561 U.S. 593 (2010)
Bernard L. Bilski and Rand A. Warsaw submitted a patent application to the Patent and Trademark Office seeking protection for a method allowing buyers and sellers of commodities in the energy market to hedge against the risk of price changes.1
Claim 1 describes a series of steps for initiating transactions between a commodity provider and consumers at a fixed rate based on historical averages, identifying market participants with a counter-risk position, and initiating transactions with those participants at a second fixed rate to balance the risk.2 Claim 4 reduces the hedging concept to a simple mathematical formula.3 Additional claims apply the method to energy markets and suggest the use of statistical techniques such as random analysis to determine inputs.4
The patent examiner rejected the application on the ground that it was not implemented on a specific apparatus and merely manipulated an abstract idea while solving a purely mathematical problem without any limitation to a practical application.5 The Board of Patent Appeals and Interferences affirmed the examiner’s rejection, concluding that the application involved only mental steps that do not transform physical matter and was directed to an abstract idea.6
Petitioners appealed to the United States Court of Appeals for the Federal Circuit, which heard the case en banc and affirmed the rejection.7 The Supreme Court granted certiorari to review the Federal Circuit’s judgment.8
Whether the machine-or-transformation test is the sole test for determining whether a claimed invention is a patent-eligible process under 35 U.S.C. § 101?9
No. The Federal Circuit erred in holding that the machine-or-transformation test is 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.12 Section 100(b) defines process without requiring it to be tied to a machine or the transformation of an article.13 The Federal Circuit’s conclusion that this Court has endorsed the test as exclusive is incorrect, as recent authorities show that the test was never intended to be exhaustive or exclusive.14
Applied to the established facts, the Federal Circuit applied the test as the sole criterion to affirm the rejection of Bilski’s patent application for a hedging method, but the Supreme Court held that this approach violated principles of statutory interpretation.15
The machine-or-transformation test is not the sole test for determining patent eligibility under 35 U.S.C. § 101.16
Related opinions on this issue
Joined by Ginsburg, Breyer, And Sotomayor, Jj.
Justice Stevens agreed that the machine-or-transformation test is not the sole test for patent eligibility under §101.17 He would have gone further to hold that business methods are not patentable processes under §101, restoring patent law to its historical moorings where methods of doing business were not considered patentable.18 In his view, 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.19
He explained that 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 §101.20
Joined by Scalia, J., As To Part Ii
Justice Breyer agreed that the machine-or-transformation test is a useful and important clue but not the sole test for patentability under §101.21 He emphasized that the test has repeatedly helped the Court determine what constitutes a patentable process, yet the Federal Circuit erred by treating it as the exclusive test.22 He joined the judgment while highlighting substantial agreement on fundamental issues of patent law.23
Breyer stressed that the test remains an important example of how courts can determine patentability under §101 even if it is not the only available test.24
Whether § 101 categorically excludes business methods from patent eligibility?25
Section 101 does not categorically exclude business methods from patent eligibility, as the term method within §100(b)’s process definition may include at least some methods of doing business and §273 contemplates their existence.26
No. The term method within §100(b)’s process definition may include at least some methods of doing business.27 The Court is unaware of any argument that the ordinary meaning of method excludes business methods.28 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).29 A contrary conclusion would violate the canon against interpreting any statutory provision in a manner that would render another provision superfluous.30
Applied to the established facts, Bilski’s hedging claims constitute a method of doing business in energy markets, but the Supreme Court rejected any categorical bar on such methods under §101.31
Section 101 does not categorically exclude business methods from patent eligibility.32
Related opinions on this issue
Joined by Ginsburg, Breyer, And Sotomayor, Jj.
Justice Stevens would have held 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.33 He explained that a claim that merely describes a method of doing business does not qualify as a process under §101.34 In his view, 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.
Stevens urged restoring patent law to its historical moorings excluding business methods from the definition of process.35
Joined by Scalia, J., As To Part Ii
Justice Breyer joined Justice Stevens in concluding that a general method of engaging in business transactions is not a patentable process within the meaning of 35 U.S.C. §101. He agreed that the text, history, and purposes of the Patent Act make clear that business methods are not patentable.36 He would have decided the case on that ground while noting the Court’s unanimous agreement that the claims are unpatentable abstract ideas.37
Breyer concurred separately to underscore the agreement among members on core patent principles.38
Whether petitioners' claims for a method of hedging risk in energy markets are directed to a patentable process or to an unpatentable abstract idea?39
Claims that attempt to patent abstract ideas are not patentable processes under §101, as established by precedents in Benson, Flook, and Diehr.40
No. Petitioners seek to patent both the concept of hedging risk and the application of that concept to energy markets.41 Claims 1 and 4 explain the basic concept of hedging and reduce that concept to a mathematical formula.42 This is an unpatentable abstract idea, just like the algorithms at issue in Benson and Flook.43
Petitioners’ remaining claims attempt to patent the use of the abstract hedging idea and instruct the use of well-known random analysis techniques.44 They add even less to the underlying abstract principle than the invention held patent ineligible in Flook.45 Applied to the established facts, the patent examiner and Board rejected the application as manipulating an abstract idea, the Federal Circuit affirmed under the machine-or-transformation test, and the Supreme Court affirmed the judgment on the ground that the claims are attempts to patent abstract ideas.46
Petitioners' claims for a method of hedging risk in energy markets are directed to an unpatentable abstract idea.47
Related opinions on this issue
Joined by Ginsburg, Breyer, And Sotomayor, Jj.
Justice Stevens agreed that petitioners seek to patent an abstract idea but would have resolved the case by holding that the method is not a process because it describes only a general method of engaging in business transactions.48 He noted that the Court does not show how its conclusion follows clearly from case law and would have restored patent law to its historical moorings excluding business methods.49 He concurred in the judgment while cautioning against language that could cause mischief in future cases.50
Stevens emphasized the need for stable and clear patent law.
Joined by Scalia, J., As To Part Ii
Justice Breyer agreed with the Court’s unanimous conclusion that the claims at issue here are unpatentable abstract ideas.51 He highlighted substantial agreement among Members of the Court on fundamental issues of patent law, including that the machine-or-transformation test is not the sole test and that the useful-concrete-and-tangible-result approach should not be endorsed.52 He concurred in the judgment to emphasize clarity and settled law in this technical area.53
Breyer stressed four points of agreement to promote predictability in patent jurisprudence.54