Why State Street is Out

State Street is out and is not coming back. The majority of justices believe that State Street’s test was improperly broad. See the footnote in the Court's opinion:

Even if the machine-or-transformation test may not define the scope of a patentable process, it would be a grave mistake to assume that anything with a " ‘useful, concrete and tangible result,’ " State Street Bank & Trust v. Signature Financial Group, Inc., 149 F. 3d 1368, 1373 (CA Fed. 1998), may be patented.

A four justice minority thought that all business method patents should not be considered as a patentable process. Justice Scalia joined Breyer in the summary that states:

“In sum, it is my view that, in reemphasizing that the ‘machine-or-transformation’ test is not necessarily the sole test of patentability, the Court intends neither to de-emphasize the test’s usefulness nor to suggest that many patentable processes lie beyond its reach.”

No 5 justice majority could be found to support any reading that a process claim should be patentable if it achieves a "useful, concrete and tangible result." The Supreme Court has left the door open to software claims that are not merely seeking to patent “abstract” ideas, but the Supreme Court only cites to Diehr for an example of how this can be accomplished. Diehr is the original “transformation and reduction of an article to a different state or thing” case, when “a process claim does not include particular machines.” Diehr at 184. Breyer’s concurrence, which Justice Scalia joined, criticizes the Federal Circuit’s State Street decision in no uncertain terms. This makes at least 5 of the 9 justices to be on record against the test in State Street. Some examples:

“although the machine-or-transformation test is not the only test for patentability, this by no means indicates that anything which produces a ’useful, concrete and tangible result’” … is patentable.

“[T]his Court has never made such a statement and, if taken literally, the statement would cover instances where this Court has held the contrary.” Laboratory Corp.

State Street’s decision preceded “the granting of patents that ‘ranged from the somewhat ridiculous to the truly absurd.’”

“To the extent that the Federal Circuit’s decision in this case rejected that approach, nothing in today’s decision should be taken as disapproving of that determination.”

So, it is clear that at least 5 justices concur that the decision in State Street was wrong and should not be followed, as least as far as its “useful, concrete and tangible result” test is concerned.

State Street Is Dead; Long Live Bilski?

It is clear from the decision that State Street Bank is dead and buried. No need to cite to this opinion from the CAFC in the future for the repudiated "useful, concrete, and tangible result" language in that decision. On the other hand, processes implemented in software that are tied to a particular machine or that result in a transformation of matter are alive and well. The big questions about how to claim patentable software processes and other processes that are not merely abstract ideas have not been answered in any way by the decision in Bilski. Business method patents are on life support. While business methods that claim steps that comprise more than mere mental steps might be patentable, even if not tied to a particular machine and not transforming matter in some way, there is no support in the Supreme Court decision for getting these types of business method claims allowed. Justice Breyer's summary of the mood of the court, which is how I read his concurring opinion, does not provide much comfort to those clients who want to receive a patent on a new business method.

Clarifying Concurrence from Justice Breyer:

"In sum, it is my view that, in reemphasizing that the"machine-or-transformation" test is not necessarily the sole test of patentability, the Court intends neither to deemphasize the test’s usefulness nor to suggest that many patentable processes lie beyond its reach."

Bilski Decision or No Decision

The Supreme Court rejects any attempt by the CAFC to limit patentability to a single test. The machine or transformation test is one way to show patentability, but it is not the sole way to do so.

The telling footnote:

Even if the machine-or-transformation test may not define the scope of a patentable process, it would be a grave mistake to assume thatanything with a " ‘useful, concrete and tangible result,’ " State Street Bank & Trust v. Signature Financial Group, Inc., 149 F. 3d 1368, 1373 (CA Fed. 1998), may be patented.

Excerpt from the decision:

The patent application here can be rejected under our precedents on the unpatentability of abstract ideas. The Court, therefore, need not define further what constitutes a patentable "process," beyond pointing to the definition of that term provided in §100(b) and looking to the guideposts in Benson, Flook, and Diehr. And nothing in today’s opinion should be read as endorsing interpretations of §101 that the Court of Appeals forthe Federal Circuit has used in the past. See, e.g., State Street, 149 F. 3d, at 1373; AT&T Corp., 172 F. 3d, at 1357. It may be that the Court of Appeals thought it needed tomake the machine-or-transformation test exclusive precisely because its case law had not adequately identifiedless extreme means of restricting business method patents, including (but not limited to) application of our opinions in Benson, Flook, and Diehr. In disapproving anexclusive machine-or-transformation test, we by no meansforeclose the Federal Circuit’s development of other limiting criteria that further the purposes of the Patent Actand are not inconsistent with its text.