View metadata, citation and similar papers at core.ac.uk brought to you by CORE provided by University of Arkansas at Little Rock: UALR Bowen Law Repository University of Arkansas at Little Rock Law Review Volume 38 Issue 2 Article 2 2016 Patent Eligibility and Physicality in the Early History of Patent Law and Practice Ben McEniery Follow this and additional works at: https://lawrepository.ualr.edu/lawreview Part of the European Law Commons, and the Legal History Commons Recommended Citation Ben McEniery, Patent Eligibility and Physicality in the Early History of Patent Law and Practice, 38 U. ARK. LITTLE ROCK L. REV. 175 (2016). Available at: https://lawrepository.ualr.edu/lawreview/vol38/iss2/2 This Article is brought to you for free and open access by Bowen Law Repository: Scholarship & Archives. It has been accepted for inclusion in University of Arkansas at Little Rock Law Review by an authorized editor of Bowen Law Repository: Scholarship & Archives. For more information, please contact [email protected]. PATENT ELIGIBILITY AND PHYSICALITY IN THE EARLY HISTORY OF PATENT LAW AND PRACTICE Ben McEniery* I. INTRODUCTION In recent times, the courts have been asked to determine whether, and to what extent, the patent system protects claims to inventions that do not involve a machine or other physical device and do not involve a physical transformation of matter from one state to another. It is uncontroversial that the patent system exists to provide an incentive to encourage the invention and commercialization of new products and processes and the disclosure by the patent applicant of information sufficient to enable a person skilled in the relevant field of technology to reproduce the claimed invention. This disclosure is the quid pro quo of the patent system; it is the benefit the pub- lic receives in exchange for the State bestowing monopoly rights on a pri- vate individual.1 There is no dispute that patent law’s incentive function is appropriate for promoting the invention of new and useful physical machines or other devices, along with new methods that physically transform matter. Howev- er, what is not clear and what the courts are having difficulty grappling with is whether the concept of patent eligibility is broad enough to encompass non-physical methods, namely those that do not involve a machine or other physical device and do not involve a physical transformation of matter from one state to another. In this respect, the courts have been charged with formulating rules that can be used to distinguish between inventions that fall within the scope of patentable subject matter and unpatentable abstract ideas or principles. The current state of uncertainty in patentable subject matter jurisprudence is a result of misguided attempts to construct bright-line rules that can supposed- ly decide the difficult questions of subject matter eligibility according to § 101 of the Patents Act.2 * BA LLB (Hons) (UQ) LLM (QUT) PhD (QUT), Senior Lecturer, Faculty of Law, Queensland University of Technology; Barrister-at-Law. 1. See Mazer v. Stein, 347 U.S. 201, 219 (1954) (“The economic philosophy behind the clause empowering Congress to grant patents and copyrights is the conviction that encour- agement of individual effort by personal gain is the best way to advance public welfare.”). 2. 35 U.S.C. § 101 (2015) (“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.”). 175 176 UALR LAW REVIEW [Vol. 38 The issue confronting the courts arises now because the world is in the midst of a shift from the Industrial Age to being a knowledge-based econo- my of the Information Age.3 Knowledge-based economies are those in which there is a greater reliance on intellectual capabilities than on physical inputs or natural resources.4 They are “[those] which are directly based on the production, distribution, and use of knowledge and information.”5 While manufactured products and manufacturing processes continue to be, and will likely always be, of great worth, we recognize that innovation manifests itself in the reduction of new and useful ideas to specific practical applica- tion. As such, the production and manipulation of new kinds of information and ideas will be of substantial value. Identifying the scope of patent eligibility at this time is an undertaking of significant importance and difficulty as inventors seek to challenge the accepted bounds of patentable subject matter. Doing so is integral to deter- mining whether much of the cutting edge innovation we are likely to witness in the emerging technology areas of the Information Age of the late twenti- eth century and beyond will receive the same encouragement as the industri- al and manufacturing technologies of previous times. Examples of the kinds of rapidly advancing technology for which pa- tents are being sought in the infancy of the Information Age can be seen in recently decided Supreme Court cases, particularly those involving non- physical inventions that are computer-implemented business methods. The Supreme Court in Bilski v. Kappos considered whether a method of hedging risk in electricity markets is patentable subject matter; the idea was to mini- mize the input costs of an electricity provider that must sell to consumers at a fixed rate despite purchasing at a variable rate.6 But in Alice Corp. Propri- etary Ltd. v. CLS Bank International, the patents held by Alice Corporation disclosed a computerized trading platform that eliminates “counterparty” or “settlement” risk, being the risk that only one party to a financial transaction performs its obligation to pay, leaving the other party without its principal or the benefit of the counterparty’s performance.7 Mayo Collaborative Services v. Prometheus Laboratories, Inc. concerned a method of medical diagnosis designed to ensure a patient receives an optimal dose of a pharmaceutical to maximize the pharmaceutical’s effectiveness and minimize its side effects. As the Court’s decisions in the cases and the decisions of the courts below 3. See ORG. FOR ECON. CO-OPERATION & DEV., THE KNOWLEDGE-BASED ECONOMY 18 (1996). 4. See id. at 10, 30. 5. Id. at 7. 6. 561 U.S. 593, 597–99 (2010). 7. 134 S. Ct. 2347, 2352, 2359 (2014). 2016] EARLY HISTORY OF PATENT LAW 177 demonstrate, the difficult issues that arise at the margins of patentable sub- ject matter are not easily solved.8 The starting point for any discussion of the scope of patent eligible sub- ject matter is 35 U.S.C. § 101, which recites four enumerated categories of patentable subject matter: “[w]hoever invents or discovers any new and use- ful 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.”9 While no explicit exclusions follow the broad language of 35 U.S.C. § 101, the Supreme Court has identified three general categories of excluded matter: laws of nature, natural phenomena, and abstract ideas.10 The ra- tionale for these judicially recognized categories of excluded subject matter is pre-emption, namely that “patent law not inhibit further discovery by im- properly tying up the future use of these building blocks of human ingenui- ty.”11 Various scholars have argued that these categories of excluded matter should be applied restrictively so that we do not exclude from the patent system whole fields of endeavor,12 that we should rely principally on the other requirements for patentability to preclude undeserving patents,13 and that we should recognize that § 101 does not impose additional requirements on patentability.14 The Supreme Court, in Mayo, set down a framework for distinguishing patents that claim laws of nature, natural phenomena, and abstract ideas from those that claim applications of those concepts.15 The first asks whether claims are directed to a patentable concept.16 If they are, the second step asks whether the additional elements recited in the claim “transform the nature of the claim” into a patentable application by reciting an “inventive concept” that is “sufficient to ensure that the patent in practice amounts to significantly more than a patent upon the [ineligible concept] itself.”17 The 8. 132 S. Ct. 1289, 1294–1295 (2012). 9. Questions of subject matter eligibility pursuant to 35 U.S.C. § 101 are separate to and distinct from the requirements that, to be patentable, an invention must be novel, non- obvious, and useful. 35 U.S.C. §§ 101–103, 112 (2015). The invention claimed must also be described in sufficient detail and enabled so that one with ordinary skill in the subject matter of the patent can make and use the invention. Id. at § 112. 10. Alice Corp., 134 S. Ct. at 2354. 11. Id. (internal quotation marks omitted) (quoting Mayo, 132 S. Ct. at 1301 (citation omitted)). 12. E.g., John F. Duffy, Rules and Standards on the Forefront of Patentability, 51 WM. & MARY L. REV. 609, 613–614 (2009). 13. E.g., Mark A. Lemley et al., Life After Bilski, 63 STAN. L. REV. 1315, 1342 (2011). 14. See, e.g., Michael Risch, Everything Is Patentable, 75 TENN. L. REV. 591, 591–93 (2008). 15. Mayo Collaborative Servs., 132 S. Ct. at 1294. 16. See id. at 1297. 17. Id. at 1294, 1297. 178 UALR LAW REVIEW [Vol. 38 difficulty lies in identifying when a claimed invention falls into one of these judicially recognized categories of excluded subject matter, and that diffi- culty is particularly acute when the patent in question is a method that lacks a physical embodiment. While the Supreme Court to some extent addressed the question in Bilski v.