Publications

A threshold question in U.S. patent law is, “Whether the subject matter of a claim in a pending patent application or issued patent is directed to patentable subject matter?”

Just a few years ago the answer to that question seemed simple, “Yes, if the claimed subject matter came from the ‘hand of man.'” However, recent case law involving business method patents and patents claiming genes have placed the issue in the forefront of pat­ent law. This brief article is intended to high­light and summarize this issue for the non-patent practitioner.

U.S. patent law is governed by 35 U.S.C. § 100, et seq. Whether the subject matter of an invention is patent-eligible is addressed by 35 U.S.C. § 101. Pursuant to § 101, an invention is patentable if it falls within one of four categories of invention: processes, machines, manufactures, or compositions of matter. The drafters of § 101 intended the scope of “patentable subject matter” to be interpreted broadly. Historically, the Su­preme Court has interpreted § 101 to have only three specific exceptions to patentable subject matter — “laws of nature, physical phenomena, and abstract ideas.”

Recently two highly publicized cases, Bil­ski v. Kappos and Association for Molecular Pathology v. USPTO, have addressed this is­sue in the context of business method pat­ents and patents directed to genes. These two cases, discussed below, have set forth the legal guidelines that federal courts and the U.S. Patent & Trademark Office (PTO) should use when determining this issue.

The Bilski Case
For patent lawyers and owners of business method patents, the Supreme Court’s Bilski v. Kappos decision (130 S. Ct. 3218 (2010)) regarding the patentability of business meth­ods was one of the most anticipated deci­sions of 2010.

In the Bilski case, the Supreme Court ex­plored two general questions: (1) what is the proper test for determining the patentability of a process, and (2) whether business meth­ods should be categorically excluded from patentable processes. Specifically at issue, was whether the Bilski business method was a patentable process under § 101.

The Bilski patent application claimed a business method for explaining how buy­ers and sellers of commodities in the energy market can protect, or hedge, against the risk of price changes. Before reaching the Supreme Court, the PTO rejected the Bilski patent application as not patentable under § 101 because it “is not implemented on a specific apparatus and merely manipulates [an] abstract idea and solves a purely math­ematical problem without any limitation to a practical application . . . .”

The PTO’s decision was then appealed to the Federal Circuit, which affirmed the PTO’s decision. As part of the Federal Cir­cuit’s en banc decision, the court rejected its prior test for determining whether a process is patentable (whether an invention produc­es a “useful, concrete, and tangible result,” which was developed by the Supreme Court in State Street Bank), and instead set forth a new and sole test, for determining whether a process is patentable. That is the “ma­chine-or-transformation” test, which states “a claimed process is patent eligible 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 Supreme Court considered whether the Federal Circuit’s “machine-or-transfor­mation” test should be the sole test for deter­mining patentability of a process and found that it was not. The Court concluded that if it were the sole test, then that would violate statutory interpretation principles because, for example, the ordinary meaning of “pro­cess” does not require tying to a machine or transformation of an article. Nevertheless, the Supreme Court found “the machine-or-transformation test is a useful and important clue, an investigative tool, for determining whether some claimed inventions are pro­cesses under § 101.”

The Supreme Court also found that busi­ness methods should not be categorically ex­cluded from “processes” under § 101. Since § 101 is only the threshold test for patent­ability, the Court said “even if a particular business method fits into the statutory defi­nition of a ‘process,’ that does not mean that the application claiming that method should be granted. In order to receive patent pro­tection, any claimed invention must be nov­el, § 102, nonobvious, § 103, and fully and particularly described, § 112.”

Even though the Supreme Court found the Federal Circuit’s test is not the exclusive patentability test for processes and business methods, and business methods are not cate­gorically outside of § 101, it affirmed the Fed­eral Circuit’s decision that the claims of the Bilski patent application were not patentable under § 101 because “it claims an abstract idea,” the concept of hedging risk. The Court reasoned that “allowing petitioners to pat­ent risk hedging would pre-empt use of this approach in all fields, and would effectively grant a monopoly over an abstract idea.”

Following Bilski, owners of business method patents can rest assured, for now, that business methods are not categorically unpatentable and that to determine the pat­entability of a business method, the Federal Circuit’s “machine-or-transformation” test is not the exclusive test.

The Myriad Case
The Federal Circuit Court of Appeals re­cently addressed a controversial issue in bio­technology: Whether an isolated gene con­stitutes patent-eligible subject matter. Since the first human gene was patented in 1982, the PTO has granted thousands of “gene patents”—i.e., a biological patent on a spe­cific, isolated DNA sequence, or the process to make or use the DNA sequence.

DNA is the complex molecule that gov­erns heredity. Heredity and physiological activity are driven by the order or “sequence” of DNA’s repeating subunits. Natural or “na­tive” DNA can be separated into “isolated” DNA by laboratory techniques to create a separate, free-standing portion of an origi­nal DNA molecule.

In Association for Molecular Pathology v. USPTO (“Myriad”), 99 U.S.P.Q.2D (BNA) 1398 (Fed. Cir. July 29, 2011), the Federal Circuit reversed a contentious decision by the Southern District of New York, and held that the two isolated DNA sequences at issue constituted patent-eligible subject matter.

First, the Federal Circuit held that the isolated DNA molecules themselves were patent-eligible under § 101 because the new DNA was “markedly different” from native DNA. Moreover, the new DNA possessed a “distinctive chemical identity” from native DNA attributable to the laboratory tech­niques that created the isolated DNA seg­ments. Second, the Federal Circuit affirmed the ineligibility of a method for “comparing” or “analyzing” DNA because this step was an abstract mental process that could “be ac­complished by mere inspection alone” rather than human intervention or manipulation. Lastly, the Federal Circuit reversed the ineli­gibility of the method of screening for can­cer therapeutics because its “growing” and “determining” steps were “inherently trans­formative” due to the physical manipulation of the cells.

As it stands, the Myriad decision will likely have a far-reaching impact in the biotechnol­ogy field. Myriad appears to establish a pat­ent eligibility standard — i.e., DNA sequences will be patent-eligible if isolated into new, dis­tinct DNA sequences — which may increase the willingness of pharmaceutical companies to increase investments in genetic treatments and therapeutics. Myriad, however, is an ap­pellate decision, so it is likely that a cert. pe­tition will be filed for the Supreme Court to clarify the standard of patent-eligibility for human genetic material.

Conclusion
In light of these recent decisions, the sub­ject of “patent-eligible subject matter” under 35 U.S.C. § 101 is evolving. Both business method patents and DNA patents are not per se patent-ineligible. As the decisions stand now and under any test that the court may adopt in the future to determine an in­vention’s patent-eligibility, patent drafters and litigators alike should pay careful at­tention to the chosen language in a patent’s claims and description to avoid enveloping one of the three § 101 exceptions.