw) filed a business method patent application for a method of hedging risks in commodities trading. The patent examiner rejected all the claims and the applicants appealed the rejection to the Board of Patent Appeals and Interferences (BPAI), which affirmed the rejection of the patent claims, although on different grounds. Thereafter, the applicants appealed the rejection to the Federal Circuit.

In October 2008, the Court of Appeals for the Federal Circuit (CAFC) rejected again Bilski's appeal on grounds of ineligible patentable subject matter.

In deciding the case, the Federal Circuit employed a test of machine implementation or physical transformation, which the patent application failed to meet. As explained by the Federal Circuit, the machine-or-transformation is explained as:

"A claimed process is surely patent-eligible under §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."

The CAFC ruling is considered to have limited the scope of patentable subject by defining the range of processes that can be patented.

However, the Supreme Court consented to undertake a review of this decision which will be completed soon. This will be the first Supreme Court decision on the scope of patentable subject matter in 28 years. 44 amicus briefs have already been filed and can be found here. The deadline to file briefs is October 2, 2009.

Dan Ravicher, Public Patent Foundation and Cardozo Law School provided some background and an analysis of how the Supreme Court's decision will determine the patent eligibility of business methods and software, but also dramatically impact life sciences patents. Ravicher alerted that this case is not just about business methods or software patents but about the bigger issue: what processes are patentable under US law, including biotechnology and medical processes.

Ravicher provided examples to illustrate how the biotechnology and pharmaceutical industries may be affected by precedent of patentable subject set in other innovative industries. For instance, in Microsoft vs. AT&T, Eli Lilly filed a brief arguing that the patent claim for computer software was ineligible as subject matter, a position supported by the Supreme Court's decision. In the case of Classen Immunotherapies v. Biogen IDEC in December 2008, the Federal Circuit relied on Bilski to render invalid a patent claim for a method of determining whether an immunization schedule affected the incidence or severity of a disease.

In the Supreme Court review of Bilski, so far 5 amicus briefs have been filed that directly address the ruling's implications for biotechnology and pharmaceuticals:

  1. BIO, AdvaMed, WARF and the University of California. The brief asserts that biotechnology and medical technology require broad patent eligibility in order to produce growth in the industry and protect investments (referencing the landmark ruling in Diamond v. Chakrabarty regarding patent eligibility of genetic materials) and that the use of the "machine-or-transformation" test to bio process patents and biomarkers would wreck 'havoc' on the biotech industry.
  2. Novartis. This brief argues that the dissent in Lab. Corp. v. Metabolite (by Justice Breyer and joined by Justices Stevens and Souter) was erroneous, the "machine-or-transformation" test should not be implemented as a one-size-fits-all solution regardless of the ruling on Bilski's claim because such a decision would threaten protection to diagnostic-processes. Further, the only exclusion to the scope laid out in §101 is processes that preempt laws of nature, natural phenomena, or abstract ideas. Processes that are applications of laws of nature, such as diagnostic-processes, should remain eligible for patent protection.
  3. Georgia Biomedical Partnership, Inc. The brief holds that the Federal Circuit's ruling and mandatory use of the "machine-or-transformation" test is inconsistent with the Supreme Court's precedent on patent eligibility and also the Patent Code. Section 287(c) of the Patent Code exempts medical practitioners from patent infringement during performance of a medical activity. Congress' intention in drafting this section of the statute was to protect doctors without limiting the patenting of medical activities. Thus, the biomedical and biotechnological processes referred to in Section 287(c) are inherently patentable under §101 and fall under a broader range than covered under the Bilski test. The filers of the brief seek a reversal in order to prevent further reliance on the Bilski test to deny patent claims such as in Classes which, in their opinion, was decided incorrectly.
  4. Medtronic, Inc. The brief urges the Supreme Court not to adopt the standard set in Bilski and provides examples of medical and biotechnological processes that risk being deemed ineligible subject matter. Use of the "machine-or-transformation" test would render patient diagnosis, monitoring and medical data management, and personalized medicine unpatentable. Consequences of the Bilski test would be to impede the prompt disclosure of medical technology through patenting and discourage investment in medical innovation.
  5. PhRMA. Taking no view on Bilski itself and business method patents, PhRMA argues that the Court should not adopt a new test that could potentially, based on the interpretation of the test, limit the scope of patentability for medical processes that make use of pharmaceuticals. There is already debate over whether these processes are 'transformative' and hence meet the requirements of the "machine-or-transformation" test. The brief goes on to state:
    "If this Court nonetheless adopts the Federal Circuit’s Bilski test, it should make clear either that (1) under that test, medical processes, particularly processes involving the administration of pharmaceuticals, are patentable, or (2) the test is limited to business method patents and other tests may be appropriate for medical-process or other patents. Alternatively, if this Court adopts a different approach to the scope of § 101 than the Federal Circuit adopted in Bilski, it should ensure that that test protects the patentability of medical process patents."

    Hence, PhRMA has sought to ensure that the decision on Bilski will not have any implications for medical process claims or limiting the patent eligibility of "methods of medical treatment and diagnosis, especially methods for new uses of existing pharmaceuticals"

Ravicher further commented that it is unclear what positions the Supreme Court judges take but that is it important for interested parties, especially consumer advocates, to express their views on these issues, particularly as they relate to life science patents.

James Love raised several points in response to the concerns raised in the 5 briefs:

  • There is a fundamental distortion in the current patent system in the area of biotechnology. Patents are conceptualized as tools to protect investment instead of protecting innovation. But several mechanisms to reward innovation investment in the biomedical field, other than patents, currently exist or have been proposed, e.g., New proposed legislation with data exclusivity for biologics, Orphan Drug Act, FDA's Priority Review Voucher to reward innovation for neglected diseases, Medical Innovation Prize Fund Bill. The government has the option of using many such instruments to reward and create incentives for biotechnological and pharmaceutical inventions, that are independent and lie outside the patent system.
  • The dangers of excessive patenting are many- stifling follow on innovation (especially involving complex inventions), anti-competitive practices, formation of patent thickets, etc. In the biomedical area, patent protections, patent linkage and the practice of 'evergreening' have led to an untenable system of excessively high prices for lengthy period of times, a situation that retracts from the benefits the inventions are obligated to provide.
  • Further, there are several areas where the unhindered freedom to innovate is essential for growth in science (e.g., data interpretation, methods of medical diagnosis). The ethical issues in withholding one kind of subject matter may vary for a different kind, this merits further scrutiny.

During the discussion that followed, topics such as the infringement provisions in Section 271, the constitutional clause on “useful arts”, ethics of withholding knowledge on diagnostic and processes, and specific repercussions of the decision on life science patents were also deliberated.

According to John Thomas, Georgetown University Law Center, the language in Section 101 of the Patent Law can be read as quite inclusive concerning the scope of patentable subject matter. The courts and the USPTO have for many years set certain limits, excluding abstract ideas and laws of nature from being patentable. The Bilski test presents the Court with one possible way to define the boundaries or the exceptions to patent eligibility.

By way of its decision, the Supreme Court will also have the option of restricting the use of the Bilski test to a given field of technology and setting distinct standards for different industry sectors. In this regard, Article 27 of the TRIPS agreement was raised during the discussions. In the event that the Court chooses to adopt one general rule, participants at the meeting were of the opinion that the Bilski “machine-or-transformation” test might be a reasonable choice. Ravicher shared his opinion that although he disagreed with the way the “machine-or- transformation” test was created or justified by the CAFC, the result is right, and might be usefully defending under a different rationale.

Parties interested in filing briefs should do so by October 2.

[*] Roger E.Schechter and John R. Thomas, Intellectual Property, West Hornbook Series, 2003, p. 314

Interesting

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CAFC rules medical diagnostics patentable under Bilski test

In a ruling on September 17 (see Prometheus Labs., Inc. v. Mayo Collaborative Servs, http://www.cafc.uscourts.gov/opinions/08-1403r.pdf), the CAFC opined that medical treatment and diagnostic methods are patent eligible under the "machine-or-transformation" Bilski test.

The Supreme Court decision which is expected in 2010 could uphold, reject, or modify the Bilski test and how it is applied to determine patent eligibility.

October 2 is the deadline for interested parties to file briefs and respond to two questions framed in the certiorari petition:

1. Whether the Federal Circuit erred by holding that a “process” must be tied to a particular machine or apparatus, or transform a particular article into a different state or thing … despite this Court’s precedent declining to limit the broad statutory grant of patent eligibility for “any” new and useful process beyond excluding patents for “laws of nature, physical phenomena, and abstract ideas.”

2. Whether the Federal Circuit’s “machine-or-transformation” test for patent eligibility, which effectively forecloses meaningful patent protection to many business methods, contradicts the clear Congressional intent that patents protect “method[s] of doing or conducting business.” 35 U.S.C. § 273.