Alex Gloor is a JD Student at Osgoode Hall Law School

The next step in the well documented Bilski case took place on Nov. 9 when the United States Supreme Court heard oral arguments from both parties. As a quick reminder, the issue revolves around the patenting of business methods; in this case, the subject matter concerned  a method of hedging risks in commodities trading. In its decision, the U.S. Court of Appeals for the Federal Circuit reverted to the "machine or transformation" test, narrowing the scope of patentable subject matter and throwing the validity of thousands of patents granted under the old State Street rule into question. This case has seen extensive attention in the blogs already; click here for a more extensive look at its history and here for its potential consequences in Canada.

Acting as Counsel for Bilski, Mr. Michael Jakes began in his opening statement by arguing that the machine or transformation test has no statutory basis nor common law precedent backing it. Jakes argues that section 101 should be interpreted broadly, with a presumption of patentability outside of the recognized exceptions that are covered in the Diehr decision. When Justice Scalia suggests that s. 101 and its "new and useful art" provision was always thought to deal with machines or inventions, Jakes argued that although the majority of historical patents concerned machines or manufacturing, this is simply a consequence of history and not because method patents were precluded. He followed by stating that, as a matter of policy, these methods should be patentable as they encourage disclosure of ideas and stimulate useful inventions.

The justices had multiple problems with Jakes' proposed interpretation of patentable subject matter. They proposed several hypothetical situations, inquiring into the bounds of patentability. Justice Breyer was particularly memorable in inquiring whether his novel method of teaching antitrust law that (amazingly) keeps 80% of students awake would be patentable, assuming it could be reduced to a series of steps. Jakes said that this may potentially be patentable. He advocated a return to Diehr, saying that standalone abstract ideas are not patentable, with the distinction between abstract ideas and patentable methods being the ability to break down the method into concrete steps requiring people to do actual things.

This led to a long discussion of how the Bilski patent could be reduced to physical steps. Jakes seemed unconvincing in his justification, claiming that a bunch of ordinary actions such as initiating a series of transactions via a phone call was sufficient to satisfy the physical step requirement. This caused a line of questions asking why, if these methods with incidental physical steps could be patented, that all sorts of methods of the sort were not patented hundreds of years ago. Justice Scalia gave an example of a horse whisperer who had his own method of training horses. Jakes replies that this could have been patented, but because it was an industrial based economy and because there would be enforcement problems, nobody bothered with these patents until recently.

As counsel for the respondant, Mr. Malcolm Stewart began by picking up on what he saw as a weak point of the Bilski argument by asserting that patents must be in the realm of the physical. Stewart alleges that Bilski's patent is ineligible for two reasons: first, because the method of commodities trading fails the machine or transformation test and second, because it is an abstract idea. While Stewart seemed to feel fairly certain that the court would find ineligibility based on the abstract idea proposal, he clearly stated that it would be more desirable to win on the machine or transformation test.

In doing so, Stewart argued that the test is not overly rigid. He said that all that needs to be done is to satisfy the test is to establish "some link to a machine or a transformation of matter", addressing a fear of Justice Sotomayer. Further, Stewart acknowledges that it is possible that some new technology will be invented in the future that is deserving of patentability but lies outside the bounds of the machine or transformation test. Still, Stewart makes it clear that his goal is simply establishing a return to the machine or transformation test, and that the "hard questions" of determining what constitutes a machine-implemented process or what constitutes sufficient transformation for later. This did not sit well with the court. In particular, Chief Justice Roberts took issue with an assertion Stewart made in his footnotes that although the Bilski patent is not eligible because it did not involve a machine, if a computer were involved to identify the parties then it may satisfy the test. Roberts equated this tangential proposition with a hypothetical situation where the patentability of a process hinged on the distinction of using a calculator or mental arithmetic to make a simple division. Stewart wisely backtracked, acknowledging that such fleeting use of a machine would be insufficient. In turn he said that the line of patentability would be closer in situations where a machine is programmed with new software related to the process in question.

The future looks grim for any hopes of Bilski being granted patent protection, especially in light of the Court's seeming reluctance to accept Mr. Jakes' proposal of the physical steps involved in the Bilski method. However, the adoption of the machine or transformation test seems less of a certainty. The court was not enthralled with Mr. Stewart's proposal to answer the "hard question" about the boundaries of what satisfies the test at a later date. And, as is pointed out in this article, it is likely that by accepting to hear this case the Supreme Court was looking to modify or set aside the test as set out in the Court of Appeal decision. Thus, although the future for Bilski looks bleak, the broader question regarding the patentability of business methods is still far from decided.