Justice KENNEDY delivered the opinion of the Court, except as to Parts II-B-2 and II-C-2.
The question in this case turns on whether a patent can be issued for a claimed invention designed for the business world. The patent application claims a procedure for instructing buyers and sellers how to protect against the risk of price fluctuations in a discrete section of the economy. Three arguments are advanced for the proposition that the claimed invention is outside the scope of patent law: (1) it is not tied to a machine and does not transform an article; (2) it involves a method of conducting business; and (3) it is merely an abstract idea. The Court of Appeals ruled that the first mentioned of these, the so-called machine-or-transformation test, was the sole test to be used for determining the patentability of a "process" under the Patent Act, 35 U.S.C. § 101.
Petitioners' application seeks patent protection for a claimed invention that explains how buyers and sellers of commodities in the energy market can protect, or hedge, against the risk of price changes. The key claims are claims 1 and 4. Claim 1 describes a series of steps instructing how to hedge risk. Claim 4 puts the concept articulated in claim 1 into a simple mathematical formula. Claim 1 consists of the following steps:
The remaining claims explain how claims 1 and 4 can be applied to allow energy suppliers and consumers to minimize the risks resulting from fluctuations in market demand for energy. For example, claim 2 claims "[t]he method of claim 1 wherein said commodity is energy and said market participants are transmission distributors." Id., at 20. Some of these claims also suggest familiar statistical approaches to determine the inputs to use in claim 4's equation. For example, claim 7 advises using well-known random analysis techniques to determine how much a seller will gain "from each transaction under each historical weather pattern." Id., at 21.
The patent examiner rejected petitioners' application, explaining that 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, therefore, the invention is not directed to the technological arts.'" App. to Pet. for Cert. 148a. The Board of Patent Appeals and Interferences affirmed, concluding that the application involved only mental steps that do not transform physical matter and was directed to an abstract idea. Id., at 181a-186a.
The United States Court of Appeals for the Federal Circuit heard the case en banc and affirmed. The case produced five different opinions. Students of patent law would be well advised to study these scholarly opinions.
Chief Judge Michel wrote the opinion of the court. The court rejected its prior test for determining whether a claimed invention was a patentable "process" under § 101—whether it produces a "`useful, concrete, and tangible result'"—as articulated in State Street Bank & Trust Co. v. Signature Financial Group, Inc., 149 F.3d 1368, 1373 (1998), and AT & T Corp. v. Excel Communications, Inc., 172 F.3d 1352, 1357 (1999). See In re Bilski, 545 F.3d 943, 959-960, and n. 19 (C.A.Fed. 2008) (en banc). The court held that "[a] claimed process is surely patent-eligible under § 101 if: (1) it is tied to a particular machine or apparatus, or (2) it transforms a particular article into a different state or thing." Id., at 954. The court concluded this "machine-or-transformation test" is "the sole test governing § 101 analyses," id., at 955, and thus the "test for determining patent eligibility of a process under § 101," id., at 956. Applying the machine-or-transformation test, the court held that petitioners' application was not patent eligible. Id., at 963-966. Judge Dyk wrote a separate concurring opinion, providing historical support for the court's approach. Id., at 966-976.
Three judges wrote dissenting opinions. Judge Mayer argued that petitioners' application was "not eligible for patent protection because it is directed to a method of conducting business." Id., at 998. He urged the adoption of a "technological standard for patentability." Id., at 1010. Judge Rader would have found petitioners' claims were an unpatentable abstract idea. Id., at 1011. Only Judge Newman disagreed with the court's conclusion that petitioners' application was outside of the reach of § 101. She did not say that the application should have been granted but
This Court granted certiorari. 556 U.S. ___, 129 S.Ct. 2735, 174 L.Ed.2d 246 (2009).
Section 101 defines the subject matter that may be patented under the Patent Act:
Section 101 thus specifies four independent categories of inventions or discoveries that are eligible for protection: processes, machines, manufactures, and compositions of matter. "In choosing such expansive terms . . . modified by the comprehensive `any,' Congress plainly contemplated that the patent laws would be given wide scope." Diamond v. Chakrabarty, 447 U.S. 303, 308, 100 S.Ct. 2204, 65 L.Ed.2d 144 (1980). Congress took this permissive approach to patent eligibility to ensure that "`ingenuity should receive a liberal encouragement.'" Id., at 308-309, 100 S.Ct. 2204 (quoting 5 Writings of Thomas Jefferson 75-76 (H. Washington ed. 1871)).
The Court's precedents provide three specific exceptions to § 101's broad patent-eligibility principles: "laws of nature, physical phenomena, and abstract ideas." Chakrabarty, supra, at 309, 100 S.Ct. 2204. While these exceptions are not required by the statutory text, they are consistent with the notion that a patentable process must be "new and useful." And, in any case, these exceptions have defined the reach of the statute as a matter of statutory stare decisis going back 150 years. See Le Roy v. Tatham, 14 How. 156, 174-175, 14 S.Ct. 367 (1853). The concepts covered by these exceptions are "part of the storehouse of knowledge of all men . . . free to all men and reserved exclusively to none." Funk Brothers Seed Co. v. Kalo Inoculant Co., 333 U.S. 127, 130, 68 S.Ct. 440, 92 S.Ct. 588 (1948).
The § 101 patent-eligibility inquiry is only a threshold test. Even if an invention qualifies as a process, machine, manufacture, or composition of matter, in order to receive the Patent Act's protection the claimed invention must also satisfy "the conditions and requirements of this title." § 101. Those requirements include that the invention be novel, see § 102, nonobvious, see § 103, and fully and particularly described, see § 112.
The present case involves an invention that is claimed to be a "process" under § 101. Section 100(b) defines "process" as:
The Court first considers two proposed categorical limitations on "process" patents under § 101 that would, if adopted, bar petitioners' application in the present case: the machine-or-transformation test and the categorical exclusion of business method patents.
Under the Court of Appeals' formulation, an invention is a "process" only if: "(1) it is tied to a particular machine or apparatus, or (2) it transforms a particular article into a different state or thing." 545
Any suggestion in this Court's case law that the Patent Act's terms deviate from their ordinary meaning has only been an explanation for the exceptions for laws of nature, physical phenomena, and abstract ideas. See Parker v. Flook, 437 U.S. 584, 588-589, 98 S.Ct. 2522, 57 L.Ed.2d 451 (1978). This Court has not indicated that the existence of these well-established exceptions gives the Judiciary carte blanche to impose other limitations that are inconsistent with the text and the statute's purpose and design. Concerns about attempts to call any form of human activity a "process" can be met by making sure the claim meets the requirements of § 101.
Adopting the machine-or-transformation test as the sole test for what constitutes a "process" (as opposed to just an important and useful clue) violates these statutory interpretation principles. Section 100(b) provides that "[t]he term `process' means process, art or method, and includes a new use of a known process, machine, manufacture, composition of matter, or material." The Court is unaware of any "`ordinary, contemporary, common meaning,'" Diehr, supra, at 182, 101 S.Ct. 1048, of the definitional terms "process, art or method" that would require these terms to be tied to a machine or to transform an article. Respondent urges the Court to look to the other patentable categories in § 101—machines, manufactures, and compositions of matter—to confine the meaning of "process" to a machine or transformation, under the doctrine of noscitur a sociis. Under this canon, "an ambiguous term may be given more precise content by the neighboring words with which it is associated." United States v. Stevens, 559 U.S. ___, ___, 130 S.Ct. 1577, 1587, 176 L.Ed.2d 435 (2010) (internal quotation marks omitted). This canon is inapplicable here, for § 100(b) already explicitly defines the term "process." See Burgess v. United States, 553 U.S. 124, 130, 128 S.Ct. 1572, 170 L.Ed.2d 478 (2008) ("When a statute includes an explicit definition, we must follow that definition" (internal quotation marks omitted)).
The Court of Appeals incorrectly concluded that this Court has endorsed the machine-or-transformation test as the exclusive test. It is true that Cochrane v. Deener, 94 U.S. 780, 788, 24 S.Ct. 139 (1877), explained that a "process" is "an act, or a series of acts, performed upon the subject-matter to be transformed and reduced to a different state or thing." More recent cases, however, have rejected the broad implications of this dictum; and, in all events, later authority shows that it was not intended to be an exhaustive or exclusive test. Gottschalk v. Benson, 409 U.S. 63,
This Court's precedents establish that 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 machine-or-transformation test is not the sole test for deciding whether an invention is a patent-eligible "process."
It is true that patents for inventions that did not satisfy the machine-or-transformation test were rarely granted in earlier eras, especially in the Industrial Age, as explained by Judge Dyk's thoughtful historical review. See 545 F.3d, at 966-976 (concurring opinion). But times change. Technology and other innovations progress in unexpected ways. For example, it was once forcefully argued that until recent times, "well-established principles of patent law probably would have prevented the issuance of a valid patent on almost any conceivable computer program." Diehr, 450 U.S., at 195, 101 S.Ct. 1048 (STEVENS, J., dissenting). But this fact does not mean that unforeseen innovations such as computer programs are always unpatentable. See id., at 192-193, 101 S.Ct. 1048 (majority opinion) (holding a procedure for molding rubber that included a computer program is within patentable subject matter). Section 101 is a "dynamic provision designed to encompass new and unforeseen inventions." J.E.M. Ag Supply, Inc. v. Pioneer Hi-Bred Int'l, Inc., 534 U.S. 124, 135, 122 S.Ct. 593, 151 L.Ed.2d 508 (2001). A categorical rule denying patent protection for "inventions in areas not contemplated by Congress . . . would frustrate the purposes of the patent law." Chakrabarty, 447 U.S., at 315, 100 S.Ct. 2204.
The machine-or-transformation test may well provide a sufficient basis for evaluating processes similar to those in the Industrial Age—for example, inventions grounded in a physical or other tangible form. But there are reasons to doubt whether the test should be the sole criterion for determining the patentability of inventions in the Information Age. As numerous amicus briefs argue, the machine-or-transformation test would create uncertainty as to the patentability of software, advanced diagnostic medicine techniques, and inventions based on linear programming, data compression, and the manipulation of digital signals. See, e.g., Brief for Business Software Alliance 24-25; Brief for Biotechnology Industry Organization et al. 14-27; Brief for Boston Patent Law Association 8-15; Brief for Houston Intellectual Property Law Association 17-22; Brief for Dolby Labs., Inc., et al. 9-10.
In the course of applying the machine-or-transformation test to emerging technologies, courts may pose questions of such intricacy and refinement that they risk obscuring the larger object of securing patents for valuable inventions without transgressing the public domain. The dissent by Judge Rader refers to some of these difficulties. 545 F.3d, at 1015. As a result, in deciding whether previously unforeseen inventions qualify as patentable
It is important to emphasize that the Court today is not commenting on the patentability of any particular invention, let alone holding that any of the above-mentioned technologies from the Information Age should or should not receive patent protection. This Age puts the possibility of innovation in the hands of more people and raises new difficulties for the patent law. With ever more people trying to innovate and thus seeking patent protections for their inventions, the patent law faces a great challenge in striking the balance between protecting inventors and not granting monopolies over procedures that others would discover by independent, creative application of general principles. Nothing in this opinion should be read to take a position on where that balance ought to be struck.
Section 101 similarly precludes the broad contention that the term "process" categorically excludes business methods. The term "method," which is within § 100(b)'s definition of "process," at least as a textual matter and before consulting other limitations in the Patent Act and this Court's precedents, may include at least some methods of doing business. See, e.g., Webster's New International Dictionary 1548 (2d ed.1954) (defining "method" as "[a]n orderly procedure or process . . . regular way or manner of doing anything; hence, a set form of procedure adopted in investigation or instruction"). The Court is unaware of any argument that the "`ordinary, contemporary, common meaning,'" Diehr, supra, at 182, 101 S.Ct. 1048, of "method" excludes business methods. Nor is it clear how far a prohibition on business method patents would reach, and whether it would exclude technologies for conducting a business more efficiently. See, e.g., Hall, Business and Financial Method Patents, Innovation, and Policy, 56 Scottish J. Pol. Econ. 443, 445 (2009) ("There is no precise definition of . . . business method patents").
The argument that business methods are categorically outside of § 101's scope is further undermined by the fact that federal law explicitly contemplates the existence of at least some business method patents. Under 35 U.S.C. § 273(b)(1), if a patent-holder claims infringement based on "a method in [a] patent," the alleged infringer can assert a defense of prior use. For purposes of this defense alone, "method" is defined as "a method of doing or conducting business." § 273(a)(3). In other words, by allowing this defense the statute itself acknowledges that there may be business method patents. Section 273's definition of "method," to be sure, cannot change the meaning of a prior-enacted statute. But what § 273 does is clarify the understanding that a business method is simply one kind of "method" that is, at least in some circumstances, eligible for patenting under § 101.
A conclusion that business methods are not patentable in any circumstances would render § 273 meaningless. This would violate the canon against interpreting any statutory provision in a manner that would render another provision superfluous. See Corley v. United States,
Interpreting § 101 to exclude all business methods simply because business method patents were rarely issued until modern times revives many of the previously discussed difficulties. See supra, at 3227-3228. At the same time, some business method patents raise special problems in terms of vagueness and suspect validity. See eBay Inc. v. MercExchange, L.L. C., 547 U.S. 388, 397, 126 S.Ct. 1837, 164 L.Ed.2d 641 (2006) (KENNEDY, J., concurring). The Information Age empowers people with new capacities to perform statistical analyses and mathematical calculations with a speed and sophistication that enable the design of protocols for more efficient performance of a vast number of business tasks. If a high enough bar is not set when considering patent applications of this sort, patent examiners and courts could be flooded with claims that would put a chill on creative endeavor and dynamic change.
In searching for a limiting principle, this Court's precedents on the unpatentability of abstract ideas provide useful tools. See infra, at 3229-3231. Indeed, if the Court of Appeals were to succeed in defining a narrower category or class of patent applications that claim to instruct how business should be conducted, and then rule that the category is unpatentable because, for instance, it represents an attempt to patent abstract ideas, this conclusion might well be in accord with controlling precedent. See ibid. But beyond this or some other limitation consistent with the statutory text, the Patent Act leaves open the possibility that there are at least some processes that can be fairly described as business methods that are within patentable subject matter under § 101.
Finally, 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. These limitations serve a critical role in adjusting the tension, ever present in patent law, between stimulating innovation by protecting inventors and impeding progress by granting patents when not justified by the statutory design.
Even though petitioners' application is not categorically outside of § 101 under the two broad and atextual approaches the Court rejects today, that does not mean it is a "process" under § 101. Petitioners seek to patent both the concept of hedging risk and the application of that concept to energy markets. App. 19-20. Rather than adopting categorical rules that might have wide-ranging and unforeseen impacts, the Court resolves this case narrowly on the basis of this Court's decisions in Benson, Flook, and Diehr, which show that petitioners' claims are not patentable processes because they
In Benson, the Court considered whether a patent application for an algorithm to convert binary-coded decimal numerals into pure binary code was a "process" under § 101. 409 U.S., at 64-67, 93 S.Ct. 253. The Court first explained that "`[a] principle, in the abstract, is a fundamental truth; an original cause; a motive; these cannot be patented, as no one can claim in either of them an exclusive right.'" Id., at 67, 93 S.Ct. 253 (quoting Le Roy, 14 How., at 175, 14 S.Ct. 367). The Court then held the application at issue was not a "process," but an unpatentable abstract idea. "It is conceded that one may not patent an idea. But in practical effect that would be the result if the formula for converting . . . numerals to pure binary numerals were patented in this case." 409 U.S., at 71, 93 S.Ct. 253. A contrary holding "would wholly pre-empt the mathematical formula and in practical effect would be a patent on the algorithm itself." Id., at 72, 93 S.Ct. 253.
In Flook, the Court considered the next logical step after Benson. The applicant there attempted to patent a procedure for monitoring the conditions during the catalytic conversion process in the petrochemical and oil-refining industries. The application's only innovation was reliance on a mathematical algorithm. 437 U.S., at 585-586, 98 S.Ct. 2522. Flook held the invention was not a patentable "process." The Court conceded the invention at issue, unlike the algorithm in Benson, had been limited so that it could still be freely used outside the petrochemical and oil-refining industries. 437 U.S., at 589-590, 98 S.Ct. 2522. Nevertheless, Flook rejected "[t]he notion that post-solution activity, no matter how conventional or obvious in itself, can transform an unpatentable principle into a patentable process." Id., at 590, 98 S.Ct. 2522. The Court concluded that the process at issue there was "unpatentable under § 101, not because it contain[ed] a mathematical algorithm as one component, but because once that algorithm [wa]s assumed to be within the prior art, the application, considered as a whole, contain[ed] no patentable invention." Id., at 594, 98 S.Ct. 2522. As the Court later explained, Flook stands for the proposition that the prohibition against patenting abstract ideas "cannot be circumvented by attempting to limit the use of the formula to a particular technological environment" or adding "insignificant postsolution activity." Diehr, 450 U.S., at 191-192, 101 S.Ct. 1048.
Finally, in Diehr, the Court established a limitation on the principles articulated in Benson and Flook. The application in Diehr claimed a previously unknown method for "molding raw, uncured synthetic rubber into cured precision products," using a mathematical formula to complete some of its several steps by way of a computer. 450 U.S., at 177, 101 S.Ct. 1048. Diehr explained that while an abstract idea, law of nature, or mathematical formula could not be patented, "an application of a law of nature or mathematical formula to a known structure or process may well be deserving of patent protection." Id., at 187, 101 S.Ct. 1048. Diehr emphasized the need to consider the invention as a whole, rather than "dissect[ing] the claims into old and new elements and then . . . ignor[ing] the presence of the old elements in the analysis." Id., at 188, 101 S.Ct. 1048. Finally, the Court concluded that because the claim was not "an attempt to patent a mathematical formula, but rather [was] an industrial process for the molding of rubber products," it fell within § 101's patentable subject matter. Id., at 192-193, 101 S.Ct. 1048.
Petitioners' remaining claims are broad examples of how hedging can be used in commodities and energy markets. Flook established that limiting an abstract idea to one field of use or adding token postsolution components did not make the concept patentable. That is exactly what the remaining claims in petitioners' application do. These claims attempt to patent the use of the abstract idea of hedging risk in the energy market and then instruct the use of well-known random analysis techniques to help establish some of the inputs into the equation. Indeed, these claims add even less to the underlying abstract principle than the invention in Flook did, for the Flook invention was at least directed to the narrower domain of signaling dangers in operating a catalytic converter.
* * *
Today, the Court once again declines to impose limitations on the Patent Act that are inconsistent with the Act's text. 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 for the 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 to make the machine-or-transformation test exclusive precisely because its case law had not adequately identified less extreme means of restricting business method patents, including (but not limited to) application of our opinions in Benson, Flook, and Diehr. In disapproving an exclusive machine-or-transformation test, we by no means foreclose the Federal Circuit's development of other limiting criteria that further the purposes of the Patent Act and are not inconsistent with its text.
The judgment of the Court of Appeals is affirmed.
It is so ordered.
Justice STEVENS, with whom Justice GINSBURG, Justice BREYER, and Justice SOTOMAYOR join, concurring in the judgment.
In the area of patents, it is especially important that the law remain stable and clear. The only question presented in this case is whether the so-called machine-or-transformation test is the exclusive test for what constitutes a patentable "process" under 35 U.S.C. § 101. It would be possible
I agree with the Court that, in light of the uncertainty that currently pervades this field, it is prudent to provide further guidance. But I would take a different approach. Rather than making any broad statements about how to define the term "process" in § 101 or tinkering with the bounds of the category of unpatentable, abstract ideas, I would restore patent law to its historical and constitutional moorings.
For centuries, it was considered well established that a series of steps for conducting business was not, in itself, patentable. In the late 1990's, the Federal Circuit and others called this proposition into question. Congress quickly responded to a Federal Circuit decision with a stopgap measure designed to limit a potentially significant new problem for the business community. It passed the First Inventors Defense Act of 1999 (1999 Act), 113 Stat. 1501A-555 (codified at 35 U.S.C. § 273), which provides a limited defense to claims of patent infringement, see § 273(b), for "method[s] of doing or conducting business," § 273(a)(3). Following several more years of confusion, the Federal Circuit changed course, overruling recent decisions and holding that a series of steps may constitute a patentable process only if it is tied to a machine or transforms an article into a different state or thing. This "machine-or-transformation test" excluded general methods of doing business as well as, potentially, a variety of other subjects that could be called processes.
The Court correctly holds that the machine-or-transformation test is not the sole test for what constitutes a patentable process; rather, it is a critical clue.
Although the Court provides a brief statement of facts, ante, at 3220-3223, a more complete explication may be useful for those unfamiliar with petitioners' patent application and this case's procedural history.
Petitioners' patent application describes a series of steps for managing risk amongst buyers and sellers of commodities. The general method, described in Claim 1, entails "managing the consumption risk costs of a commodity sold by a commodity provider at a fixed price," and consists of the following steps:
Although the patent application makes clear that the "method can be used for any commodity to manage consumption risk in a fixed bill price product," id., at 11, it includes specific applications of the method, particularly in the field of energy, as a means of enabling suppliers and consumers to minimize the risks resulting from fluctuations in demand during specified time periods. See id., at 20-22. Energy suppliers and consumers may use that method to hedge their risks by agreeing upon a fixed series of payments at regular intervals throughout the year instead of charging or paying prices that fluctuate in response to changing weather conditions. The patent application describes a series of steps, including the evaluation of historical costs and weather variables and the use of economic and statistical formulas, to analyze these data and to estimate the likelihood of certain outcomes. See id., at 12-19.
The patent examiner rejected petitioners' application on the ground that it "is not directed to the technological arts," insofar as 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." App. to Pet. for Cert. 148a.
The Board of Patent Appeals and Interferences (Board) affirmed the examiner's decision, but it rejected the position that a patentable process must relate to "technological arts" or be performed on a machine. Id., at 180a-181a. Instead, the Board denied petitioners' patent on two alternative, although similar, grounds: first, that the patent involves only mental steps that do not transform physical subject matter, id., at 181a-184a; and, second, that it is directed to an "abstract idea," id., at 184a-187a.
Petitioners appealed to the United States Court of Appeals for the Federal Circuit. After briefing and argument before a three-judge panel, the court sua sponte decided to hear the case en banc and ordered the parties to address: (1) whether petitioners'"claim 1 . . . claims patent-eligible subject matter under 35 U.S.C. § 101"; (2) "[w]hat standard should govern in determining whether a process is patent-eligible subject matter"; (3) "[w]hether the claimed subject matter is not patent-eligible because it constitutes an abstract idea or mental process"; (4) "[w]hether a method or process must result in a physical transformation of an article or be tied to a machine to be patent-eligible subject matter"; and (5) whether the court's decisions in State Street Bank & Trust Co. v. Signature Financial Group, Inc., 149 F.3d 1368 (1998) (State Street), and AT & T Corp. v. Excel Communications, Inc., 172 F.3d 1352 (1999), should be overruled in any respect. App. to Pet. for Cert. 144a-145a.
The en banc Court of Appeals affirmed the Board's decision. Eleven of the twelve judges agreed that petitioners' claims do not describe a patentable "process," § 101. Chief Judge Michel's opinion, joined by eight other judges, rejected several possible tests for what is a patent-eligible process, including whether the patent produces a "`useful, concrete and tangible result,'" whether the process relates to
In a separate opinion reaching the same conclusion, Judge Dyk carefully reviewed the history of American patent law and English precedents upon which our law is based, and found that "the unpatentability of processes not involving manufactures, machines, or compositions of matter has been firmly embedded . . . since the time of the Patent Act of 1793." Id., at 966. Judge Dyk observed, moreover, that "[t]here is no suggestion in any of this early consideration of process patents that processes for organizing human activity were or ever had been patentable." Id., at 972.
Three judges wrote dissenting opinions, although two of those judges agreed that petitioners' claim is not patent eligible. Judge Mayer would have held that petitioners' claim "is not eligible for patent protection because it is directed to a method of conducting business." Id., at 998. He submitted that "[t]he patent system is intended to protect and promote advances in science and technology, not ideas about how to structure commercial transactions." Ibid. "Affording patent protection to business methods lacks constitutional and statutory support, serves to hinder rather than promote innovation[,] and usurps that which rightfully belongs in the public domain." Ibid.
Judge Rader would have rejected petitioners' claim on the ground that it seeks to patent merely an abstract idea. Id., at 1011.
Only Judge Newman disagreed with the court's conclusion that petitioners' claim seeks a patent on ineligible subject matter. Judge Newman urged that the en banc court's machine-or-transformation test ignores the text and history of § 101, id., at 977-978, 985-990, is in tension with several of decisions by this Court, id., at 978-985, and the Federal Circuit, id., at 990-992, and will invalidate thousands of patents that were issued in reliance on those decisions, id., at 992-994.
Before explaining in more detail how I would decide this case, I will comment briefly on the Court's opinion. The opinion is less than pellucid in more than one respect, and, if misunderstood, could result in confusion or upset settled areas of the law. Three preliminary observations may be clarifying.
First, the Court suggests that the terms in the Patent Act must be read as lay speakers use those terms, and not as they have traditionally been understood in the context of patent law. See, e.g., ante, at 3226 (terms in § 101 must be viewed in light of their "`ordinary, contemporary, common meaning'"); ante, at 3228 (patentable "method" is any "orderly procedure or process," "regular way or manner of doing anything," or "set form of procedure adopted in investigation or instruction" (internal quotation marks omitted)).
Second, in the process of addressing the sole issue presented to us, the opinion uses some language that seems inconsistent with our centuries-old reliance on the machine-or-transformation criteria as clues to patentability. Most notably, the opinion for a plurality suggests that these criteria may operate differently when addressing technologies of a recent vintage. See ante, at 3227-3228 (machine-or-transformation test is useful "for evaluating processes similar to those in the Industrial Age," but is less useful "for determining the patentability of inventions in the Information Age"). In moments of caution, however, the opinion for the Court explains —correctly—that the Court is merely restoring the law to its historical state of rest. See ante, at 3227 ("This Court's precedents establish that the machine-or-transformation test is a useful and important clue, an investigative tool, for determining whether some claimed inventions are processes under § 101"). Notwithstanding this internal tension, I understand the Court's opinion to hold only that the machine-or-transformation test remains an important test for patentability. Few, if any, processes cannot effectively be evaluated using these criteria.
Third, in its discussion of an issue not contained in the questions presented— whether the particular series of steps in petitioners' application is an abstract idea—the Court uses language that could suggest a shift in our approach to that issue. Although I happen to agree that petitioners seek to patent an abstract idea, the Court does not show how this conclusion follows "clear[ly]," ante, at 3230-3231, from our case law. The patent now before us is not for "[a] principle, in the abstract," or a "fundamental truth." Parker v. Flook, 437 U.S. 584, 589, 98 S.Ct. 2522, 57 L.Ed.2d 451 (1978) (internal quotation marks omitted). Nor does it claim the sort of phenomenon of nature or abstract idea that was embodied by the mathematical formula at issue in Gottschalk v. Benson, 409 U.S. 63, 67, 93 S.Ct. 253, 34 L.Ed.2d 273 (1972), and in Flook.
The Court construes petitioners' claims on processes for pricing as claims on "the basic concept of hedging, or protecting against risk," ante, at 3231, and thus discounts the application's discussion of what sorts of data to use, and how to analyze those data, as mere "token postsolution components," ante, at 3231. In other words, the Court artificially limits petitioners' claims to hedging, and then concludes that hedging is an abstract idea rather than a term that describes a category of processes including petitioners' claims. Why the Court does this is never made clear. One might think that the Court's analysis means that any process that utilizes an abstract idea is itself an unpatentable, abstract idea. But we have never suggested any such rule, which would undermine a host of patentable processes. It is true, as the Court observes, that petitioners' application is phrased broadly. See ante, at 3230-3231. But claim specification is covered by § 112, not § 101; and if a series of steps constituted an
The Court, in sum, never provides a satisfying account of what constitutes an unpatentable abstract idea. Indeed, the Court does not even explain if it is using the machine-or-transformation criteria. The Court essentially asserts its conclusion that petitioners' application claims an abstract idea. This mode of analysis (or lack thereof) may have led to the correct outcome in this case, but it also means that the Court's musings on this issue stand for very little.
I agree with the Court that the text of § 101 must be the starting point of our analysis. As I shall explain, however, the text must not be the end point as well.
Pursuant to its power "[t]o promote the Progress of . . . useful Arts, by securing for limited Times to . . . Inventors the exclusive Right to their . . . Discoveries," U.S. Const., Art. I, § 8, cl. 8, Congress has passed a series of patent laws that grant certain exclusive rights over certain inventions and discoveries as a means of encouraging innovation. In the latest iteration, the Patent Act of 1952 (1952 Act), Congress has provided that "[w]hoever invents or discovers any new and useful process, machine, manufacture, or composition of matter, or any new and useful improvement thereof, may obtain a patent therefor, subject to the conditions and requirements of this title," 35 U.S.C. § 101, which include that the patent also be novel, § 102, and nonobvious, § 103. The statute thus authorizes four categories of subject matter that may be patented: processes, machines, manufactures, and compositions of matter. Section 101 imposes a threshold condition. "[N]o patent is available for a discovery, however useful, novel, and nonobvious, unless it falls within one of the express categories of patentable subject matter." Kewanee Oil Co. v. Bicron Corp., 416 U.S. 470, 483, 94 S.Ct. 1879, 40 L.Ed.2d 315 (1974).
Section 101 undoubtedly defines in "expansive terms" the subject matter eligible for patent protection, as the statute was meant to ensure that "`ingenuit[ies] receive a liberal encouragement.'" Diamond v. Chakrabarty, 447 U.S. 303, 308-309, 100 S.Ct. 2204, 65 L.Ed.2d 144 (1980); see also J.E.M. Ag Supply, Inc. v. Pioneer Hi-Bred Int'l, Inc., 534 U.S. 124, 130, 122 S.Ct. 593, 151 L.Ed.2d 508 (2001). Nonetheless, not every new invention or discovery
The text of the Patent Act does not on its face give much guidance about what constitutes a patentable process. The statute defines the term "process" as a "process, art or method [that] includes a new use of a known process, machine, manufacture, composition of matter, or material." § 100(b). But, this definition is not especially helpful, given that it also uses the term "process" and is therefore somewhat circular.
As lay speakers use the word "process," it constitutes any series of steps. But it has always been clear that, as used in § 101, the term does not refer to a "`process' in the ordinary sense of the word," Flook, 437 U.S., at 588, 98 S.Ct. 2522; see also Corning v. Burden, 15 How. 252, 268, 14 S.Ct. 683 (1854) ("[T]he term process is often used in a more vague sense, in which it cannot be the subject of a patent"). Rather, as discussed in some detail in Part IV, infra, the term "process" (along with the definitions given to that term) has long accumulated a distinctive meaning in patent law. When the term was used in the 1952 Patent Act, it was neither intended nor understood to encompass any series of steps or any way to do any thing.
With that understanding in mind, the Government has argued that because "a word" in a statute "is given more precise content by the neighboring words with which it" associates, United States v. Williams, 553 U.S. 285, 294, 128 S.Ct. 1830, 170 L.Ed.2d 650 (2008), we may draw inferences from the fact that "[t]he other three statutory categories of patent-eligible subject matter identified in Section 101—`machine, manufacture, or composition of matter'—all `are things made by man, and involve technology.'" Brief for Respondent 26. Specifically, the Government submits, we may infer "that the term `process' is limited to technological and industrial methods." Ibid. The Court rejects this submission categorically, on the ground that "§ 100(b) already explicitly defines the term `process.'" Ante, at 3226. But § 100(b) defines the term "process" by using the term "process," as well as several other general terms. This is not a case, then, in which we must either "follow" a definition, ante, at 3226, or rely on neighboring words to understand the scope of an ambiguous term. The definition itself contains the very ambiguous term that we must define.
In my view, the answer lies in between the Government's and the Court's positions: The terms adjacent to "process" in § 101 provide a clue as to its meaning, although not a very strong clue. Section 101's list of categories of patentable subject matter is phrased in the disjunctive, suggesting that the term "process" has content distinct from the other items in the
The Court makes a more serious interpretive error. As briefly discussed in Part II, supra, the Court at points appears to reject the well-settled proposition that the term "process" in § 101 is not a "`process' in the ordinary sense of the word," Flook, 437 U.S., at 588, 98 S.Ct. 2522. Instead, the Court posits that the word "process" must be understood in light of its "ordinary, contemporary, common meaning," ante, at 3228 (internal quotation marks omitted). Although this is a fine approach to statutory interpretation in general, it is a deeply flawed approach to a statute that relies on complex terms of art developed against a particular historical background.
So is the Court, perhaps. What is particularly incredible about the Court's stated method of interpreting § 101 (other than that the method itself may be patent-eligible under the Court's theory of § 101) is that the Court deviates from its own professed commitment to "ordinary, contemporary, common meaning." As noted earlier, the Court accepts a role for the "atextual" machine-or-transformation "clue." Ante, at 3229, 3234. The Court also accepts that we have "foreclose[d] a purely literal reading of § 101," Flook, 437 U.S., at 589, 98 S.Ct. 2522, by holding that claims that are close to "laws of nature, natural phenomena, and abstract ideas," Diamond v. Diehr, 450 U.S. 175, 185, 101 S.Ct. 1048, 67 L.Ed.2d 155 (1981), do not count as "processes" under § 101, even if
In fact, the Court's understanding of § 101 is even more remarkable because its willingness to exclude general principles from the provision's reach is in tension with its apparent willingness to include steps for conducting business. The history of patent law contains strong norms against patenting these two categories of subject matter. Both norms were presumably incorporated by Congress into the Patent Act in 1952.
Because the text of § 101 does not on its face convey the scope of patentable processes, it is necessary, in my view, to review the history of our patent law in some detail. This approach yields a much more straightforward answer to this case than the Court's. As I read the history, it strongly supports the conclusion that a method of doing business is not a "process" under § 101.
I am, of course, mindful of the fact that § 101 "is a dynamic provision designed to encompass new and unforeseen inventions," and that one must therefore view historical conceptions of patent-eligible subject matter at an appropriately high level of generality. J.E.M. Ag Supply, 534 U.S., at 135, 122 S.Ct. 593; see also Chakrabarty, 447 U.S., at 315-316, 100 S.Ct. 2204. But it is nonetheless significant that while people have long innovated in fields of business, methods of doing business fall outside of the subject matter that has "historically been eligible to receive the protection of our patent laws," Diehr, 450 U.S., at 184, 101 S.Ct. 1048, and likely go beyond what the modern patent "statute was enacted to protect," Flook, 437 U.S., at 593, 98 S.Ct. 2522. It is also significant that when Congress enacted the latest Patent Act, it did so against the background of a well-settled understanding that a series of steps for conducting business cannot be patented. These considerations ought to guide our analysis. As Justice Holmes noted long ago, sometimes, "a page of history is worth a volume of logic." New York Trust Co. v. Eisner, 256 U.S. 345, 349, 41 S.Ct. 506, 65 S.Ct. 963 (1921).
The Constitution's Patent Clause was written against the "backdrop" of English patent practices, Graham v. John Deere Co. of Kansas City, 383 U.S. 1, 5, 86 S.Ct. 684, 15 L.Ed.2d 545 (1966), and early American patent law was "largely based on and incorporated" features of the English patent system, E. Walterscheid, To Promote the Progress of Useful Arts: American Patent Law and Administration, 1789-1836, p. 109 (1998) (hereinafter Walterscheid, To Promote the Progress).
Pursuant to that provision, patents issued for the "mode, method, or way of manufacturing," F. Campin, Law of Patents for Inventions 11 (1869) (emphasis deleted), and English courts construed the phrase "working or making of any manner of new manufactures" to encompass manufacturing processes, see, e.g., Boulton v. Bull, 2 H. Bl. 463, 471, 492, 126 Eng. Rep. 651, 655, 666 (C.P. 1795) (holding that the term "manufacture" "applied not only to things made, but to the practice of making, to principles carried into practice in a new manner, to new results of principles carried into practice"). Thus, English courts upheld James Watt's famous patent on a method for reducing the consumption of fuel in steam engines,
Although it is difficult to derive a precise understanding of what sorts of methods were patentable under English law, there is no basis in the text of the Statute of Monopolies, nor in pre-1790 English precedent, to infer that business methods could qualify.
There were a small number of patents issued between 1623 and 1790 relating to banking or lotteries and one for a method
In any event, these patents (or patent) were probably not known to the Framers of early patent law. In an era before computerized databases, organized case law, and treatises,
Also noteworthy is what was not patented under the English system. During the 17th and 18th centuries, Great Britain saw innovations in business organization,
Early American Patent Law
At the Constitutional Convention, the Founders decided to give Congress a patent power so that it might "promote the Progress of ... useful Arts." Art. I, § 8, cl. 8. There is little known history of that Clause.
In 1790, Congress passed the first Patent Act, an "Act to promote the progress of useful Arts" that authorized patents for persons who had "invented or discovered any useful art, manufacture, engine, machine, or device, or any improvement therein not before known or used," if "the invention or discovery [was] sufficiently useful and important." 1 Stat. 109-110. Three years later, Congress passed the Patent Act of 1793 and slightly modified the language to cover "any new and useful
The object of the constitutional patent power and the statutory authorization for process patents in the early patent Acts was the term "useful art." It is not evident from the face of the statutes or the Constitution whether the objects of the patent system were "arts" that are also useful, or rather a more specific category, the class of arts known as "useful arts." Cf. Graham, 383 U.S., at 12, 86 S.Ct. 684 (describing the "`new and useful' tests which have always existed in the statutory scheme" and apply to all categories of subject matter). However, we have generally assumed that "useful art," at least as it is used in the Patent Act, is itself a term of art. See Burden, 15 How., at 267-268, 14 S.Ct. 683.
The word "art" and the phrase "useful arts" are subject to many meanings. There is room on the margins to debate exactly what qualifies as either. There is room, moreover, to debate at what level of generality we should understand these broad and historical terms, given that "[a] rule that unanticipated inventions are without protection would conflict with the core concept of the patent law," Chakrabarty, 447 U.S., at 316, 100 S.Ct. 2204. It appears, however, that regardless of how one construes the term "useful arts," business methods are not included.
Noah Webster's first American dictionary
Thus, fields such as business and finance were not generally considered part of the "useful arts" in the founding Era. See, e.g., The Federalist No. 8, p. 69 (C. Rossiter ed. 1961) (A.Hamilton) (distinguishing between "the arts of industry, and the science of finance"); 30 The Writings of George Washington 1745-1799, p. 186 (J. Fitzpatrick ed.1939) (writing in a letter that "our commerce has been considerably curtailed," but "the useful arts have been almost imperceptible pushed to a considerable degree of perfection"). Indeed, the same delegate to the Constitutional Convention who gave an address in which he listed triumphs in the useful arts distinguished between those arts and the conduct of business. He explained that investors were now attracted to the "manufactures and the useful arts," much as they had long invested in "commerce, navigation, stocks, banks, and insurance companies." T. Coxe, A Statement of the Arts and Manufactures of the United States of
Some scholars have remarked, as did Thomas Jefferson, that early patent statutes neither included nor reflected any serious debate about the precise scope of patentable subject matter. See, e.g., Graham, 383 U.S., at 9-10, 86 S.Ct. 684 (discussing Thomas Jefferson's observations). It has been suggested, however, that "[p]erhaps this was in part a function of an understanding—shared widely among legislators, courts, patent office officials, and inventors—about what patents were meant to protect. Everyone knew that manufactures and machines were at the core of the patent system." Merges, Property Rights for Business Concepts and Patent System Reform, 14 Berkeley Tech. L.J. 577, 585 (1999) (hereinafter Merges). Thus, although certain processes, such as those related to the technology of the time, might have been considered patentable, it is possible that "[a]gainst this background, it would have been seen as absurd for an entrepreneur to file a patent" on methods of conducting business. Ibid.
Development of American Patent Law
During the first years of the patent system, no patents were issued on methods of doing business.
Thomas Jefferson was the "`first administrator of our patent system'" and "the author of the 1793 Patent Act." Graham, 383 U.S., at 7, 86 S.Ct. 684. We have said that his "conclusions as to conditions of patentability ... are worthy of note." Ibid. at 7, 86 S.Ct. 684. During his time administering the system, Jefferson "saw clearly the difficulty" of deciding what should be patentable.
Although courts occasionally struggled with defining what was a patentable "art"
By the early 20th century, it was widely understood that a series of steps for conducting business could not be patented. A leading treatise, for example, listed "`systems' of business" as an "unpatentable subjec[t]." 1 A. Deller, Walker on Patents § 18, p. 62 (1937).
Modern American Patent Law
By the mid-1900's, many courts were construing the term "art" by using words such as "method, process, system, or like terms." Berman 713; see Expanded Metal Co. v. Bradford, 214 U.S. 366, 382, 29 S.Ct. 652, 53 S.Ct. 1034 (1909) ("The word `process' has been brought into the decisions because it is supposedly an equivalent form of expression or included in the statutory designation of a new and useful art").
That change was made for clarity and did not alter the scope of a patentable "process." See Diehr, 450 U.S., at 184, 101 S.Ct. 1048. The new terminology was added only in recognition of the fact that courts had been interpreting the category "art" by using the terms "process or method"; Congress thus wanted to avoid "the necessity of explanation that the word `art' as used in this place means `process or method.'" S.Rep. No.1979, 82d Cong., 2d Sess., 5 (1952) (hereinafter S. Rep.1979); accord, H.R.Rep. No.1923, 82d Cong., 2d Sess., 6 (1952) (hereinafter H.R. Rep.1923); see also id., at 17 (explaining that "the word `art'" in § 101 "has been interpreted by the courts as being practically synonymous with process or method," and that the switch to the word "[p]rocess" was intended only for clarity).
It appears that when Congress changed the language in § 101 to incorporate the prevailing judicial terminology, it merely codified the prevailing judicial interpretation of that category of subject matter. See Diehr, 450 U.S., at 184, 101 S.Ct. 1048; see also Barber v. Gonzales, 347 U.S. 637, 641, 74 S.Ct. 822, 98 S.Ct. 1009 (1954) ("While it is true that statutory language should be interpreted whenever possible according to common usage, some terms acquire a special technical meaning by a process of judicial construction"). Both the Senate and House Committee Reports explained that the word "process" was used in § 101 "to clarify the present law as to the patentability of certain types of processes or methods as to which some insubstantial doubts have been expressed." S. Rep.1979, at 5; accord, H. Rep.1923, at 6. And both noted that those terms were used to convey the prevailing meaning of the term "art," "as interpreted" by courts, S. Rep.1979, at 17; accord, H. Rep.1923, at 17. Indeed, one of the main drafters of the Act explained that the definition of the term "process" in § 100(b) reflects "how the courts have construed the term `art.'" Tr. of address by Judge Giles S. Rich to
As discussed above, by this time, courts had consistently construed the term "art" to exclude methods of doing business. The 1952 Act likely captured that same meaning.
"Anything Under the Sun"
Despite strong evidence that Congress has consistently authorized patents for a limited class of subject matter and that the 1952 Act did not alter the nature of the then-existing limits, petitioners and their amici emphasize a single phrase in the Act's legislative history, which suggests that the statutory subject matter "`include[s] anything under the sun that is made by man.'" Brief for Petitioners 19 (quoting Chakrabarty, 447 U.S., at 309, 100 S.Ct. 2204, in turn quoting S. Rep.1979, at 5). Similarly, the Court relies on language from our opinion in Chakrabarty that was based in part on this piece of legislative history. See ante, at 3224, 3226.
This reliance is misplaced. We have never understood that piece of legislative history to mean that any series of steps is a patentable process. Indeed, if that were so, then our many opinions analyzing what
Taken in context, it is apparent that the quoted language has a far less expansive meaning. The full sentence in the Committee Reports reads: "A person may have `invented' a machine or a manufacture, which may include anything under the sun that is made by man, but it is not necessarily patentable under section 101 unless the conditions of [this] title are fulfilled." S.Rep.1979, at 5; H.R. Rep. 1923, at 6. Viewed as a whole, it seems clear that this language does not purport to explain that "anything under the sun" is patentable. Indeed, the language may be understood to state the exact opposite: that "[a] person may have `invented' ... anything under the sun," but that thing "is not necessarily patentable under section 101." Thus, even in the Chakrabarty opinion, which relied on this quote, we cautioned that the 1952 Reports did not "suggest that § 101 has no limits or that it embraces every discovery." 447 U.S., at 309, 100 S.Ct. 2204.
Moreover, even if the language in the Committee Reports was meant to flesh out the meaning of any portion of § 101, it did not purport to define the term "process." The language refers only to "manufacture[s]" and "machine[s]," tangible objects "made by man." It does not reference the "process" category of subject matter (nor could a process be comfortably described as something "made by man"). The language may also be understood merely as defining the term "invents" in § 101. As Judge Dyk explained in his opinion below, the phrase "made by man" "is reminiscent" of a 1790's description of the limits of English patent law, that an "invention must be `made by man'" and cannot be "`a philosophical principle only, neither organized or capable of being organized' from a patentable manufacture." 545 F.3d, at 976 (quoting Hornblower v. Boulton, 8 T.R. 95, 98 (K. & B. 1799)).
The 1952 Act, in short, cannot be understood as expanding the scope of patentable subject matter by suggesting that any series of steps may be patented as a "process" under § 101. If anything, the Act appears to have codified the conclusion that subject matter which was understood not to be patentable in 1952 was to remain unpatentable.
Our recent case law reinforces my view that a series of steps for conducting business is not a "process" under § 101. Since Congress passed the 1952 Act, we have never ruled on whether that Act authorizes patents on business methods. But we have cast significant doubt on that proposition by giving substantial weight to the machine-or-transformation test, as general methods of doing business do not pass that test. And more recently, Members of this Court have noted that patents on business methods are of "suspect validity." eBay Inc. v. MercExchange, L.L. C., 547 U.S. 388, 397, 126 S.Ct. 1837, 164 L.Ed.2d 641 (2006) (KENNEDY, J., concurring).
* * *
Since at least the days of Assyrian merchants, people have devised better and better ways to conduct business. Yet it appears that neither the Patent Clause, nor early patent law, nor the current § 101 contemplated or was publicly understood to mean that such innovations are patentable. Although it may be difficult to define with precision what is a patentable "process"
Despite the strong historical evidence that a method of doing business does not constitute a "process" under § 101, petitioners nonetheless argue—and the Court suggests in dicta, ante, at 3228-3229— that a subsequent law, the First Inventor Defense Act of 1999, "must be read together" with § 101 to make business methods patentable. Brief for Petitioners 29. This argument utilizes a flawed method of statutory interpretation and ignores the motivation for the 1999 Act.
In 1999, following a Federal Circuit decision that intimated business methods could be patented, see State Street, 149 F.3d 1368, Congress moved quickly to limit the potential fallout. Congress passed the 1999 Act, codified at 35 U.S.C. § 273, which provides a limited defense to claims of patent infringement, see § 273(b), regarding certain "method[s] of doing or conducting business," § 273(a)(3).
It is apparent, both from the content and history of the Act, that Congress did not in any way ratify State Street (or, as petitioners contend, the broadest possible reading of State Street). The Act merely limited one potential effect of that decision: that businesses might suddenly find themselves liable for innocently using methods they assumed could not be patented. The Act did not purport to amend the limitations in § 101 on eligible subject matter. Indeed, Congress placed the statute in Part III of Title 35, which addresses "Patents and Protection of Patent Rights," rather than in Part II, which contains § 101 and addresses "Patentability of Inventions and Grant of Patents." Particularly because petitioners' reading of the 1999 Act would expand § 101 to cover a category of processes that have not "historically been eligible" for patents, Diehr, 450 U.S., at 184, 101 S.Ct. 1048, we should be loathe to conclude that Congress effectively amended § 101 without saying so clearly. We generally presume that Congress "does not, one might say, hide elephants in mouseholes." Whitman v. American Trucking Assns., Inc., 531 U.S. 457, 468, 121 S.Ct. 903, 149 L.Ed.2d 1 (2001).
The Act therefore is, at best, merely evidence of 1999 legislative views on the meaning of the earlier, 1952 Act. "[T]he views of a subsequent Congress," however, "form a hazardous basis for inferring the intent of an earlier one." United States v. Price, 361 U.S. 304, 313, 80 S.Ct. 326, 4 L.Ed.2d 334 (1960). When a later statute is offered as "an expression of how the ... Congress interpreted a statute passed by another Congress ... a half century before," "such interpretation has very little, if any, significance." Rainwater v. United States, 356 U.S. 590, 593, 78 S.Ct. 946, 2 L.Ed.2d 996 (1958).
Furthermore, even assuming that Congress' views at the turn of the 21st century could potentially serve as a valid basis for interpreting a statute passed in the mid-20th century, the First Inventor Defense Act does not aid petitioners because it does not show that the later Congress itself understood § 101 to cover business methods. If anything, it shows that a few judges on the Federal Circuit understood
The Court nonetheless states that the 1999 Act "acknowledges that there may be business method patents," thereby "clarify[ing]" its "understanding" of § 101. Ante, at 3228. More specifically, the Court worries that if we were to interpret the 1952 Act to exclude business methods, our interpretation "would render § 273 meaningless." Ibid. I agree that "[a] statute should be construed so that effect is given to all its provisions." Corley v. United States, 556 U.S. ___, ___, 129 S.Ct. 1558, 1566, 173 L.Ed.2d 443 (2009) (internal quotation marks omitted). But it is a different matter altogether when the Court construes one statute, the 1952 Act, to give effect to a different statute, the 1999 Act. The canon on which the Court relies is predicated upon the idea that "[a] statute is passed as a whole." 2A N. Singer & J. Singer, Statutes and Statutory Construction § 46:5, p. 189 (7th ed.2007). But the two statutes in question were not passed as a whole.
Put another way, we ordinarily assume, quite sensibly, that Congress would not in one statute include two provisions that are at odds with each other. But as this case shows, that sensible reasoning can break down when applied to different statutes.
In light of its history and purpose, I think it obvious that the 1999 Congress would never have enacted § 273 if it had foreseen that this Court would rely on the provision as a basis for concluding that business methods are patentable. Section 273 is a red herring; we should be focusing our attention on § 101 itself.
The constitutionally mandated purpose and function of the patent laws bolster the conclusion that methods of doing business are not "processes" under § 101.
The Constitution allows Congress to issue patents "[t]o promote the Progress of... useful Arts," Art. I, § 8, cl. 8. This clause "is both a grant of power and a limitation." Graham, 383 U.S., at 5, 86 S.Ct. 684. It "reflects a balance between the need to encourage innovation and the avoidance of monopolies which stifle competition without any concomitant advance in the `Progress of Science and useful Arts.'" Bonito Boats, 489 U.S., at 146, 109 S.Ct. 971. "This is the standard expressed in the Constitution and it may not be ignored. And it is in this light that patent validity `requires reference to [the] standard written into the Constitution.'" Graham, 383 U.S., at 6, 86 S.Ct. 684 (quoting Great Atlantic & Pacific Tea Co. v. Supermarket Equipment Corp., 340 U.S. 147, 154, 71 S.Ct. 127, 95 S.Ct. 162 (1950) (Douglas, J., concurring) (emphasis deleted)); see also Grant v. Raymond, 6 Pet. 218, 241-242, 8 S.Ct. 376 (1832) (explaining that patent "laws which are passed to give effect to this [constitutional] purpose ought, we think, to be construed in the spirit in which they have been made").
Thus, although it is for Congress to "implement the stated purpose of the Framers by selecting the policy which in its judgment best effectuates the constitutional aim," Graham, 383 U.S., at 6, 86 S.Ct. 684, we interpret ambiguous patent laws as a set of rules that "wee[d] out those inventions which would not be disclosed or devised but for the inducement of a patent," id., at 11, 86 S.Ct. 684, and that "embod[y]" the "careful balance between the need to promote innovation and the recognition that imitation and refinement through imitation are both necessary to invention itself and the very lifeblood of a competitive economy," Bonito Boats, 489
The Court has kept this "constitutional standard" in mind when deciding what is patentable subject matter under § 101. For example, we have held that no one can patent "laws of nature, natural phenomena, and abstract ideas." Diehr, 450 U.S., at 185, 101 S.Ct. 1048. These "are the basic tools of scientific and technological work," Benson, 409 U.S., at 67, 93 S.Ct. 253, and therefore, if patented, would stifle the very progress that Congress is authorized to promote, see, e.g., O'Reilly, 15 How., at 113, 14 S.Ct. 601 (explaining that Morse's patent on electromagnetism for writing would preempt a wide swath of technological developments).
Without any legislative guidance to the contrary, there is a real concern that patents on business methods would press on the limits of the "standard expressed in the Constitution," Graham, 383 U.S., at 6, 86 S.Ct. 684, more likely stifling progress than "promot[ing]" it. U.S. Const., Art. I, § 8, cl. 8. I recognize that not all methods of doing business are the same, and that therefore the constitutional "balance," Bonito Boats, 489 U.S., at 146, 109 S.Ct. 971, may vary within this category. Nevertheless, I think that this balance generally supports the historic understanding of the term "process" as excluding business methods. And a categorical analysis fits with the purpose, as Thomas Jefferson explained, of ensuring that "`every one might know when his actions were safe and lawful,'" Graham, 383 U.S., at 10, 86 S.Ct. 684; see also Festo Corp. v. Shoketsu Kinzoku Kogyo Kabushiki Co., 535 U.S. 722, 730-731, 122 S.Ct. 1831, 152 L.Ed.2d 944 (2002) ("The monopoly is a property right; and like any property right, its boundaries should be clear. This clarity is essential to promote progress"); Diehr, 450 U.S., at 219, 101 S.Ct. 1048 (STEVENS, J., dissenting) (it is necessary to have "rules that enable a conscientious patent lawyer to determine with a fair degree of accuracy" what is patentable).
On one side of the balance is whether a patent monopoly is necessary to "motivate the innovation," Pfaff v. Wells Electronics, Inc., 525 U.S. 55, 63, 119 S.Ct. 304, 142 L.Ed.2d 261 (1998). Although there is certainly disagreement about the need for patents, scholars generally agree that when innovation is expensive, risky, and easily copied, inventors are less likely to undertake the guaranteed costs of innovation in order to obtain the mere possibility of an invention that others can copy.
Many have expressed serious doubts about whether patents are necessary to encourage business innovation.
"[C]ompanies have ample incentives to develop business methods even without patent protection, because the competitive marketplace rewards companies that use more efficient business methods." Burk & Lemley 1618.
Nor, in many cases, would patents on business methods promote progress by encouraging "public disclosure." Pfaff, 525 U.S., at 63, 119 S.Ct. 304; see also Brenner v. Manson, 383 U.S. 519, 533, 86 S.Ct. 1033, 16 L.Ed.2d 69 (1966) ("[O]ne of the purposes of the patent system is to encourage dissemination of information concerning discoveries and inventions"). Many business methods are practiced in public, and therefore a patent does not necessarily
In any event, even if patents on business methods were useful for encouraging innovation and disclosure, it would still be questionable whether they would, on balance, facilitate or impede the progress of American business. For even when patents encourage innovation and disclosure, "too much patent protection can impede rather than `promote the Progress of ... useful Arts.'" Laboratory Corp. of America Holdings v. Metabolite Laboratories, Inc., 548 U.S. 124, 126-127, 126 S.Ct. 2921, 165 L.Ed.2d 399 (2006) (BREYER, J., dissenting from dismissal of certiorari). Patents "can discourage research by impeding the free exchange of information," for example, by forcing people to "avoid the use of potentially patented ideas, by leading them to conduct costly and time-consuming searches of existing or pending patents, by requiring complex licensing arrangements, and by raising the costs of using the patented" methods. Id., at 127, 126 S.Ct. 2921. Although "[e]very patent is the grant of a privilege of exacting tolls from the public," Great Atlantic, 340 U.S., at 154, 71 S.Ct. 127 (Douglas, J., concurring), the tolls of patents on business methods may be especially high.
The primary concern is that patents on business methods may prohibit a wide swath of legitimate competition and innovation. As one scholar explains, "it is useful to conceptualize knowledge as a pyramid: the big ideas are on top; specific applications are at the bottom." Dreyfuss 275. The higher up a patent is on the pyramid, the greater the social cost and the greater the hindrance to further innovation.
If business methods could be patented, then many business decisions, no matter how small, could be potential patent violations. Businesses would either live in constant fear of litigation or would need to undertake the costs of searching through patents that describe methods of doing business, attempting to decide whether their innovation is one that remains in the public domain. See Long, Information Costs in Patent and Copyright, 90 Va. L.Rev. 465, 487-488 (2004) (hereinafter Long). But as we have long explained, patents should not "embaras[s] the honest pursuit of business with fears and apprehensions of concealed liens and unknown liabilities to lawsuits and vexatious accountings for profits made in good faith." Atlantic Works v. Brady, 107 U.S. 192, 200, 2 S.Ct. 225, 27 S.Ct. 438 (1883).
These effects are magnified by the "potential vagueness" of business method patents, eBay Inc., 547 U.S., at 397, 126 S.Ct. 1837 (KENNEDY, J., concurring). When it comes to patents, "clarity is essential to promote progress." Festo Corp., 535 U.S., at 730-731, 122 S.Ct. 1831. Yet patents on methods of conducting business generally are composed largely or entirely of intangible steps. Compared to "the kinds of goods ... around which patent rules historically developed," it thus tends to be more costly and time consuming to search through, and to negotiate licenses for, patents on business methods. See Long 539, 470.
The breadth of business methods, their omnipresence in our society, and their potential vagueness also invite a particularly pernicious use of patents that we have long criticized. As early as the 19th century, we explained that the patent laws are not intended to "creat[e] a class of speculative schemers who make it their business to watch the advancing wave of improvement, and gather its foam in the form of patented monopolies, which enable them to lay a heavy tax upon the industry of the country, without contributing anything to the real advancement of the arts." Atlantic Works, 107 U.S., at 200, 2 S.Ct. 225. Yet business method patents may have begun to do exactly that. See eBay Inc., 547 U.S., at 396-397, 126 S.Ct. 1837 (opinion of KENNEDY, J.).
These many costs of business method patents not only may stifle innovation, but
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The constitutional standard for patentability is difficult to apply with any precision, and Congress has significant discretion to "implement the stated purpose of the Framers by selecting the policy which in its judgment best effectuates the constitutional aim," Graham, 383 U.S., at 6, 86 S.Ct. 684. But Congress has not, either explicitly or implicitly, determined that patents on methods of doing business would effectuate this aim. And as I understand their practical consequences, it is hard to see how they would.
The Constitution grants to Congress an important power to promote innovation. In its exercise of that power, Congress has established an intricate system of intellectual property. The scope of patentable subject matter under that system is broad. But it is not endless. In the absence of any clear guidance from Congress, we have only limited textual, historical, and functional clues on which to rely. Those clues all point toward the same conclusion: that petitioners' claim is not a "process" within the meaning of § 101 because methods of doing business are not, in themselves, covered by the statute. In my view, acknowledging as much would be a far more sensible and restrained way to resolve this case. Accordingly, while I concur in the judgment, I strongly disagree with the Court's disposition of this case.
Justice BREYER, with whom Justice SCALIA joins as to Part II, concurring in the judgment.
I agree with Justice STEVENS that a "general method of engaging in business transactions" is not a patentable "process" within the meaning of 35 U.S.C. § 101. Ante, at 3232 (STEVENS, J., concurring in judgment). This Court has never before held that so-called "business methods" are patentable, and, in my view, the text, history, and purposes of the Patent Act make clear that they are not. Ante, at
I write separately, however, in order to highlight the substantial agreement among many Members of the Court on many of the fundamental issues of patent law raised by this case. In light of the need for clarity and settled law in this highly technical area, I think it appropriate to do so.
In addition to the Court's unanimous agreement that the claims at issue here are unpatentable abstract ideas, it is my view that the following four points are consistent with both the opinion of the Court and Justice STEVENS' opinion concurring in the judgment:
First, although the text of § 101 is broad, it is not without limit. See ante, at 3224-3225 (opinion of the Court); ante, at 3236 (STEVENS, J., concurring in judgment). "[T]he underlying policy of the patent system [is] that `the things which are worth to the public the embarrassment of an exclusive patent,' ... must outweigh the restrictive effect of the limited patent monopoly." Graham v. John Deere Co. of Kansas City, 383 U.S. 1, 10-11, 86 S.Ct. 684, 15 L.Ed.2d 545 (1966) (quoting Letter from Thomas Jefferson to Isaac McPherson (Aug. 13, 1813), in 6 Writings of Thomas Jefferson 181 (H. Washington ed.)). The Court has thus been careful in interpreting the Patent Act to "determine not only what is protected, but also what is free for all to use." Bonito Boats, Inc. v. Thunder Craft Boats, Inc., 489 U.S. 141, 151, 109 S.Ct. 971, 103 L.Ed.2d 118 (1989). In particular, the Court has long held that "[p]henomena of nature, though just discovered, mental processes, and abstract intellectual concepts are not patentable" under § 101, since allowing individuals to patent these fundamental principles would "wholly pre-empt" the public's access to the "basic tools of scientific and technological work." Gottschalk v. Benson, 409 U.S. 63, 67, 72, 93 S.Ct. 253, 34 L.Ed.2d 273 (1972); see also, e.g., Diamond v. Diehr, 450 U.S. 175, 185, 101 S.Ct. 1048, 67 L.Ed.2d 155 (1981); Diamond v. Chakrabarty, 447 U.S. 303, 309, 100 S.Ct. 2204, 65 L.Ed.2d 144 (1980).
Second, in a series of cases that extend back over a century, the Court has stated that "[t]ransformation and reduction of an article to a different state or thing is the clue to the patentability of a process claim that does not include particular machines." Diehr, supra, at 184, 101 S.Ct. 1048 (emphasis added; internal quotation marks omitted); see also, e.g., Benson, supra, at 70, 93 S.Ct. 253; Parker v. Flook, 437 U.S. 584, 588, n. 9, 98 S.Ct. 2522, 57 L.Ed.2d 451 (1978); Cochrane v. Deener, 94 U.S. 780, 788, 24 S.Ct. 139 (1877). Application of this test, the so-called "machine-ortransformation test," has thus repeatedly helped the Court to determine what is "a patentable `process.'" Flook, supra, at 589, 98 S.Ct. 2522.
Third, while the machine-or-transformation test has always been a "useful and important clue," it has never been the "sole test" for determining patentability. Ante, at 3227; see also ante, at 3231-3232 (STEVENS, J., concurring in judgment); Benson, supra, at 71, 93 S.Ct. 253 (rejecting the argument that "no process patent could ever qualify" for protection under § 101 "if it did not meet the [machine-or-transformation] requirements"). Rather, the Court has emphasized that a process claim meets the requirements of § 101 when, "considered as a whole," it "is performing a function which the patent laws were designed to protect (e.g., transforming or reducing an article to a different state or thing)." Diehr, supra, at 192, 101 S.Ct. 1048.
Fourth, 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,'" State Street Bank & Trust Co. v. Signature Financial Group, Inc., 149 F.3d 1368, 1373 (C.A.Fed.1998), 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. of America Holdings v. Metabolite Laboratories, Inc., 548 U.S. 124, 136, 126 S.Ct. 2921, 165 L.Ed.2d 399 (2006) (BREYER, J., dissenting from dismissal of certiorari as improvidently granted); see also, e.g., O'Reilly v. Morse, 15 How. 62, 117, 14 S.Ct. 601 (1854); Flook, supra, at 590, 98 S.Ct. 2522. Indeed, the introduction of the "useful, concrete, and tangible result" approach to patentability, associated with the Federal Circuit's State Street decision, preceded the granting of patents that "ranged from the somewhat ridiculous to the truly absurd." In re Bilski, 545 F.3d 943, 1004 (C.A.Fed.2008) (Mayer, J., dissenting) (citing patents on, inter alia, a "method of training janitors to dust and vacuum using video displays," a "system for toilet reservations," and a "method of using color-coded bracelets to designate dating status in order to limit `the embarrassment of rejection'"); see also Brief for Respondent 40-41, and n. 20 (listing dubious patents). 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. See ante, at 3231; ante, at 3232, n. 1 (STEVENS, J., concurring in judgment).
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.
With these observations, I concur in the Court's judgment.