February 19, 2010

Formalism, Holism, and Technological Engagement in Patent Law

Last November, the Supreme Court heard oral argument in Bilski v. Kappos, a patent case with significant implications. At issue in Bilski is whether a method for hedging risks in commodities trading comprises patentable subject matter. Many have criticized the prospect of granting exclusive rights on processes so divorced from traditional conceptions of “technology.” Others, however, contend that in today’s information economy, such valuable yet intangible innovations should be eligible for patent protection.

The patent community is now eagerly awaiting the Supreme Court’s resolution of the case, and much hangs in the balance. Commentators argue that Bilski could affect the patentability of everything from business methods and software to diagnostic tests and medical correlations. The case has attracted dozens of amicus briefs from parties such as the ACLU, American Express, Microsoft, IBM, and Yahoo!.

I offer no predictions on the Supreme Court’s substantive resolution of Bilski, but I do wish to highlight one methodological point. In prior proceedings, the Federal Circuit had denied the patentability of this invention based on its newly-articulated “machine or transformation test.” According to this test, a process is only eligible for patenting if 1) it is tied to a particular machine or 2) it transforms a particular article into a different state or thing. In many ways, this test reflects the Federal Circuit’s well-recognized preference for formalistic patent doctrine. In a variety of areas, the Federal Circuit has crafted bright-line rules that limit inquiries to a few core questions and discourage consideration of “extraneous” context.

Among other functions, such formalism partially shields judges from technologically difficult inquiries about patented inventions. For example, the Federal Circuit’s historic approach to patent infringement remedies followed a simple syllogism: if infringement, then injunction. According to this formalistic framework, courts would not consider the “value” of a patented technology or its social importance in determining whether to grant an injunction; they would issue such relief almost as a matter of course.

While the Federal Circuit favors formalistic rules, the Supreme Court’s recent forays into patent law reflect a preference for holistic standards. In areas as diverse as prosecution history estoppel, nonobviousness, and remedies, the Court has produced doctrine compelling judges to delve deeper into inventions and their technological context.

These methodological observations add another layer of complexity to Bilski. Substantively, the patentability of “intangible” processes has significant implications for the financial services, information technology, and biomedical industries. However, whether the Supreme Court answers this question with a holistic standard or a set of bright-line rules may significantly impact the administration of patent law.

Among other effects, the Supreme Court’s preference for holistic standards invites greater judicial engagement with technology and its context. In the realm of cutting-edge innovations, such contextual engagement can significantly increase the difficulty of adjudication. (Indeed, there is some indication that lower courts have struggled to apply the Court’s recent holistic standards.) Thus, while observers are eagerly awaiting the Supreme Court's substantive resolution of Bilski, the form of the Court's ruling may matter a great deal as well.