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August 01, 2010 (Vol. 30, No. 14)

What Biotech Needs to Know about Bilski

Decision Will Have Lasting Impact on Industry

  • On the last day of its 2009 term, the Supreme Court issued an important decision in Bilski v. Kappos that addresses the fundamental question of what types of methods are eligible for patent protection under the primary patent statute, 35 U.S.C. § 101. While the patent at issue related to a business method, the law in this area is gaining increasing importance in the biotech industry, as courts are scrutinizing whether human genes, diagnostic methods, and personalized medicine methods should be eligible for patent protection, even assuming all other requirements for a patent are met. 

    The Bilski decision itself may not directly impact biotech companies, but the fall-out from Bilski and cases that will be decided in Bilski’s wake will no doubt have a lasting impact on this industry.

    Bilski’s patent described a method of hedging risk in the field of commodities trading. The Federal Circuit considered whether Bilski’s claims satisfied 35 U.S.C. § 101, which defines subject matter that may be patented.

    Although the plain language of the statute is very broad, a number of Supreme Court decisions have placed limits on its reach. For example, “laws of nature, physical phenomena, and abstract ideas” are not patent-eligible, nor are “mental processes.”

    In its Bilski decision, the Federal Circuit determined that the “machine or transformation test” is the appropriate way to determine whether method claims satisfy § 101. The court presented the test as having two independent parts, only one of which must be satisfied:

    (1) the process is tied to a particular machine or apparatus, or
    (2) the process transforms a particular article into a different state or thing. 

    The court explained that the test has two further aspects: 

    (i) the use of a specific machine or transformation of an article must impose meaningful limits on the claim’s scope, and
    (ii) the involvement of the machine or transformation must not merely be insignificant extra solution activity.

    Bilski’s methods admittedly failed the “machine” prong of the test, because the claims did not recite the use of any machine or apparatus. (Unlike many business method patents, Bilski’s claims did not require that any of the method steps be performed by a computer.) 

    With regard to the “transformation” prong, the court reasoned that transformations of “public or private legal obligations or relationships, business risks, or other such abstractions cannot meet the test.”

    Applying these principles to Bilski’s methods, the court held that they could not be patented because they “encompass the exchange of only options, which are simply legal rights to purchase some commodity at a given price in a given time period,” and do “not involve the transformation of any physical object or substance, or an electronic signal representative of any physical object or substance.” 

    The Supreme Court held that the machine or transformation test is not the “only” way to determine whether method claims satisfy § 101. The Court did not discredit the test, however, stating that it is a “useful” tool. Moreover, the Court refused to adopt a rule that business methods cannot be patented. Still, the Court affirmed the Federal Circuit’s determination that Bilski’s claims are invalid, on the specific ground that they claim an “abstract idea.”

    The majority opinion does not provide much guidance to aid future applications of § 101. Nor does it indicate how to determine whether a patent is invalid for claiming an abstract idea or natural phenomena, or how to address this issue in biotech-related fields such as genes, diagnostics, and personalized medicine.   

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