OPINION OF THE COURT BILSKI V. KAPPOS 561 U. S. ____ (2010) SUPREME COURT OF THE UNITED STATES NO. 08-964 BERNARD L. BILSKI and RAND A. WARSAW, PETITIONERS v. DAVID J. KAPPOS, UNDER SECRETARY OF COMMERCE FOR INTEL-
LECTUAL PROPERTY AND DIRECTOR, PATENT AND TRADEMARK OFFICE

															on writ of certiorari to the united states court of
appeals for the federal circuit

															[June 28, 2010]

															   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.

															I

															   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:

															   “(a) initiating a series of
transactions between said commodity provider and consumers of said
commodity wherein said consumers purchase said commodity at a fixed
rate based upon historical averages, said fixed rate corresponding
to a risk position of said consumers;

															   “(b) identifying market participants for said
commodity having a counter-risk position to said consumers; and

															   “(c) initiating a series of transactions
between said commodity provider and said market participants at a
second fixed rate such that said series of market participant
transactions balances the risk position of said series of consumer
transactions.” App. 19–20.

															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 (CA 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 only that the issue
should be remanded for further proceedings to determine whether the
application qualified as patentable under other provisions. Id., at 997.

															   This Court granted certiorari. 556 U. S. ___
(2009).

															II

															A

															   Section 101 defines the subject
matter that may be patented under the Patent Act:

															   “Whoever 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.”

															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
(1980). Congress took this permissive approach to patent
eligibility to ensure that “ ‘ingenuity should receive a
liberal encouragement.’ ” Id., at 308–309 (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. 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 (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 (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:

															“process, art or method, and includes a new use of
a known process, machine, manufacture, composition of matter, or
material.”

															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.

															B

															1

															   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
F. 3d, at 954. This Court has “more than once cautioned that
courts ‘should not read into the patent laws limitations and
conditions which the legislature has not expressed.’ ” Diamond v. Diehr , 450 U. S. 175 , 182
(1981) (quoting Chakrabarty , supra , at 308; some
internal quotation marks omitted). In patent law, as in all
statutory construction, “[u]nless otherwise defined, ‘words will be
interpreted as taking their ordinary, contemporary, common
meaning.’ ” Diehr , supra , at 182 (quoting Perrin v. United States , 444 U. S. 37 , 42 (1979)).
The Court has read the §101 term “manufacture” in accordance with
dictionary definitions, see Chakrabarty, supra , at 308
(citing American Fruit Growers, Inc. v. Brogdex
Co. , 283 U. S.
1 , 11 (1931)), and approved a construction of the term
“composition of matter” consistent with common usage, see Chakrabarty , supra , at 308 (citing Shell
Development Co. v. Watson , 149 F. Supp. 279, 280 (DC
1957)).

															   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
(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, 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.
___, ___ (2010) (slip op., at 12) (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
(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 (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 , 70 (1972),
noted 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.” At the
same time, it explicitly declined to “hold that no process patent
could ever qualify if it did not meet [machine or transformation]
requirements.” Id., at 71. Flook took a similar
approach, “assum[ing] that a valid process patent may issue even if
it does not meet [the machine-or-transformation test].” 437 U. S.,
at 588, n. 9.

															   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.”

															2

															   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 (Stevens, J.,
dissenting). But this fact does not mean that unforeseen
innovations such as computer programs are always unpatentable. See id., at 192–193 (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
(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.

															   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 “process[es],” it may not make
sense to require courts to confine themselves to asking the
questions posed by the machine-or-transformation test. Section
101’s terms suggest that new technologies may call for new
inquiries. See Benson , supra , at 71 (to “freeze
process patents to old technologies, leaving no room for the
revelations of the new, onrushing technology[,] … is not our
purpose”).

															   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.

															C

															1

															   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, 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 , 556 U.
S. ___, ___ (2009) (slip op., at 9). This principle, of course,
applies to interpreting any two provisions in the U. S. Code, even
when Congress enacted the provisions at different times. See, e.g., Hague v. Committee for Industrial
Organization , 307 U. S. 496 , 529–530
(1939) (opinion of Stone, J.). This established rule of statutory
interpretation cannot be overcome by judicial speculation as to the
subjective intent of various legislators in enacting the subsequent
provision. Finally, while §273 appears to leave open the
possibility of some business method patents, it does not suggest
broad patentability of such claimed inventions.

															2

															   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 8–9. 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
(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 12–15. 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.

															III

															   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 are attempts to patent abstract
ideas. Indeed, all members of the Court agree that the patent
application at issue here falls outside of §101 because it claims
an abstract idea.

															   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. 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 (quoting Le Roy , 14 How., at 175). 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. 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.

															   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. 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 . 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. 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. 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.

															   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. 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. 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. 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.

															   In light of these precedents, it is clear that
petitioners’ application is not a patentable “process.” Claims 1
and 4 in petitioners’ application explain the basic concept of
hedging, or protecting against risk: “Hedging is a fundamental
economic practice long prevalent in our system of commerce and
taught in any introductory finance class.” 545 F. 3d, at 1013
(Rader, J., dissenting); see, e.g., D. Chorafas,
Introduction to Derivative Financial Instruments 75–94 (2008); C.
Stickney, R. Weil, K. Schipper, & J. Francis, Financial
Accounting: An Introduction to Concepts, Methods, and Uses 581–582
(13th ed. 2010); S. Ross, R. Westerfield, & B. Jordan,
Fundamentals of Corporate Finance 743–744 (8th ed. 2008). The
concept of hedging, described in claim 1 and reduced to a
mathematical formula in claim 4, is an unpatentable abstract idea,
just like the algorithms at issue in Benson and Flook . 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.

															   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 Scalia does not join Parts II–B–2
and II–C–2. STEVENS, J., CONCURRING IN JUDGMENT BILSKI V. KAPPOS 561 U. S. ____ (2010) SUPREME COURT OF THE UNITED STATES NO. 08-964 BERNARD L. BILSKI and RAND A. WARSAW, PETITIONERS v. DAVID J. KAPPOS, UNDER SECRETARY OF COMMERCE FOR INTEL-
LECTUAL PROPERTY AND DIRECTOR, PATENT AND TRADEMARK OFFICE

															on writ of certiorari to the united states court of
appeals for the federal circuit

															[June 28, 2010]

															   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 to answer that question simply by holding, as the
entire Court agrees, that although the machine-or-transformation
test is reliable in most cases, it is not the exclusive test.

															   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.[ Footnote 1 ] But the Court
is quite wrong, in my view, to suggest that any series of steps
that is not itself an abstract idea or law of nature may constitute
a “process” within the meaning of §101. The language in the Court’s
opinion to this effect can only cause mischief. The wiser course
would have been to hold that petitioners’ method is not a “process”
because it describes only a general method of engaging in business
transactions—and business methods are not patentable. More
precisely, although a process is not patent-ineligible simply
because it is useful for conducting business, a claim that merely
describes a method of doing business does not qualify as a
“process” under §101.

															I

															   Although the Court provides a
brief statement of facts, ante , at 1–4, 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:

															   “(a) initiating a series of
transactions between said commodity provider and consumers of said
commodity wherein said consumers purchase said commodity at a fixed
rate based upon historical averages, said fixed rate corresponding
to a risk position of said consumers;

															   “(b) identifying market participants for said
commodity having a counter-risk position to said consumers; and

															   “(c) initiating a series of transactions
between said commodity provider and said market participants at a
second fixed rate such that said series of market participant
transactions balances the risk position of said series of consumer
transactions.” App. 19–20.

															   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 “technological arts,” and “categorical exclusions” for certain
processes such as business methods. In re Bilski, 545
F. 3d 943, 959–960 (2008). Relying on several of our cases in
which we explained how to differentiate a claim on a “fundamental
principle” from a claim on a “process,” the court concluded 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 954–955. The court further concluded that this
“machine-or-transformation test” is “the sole test
governing §101 analyses,” id. , at 955 (emphasis added),
and therefore the “test for determining patent eligibility of a
process under §101,” id. , at 956. Applying that test, the
court held that petitioners’ claim is not a patent-eligible
process. Id. , at 963–966.

															   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.

															II

															   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 6
(terms in §101 must be viewed in light of their “ ‘ordinary,
contemporary, common meaning’ ”); ante , at 10
(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)). As I will explain at more length in Part
III, infra , if this portion of the Court’s opinion were
taken literally, the results would be absurd: Anything that
constitutes a series of steps would be patentable so long as it is
novel, nonobvious, and described with specificity. But the opinion
cannot be taken literally on this point. The Court makes this clear
when it accepts that the “atextual” machine-or-transformation test, ante , at 12, is “useful and important,” ante , at
8, even though it “violates” the stated “statutory interpretation
principles,” ante , at 6; and when the Court excludes
processes that tend to pre-empt commonly used ideas, see ante , at 14–15.

															   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 8–9 (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 8 (“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 15, 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 (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
(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 14, 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 15. 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 14–15. But claim specification is covered by
§112, not §101; and if a series of steps constituted an
unpatentable idea merely because it was described without
sufficient specificity, the Court could be calling into question
some of our own prior decisions.[ Footnote 2 ] At points, the opinion suggests that novelty
is the clue. See ante , at 14. But the fact that hedging is
“ ‘long prevalent in our system of commerce,’ ” ibid. , cannot justify the Court’s conclusion, as “the
proper construction of §101 … does not involve the familiar issu[e]
of novelty” that arises under §102. Flook , 437 U. S., at
588. At other points, the opinion for a plurality suggests that the
analysis turns on the category of patent involved. See, e.g. , ante, at 12 (courts should use the
abstract-idea rule as a “too[l]” to set “a high enough bar” “when
considering patent applications of this sort”). But we have never
in the past suggested that the inquiry varies by subject
matter.

															   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.

															III

															   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
(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 (1980); see
also J. E. M. Ag Supply, Inc. v. Pioneer Hi-Bred Int’l, Inc. , 534 U. S. 124 , 130
(2001). Nonetheless, not every new invention or discovery may be
patented. Certain things are “free for all to use.” Bonito
Boats, Inc. v. Thunder Craft Boats, Inc. , 489 U. S. 141 , 151
(1989).[ Footnote 3 ]

															   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;
see also Corning v. Burden , 15 How. 252, 268
(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
(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 6. 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 7, 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
list. It would therefore be illogical to “rob” the word “process”
of all independent meaning. Reiter v. Sonotone
Corp. , 442 U.
S. 330 , 338 (1979). Moreover, to the extent we can draw
inferences about what is a “process” from common attributes in
§101, it is a dangerous endeavor to do so on the basis of a
perceived overarching theme. Given the many moving parts at work in
the Patent Act, there is a risk of merely confirming our
preconceived notions of what should be patentable or of seeing
common attributes that track “the familiar issues of novelty and
obviousness” that arise under other sections of the statute but are
not relevant to §101, Flook , 437 U. S., at 588. The
placement of “process” next to other items thus cannot prove that
the term is limited to any particular categories; it does, however,
give reason to be skeptical that the scope of a patentable
“process” extends to cover any series of steps at all.

															   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. Instead, the
Court posits that the word “process” must be understood in light of
its “ordinary, contemporary, common meaning,” ante , at 6
(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.[ Footnote 4 ] Indeed, the approach would
render §101 almost comical. A process for training a dog, a series
of dance steps, a method of shooting a basketball, maybe even
words, stories, or songs if framed as the steps of typing letters
or uttering sounds—all would be patent-eligible. I am confident
that the term “process” in §101 is not nearly so
capacious.[ Footnote 5 ]

															   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 12, 7. The
Court also accepts that we have “foreclose[d] a purely literal
reading of §101,” Flook , 437 U. S., at 589, by holding
that claims that are close to “laws of nature, natural phenomena,
and abstract ideas,” Diamond v. Diehr , 450 U. S. 175 , 185 (1981), do not
count as “processes” under §101, even if they can be colloquially
described as such.[ Footnote 6 ]
The Court attempts to justify this latter exception to §101 as “a
matter of statutory stare decisis .” Ante , at 5.
But it is strange to think that the very same term must be
interpreted literally on some occasions, and in light of its
historical usage on others.

															   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.

															IV

															   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; see
also Chakrabarty , 447 U. S., at 315–316. 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,
and likely go beyond what the modern patent “statute was enacted to
protect,” Flook , 437 U. S., at 593. 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
(1921). English Backdrop 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 (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).[ Footnote 7 ] The governing English law, the Statute of
Monopolies, responded to abuses whereby the Crown would issue
letters patent, “granting monopolies to court favorites in goods or
businesses which had long before been enjoyed by the public.” Graham , 383 U. S., at 5. The statute generally prohibited
the Crown from granting such exclusive rights, 21 Jam. 1,
c. 3, §1 (1623), in 4 Statutes of the Realm 1213 (reprint
1963), but it contained exceptions that, inter alia ,
permitted grants of exclusive rights to the “working or making of
any manner of new Manufacture.” §6.

															   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,[ Footnote 8 ] as well as a variety of patents
issued for methods of synthesizing substances or building
mechanical devices.[ Footnote
9 ]

															   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.[ Footnote 10 ] There was some debate throughout the
relevant time period about what processes could be patented. But it
does not appear that anyone seriously believed that one could
patent “a method for organizing human activity.” 545 F. 3d, at
970 (Dyk, J., concurring).[ Footnote 11 ]

															   There were a small number of patents issued
between 1623 and 1790 relating to banking or lotteries and one for
a method of life insurance,[ Footnote 12 ] but these did not constitute the
“prevail[ing]” “principles and practice” in England on which our
patent law was based, Pennock v. Dialogue, 2 Pet.
1, 18 (1829). Such patents were exceedingly rare, and some of them
probably were viewed not as inventions or discoveries but rather as
special state privileges[ Footnote 13 ] that until the mid-1800’s were recorded
alongside inventions in the patent records, see MacLeod 1–2
(explaining that various types of patents were listed together). It
appears that the only English patent of the time that can fairly be
described as a business method patent was one issued in 1778 on a
“Plan for assurances on lives of persons from 10 to 80 years of
Age.” Woodcroft 324.[ Footnote
14 ] And “[t]here is no indication” that this patent “was ever
enforced or its validity tested,” 545 F. 3d, at 974 (Dyk, J.,
concurring); the patent may thus have represented little more than
the whim—or error—of a single patent clerk.[ Footnote 15 ]

															   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,[ Footnote 16 ] the
American drafters probably would have known about particular
patents only if they were well publicized or subject to reported
litigation. So far as I am aware, no published cases pertained to
patents on business methods.

															   Also noteworthy is what was not patented under the English system. During the 17th and 18th
centuries, Great Britain saw innovations in business
organization,[ Footnote 17 ]
business models,[ Footnote
18 ] management techniques,[ Footnote 19 ] and novel solutions to the challenges of
operating global firms in which subordinate managers could be
reached only by a long sea voyage.[ Footnote 20 ] Few if any of these methods of conducting
business were patented.[ Footnote
21 ] 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.[ Footnote 22 ] We do know that the Clause passed without
objection or debate.[ Footnote
23 ] This is striking because other proposed powers, such as a
power to grant charters of incorporation, generated discussion
about the fear that they might breed “monopolies.”[ Footnote 24 ] Indeed, at the ratification
conventions, some States recommended amendments that would have
prohibited Congress from granting “ ‘exclusive advantages of
commerce.’ ” [ Footnote
25 ] If the original understanding of the Patent Clause included
the authority to patent methods of doing business, it might not
have passed so quietly.

															   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 art, machine, manufacture
or composition of matter, or any new and useful improvement on any
art, machine, manufacture or composition of matter.” 1 Stat.
319.

															   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 (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.

															   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. It appears, however, that regardless of how one construes the
term “useful arts,” business methods are not included.

															   Noah Webster’s first American
dictionary[ Footnote 26 ]
defined the term “art” as the “disposition or modification of things by human skill, to answer the purpose intended,”
and differentiated between “useful or mechanic” arts, on the one
hand, and “liberal or polite” arts, on the other. 1 An American
Dictionary of the English Language (1828) (facsimile edition)
(emphasis added). Although other dictionaries defined the word
“art” more broadly,[ Footnote
27 ] Webster’s definition likely conveyed a message similar to
the meaning of the word “manufactures” in the earlier English
statute. And we know that the term “useful arts” was used in the
founding era to refer to manufacturing and similar applied
trades.[ Footnote 28 ] See
Coulter, The Field of the Statutory Useful Arts, 34 J. Pat. Off.
Soc. 487, 493–500 (1952); see also Thomas, The Patenting of the
Liberal Professions, 40 Boston College L. Rev. 1139, 1164
(1999) (“[The Framers of the Constitution] undoubtedly contemplated
the industrial, mechanical and manual arts of the late eighteenth
Century, in contrast to the seven ‘liberal arts’ and the four ‘fine
arts’ of classical learning”). Indeed, just days before the
Constitutional Convention, one delegate listed examples of American
progress in “manufactures and the useful arts,” all of which
involved the creation or transformation of physical substances. See
T. Coxe, An Address to an Assembly of the Friends of American
Manufactures 17–18 (1787) (listing, inter alia , meal,
ships, liquors, potash, gunpowder, paper, starch, articles of iron,
stone work, carriages, and harnesses). Numerous scholars have
suggested that the term “useful arts” was widely understood to
encompass the fields that we would now describe as relating to
technology or “technological arts.”[ Footnote 29 ]

															   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 America for the Year 1810,
(1814), in 2 American State Papers, Finance 666, 688 (1832).

															   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 (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.[ Footnote 30 ] Indeed, for some time, there
were serious doubts as to “the patentability of processes per se,”
as distinct from the physical end product or the tools used to
perform a process. Id., at 581–582.[ Footnote 31 ]

															   Thomas Jefferson was the “ ‘first
administrator of our patent system’ ” and “the author of the
1793 Patent Act.” Graham , 383 U. S., at 7. We have said
that his “conclusions as to conditions of patentability … are
worthy of note.” Ibid . at 7. During his time administering
the system, Jefferson “saw clearly the difficulty” of deciding what
should be patentable.[ Footnote
32 ] Id. , at 9. He drafted the 1793 Act, id. ,
at 7, and, years later, explained that in that Act “ ‘the
whole was turned over to the judiciary, to be matured into a
system, under which every one might know when his actions were safe
and lawful,’ ” id. , at 10 (quoting Letter to Issac
McPherson, in VI Writings of Thomas Jefferson 181–182 (H.
Washington ed. 1861)). As the Court has explained, “Congress agreed
with Jefferson … that the courts should develop additional
conditions for patentability.” Graham, 383 U. S., at 10.
Thus “[a]lthough the Patent Act was amended, revised or codified
some 50 times between 1790 and 1950, Congress steered clear” of
adding statutory requirements of patentability. Ibid . For
nearly 160 years, Congress retained the term “useful arts,” see, e.g. , Act of July 4, 1836, ch. 357, 5 Stat. 117, leaving
“wide latitude for judicial construction … to keep pace with
industrial development,” Berman, Method Claims, 17 J. Pat. Off.
Soc. 713, 714 (1935) (hereinafter Berman).

															   Although courts occasionally struggled with
defining what was a patentable “art” during those 160 years, they
consistently rejected patents on methods of doing business. The
rationales for those decisions sometimes varied. But there was an
overarching theme, at least in dicta: Business methods are not
patentable arts. See, e.g. , United States Credit Sys.
Co. v. American Credit Indem. Co., 53 F. 818, 819
(CC NY 1893) (“method of insuring against loss by bad debts” could
not be patented “as an art”); Hotel Security Checking Co. v. Lorraine Co. , 160 F. 467, 469 (CA2 1908) (“A system of
transacting business disconnected from the means for carrying out
the system is not, within the most liberal interpretation of the
term, an art”); Guthrie v. Curlett , 10 F. 2d
725, 726 (CA2 1926) (method of abbreviating rail tariff schedules,
“if it be novel, is not the kind of art protected by the patent
acts”); In re Patton , 127 F. 2d 324, 327–328
(CCPA 1942) (holding that novel “ ‘interstate and national
fire-fighting system’ ” was not patentable because, inter
alia , “a system of transacting business, apart from the means
for carrying out such system is not” an art within the meaning of
the patent law, “nor is an abstract idea or theory, regardless of
its importance or … ingenuity”); Loew’s Drive-In Theatres,
Inc. v. Park-In Theatres, Inc. , 174 F. 2d 547,
552 (CA1 1949) (“[A] system for the transaction of business, such,
for example, as the cafeteria system for transacting the restaurant
business … however novel, useful, or commercially successful is not
patentable apart from the means for making the system practically
useful, or carrying it out”); Joseph E. Seagram & Sons,
Inc. v. Marzall , 180 F. 2d 26, 28 (CADC 1950)
(method of focus-group testing for beverages is not patentable
subject matter); see also In re Howard , 394
F. 2d 869, 872 (CCPA 1968) (Kirkpatrick, J., concurring)
(explaining that a “method of doing business” cannot be patented).
Between 1790 and 1952, this Court never addressed the patentability
of business methods. But we consistently focused the inquiry on
whether an “art” was connected to a machine or physical
transformation,[ Footnote 33 ]
an inquiry that would have excluded methods of doing business.

															   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).[ Footnote 34 ] Citing many of the cases listed
above, the treatise concluded that a “method of transacting
business” is not an “ ‘art.’ ” Id. , §22, at 69;
see also L. Amdur, Patent Law and Practice §39, p. 53 (1935)
(listing “Methods of doing business” as an “Unpatentable [A]r[t]”);
Berman 718 (“[C]ases have been fairly unanimous in denying
patentability to such methods”); Tew, Method of Doing Business, 16
J. Pat. Off. Soc. 607 (1934) (“It is probably settled by long
practice and many precedents that ‘methods of doing business,’ as
these words are generally understood, are unpatentable”). Indeed,
“[u]ntil recently” it was still “considered well established that
[business] methods were non-statutory.” 1 R. Moy, Walker on Patents
§5:28, p. 5–104 (4th ed. 2009).[ Footnote 35 ] 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 (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”).[ Footnote 36 ] Thus in 1952, when Congress
updated the patent laws as part of its ongoing project to revise
the United States Code, it changed the operative language in §101,
replacing the term “art” with “process” and adding a definition of
“process” as a “process, art or method,” §100(b).

															   That change was made for clarity and did not
alter the scope of a patentable “process.” See Diehr , 450
U. S., at 184. 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).[ Footnote 37 ]

															   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; see also Barber v. Gonzales , 347 U. S. 637 , 641
(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 the New
York Patent Law Association 7–8 (Nov. 6, 1952).

															   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.[ Footnote 38 ] Cf. Graham ,
383 U. S., at 16–17 (reasoning that because a provision of the 1952
Act “paraphrases language which has often been used in decisions of
the courts” and was “added to the statute for uniformity and
definiteness, ” that provision should be treated as “a
codification of judicial precedents”).[ Footnote 39 ] Indeed, Judge Rich, the main drafter of
the 1952 Act, later explained that “the invention of a more
effective organization of the materials in, and the techniques of
teaching a course in physics, chemistry, or Russian is not a
patentable invention because it is outside of the enumerated
categories of ‘process, machine, manufacture, or composition of
matter, or any new and useful improvement thereof.’ ”
Principles of Patentability, 28 Geo. Wash. L. Rev. 393, 394
(1960). “Also outside that group,” he added, was a process for
doing business: “the greatest inventio[n] of our times, the diaper
service.” Ibid .[ Footnote 40 ] “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, 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
4, 6.

															   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 is a patentable process were
simply wastes of pages in the U. S. Reports. And to accept that
errant piece of legislative history as widening the scope of the
patent law would contradict other evidence in the congressional
record, as well as our presumption that the 1952 Act merely
codified the meaning of “process” and did not expand it, see Diehr , 450 U. S., at 184.

															   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.

															   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
(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” under §101, the historical clues converge on
one conclusion: A business method is not a “process.” And to the
extent that there is ambiguity, we should be mindful of our
judicial role. “[W]e must proceed cautiously when we are asked to
extend patent rights” into an area that the Patent Act likely was
not “enacted to protect,” Flook , 437 U. S., at 596, 593,
lest we create a legal regime that Congress never would have
endorsed, and that can be repaired only by disturbing settled
property rights.

															V

															   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 10–11—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, 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 (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
(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 (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 §101 in that manner and
that Congress understood what those judges had done. The Act
appears to reflect surprise and perhaps even dismay that business
methods might be patented. Thus, in the months following State
Street , congressional authorities lamented that “business
methods and processes … until recently were thought not to be
patentable,” H. R. Rep. No. 106–464, p. 121 (1999);
accord, H. R. Rep. No. 106–287, pt. 1, p. 31 (1999).[ Footnote 41 ] The fact that Congress
decided it was appropriate to create a new defense to
claims that business method patents were being infringed merely
demonstrates recognition that such claims could create a
significant new problem for the business community.

															   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 11.
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. ___, ___
(2009) (slip op., at 9) (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.[ Footnote
42 ] The 1999 Act was passed to limit the impact of the Federal
Circuit’s then-recent statements on the 1952 Act. Although
repudiating that judicial dictum (as we should) might effectively
render the 1999 Act a nullity going forward, such a holding would
not mean that it was a nullity when Congress enacted it. Section
273 may have been a technically unnecessary response to confusion
about patentable subject matter, but it appeared necessary in 1999
in light of what was being discussed in legal circles at the
time.[ Footnote 43 ] Consider
the logical implications of the Court’s approach to this question:
If, tomorrow, Congress were to conclude that patents on business
methods are so important that the special infringement
defense in §273 ought to be abolished, and thus repealed that
provision, this could paradoxically strengthen the case against such patents because there would no longer be a
§273 that “acknowledges … business method patents,” ante ,
at 11. That is not a sound method of statutory interpretation.

															   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.

															VI

															   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. 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. “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 (quoting Great Atlantic & Pacific Tea
Co. v. Supermarket Equipment Corp. , 340 U. S. 147 , 154 (1950) (Douglas,
J., concurring) (emphasis deleted)); see also Grant v. Raymond , 6 Pet. 218, 241–242 (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”).[ Footnote 44 ]

															   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, 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, 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 U. S., at 146. And absent a
discernible signal from Congress, we proceed cautiously when
dealing with patents that press on the limits of the
“ ‘standard written into the constitution,’ ” Graham , 383 U. S., at 6, for at the “fringes of
congressional power,” “more is required of legislatures than a
vague delegation to be filled in later,” Barenblatt v. United States , 360 U. S. 109 , 139–140
(1959) (Black, J., dissenting); see also Greene v. McElroy , 360 U. S. 474 , 507
(1959) (“[D]ecisions of great constitutional import and effect”
“requir[e] careful and purposeful consideration by those
responsible for enacting and implementing our laws”). We should not
casually risk exceeding the constitutional limitation on Congress’
behalf.

															   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. These “are the basic tools of scientific and
technological work,” Benson , 409 U. S., at 67, and
therefore, if patented, would stifle the very progress that
Congress is authorized to promote, see, e.g. , O’Reilly , 15 How., at 113 (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, 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, 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; see also Festo Corp. v. Shoketsu Kinzoku Kogyo Kabushiki
Co. , 535 U. S.
722 , 730–731 (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 (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 (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.[ Footnote 45 ] Both common sense and recent
economic scholarship suggest that these dynamics of cost, risk, and
reward vary by the type of thing being patented.[ Footnote 46 ] And the functional case that
patents promote progress generally is stronger for subject matter
that has “historically been eligible to receive the protection of
our patent laws,” Diehr , 450 U. S., at 184, than for
methods of doing business.

															   Many have expressed serious doubts about
whether patents are necessary to encourage business
innovation.[ Footnote 47 ]
Despite the fact that we have long assumed business methods could
not be patented, it has been remarked that “the chief business of
the American people, is business.”[ Footnote 48 ] Federal Express developed an overnight
delivery service and a variety of specific methods (including
shipping through a central hub and online package tracking) without
a patent. Although counterfactuals are a dubious form of analysis,
I find it hard to believe that many of our entrepreneurs forwent
business innovation because they could not claim a patent on their
new methods.

															   “[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.[ Footnote 49 ] Innovators often capture
advantages from new business methods notwithstanding the risk of
others copying their innovation. Some business methods occur in
secret and therefore can be protected with trade secrecy.[ Footnote 50 ] And for those methods
that occur in public, firms that innovate often capture long-term
benefits from doing so, thanks to various first mover advantages,
including lockins, branding, and networking effects.[ Footnote 51 ] Business innovation,
moreover, generally does not entail the same kinds of risk as does
more traditional, technological innovation. It generally does not
require the same “enormous costs in terms of time, research, and
development,” Bicron , 416 U. S., at 480, and thus does not
require the same kind of “compensation to [innovators] for their
labor, toil, and expense,” Seymour v. Osborne , 11
Wall. 516, 533–544 (1871).[ Footnote 52 ]

															   Nor, in many cases, would patents on business
methods promote progress by encouraging “public disclosure.” Pfaff , 525 U. S., at 63; see also Brenner v. Manson , 383
U. S. 519 , 533 (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 encourage
the dissemination of anything not already known. And for the
methods practiced in private, the benefits of disclosure may be
small: Many such methods are distributive, not productive—that is,
they do not generate any efficiency but only provide a means for
competitors to one-up each other in a battle for pieces of the pie.
And as the Court has explained, “it is hard to see how the public
would be benefited by disclosure” of certain business tools, since
the nondisclosure of these tools “encourages businesses to initiate
new and individualized plans of operation,” which “in turn, leads
to a greater variety of business methods.” Bicron , 416 U.
S., at 483.

															   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
(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. Although
“[e]very patent is the grant of a privilege of exacting tolls from
the public,” Great Atlantic , 340 U. S., at 154 (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.[ Footnote 53 ] Thus, this Court stated in Benson that “[p]henomena of nature … , mental processes,
and abstract intellectual concepts are not patentable, as they are
the basic tools of scientific and technological work,” 409 U. S.,
at 67; see also, Joseph E. Seagram & Sons, Inc. , 180
F. 2d, at 28 (“To give appellant a monopoly, through the
issuance of a patent, upon so great an area … would in our view
impose without warrant of law a serious restraint upon the advance
of science and industry”). Business methods are similarly often
closer to “big ideas,” as they are the basic tools of commercial work. They are also, in many cases, the basic
tools of further business innovation: Innovation in business
methods is often a sequential and complementary process in which
imitation may be a “ spur to innovation” and patents may
“become an impediment .” Bessen & Maskin, Sequential
Innovation, Patents, and Imitation, 40 RAND J. Econ. 611, 613
(2009).[ Footnote 54 ] “Think
how the airline industry might now be structured if the first
company to offer frequent flyer miles had enjoyed the sole right to
award them.” Dreyfuss 264. “[I]mitation and refinement through
imitation are both necessary to invention itself and the very
lifeblood of a competitive economy.” Bonito Boats , 489 U.
S., at 146.

															   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
(1883).[ Footnote 55 ]

															   These effects are magnified by the “potential
vagueness” of business method patents, eBay Inc. , 547 U.
S., at 397 (Kennedy, J., concurring). When it comes to patents,
“clarity is essential to promote progress.” Festo Corp. ,
535 U. S., at 730–731. 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.[ Footnote 56 ]

															   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. Yet business method patents may have begun to do exactly that.
See eBay Inc. , 547 U. S., at 396–397 (opinion of Kennedy,
J.).

															   These many costs of business method patents
not only may stifle innovation, but they are also likely to “stifle
competition,” Bonito Boats, 489 U. S., at 146. Even if a
business method patent is ultimately held invalid, patent holders
may be able to use it to threaten litigation and to bully
competitors, especially those that cannot bear the costs of a drawn
out, fact-intensive patent litigation.[ Footnote 57 ] That can take a particular toll on small
and upstart businesses.[ Footnote
58 ] Of course, patents always serve as a barrier to competition
for the type of subject matter that is patented. But patents on
business methods are patents on business itself. Therefore, unlike
virtually every other category of patents, they are by their very
nature likely to depress the dynamism of the marketplace.[ Footnote 59 ]

															*  *  *

															   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. 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.

															VII

															   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. Footnote 1 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. Footnote 2 For example, a rule that broadly-phrased
claims cannot constitute patentable processes could call into
question our approval of Alexander Graham Bell’s famous fifth claim
on “ ‘[t]he method of, and apparatus for, transmitting vocal
or other sounds telegraphically, as herein described, by causing
electrical undulations, similar in form to the vibrations of the
air accompanying the said vocal or other sounds, substantially as
set forth,’ ” The Telephone Cases , 126 U. S. 1 , 531
(1888). Footnote 3 The Court quotes our decision in Diamond v. Chakrabarty , 447 U. S. 303 (1980), for the
proposition that, “ ‘[i]n choosing such expansive terms …
modified by the comprehensive “any,” Congress plainly contemplated
that the patent laws would be given wide scope.’ ” Ante , at 4. But the Court fails to mention which terms we
were discussing in Chakrabarty: the terms “manufacture”
and “composition of matter.” See 447 U. S., at 308 (“In choosing
such expansive terms as ‘manufacture’ and ‘composition of matter,’
modified by the comprehensive ‘any,’ Congress plainly contemplated
that the patent laws would be given wide scope”). As discussed
herein, Congress’ choice of the term “process” reflected a
background understanding of what sorts of series of steps could be
patented, and likely reflected an intentional design to codify that
settled, judicial understanding. This may not have been the case
with the terms at issue in Chakrabarty. Footnote 4 For example, if this Court were to
interpret the Sherman Act according to the Act’s plain text, it
could prohibit “the entire body of private contract,” National Soc.
of Professional Engineers v. United States , 435 U. S. 679 , 688
(1978). Footnote 5 The Court attempts to avoid such absurd
results by stating that these “[c]oncerns” “can be met by making
sure that the claim meets the requirements of §101.” Ante ,
at 6. Because the only limitation on the plain meaning of “process”
that the Court acknowledges explicitly is the bar on abstract
ideas, laws of nature, and the like, it is presumably this
limitation that is left to stand between all conceivable human
activity and patent monopolies. But many processes that would make
for absurd patents are not abstract ideas. Nor can the requirements
of novelty, nonobviousness, and particular description pick up the
slack. Cf. ante , at 12–13 (plurality opinion). A great
deal of human activity was at some time novel and nonobvious. Footnote 6 Curiously, the Court concedes that “these
exceptions are not required by the statutory text,” but urges that
“they are consistent with the notion that a patentable
process must be ‘new and useful.’ ” Ante , at 5
(emphasis added). I do not see how these exceptions find a textual
home in the term “new and useful.” The exceptions may be consistent
with those words, but they are sometimes inconsistent with the
“ordinary, contemporary, common meaning,” ante, at 6, 10
(internal quotation marks omitted), of the words “process” and
“method.” Footnote 7 See Pennock v. Dialogue , 2
Pet. 1, 18 (1829) (“[M]any of the provisions of our patent act are
derived from the principles and practice, which have prevailed in
the construction of that of England”); Proceedings in Congress
During the Years 1789 and 1790 Relating to the First Patent and
Copyright Laws, 22 J. Pat. Off. Soc. 352, 363 (1940) (explaining
that the 1790 Patent Act was “framed according to the Course of
Practice in the English Patent Office”); see also Walterscheid, The
Early Evolution of the United States Patent Law: Antecedents, 76 J.
Pat. & Trademark Off. Soc. 697, 698 (1994) (describing the role
of the English backdrop). Footnote 8 See Hornblower v. Boulton, 8 T. R. 95 (K. B. 1799). Footnote 9 See, e.g. , Roebuck and
Garbett v. William Stirling & Son (H. L. 1774),
reprinted in 1 T. Webster, Reports and Notes of Cases on Letters
Patent for Inventions 45 (1844) (“method of making acid spirit by
burning sulphur and saltpetre, and collecting the condensed
fumes”); id. , at 77 (“ ‘method of producing a yellow
colour for painting in oil or water, making white lead, and
separating the mineral alkali from common salt, all to be performed
in one single process’ ”); see also C. MacLeod, Inventing the
Industrial Revolution: The English Patent System, 1660–1800, pp.
84–93, 100–104, 109–110, 152–155 (1988) (listing patents)
(hereinafter MacLeod). Footnote 10 Some English cases made reference to the
permissibility of patents over new “trades.” But so far as I can
tell, the term “trade” referred not to the methods of conducting
business but rather to methods of making and using physical items
or to the object of the trade. See, e.g. , Clothworkers
of Ipswich Case , 78 Eng. Rep. 147, 148 (K. B. 1603) (“[I]f a
man hath brought in a new invention and a new trade within the
kingdom … [the King] may grant by charter unto him”). Footnote 11 See also Pollack, The Multiple
Unconstitutionality of Business Method Patents: Common Sense,
Congressional Consideration, and Constitutional History, 28 Rutgers
Computer & Tech. L. J. 61, 94–96 (2002) (hereinafter
Pollack) (describing English practice). Footnote 12 See id., at 95; B. Woodcroft,
Alphabetical Index of Patentees of Inventions, from March 2, 1617
(14 James I) to October 1, 1852 (16 Victoriae) 383, 410 (2d ed.
1969) (hereinafter Woodcroft). Footnote 13 See, e.g. , C. Ewen, Lotteries and
Sweepstakes 70–71 (1932) (describing the “letters patent” to form a
colony in Virginia and to operate lotteries to fund that
colony). Footnote 14 See also Renn, John Knox’s Plan for Insuring
Lives: A Patent of Invention in 1778, 101 J. Inst. Actuaries 285,
286 (1974) (hereinafter Renn) (describing the patent). Footnote 15 “The English patent system” at that time “was
one of simple registration. Extensive scrutiny was not expected of
the law officers administering it.” MacLeod 41. Thus, as one
scholar suggested of the patent on life insurance, “perhaps the Law
Officer was in a very good humour that day, or perhaps he had
forgotten the wording of the statute; most likely he was concerned
only with the promised ‘very considerable Consumption of [Revenue]
Stamps’ which [the patent holder] declared, would ‘contribute to
the increase of the Public Revenues.’ ” Renn 285. Footnote 16 See Markman v. Westview
Instruments, Inc. , 517 U. S. 370 , 381
(1996) (“[T]he state of patent law in the common-law courts before
1800 led one historian to observe that ‘the reported cases are
destitute of any decision of importance’ ” (quoting Hulme, On
the Consideration of the Patent Grant, Past and Present, 13
L. Q. Rev. 313, 318 (1897))); MacLeod 1, 61–62 (explaining the
dearth of clear case law); see also Boulton v. Bull, 2 H. Bl. 463, 491, 126 Eng. Rep. 651, 665 (C. P.
1795) (Eyre, C. J.) (“Patent rights are no where that I can find
accurately discussed in our books”). Footnote 17 See, e.g. , A. DuBois, The English
Business Company After the Bubble Act, 1720–1800, pp.  38–40,
435–438 (1938); Harris, The Bubble Act: Its Passage and its Effects
on Business Organization, 54 J. Econ. Hist. 610, 624–625
(1994). Footnote 18 See Pollack 97–100. For example, those who
held patents on oil lamps developed firms that contracted to
provide street lighting. See M. Falkus, Lighting in the Dark Ages
of English Economic History: Town Streets before the Industrial
Revolutions, in Trade, Government, and Economy in Pre-Industrial
England 249, 255–257, 259–260 (D. Coleman & A. John eds.
1976). Footnote 19 See, e.g. , G. Hammersley, The State
and the English Iron Industry in the Sixteenth and Seventeenth
Centuries, in id., at 166, 173, 175–178 (describing the
advent of management techniques for efficiently running a major
ironworks). Footnote 20 See, e.g. , Carlos & Nicholas,
Agency Problems in Early Chartered Companies: The Case of the
Hudson’s Bay Company, 50 J. Econ. Hist. 853, 853–875 (1990). Footnote 21 Nor, so far as I can tell, were business
method patents common in the United States in the brief period
between independence and the creation of our Constitution—despite
the fact that it was a time of great business innovation, including
new processes for engaging in risky trade and transport, one of
which has been called “the quintessential business innovation of
the 1780s.” T. Doerflinger, A Vigorous Spirit of Enterprise:
Merchants and Economic Development in Revolutionary Philadelphia
291 (1986) (describing new methods of conducting and financing
trade with China). Footnote 22 See Seidel, The Constitution and a Standard
of Patentability, 48 J. Pat. Off. Soc. 5, 10 (1966) (hereinafter
Seidel); Walterscheid, To Promote the Progress of Science and
Useful Arts: The Background and Origin of the Intellectual Property
Clause of the United States Constitution, 2 J. Intell. Prop. L. 1,
26 (1994) (hereinafter Walterscheid, Background and Origin);
Walterscheid, To Promote the Progress 59, and n. 12; Prager, A
History of Intellectual Property From 1545 to 1787, 26 J. Pat. Off.
Soc. 711, 746 (1944). Footnote 23 Walterscheid, Background and Origin 26; 2
Records of the Federal Convention of 1787, pp. 509–510 (M. Farrand
ed. 1966). Footnote 24 J. Madison, Notes of Debates in the Federal
Convention of 1787, pp. 638–639 (Ohio Univ. Press ed.
1966). Footnote 25 See Walterscheid, Background and Origin 38,
n. 124, 55–56 (collecting sources); see also The Objections of
Hon. George Mason, One of the Delegates from Virginia, in the Late
Continental Convention, to the Proposed Federal Constitution,
Assigned as His Reasons For Not Signing the Same, 2 American Museum
or Repository of Ancient and Modern Fugitive Pieces, etc. 534, 536
(1787) (reprint 1965); Ratification of the New Constitution by the
Convention of the State of New York, 4 id., at 153, 156
(1789); Remarks on the Amendments to the Federal Constitution
Proposed by The Conventions of Massachusetts, New Hampshire, New
York, Virginia, South and North Carolina, with the Minorities of
Pennsylvania and Maryland by the Rev. Nicholas Collin, D. D.,
6 id., at 303, 303. Footnote 26 Some scholars suggest that Webster’s “close
proximity to the Constitutional Convention coupled with his
familiarity with the delegates makes it likely that he played some
indirect role in the development” of the Constitution’s
Intellectual Property Clause—a Clause that established not only the
power to create patents but also copyrights, a subject in which
Webster had great interest. Donner, Copyright Clause of the U. S.
Constitution: Why Did the Framers Include It With Unanimous
Approval? 36 Am. J. Legal. Hist. 361, 372 (1992). But there is no
direct evidence of this fact. See Walterscheid, Background and
Origin 40–41. Footnote 27 See, e.g. , 1 S. Johnson, Dictionary
of the English Language (1773) (reprint 1978) (listing as
definitions of an “art”:“[t]he power of doing something not taught
by nature and instinct,” “[a] science; as, the liberal arts ,” “[a] trade,” “[a]rtfulness; skill; dexterity,”
“[c]unning,” and “[s]peculation”). One might question the breadth
of these definitions. This same dictionary offered as an example of
“doing something not taught by nature and instinct,” the art of
“dance”; and as an example of a “trade,” the art of “making sugar.” Ibid. Footnote 28 For examples of this usage, see Book of
Trades or Library of Useful Arts (1807) (describing in a
three-volume work 68 trades, each of which is the means of creating
a product, such as feather worker or cork cutter); 1 J. Bigelow,
The Useful Arts Considered in Connexion with the Applications of
Science (1840) (surveying a history of what we would today call
mechanics, technology, and engineering). See also D. Defoe, A
General History of Discoveries and Improvements, in Useful Arts
(1727); T. Coxe, An Address to an Assembly of the Friends of
American Manufactures 17–18 (1787); G. Logan, A Letter to the
Citizens of Pennsylvania, on the Necessity of Promoting
Agriculture, Manufactures, and the Useful Arts 12–13 (2d ed. 1800);
W. Kenrick, An Address to the Artists and Manufacturers of Great
Britain 21–38 (1774); cf. Corning v. Burden , 15 How.
252, 267 (1854) (listing the “arts of tanning, dyeing, making
water-proof cloth, vulcanizing India rubber, [and] smelting
ores”). Footnote 29 See, e.g. , 1 D. Chisum, Patents
G1–23 (2010); Lutz, Patents and Science: A Clarification of the
Patent Clause of the U. S. Constitution, 18 Geo. Wash. L. Rev.
50, 54 (1949–1950); Samuelson, Benson Revisited: The Case
Against Patent Protection for Algorithms and Other Computer-Related
Inventions, 39 Emory L. J. 1025, 1033, n. 24 (1990); Seidel
10, 13; see also Great Atlantic & Pacific Tea Co. v. Supermarket Equipment Corp. , 340 U. S. 147 , 154 (1950) (Douglas,
J., concurring) (explaining that in the Framers’ view, an
“invention, to justify a patent, had to serve the ends of
science—to push back the frontiers of chemistry, physics, and the
like; to make a distinctive contribution to scientific knowledge”); In re Waldbaum , 457 F. 2d 997, 1003 (CCPA 1972)
(Rich, J., concurring) (“ ‘The phrase “technological arts,” as
we have used it, is synonymous with the phrase “useful arts” as it
appears in Article I, Section 8 of the Constitution’ ”); Paulik v. Rizkalla , 760 F. 2d 1270, 1276 (CA
Fed. 1985) (explaining that “useful arts” is “the process today
called technological innovation”); Thomas, The Post-Industrial
Patent System, 10 Fordham Intell. Prop. Media & Ent. L. J.
3, 32–55 (1999) (cataloguing early understandings of technological
arts). This view may be supported, for example, by an 1814 grant to
Harvard University to create a “Professorship on the Application of
Science to the Useful Arts,” something that today might be akin to
applied science or engineering. See M. James, Engineering an
Environment for Change: Bigelow, Peirce, and Early
Nineteenth-Century Practical Education at Harvard, in Science at
Harvard University: Historical Perspectives 59 (C. Elliott & M.
Rossiter eds. 1992). Footnote 30 See Walterscheid, To Promote the Progress
173–178; Pollack 107–108. Footnote 31 These doubts ended by the time of Cochrane v. Deener , 94 U. S. 780 (1877), in
which we held that “a process may be patentable irrespective of the
particular form of the instrumentalities used,” and therefore one
may patent “an act, or series of acts, performed upon the subject
matter to be transformed and reduced to a different state or
thing.” Id. , at 788. Footnote 32 A skeptic of patents, Jefferson described
this as “drawing a line between things which are worth to the
public the embarrassment of a patent, and those which are not.” 13
Writings of Thomas Jefferson 335 (Memorial ed. 1904). Footnote 33 See, e.g. , Expanded Metal
Co. v. Bradford , 214 U. S. 366 , 383, 385–386 (1909); The Telephone Cases , 126 U. S., at 533–537; Cochrane , 94 U. S., at 787–788; Burden , 15 How.,
at 267–268. Footnote 34 See also 1 A. Deller, Walker on Patents §26,
p. 152 (2d ed. 1964) (A “ ‘system’ or method of transacting
business is not [a process], nor does it come within any other
designation of patentable subject matter”). Footnote 35 Although a few patents issued before 1952
that related to methods of doing business, see United States Patent
and Trademark Office, Automated Financial or Management Data
Processing Methods, online at
http://www.uspto.gov/web/menu/busmethp/ (all Internet
materials as visited June 26, 2010, and available in Clerk of
Court’s case file), these patents were rare, often issued through
self-registration rather than any formalized patent examination,
generally were not upheld by courts, and arguably are
distinguishable from pure patents on business methods insofar as
they often involved the manufacture of new objects. See In re Bilski , 545 F. 3d 943, 974, and n. 18
(CA Fed. 2008) (case below) (Dyk, J., concurring); Pollack 74–75;
Walterscheid, To Promote the Progress 243. Footnote 36 For examples of such usage, see The
Telephone Cases , 126 U. S., at 533, and Burden , 15
How., at 267. Footnote 37 See also 98 Cong. Rec. A415 (1952) (remarks
of Rep. Bryson) (describing, after the fact, the 1952 Patent Act,
and explaining that “[t]he word ‘art’ was changed to ‘process’ in
order to clarify its meaning. No change in substance was
intended”). Footnote 38 The 1952 Act also retained the language
“invents or discovers,” which by that time had taken on a
connotation that would tend to exclude business methods. See B.
Evans & C. Evans, A Dictionary of Contemporary Usage 137 (1957)
(explaining that “discover; invent” means “to make or create
something new, especially, in modern usage, something ingeniously
devised to perform mechanical operations”). Footnote 39 As explained in Part II, supra , the
Court engages in a Jekyll-and-Hyde form of interpretation with
respect to the word “process” in §101. It rejects the
interpretation I proffer because the words “process” and “method”
do not, on their face, distinguish between different series of
acts. Ante , at 10. But it also rejects many sorts of
processes without a textual basis for doing so. See ante ,
at 4–5, 7, 12–15. And while the Courts rests a great deal of weight
on Parker v. Flook, 437 U. S. 584 (1978), for its analysis
of abstract ideas, the Court minimizes Flook ’s rejection
of “a purely literal reading of §101,” as well as Flook ’s
reliance on the historical backdrop of §101 and our understanding
of what “the statute was enacted to protect,” id., at
588–590, 593; see also Diamond v. Diehr , 450 U. S. 175 , 192 (1981) (explaining
that a “claim satisfies the requirements of §101” when it “is
performing a function which the patent laws were designed to
protect”). Footnote 40 Forty years later, Judge Rich authored the State Street opinion that some have understood to make
business methods patentable. But State Street dealt with
whether a piece of software could be patented and addressed only
claims directed at machines, not processes. His opinion may
therefore be better understood merely as holding that an otherwise
patentable process is not unpatentable simply because it is
directed toward the conduct of doing business—an issue the Court
has no occasion to address today. See State Street, 149
F. 3d, at 1375. Footnote 41 See also 145 Cong. Rec. 30985 (1999) (remarks
of Sen. Schumer) (explaining that “[i]n State Street, the
Court did away with the so-called ‘business methods’ exception to
statutory patentable subject matter,” and “[t]he first inventor
defense will provide … important, needed protections in the face of
the uncertainty presented by … the State Street case”); id., at 31007 (remarks of Sen. DeWine) (“Virtually no one
in the industry believed that these methods or processes were
patentable”); id., at 19281 (remarks of Rep. Manzullo)
(“Before the State Street Bank and Trust case … it was universally
thought that methods of doing or conducting business were not
patentable items”). Footnote 42 The Court opines that “[t]his principle, of course , applies to interpreting any two provisions in
the U. S. Code, even when Congress enacted the provisions at
different times.” Ante , at 11 (emphasis added). The only
support the Court offers for this proposition is a 1937 opinion for
three Justices, in Hague v. Committee for Industrial
Organization , 307 U. S. 496 , 528–530
(1939) (opinion of Stone, J.). But that opinion is inapposite.
Although Justice Stone stated that two provisions “must be read
together,” id. , at 530, he did so to explain that an
ambiguity in a later-in-time statute must be understood in light of
the earlier-in-time framework against which the ambiguous statute
was passed, id. , at 528–530, particularly because the
later statute explicitly stated that it “shall not be construed to
apply” to the provision created by an earlier Act, id. , at
528. Footnote 43 I am not trying to “overcome” an “established
rule of statutory interpretation” with “judicial speculation as to
the subjective intent of various legislators,” ante , at
11, but, rather, I am explaining why the Court has illogically
expanded the canon upon which it relies beyond that canon’s logical
underpinnings. Footnote 44 See also Quanta Computer, Inc. v. LG Electronics, Inc. , 553 U. S. 617 , 626
(2008) (“ ‘[T]he primary purpose of our patent laws is not the
creation of private fortunes for the owners of patents but is “to
promote the progress of science and useful arts” ’ ”
(quoting Motion Picture Patents Co. v. Universal Film
Mfg. Co. , 243
U. S. 502 , 511 (1917))); Pfaff v. Wells
Electronics, Inc. , 525 U. S. 55 , 63 (1998) (“[T]he patent
system represents a carefully crafted bargain that encourages both
the creation and the public disclosure of new and useful advances
in technology”). Footnote 45 See generally W. Landes & R. Posner, The
Economic Structure of Intellectual Property Law 13–15 (2003). Footnote 46 See, e.g. , Burk & Lemley, Policy
Levers in Patent Law, 89 Va. L. Rev. 1575, 1577–1589 (2003)
(hereinafter Burk & Lemley). Footnote 47 See, e.g. , Burk & Lemley 1618;
Carrier, Unraveling the Patent-Antitrust Paradox, 150 U. Pa.
L. Rev. 761, 826 (2002) (hereinafter Carrier); Dreyfuss, Are
Business Methods Patents Bad for Business? 16 Santa Clara Computer
& High Tech. L. J. 263, 274–277 (2000) (hereinafter
Dreyfuss); Posner, The Law and Economics of Intellectual Property,
131 Daedalus 5 (Spring 2002). Footnote 48 C. Coolidge, The Press Under a Free
Government, in Foundations of the Republic: Speeches and Addresses
187 (1926). Footnote 49 See also Pollack 75–76 (“Since business
methods are ‘useful’ when they directly earn revenue, they are
inherently unlikely to be underproduced”). Footnote 50 See R. Levin et al., Appropriating the
Returns from Industrial Research and Development, in 3 Brookings
Papers on Econ. Activity 794–795 (1987). Footnote 51 See Burk & Lemley 1618; Dreyfuss 275; see
generally Carrier 821–823. Concededly, there may some methods of
doing business that do not confer sufficient first-mover
advantages. See Abramowicz & Duffy, Intellectual Property for
Market Experimentation, 83 N. Y. U. L. Rev. 337, 340–342
(2008). Footnote 52 See Burk & Lemley 1618; Carrier 826;
Olson, Taking the Utilitarian Basis for Patent Law Seriously: The
Case For Restricting Patentable Subject Matter, 82 Temp.
L. Rev. 181, 231 (2009). Footnote 53 See Dreyfuss 276; Merges & Nelson, On the
Complex Economics of Patent Scope, 90 Colum. L. Rev. 839,
873–878 (1990). Footnote 54 See also Raskind, The State Street
Bank Decision, The Bad Business of Unlimited Patent Protection
for Methods of Doing Business, 10 Fordham Intell. Prop. Media &
Ent. L. J. 61, 102 (1999) (“Interactive emulation more than
innovation is the driving force of business method changes”). Footnote 55 There is substantial academic debate,
moreover, about whether the normal process of screening patents for
novelty and obviousness can function effectively for business
methods. The argument goes that because business methods are both
vague and not confined to any one industry, there is not a
well-confined body of prior art to consult, and therefore many
“bad” patents are likely to issue, a problem that would need to be
sorted out in later litigation. See, e.g. , Dreyfuss
268–270; Eisenberg, Analyze This: A Law and Economics Agenda for
the Patent System, 53 Vand. L. Rev. 2081, 2090 (2000); Merges
589–590. Footnote 56 See also J. Bessen & M. Meurer, Patent
Failure: How Judges, Bureaucrats, and Lawyers Put Innovators at
Risk 46–72 (2008) (hereinafter Bessen & Meurer); P. Menell
& S. Scotchmer, Intellectual Property Law, in 2 Handbook of Law
and Economics 1500–1501, 1506 (M. Polinsky & S. Shavell eds.
2007). Concededly, alterations in the remedy structure, such as the
First Inventor Defense Act of 1999, §4301 et seq., 113
Stat. 1536, codified at 35 U. S. C. §273, mitigate these
costs. Footnote 57 See generally Farrell & Shapiro, How
Strong Are Weak Patents? 98 Amer. Econ. Rev. 1347 (2008); Meurer,
Controlling Opportunistic and Anti-Competitive Intellectual
Property Litigation, 44 Boston College L. Rev. 509 (2003); Moore,
Populism and Patents, 82 N. Y. U. L. Rev. 69, 90–91
(2007). Footnote 58 See Bessen & Meurer 176; Lessig, The
Death of Cyberspace, 57 Wash. & Lee L. Rev. 337, 346–347
(2000). Footnote 59 Congress and the courts have worked long and
hard to create and administer antitrust laws that ensure businesses
cannot prevent each other from competing vigorously. If methods of
conducting business were themselves patentable, then virtually any
novel, nonobvious business method could be granted a federally
protected monopoly. The tension this might create with our
antitrust regime provides yet another reason for skepticism that
Congress would have wanted the patent laws to extend to business
methods. BREYER, J., CONCURRING IN JUDGMENT BILSKI V. KAPPOS 561 U. S. ____ (2010) SUPREME COURT OF THE UNITED STATES NO. 08-964 BERNARD L. BILSKI and RAND A. WARSAW, PETITIONERS v. DAVID J. KAPPOS, UNDER SECRETARY OF COMMERCE FOR INTEL-
LECTUAL PROPERTY AND DIRECTOR, PATENT AND TRADEMARK OFFICE

															on writ of certiorari to the united states court of
appeals for the federal circuit

															[June 28, 2010]

															   Justice Breyer, with whom Justice
Scalia joins as to Part II, concurring in the judgment.

															I

															   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 2 (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 10–47. I
would therefore decide this case on that ground, and I join Justice
Stevens’ opinion in full.

															   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.

															II

															   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
4–5 (opinion of the Court); ante, at 10 (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 (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
(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 (1972); see also, e.g., Diamond v. Diehr , 450 U. S. 175 , 185
(1981); Diamond v. Chakrabarty , 447 U. S. 303 , 309
(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 (emphasis added; internal quotation marks
omitted); see also, e.g., Benson , supra ,
at 70; Parker v. Flook , 437 U. S. 584 , 588,
n. 9 (1978); Cochrane v. Deener , 94 U. S. 780 , 788 (1877).
Application of this test, the so-called “machine-or-transformation
test,” has thus repeatedly helped the Court to determine what is “a
patentable ‘process.’ ” Flook , supra, at
589. 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 8; see also ante, at 1
(Stevens, J., concurring in judgment); Benson , supra , at 71 (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. The
machine-or-transformation test is thus an important example of how a court can determine patentability under
§101, but the Federal Circuit erred in this case by treating it as
the exclusive test . 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 (CA 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 (2006) (Breyer, J., dissenting from dismissal of certiorari as
improvidently granted); see also, e.g. , O’Reilly v. Morse , 15 How. 62, 117 (1854); Flook , supra , at 590. 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 (CA 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 16; ante , at 2, 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.

															III

															   With these observations, I concur
in the Court’s judgment.