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St Onge Steward Johnston amp Reens LLC
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October 27 2015I ~ -~ Michelle K Lee Director of the USPTO USPTO Madison Building 600 Dulany Street Alexandria VA 22314
VIA EMAIL ONLY 2014 _interim _guidanceusptogov
Re Comment on Interim Subject Matter Eligibility Guidance
Dear Ms Lee
I write today to submit a comment regarding the recent guidance on subject matter eligibility (Guidelines) found at the following link
httpwwwusptogovpatentlaws-and-regulationsexamination-policy2014-interimshyguidance-subject-matter-eligibility-0
Summary
The Court stated in Alice that if claims include something that the industry had not been able to obtain they qualify as significantly more 134 S Ct at 2358 (citing Diehf) The Guidelines provide six categories that qualify as significantly more But the Guidelines also allow Examiners to make rejections based on case law and without evidence The result is that Applicants cited evidence in a response can be ignored by the Examiner who then reiterates a legal conclusion in a second rejection that is now inconsistent with the evidence of record This is true even if the submitted evidence and argument shows that the claims include a specific limitation other than what is well-understood routine and conventional in the field
The result is that the Guidelines allow Examiners to ignore facts in the record because there are no guidelines as to when Applicant has submitted a persuasive argument or evidence of significantly more Once the prima facie case is rebutted with evidence the examiner should not be able to make another rejection without rebutting the evidence
The only way to determine if the industry has or has not been able to obtain a feature is on the evidence Allowing the Examiner to reiterate a prima facie case based on a legal conclusion without rebutting Applicants evidence makes the Step 2B analysis cursory such that it nearly impossible to overcome an Alice rejection This is surely not the intent
Discussion
According to the Guidelines the Claims are significantly more than the abstract idea if the claim includes
Michele K Lee Comment on Interim 101 Guidance
October 27 2015 Page 2
bull Improvements to another technology or technical field
bull Improvements to the functioning of the computer itself
bull Applying the judicial exception with or by use of a particular machine
bull Effecting a transformation or reduction of a particular article to a different state or thing
bull Adding a specific limitation other than what is well-understood routine and conventional in the field or adding unconventional steps that confine the claim to a particular useful application or
bull Other meaningful limitations beyond generally linking the use of the judicial exception to a particular technological environment
Without evidence it is impossible to know when a claim element fits into one of the above categories especially when the category requires an understanding of what is wellshyunderstood routine and conventional in the field Examiners need to have guidance on how to determine when Applicant has submitted persuasive arguments
The Court in Alice said
The invention in Diehrused a thermocouple to record constant temperature measurements inside the rubber mold shysomething the industrv ha[dJ not been able to obtain The temperature measurements were then fed into a computer which repeatedly recalculated the remaining cure time by using the mathematical equation These additional steps we recently explained transformed the process into an inventive application of the formula 1
The only way to know if the industry has or has not been able to obtain a feature is with evidence In contrast a claim does not supply significantly more when a hypothetical programmer could be told about the abstract idea and then instructed to write a program to perform said idea During oral argument of Alice Justice Kennedy stated
Well let me put it this way If you describe that to a second year college class in engineering and said heresmy idea now you go home and you program over this weekend my guess isthat would be fairly easy to program2
1 134 sa at 2358 (citations omitted emphasis added) 2 Transcript of Oral Argument at 5 Alice 134 sa 2347 (No 13-298) (See Exhibit A at Page 5 Lines 7-12)
Michele K Lee Comment on Interim 101 Guidance
October 27 2015 Page 3
The basic point Justice Kennedy made is that if someone told a developer to create a computer program to mitigate settlement risk the computer programmer would program the claims The same holds true for why the patent failed in Ultramercial LLC v Hulu LLC and WildTangent No 2010-1544 (Fed Cir 2014) If a computer programmer was told to set up a system that displays advertisements before internet video content the programmer would end up with the Claims in Ultramercial
The Guidelines state that a prima facie case can be made without evidence It appears the reasoning by the Office comes from a reading of Supreme Court opinions as not citing evidence However if something the industry had not been able to obtain is enough to qualify as significantly more there must be evidence in the record for the Supreme Court to know this If Applicant cites evidence that a claim element or combination of claim elements is something the industry had not been able to obtain Applicant has met the burden of rebutting the prima facie case Otherwise the Guidelines would be inconsistent with Diehr
When a prima facie case can be made without evidence and Applicant points to evidence in the specification the examiner returns to the July 2015 update that says that the evidence is not needed for a prima facie case Examiners then submit another nearly identical rejection without evidence The real problem is that the second rejection is inconsistent with the evidence of record cited by Applicant and inconsistent with Diehr
Without guidance on what is persuasive and what examiners must do to respond to evidence examiners cannot know what is a quality rejection and a quality allowance
Thank you for taking the time to consider this letter
Very truly yours-
gt~~ c_Jorfathan A Winter
jwinterssjrcom GSWSBSJAW Enclosure
Exhibit A
1
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1 IN THE SUPREME COURT OF THE UNITED STATES
2 shy shy shy shy shy shy shy shy shy shy shy shy shy shy shy shy shy x
3 ALICE CORPORATION PTY
4 LTD
5 Petitioners No 13shy298
6 v
7 CLS BANK INTERNATIONAL
8 ET AL
9 shy shy shy shy shy shy shy shy shy shy shy shy shy shy shy shy shy x
10 Washington DC
11 Monday March 31 2014
12
13 The aboveshyentitled matter came on for oral
14 argument before the Supreme Court of the United States
15 at 1004 am
16 APPEARANCES
17 CARTER G PHILLIPS ESQ Washington DC on behalf
18 of Petitioners
19 MARK A PERRY ESQ Washington DC on behalf of
20 Respondents
21 DONALD B VERRILLI JR ESQ Solicitor General
22 Department of Justice Washington DC on behalf of
23 the United States as amicus curiae supporting
24 Respondents
25
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1 C O N T E N T S
2 ORAL ARGUMENT OF PAGE
3 CARTER G PHILLIPS ESQ
4 On behalf of the Petitioners 3
5 ORAL ARGUMENT OF
6 MARK A PERRY ESQ
7 On behalf of the Respondents 26
8 ORAL ARGUMENT OF
9 DONALD B VERRILLI JR ESQ
10 On behalf of the United States as amicus
11 curiae supporting Respondents 44
12 REBUTTAL ARGUMENT OF
13 CARTER G PHILLIPS ESQ
14 On behalf of the Petitioners 53
15
16
17
18
19
20
21
22
23
24
25
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1 P R O C E E D I N G S
2 (1004 am)
3 CHIEF JUSTICE ROBERTS Well hear argument
4 this morning in Case 13shy298 Alice Corporation versus
5 CLS Bank International
6 Mr Phillips
7 ORAL ARGUMENT OF CARTER G PHILLIPS
8 ON BEHALF OF THE PETITIONERS
9 MR PHILLIPS Thank you Mr Chief Justice
10 and may it please the Court
11 It is common ground between the parties in
12 this case that Section 101 by its terms and with the
13 sweeping interpretation this Court adopted in Bilski
14 applies directly to the patents here These are system
15 and process patents that speak directly to Section 101
16 The only issue then is whether the
17 judicially recognized exception that this Court adopted
18 many many years ago applies under these circumstances
19 JUSTICE KENNEDY And just repeat it is
20 common ground between the parties that shyshy
21 MR PHILLIPS That shyshy that our shyshy our
22 patents speak directly to the language of Section 101
23 that is they are a process and they are machines and
24 they are shyshy and they are improvements to the process and
25 the machines They dont shyshy they dont dispute that by
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1 its terms 101 applies The only argument between the
2 parties is the abstract idea exception that exists and
3 whether that bars us from otherwise satisfying
4 Section 101
5 JUSTICE GINSBURG Mr Phillips on the
6 abstract idea you know that the Bilski case held that
7 hedging qualified as an abstract idea So how is
8 intermediate settlement a less abstract than hedging
9 MR PHILLIPS If our shyshy if our patent
10 merely claimed intermediated settlements although I
11 have to say I dont really know exactly what that means
12 because I dont think thats the same kind of
13 economics shyshy basic economics concept that a hedge risk
14 treatment is But if it claimed that we wouldnt shyshy we
15 wouldnt have a distinction from Bilski
16 What we claim is a very specific way of
17 dealing with a problem that came into being in the early
18 1970s of how to try to eliminate the risk of
19 nonshysettlement in these very massive multiparty problems
20 in which you need to deal with difficulties that exist
21 at different time zones simultaneously and to do it with
22 a computer so that you not only take them on
23 chronologically deal with them sequentially based on
24 the kind software analysis that the patent specifically
25 describes by function
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1 And it goes even further than that and does
2 something that no escrow agent and shyshy and no
3 intermediated settlement that I know of shyshy settler that
4 I know of It actually blocks specific transactions
5 that in the shadow account would violate the terms of
6 the settlement that would ultimately be implemented
7 JUSTICE KENNEDY Well let me put it this
8 way If you describe that to a secondshyyear college
9 class in engineering and said heres shyshy heres my idea
10 now you go home and you program over this weekend my
11 guess is shyshy my guess is that that would be fairly easy
12 to program
13 MR PHILLIPS I dont disagree with it
14 Justice shyshy
15 JUSTICE KENNEDY So the fact that the
16 computer is involved it shyshy it seems to me is necessary
17 to make it work But the shyshy but the innovative aspect
18 is certainly not in the creation of the program to make
19 that work All youre talking about is shyshy if I can use
20 the word shyshy an idea
21 MR PHILLIPS I prefer not to use that word
22 for obvious reasons
23 (Laughter)
24 MR PHILLIPS But shyshy but if you shyshy but if
25 you look at the Solicitor shyshy
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1 JUSTICE KENNEDY Or shyshy or a method or a
2 process
3 MR PHILLIPS Right But shyshy and shyshy and
4 obviously methods and processes are precisely what
5 Section 101 permits to be subject shyshy
6 JUSTICE BREYER Why is that less abstract
7 MR PHILLIPS Im sorry
8 JUSTICE BREYER Why is that less abstract
9 I mean imagine King Tut sitting in front of the pyramid
10 where all his gold is stored and he has the habit of
11 giving chits away Good for the gold which is given at
12 the end of the day And he hires a man with an abacus
13 and when the abacus keeping track sees that hes given
14 away more gold than he is in storage he says stop
15 You see
16 Or my mother who used to look at my
17 checkbook when she saw that in fact I had written
18 more checks than I had in the account she would grab
19 it Stop You see
20 So what is it here thats less abstract that
21 the computer says stop
22 MR PHILLIPS It is shyshy
23 JUSTICE BREYER How is that less abstract
24 than King Tut if we had the same thing with a grain
25 elevator if we had the same thing with a reservoir of
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1 water if we had the same thing with my checkbook You
2 see the point
3 MR PHILLIPS I do see the point Justice
4 Breyer and it seems to me that it goes to the question
5 of the methodology youre going to employ
6 JUSTICE BREYER Methodology is just that
7 you said stop
8 MR PHILLIPS Well we could shyshy
9 JUSTICE BREYER So what we have different
10 here is the computer stops rather than the abacus man
11 stopping or my mother stopping or the guy that the grain
12 elevator has that says stop So just saying what shyshy is
13 that it In other words if you say computer stop you
14 have an invention Useful add shyshy but if you say mother
15 stop you dont
16 MR PHILLIPS No Well I mean again it
17 seems to me that in some ways what shyshy what you described
18 there is a caricature of what this invention is
19 JUSTICE BREYER Of course its a
20 caricature Its a caricature designed to suggest that
21 there is an abstract idea here Its called solvency
22 MR PHILLIPS But shyshy
23 JUSTICE BREYER And what you do is you take
24 the idea of solvency and you say apply it And you say
25 apply it through the computer
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1 Is that enough to make it not just the
2 abstract idea And now were at the heart of why I used
3 my exaggerated examples shyshy
4 MR PHILLIPS Right
5 JUSTICE BREYER shyshy because you will tell me
6 why shyshy
7 MR PHILLIPS Right
8 JUSTICE BREYER shyshy this is enough
9 MR PHILLIPS Right Because Justice
10 Breyer the shyshy the shyshy the concept here is not simply to
11 say stop Stop is obviously part of the element of it
12 But its also designed to ensure that at the
13 end of the day this transaction in the midst of
14 literally a global set of shyshy of deals that are going on
15 simultaneously will be implemented at the appropriate
16 time in the appropriate way And whatever else that may
17 be it seems to me its difficult to say thats an
18 abstract idea as implemented
19 JUSTICE SOTOMAYOR Im sorry But shyshy but
20 what it appears to be it sounds like youre trying to
21 revive the patenting of a function You used the word
22 function earlier and thats all Im seeing in this
23 patent is the function of reconciling accounts the
24 function of making sure theyre paid on time But in
25 what particular way other than saying do it through a
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1 computer is this something new and not function
2 MR PHILLIPS Well it does it through shyshy
3 it creates the shadow accounts because of the concerns
4 for security You dont shyshy youre not going to allow
5 somebody to enter into a central banks own accounts
6 You create the shadow accounts You monitor through the
7 software that allows you to do that You evaluate each
8 of the transactions to ensure that the settlement will
9 be available You do it sequentially and you act on it
10 by the end of the day or whenever the transaction is to
11 take place and you implement that transaction
12 JUSTICE SCALIA Why isnt it shyshy why isnt
13 doing it through a computer not enough I mean was the
14 cotton gin not an invention because it just means youre
15 doing through a machine what people used to do by hand
16 Its not an invention Its the same old same old
17 MR PHILLIPS Justice Scalia shyshy
18 JUSTICE SCALIA Why shyshy why is a computer
19 any different in that respect
20 MR PHILLIPS At one level I agree with you
21 completely There is no difference between them
22 This Court has however said on more than a
23 few occasions albeit in dicta that coming up with an
24 idea and then say use a computer is not sufficient
25 And what Im trying to suggest to you is we dont fall
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1 within that dicta
2 Now if you dont accept the dicta and you
3 say use a computer is fine then I think were done
4 JUSTICE SCALIA Well Im not saying use a
5 computer is shyshy is much of a novelty I mean thats shyshy
6 that goes to whether its novel or not If you just say
7 use a computer you havent invented anything But if
8 you come up with a serious program that shyshy that does it
9 then you know that may be novel But thats a novelty
10 issue isnt it
11 MR PHILLIPS To be sure Justice Scalia
12 JUSTICE BREYER And this is exactly the
13 question I really would like to you to focus on for me
14 Why is it shyshy and Im not saying this from a point of
15 view but it seems to me pretty clear that if what you
16 did was take the idea of solvency shyshy remember King Tut
17 Thats what I use the exaggeration shyshy and what you say
18 is implemented by having the abacus man keep track and
19 say stop okay shyshy
20 MR PHILLIPS Right
21 JUSTICE BREYER Then we implement it by
22 having somebody with a pencil and a piece of paper and
23 this is all that they add you see Say Have a man
24 with a pencil and a piece of paper keeping track and
25 saying stop or we say implement it in the computer
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1 which will automatically keep track and say stop are
2 they all enough Are some of them enough Whats the
3 rule
4 And you realize I couldnt figure out much
5 in Prometheus to go beyond what I thought was an obvious
6 case leaving it up to you and your colleagues to figure
7 out how to go further Am I making enough shyshy making
8 clear enough whats bothering me And Id really like
9 to get your answer to this
10 MR PHILLIPS And shyshy and look theres
11 no shyshy Ill be the first one to shyshy to confess that trying
12 to use language to describe these things is not all that
13 easy But the way I think you can meaningfully look at
14 this is to say that this is not simply something that
15 was a fundamental truth this is not something that
16 simply says use a computer Its not simply something
17 that says maintain solvency It shyshy it operates in a
18 much more specific and concrete environment where youre
19 dealing with a problem thats been in existence since
20 the 1970s a solution in the 1990s that CLS itself
21 acknowledges needed a solution and came forward with
22 their own solution that looks a lot like ours
23 JUSTICE KENNEDY But my shyshy my initial
24 question and I think I can work this into King Tut
25 is shyshy
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1 (Laughter)
2 JUSTICE KENNEDY shyshy is shyshy is whether or not
3 you could have patented that system idea process
4 method without attaching a computer program
5 MR PHILLIPS You cannot absolutely cannot
6 do that with this system because it is so complex and
7 so many interrelated parts
8 JUSTICE KENNEDY Suppose I thought shyshy and
9 again its just a thought because I dont have the
10 expertise shyshy that any computer group of people sitting
11 around a coffee shop in Silicon Valley could do this
12 over a weekend Suppose I thought that
13 MR PHILLIPS You mean wrote the code
14 JUSTICE KENNEDY Yes right
15 MR PHILLIPS Well thats absolutely shyshy
16 Im certain thats true
17 JUSTICE KENNEDY Well then shyshy then shyshy
18 MR PHILLIPS But thats true of almost all
19 software
20 JUSTICE KENNEDY Then why is the computer
21 program necessary to make the patent valid
22 MR PHILLIPS Well its shyshy its necessary
23 to make the invention effective As the Solicitor
24 General said the computer is essential to the efficacy
25 of this invention because of the complicated financial
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1 arrangements that exist and that can only be resolved on
2 a shyshy on a realtime basis Your abacus is great if you
3 happen to be waiting for the pyramids to be finished or
4 waiting for the gold to move in and out but it doesnt
5 help with you an abacus if youre dealing with literally
6 thousands of transactions simultaneously going on in
7 different countries at different points in time
8 JUSTICE KENNEDY But thats just an idea
9 hey lets use a computer
10 MR PHILLIPS But its not just shyshy I mean
11 obviously part of it is use the computer Justice
12 Kennedy But more fundamentally it goes beyond that
13 See I shyshy
14 JUSTICE SOTOMAYOR Is your software
15 copyrighted
16 MR PHILLIPS No I dont believe so
17 JUSTICE GINSBURG There is no special
18 software that comes with this shyshy thats part of this
19 patent is it shyshy is there
20 MR PHILLIPS No Justice Ginsburg what
21 we did here is what the Patent and Trademark Office
22 encourages us to do and encourages all software patent
23 writers to do which is to identify the functions that
24 you want to be provided for with the software and leave
25 it then to the software writers who I gather are you
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1 know quite capable of converting these functions into
2 very specific code
3 JUSTICE KAGAN Mr Phillips could you shyshy
4 could you disaggregate your argument for me Because
5 you just said look this Court has said its not
6 sufficient if you have an idea and then you say use a
7 computer to implement it right So are you saying that
8 your shyshy that shyshy are you saying that youre doing more
9 than saying use a computer to implement it or are you
10 saying that its shyshy that the idea itself is more than an
11 idea
12 MR PHILLIPS Yes Im saying shyshy
13 JUSTICE KAGAN Which part of what shyshy
14 MR PHILLIPS Im saying both actually I
15 mean Im making both of those arguments I shyshy I
16 believe that if you analyze the claims and you dont
17 caricature them and you dont strip them out of the
18 limitations that are embedded in there this is not some
19 kind of an abstract concept This is not some kind shyshy
20 its not an abstract idea Its a vary shyshy
21 JUSTICE KAGAN So putting the computer
22 stuff aside completely shyshy
23 MR PHILLIPS Right
24 JUSTICE KAGAN shyshy youre saying that youve
25 invented something or you shyshy
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1 MR PHILIPS Yes
2 JUSTICE KAGAN There is something that
3 youve patented that has shyshy that is not just simple use
4 a third party to do a settlement
5 MR PHILLIPS Right
6 JUSTICE KAGAN And what is that putting
7 the computer aside
8 MR PHILLIPS It is shyshy well shyshy and again
9 its difficult to do that because you absolutely need
10 the computer in order to implement this But the key to
11 the invention is the notion of being able
12 simultaneously dealing with it on a chronological basis
13 to stop transactions that will otherwise interfere with
14 the ability to settle on time and under the appropriate
15 circumstances And the only way you can do that in a
16 realtime basis when youre dealing with a global economy
17 is to use a computer It is necessary to the efficacy
18 of this
19 So in that sense I cant shyshy I cant
20 disaggregate it the way in some sense youre suggesting
21 It seems to me its bound up with in shyshy its bounds up
22 with the whole notion of is this an abstract concept
23 JUSTICE BREYER Can you in fact shyshy now
24 this is shyshy look there are 42 briefs in this case I
25 actually read them and I found them very very helpful
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1 up to the point where I have to make a decision because
2 theyre serious I mean you know shyshy now the problem
3 that I came away with is the one that youre beginning
4 to discuss that if you simply say take an idea thats
5 abstract and implement it on a computer there are shyshy
6 youre going to get it much faster youre going to be
7 able to do many many things and if thats good enough
8 there is a risk that you will take business in the
9 United States or large segments and instead of having
10 competition on price service and better production
11 methods well have competition on who has the best
12 patent lawyer You see where Im going on that one
13 MR PHILLIPS Yeah of course
14 JUSTICE BREYER And if you go the other way
15 and say never then what you do is you rule out real
16 inventions with computers
17 MR PHILLIPS Right
18 JUSTICE BREYER And so in those 42 briefs
19 there are a number of suggestions as to how to go
20 between Scylla and Charybdis Now I would like to
21 know shyshy I dont know if you can step back from your
22 representational model Thats a problem Youre all
23 we have now And shyshy and from my point of view I need
24 to know what in your opinion is the best way of sailing
25 between these two serious arms
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1 MR PHILLIPS Well Justice Breyer I guess
2 I would suggest to you that you might want to deal with
3 the problem you know as opposed to the problems you
4 dont know at this stage I mean we have had business
5 method patents and software patents in existence for
6 well over a decade and theyre obviously quite
7 significant in number And shyshy and we know what the
8 system is we have And Congress looked at that system
9 right and didnt say no to business methods patents
10 didnt say no to software patents instead said the
11 solution to this problem is to get it out of the
12 judicial process and create an administrative process
13 but leave the substantive standards intact
14 So my suggestion to you would be follow that
15 same advice a liberal interpretation of 101 and not a
16 caricature of the claims analyze the claims as written
17 and therefore say that the solution is 102 and 103 and
18 use the administrative process If you shyshy
19 JUSTICE GINSBURG Mr Phillips let me just
20 stop you there because four Justices of this Court did
21 not read that legislative history the way you do And
22 it was shyshy was in Bilski
23 MR PHILLIPS But this is postshyBilski
24 JUSTICE GINSBURG Justice Stevens went
25 carefully through that and he said Congress was
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1 reacting to a decision It had shyshy it was not addressing
2 101 So there are at least four Justices who say shyshy who
3 didnt buy that argument
4 MR PHILLIPS Well I mean it still seems
5 to me that the shyshy the natural inference is Congress did
6 not change 101 Congress created an entire
7 administrative system to deal with 101 102 and 103
8 And shyshy and I would hope shyshy
9 JUSTICE SCALIA And four is not five
10 anyway right
11 MR PHILLIPS Thats true
12 JUSTICE SCALIA Four is not five
13 MR PHILLIPS And youve exhausted my math
14 skills Your Honor
15 JUSTICE SCALIA By the way we shyshy we have
16 said that you cant take an abstract idea and then say
17 use a computer to implement it But we havent said
18 that you cant take an abstract idea and then say here
19 is how you use a computer to implement it shyshy
20 MR PHILLIPS Exactly
21 JUSTICE SCALIA shyshy which is basically what
22 youre doing
23 MR PHILLIPS And thats the argument were
24 doing and shyshy
25 JUSTICE SCALIA And thats a little
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1 different
2 MR PHILLIPS shyshy thats the line were
3 asking the Court to draw here
4 JUSTICE KAGAN Well how are you saying the
5 how Because I thought that your computers shyshy that your
6 patents really did just say do this on a computer as
7 opposed to saying anything substantive about how to do
8 it on a computer
9 MR PHILLIPS I would urge the Court to
10 look at Joint Appendix 159 285shy286 where it goes
11 through the flow charts This is shyshy and this is just a
12 specific example of the method by which you stop a
13 transaction and it goes through a varied series of
14 detailed steps and what the computer has to do in order
15 to do that It doesnt actually obviously put in the
16 code but thats what the PTO says dont do Dont put
17 in the code because nobody understands code so shyshy but
18 put in the functions and we know shyshy and we know that
19 someone skilled in the art will be able to put in the
20 code And if they arent if they cant do that then
21 its not enabled and thats a 112 problem
22 To go back Justice Breyer to your
23 question So on the one hand youve got a problem that
24 it seems to me Congress to some extent has said is okay
25 and weve got a solution and that solutions playing
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1 through On the other hand if this Court were to say
2 much more categorically either that theres no such
3 thing as business method patents or adopt the Solicitor
4 Generals interpretation which is to say that there
5 cannot be software unless the software somehow actually
6 improves the computer as opposed to software improving
7 every other device or any other mechanism that might be
8 out there
9 What we know is that this would inherently
10 declare and in one fell swoop hundreds of thousands of
11 patents invalid and the consequences of that it seems
12 to me are utterly unknowable And before the Court goes
13 down that path I would think it would think long and
14 hard about whether isnt that a judgment that Congress
15 ought to make And It seems to me in that sense youre
16 essentially where the Court was in Chakrabarty where
17 everybody was saying youve got to act in one way or the
18 other or the world comes to an end and the courts have
19 said well apply 101 directly
20 JUSTICE KENNEDY If we say that theres no
21 software patentability and agree with the Attorney
22 General do you lose in this case
23 MR PHILLIPS Well it would be very hard
24 for me to see how that shyshy how shyshy how I can get around
25 that particular problem because the computer is the
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1 essence of it so shyshy and a portion of it is clearly the
2 software So I think if you say there is no such thing
3 as software patentability I do lose in this case yes
4 Your Honor As do a whole lot of other people
5 JUSTICE KENNEDY Is there any common ground
6 between you and the government shyshy maybe a better
7 question to ask the government shyshy a common ground
8 between you and the government on something in the
9 software area thats patentable other than making the
10 computer itself work You understand the government to
11 say no software patents
12 MR PHILLIPS Thats the way I interpret
13 the governments shyshy the governments brief
14 JUSTICE BREYER It was like shyshy theres a
15 Bloomberg brief out here that was on this that said
16 no you can shyshy you can patent computer software when
17 its an improvement in the computer when its an
18 improvement in software when its an improvement in a
19 technology that is developed out of computers like
20 robotics when it is an improvement in a machine or
21 technology but you cannot improve it where it is simply
22 an improvement in an activity that is engaged in
23 primarily through mental processes But what they mean
24 by that is business finance and similar arts
25 Thats shyshy I mean thats shyshy it wasnt quite what shyshy I
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1 know Thats what I want to know what you dont agree
2 with about that because its a little more refined than
3 you suggested
4 MR PHILLIPS I read the Solicitor
5 Generals brief as broader than the Bloomberg brief
6 in shyshy in terms of the approach And IBMs argument is
7 if you knock out software patents you eliminate web
8 browsing word processing cellphones eshymail Those
9 are all activities that I dont think fall within the
10 meaning of the shyshy the meaning of the governments theory
11 of the case
12 JUSTICE BREYER But Im asking you shyshy Im
13 asking you what about this one that I just mentioned
14 You see I went through those five steps shyshy
15 MR PHILLIPS Right
16 JUSTICE BREYER shyshy and four of them you
17 could patent and the fifth one you cant
18 MR PHILLIPS Right But I shyshy and I guess
19 my answer to that is thats nowhere in the statute and
20 it doesnt seem to me to reflect an abstract idea Its
21 a shyshy its a line you draw that takes out business method
22 patents If the Court wants to eliminate business
23 method patents fine But you just said no to that in
24 Bilski two three terms ago
25 Now to be sure give the Solicitor General
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1 credit he comes here and says to you We didnt like
2 the result in Bilski we want you to say dont use
3 process in order to get there which is a statutory
4 interpretation come up with an extraordinarily
5 complicated way of looking at the exception and use that
6 to get to the exact same result
7 JUSTICE SOTOMAYOR Well youre doing a
8 very good job of proving shyshy
9 JUSTICE GINSBURG In Bilski Justice Breyer
10 did try to say that there wasnt that shyshy a whole lot of
11 distance between the four who thought business methods
12 were not patentable But he shyshy he also said something
13 else in shyshy in the other case Mayo Justice Scalia
14 asked you the question about doesnt that go to novelty
15 but didnt Justice Breyer say in Mayo that novelty can
16 be relevant to patent shyshy to patent eligibility He said
17 theres shyshy theres an overlap
18 MR PHILLIPS Well he said theres an
19 overlap Here in this context I think basically the
20 Respondents theory would mean that they are completely
21 coterminous And I dont think thats what the Court
22 meant And also we know from Diehr that theres got to
23 be at least some significant limitations on the extent
24 to which novelty has to be built into 101 That is the
25 province of 102 and 103 And as I said Congress
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1 modified the system of adjudication to create an
2 administrative mechanism that allows you to get to 102
3 and 103 And at least in context its important to
4 realize there have been 11 cases since that was created
5 9 of the 11 have been knocked down on 102 or 103 grounds
6 and not on 101 grounds And it seems to me thats the
7 answer to this problem is leave 101 as the coarse
8 filter If on its face it states these kinds of broad
9 abstract principles fundamental truths and even if it
10 says use a computer those should be struck down
11 JUSTICE SOTOMAYOR Which of the shyshy which of
12 the opinions below captures your position most
13 accurately
14 MR PHILLIPS I would guess it would be
15 Judge Moores opinion below that would capture ours most
16 correctly
17 JUSTICE SOTOMAYOR And if we were to think
18 your method claim is ineligible do you agree that your
19 systems and shyshy your medium and system claims fail as
20 well Do they rise and fall together
21 MR PHILLIPS No No I dont believe they
22 do rise and fall together I mean I think you could shyshy
23 if you wanted to interpret our medium claim shyshy I mean
24 our shyshy our method claims in a shyshy in particularly
25 abstract way I think you could still say that the
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1 system claims which clearly are shyshy are how to create a
2 computer system and how to implement it using that
3 method would be a much more concrete version of that in
4 a way that would take it out of 101 That said I
5 obviously believe that all of our claims satisfy 101
6 and should go on to the next stage
7 JUSTICE KAGAN Can I give you a
8 hypothetical Mr Phillips and you tell me how its
9 different or the same Lets say you know 30 years
10 somebody took a look around the world and said a lot of
11 people seem to order products by mail They get the
12 catalogues in the mail and then they send back their
13 return forms And lets say that one of the founders of
14 the Internet said wouldnt this be an amazing system
15 we could actually do this by computer and they had
16 patented that Is that the same
17 MR PHILLIPS I dont know if its the
18 same but I would shyshy I would argue that it could very
19 well be a patentable subject matter because shyshy but it
20 depends on how the claims play out
21 JUSTICE KAGAN No but exactly I mean
22 the claim would have said something along the lines of
23 you know theres this process by which people order
24 products and we want to do it over the Internet we want
25 to do it electronically and we will use a computer to
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1 do that to essentially take the process of mail order
2 catalogues and make it electronic
3 MR PHILLIPS I could certainly shyshy I think
4 I could write a claim shyshy a set of claims that I believe
5 would satisfy 101 And shyshy and to the extent that
6 youd shyshy that youd think those are no different than
7 the ones I have here then my argument is simply I think
8 I satisfy 101 with the claims we have before us Your
9 Honor
10 If there are no further questions then Id
11 like to reserve the rest of my time
12 CHIEF JUSTICE ROBERTS Thank you
13 Mr Phillips
14 Mr Perry
15 ORAL ARGUMENT OF MARK A PERRY
16 ON BEHALF OF THE RESPONDENTS
17 MR PERRY Mr Chief Justice and may it
18 please the Court
19 That path between Scylla and Charybdis was
20 charted in Bilski and Mayo Bilski holds that a
21 fundamental economic principle is an abstract idea and
22 Mayo holds that running such a principle on a computer
23 is quote not a patentable application of that
24 principle Those two propositions are sufficient to
25 dispose of this case
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1 If Bilski and Mayo stand Alices patents
2 fail Therefore Mr Phillips and his friends are
3 asking this Court to change the standard even though
4 this Court has had three unanimous decisions in the last
5 four terms establishing what the Court called a myriad
6 a wellshyestablished standard
7 On the abstract idea Justice Ginsburg you
8 asked Mr Phillips whats the difference between hedging
9 and this claim There is no difference This is
10 hedging It is hedging against credit default rather
11 than price fluctuation but it is simply hedging
12 And Mr Phillips stood up for 26 minutes and
13 never once referred to the patent Lets look at what
14 the inventor the soshycalled inventor said about this
15 invention This is at JA 293 to 94 in the
16 specification
17 This claim has simply two steps Its very
18 simple First debiting and crediting on a realtime
19 basis the relevant shadow records and second by
20 periodically affecting corresponding payment
21 instructions Those are direct quotes Debit credit
22 and pay Your Honor you cant get much more simple
23 than that
24 Mr Phillips suggests well we have
25 multilateral transactions global things chronological
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1 time zones and so forth None of those are claimed
2 Your Honor Those are all recited in specification
3 The claims read on a single transaction involving two
4 parties
5 JUSTICE BREYER Can I ask you at some
6 point not necessarily this second to say in my shyshy this
7 is just shyshy you know you have an opinion for a court
8 Different judges can have different interpretations
9 All youre getting is mine okay
10 But I think its pretty easy to say that
11 Archimedes cant just go to a boat builder and say
12 apply my idea All right Everybody agrees with that
13 But now we try to take that word apply and give
14 content to it
15 And what I suspect in my opinion Mayo did
16 and Bilski and the other cases is sketch an outer shell
17 of the content hoping that the experts you and the
18 other lawyers and the shyshy the circuit court could fill
19 in a little better than we had done the content of that
20 shell
21 So so far youre saying well this is
22 close enough to Archimedes saying apply it that we
23 neednt go further
24 Now will you at some point in the next few
25 minutes give me your impression of if it were necessary
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1 to go further what would the right words or example be
2 MR PERRY Your Honor as shyshy Justice
3 Breyer as to abstract ideas the PTO has filled in that
4 shell by listing economic concepts legal concepts
5 financial concepts teaching concepts dating and
6 interpersonal relationships and generally how business
7 should be conducted as examples of those things that are
8 likely abstract which of course all follow directly
9 from Bilski and the discussion this Court had in Bilski
10 And this patent shyshy these patents fall squarely within
11 that
12 Congress in the AIA confirmed that
13 reading Congress in the CBM method said business
14 methods that are subject to special scrutiny shyshy that is
15 dubious patents shyshy include methods and corresponding
16 apparatus which is what we have here that pertain to
17 data processing in the financial services industry and
18 do not offer a technological solution That describes
19 Alices patents to a letter Your Honor So that we
20 have shyshy
21 JUSTICE SOTOMAYOR What do you think is a
22 technological solution
23 MR PERRY Your Honor shyshy
24 JUSTICE SOTOMAYOR How could they if at
25 all written their patents to shyshy to make shyshy to make
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1 their software eligible What would shyshy what do they
2 need shyshy would have needed to have added
3 MR PERRY Justice Sotomayor they have no
4 software first Theyve never written software
5 Theyve never programmed a computer So thats a
6 nonexistent set
7 Second there are many technological
8 solutions to trading and settlement problems For
9 example data compression These shyshy these trading
10 platforms involve the movement of very large quantities
11 of data around the world The physical pipes that is
12 the fiber optic cables and data lines are limited
13 There are very sophisticated algorithms for both
14 security and speed to move data through the transmission
15 lines in novel and useful ways that could well be
16 patented
17 Nothing like that is claimed here To come
18 back to where I started if you look for example at
19 Claim 65 in the 510 patent as Mr Phillips reads it
20 it literally reads on a twoshyparty escrow to sell a
21 house so long as the escrow agent is typing this stuff
22 into the HUDshy1 using a computer That has nothing to do
23 with multilevel shyshy
24 CHIEF JUSTICE ROBERTS Well thats a
25 little more complicated He referred us to Joint
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1 Appendix Page 159 which is not a change in how
2 computers work But it is shyshy constitutes the
3 instructions about how to use the computer and where it
4 needs to be affected And just looking at it it looks
5 pretty complicated There are a lot of arrows and
6 they shyshy you know different things that go shyshy
7 (Laughter)
8 CHIEF JUSTICE ROBERTS Well but I mean
9 you know it shyshy in different directions And I
10 understand him to say that in each of those places
11 thats where the computer is needed
12 MR PERRY Mr Chief Justice Figure 16 has
13 nothing to do with the invention asserted against my
14 client in this case There are two inventions in this
15 patent One invention involving multilateral contract
16 formation is not asserted against my client And all of
17 these drawings pertain to that The only drawings that
18 pertain to the asserted claims are 25 and 33 to 37 And
19 that was established below and its established in this
20 Court And Mr Phillips has never disputed it
21 So the claim hes pointed the Court shyshy the
22 figure hes pointed the Court to has nothing to do with
23 the invention Its for a different invention that is
24 not at issue in this case
25 Remember there are hundreds and hundreds of
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1 pages of these patents They all pertain to the other
2 invention Thats why in the back of our red brief we
3 excerpted the very little bit that actually pertains to
4 this You sort of tack on patent shyshy the tack on claim
5 that Mr Phillips is asserting here Its 4 columns
6 Its less than five pages in the printed appendix that
7 actually pertains to this invention And it contains no
8 disclosure whatever
9 Justice Scalia to your question about how
10 the computer does it Of course a patent that
11 describes sufficiently how a computer does a new and
12 useful thing whether its data compression or any other
13 technological solution to a business problem a social
14 problem or a technological problem would be within the
15 realm of the shyshy of the patent laws That is what the
16 patent laws have always been for
17 This is not such a patent And the reason
18 for that is this is a preshyBilski set of patents These
19 were prosecuted under the old State Street test where
20 all the applicant had to claim was a result
21 JUSTICE KENNEDY Would you give me shyshy
22 again you already did it once shyshy an example of a
23 business process patent shyshy of a business process idea
24 and invention that is patentable
25 MR PERRY Your Honor there are many
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1 examples One would be a technological solution to a
2 business problem So that for example shyshy Ill give a
3 different example There are many applications today
4 The Court may be familiar with streaming video to watch
5 video on your computer
6 It is not possible to get enough data
7 through existing lines in its raw format The data has
8 to be manipulated in order to see live video So if you
9 want to watch TV on your phone for example
10 Those algorithms those inventions are
11 undoubtedly technological And if they are used in a
12 trading platform or a hedging system or something else
13 that wouldnt disable them And this is what the Diehr
14 case shyshy
15 JUSTICE KENNEDY Well I shyshy I shyshy in my
16 language Ive called that mechanical rather than
17 process Can you give me an example of process
18 MR PERRY Yes Your Honor The process in
19 that example would be a computer running the particular
20 data compression algorithm
21 JUSTICE KENNEDY But thats how to make
22 a shyshy thats how to make a machine work better
23 MR PERRY Yes Your Honor
24 JUSTICE KENNEDY Im asking you Is there
25 any business process any business activity that is
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1 susceptible to a patent a pure patent innovations that
2 deserve patents
3 MR PERRY Your Honor again a
4 technological solution to a business problem could well
5 be whether its a method or a process is equivalent
6 Again Congress said method in a corresponding shyshy
7 JUSTICE KENNEDY Can you give me an
8 example
9 MR PERRY I thought the data compression
10 example was a good one Ill try an encryption
11 technology Many of these trading platforms you know
12 dealing with securities and money would require some
13 sort of security devices You could have a process for
14 securely transmitting data would be another computer
15 implemented technological solution to a business
16 problem Again nothing like that claimed here
17 JUSTICE SOTOMAYOR How about eshymail and
18 just word processing programs
19 MR PERRY Your Honor a program shyshy let me
20 try it this way to both of your questions In our view
21 if what is claimed as the inventive contribution under
22 Mayo shyshy in other words if we have an abstract idea as
23 we do here and what is claimed is the inventive
24 contribution for Step 2 is the computer then the
25 computer must be essential to that operation and
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1 represent an advancement in computer science or other
2 technology And we know thats not met here Justice
3 Sotomayor because shyshy
4 JUSTICE SOTOMAYOR So youre saying no to
5 eshymail and word processing
6 MR PERRY Your Honor I think at a
7 point shyshy
8 JUSTICE SOTOMAYOR They certainly have
9 functionality and shyshy and improvement of functionality
10 for the user
11 MR PERRY At a point in time in the past
12 I think both of those would have been technological
13 advances that were patentable
14 JUSTICE SOTOMAYOR How
15 MR PERRY Today shyshy because they would have
16 provided a technological solution to a then unmet
17 problem Today reciting and do it on a word processor
18 is no different than and do it on a typewriter or shyshy and
19 do it on a calculator
20 The inventive contribution component which
21 uses specifically the language of conventional and
22 routine and well understood will evolve with
23 technology Thats why its different than the abstract
24 idea component
25 And here we know that these patents dont
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1 claim anything that was not conventional well
2 understood and routine We went through that in great
3 detail and Alice has never disputed a word of it They
4 just say youre not supposed to do that analysis even
5 though the Court 9shy0 in Mayo said we should
6 And in this case its very important to
7 look at what Alices own experts said on the subject
8 This is not our expert This is Alices expert And
9 this is at Page 1327shy28 of the Joint Appendix It is
10 possible to do the business methods of maintaining
11 accounts adjusting accounts and providing an
12 instruction without a computer or other hardware
13 And then Justice Breyer directly to your
14 abacus If someone had thought of this invention
15 soshycalled invention 100 years ago they might have
16 implemented it in a nonelectronic manner using various
17 precomputing tools such as an abacus or handwritten
18 ledgers
19 We know from Benson the Courts seminal
20 computer implementation case that if you can do it by
21 head and hand then the computer doesnt add anything
22 inventive within the meaning of the 101 exception That
23 is the holding of Benson And the Court reiterated that
24 in Mayo
25 Flook said exactly the same thing If you
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1 can do it with pencil and paper then the computer is
2 not offering anything that the patent laws are or should
3 be concerned with
4 It is only where the method will not work
5 without a computer which is not these claims and where
6 the computer itself is doing something that the patent
7 law is willing to protect
8 CHIEF JUSTICE ROBERTS What if shyshy what if
9 you can do it without a computer but its going to
10 take you know 20 people a hundred years In other
11 words theoretically you can replicate what the
12 computer does shyshy
13 MR PERRY Two answers
14 CHIEF JUSTICE ROBERTS shyshy but its
15 impractical without looking to do it on the computer
16 MR PERRY Mr Chief Justice first these
17 claims literally read as Alice reads them on a single
18 transaction between two parties so its not 20 people
19 for a hundred years Its one person sitting in a room
20 so thats not a problem
21 Second if what is being claimed is the
22 necessary speed or efficiency or data crunching
23 capabilities if you will of a computer then it would
24 have to be claimed and theres nothing claimed here
25 All that is claimed shyshy and my friend is going to stand
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1 up on rebuttal and tell you all that the expert said
2 well what is claimed is a computer but its just a
3 computer It just says a computer configured too It
4 doesnt say that the computer actually has to shyshy
5 JUSTICE BREYER Yeah but the trouble with
6 that particular test is as I think partly the Chief
7 Justice said how long et cetera and then add to that
8 though you could do it without a computer what happens
9 at the end of the line is the automobile engine goes off
10 or it begins to sputter or it turns left
11 You see its possible to take Archimedes shyshy
12 shyshy you know I use that example purposely to call
13 attention to the problem You can take those things
14 and youre not just saying apply it and youre not even
15 just saying shyshy you are saying use the computer but at
16 the end of the road something physical in the world
17 changes and everybody would say now thats shyshy that
18 will falls within I mean probably I mean my
19 hesitation shows Im looking for the right words
20 MR PERRY Justice Breyer your point is
21 the reason that it is equally fallacious to suggest on
22 the one hand as Alice and IBM does that simply
23 reciting a computer is a magic key that gets you through
24 101 and you never have to any other inquiry and what
25 some of folks the amici on the other side say which
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1 is that computers or software are never eligible Both
2 of those things have to be wrong because what the Court
3 said in Bilski was future innovation is too uncertain
4 We are not going to do that as a Court And the Court
5 laid out an approach using abstract ideas in Bilski and
6 inventive contribution in Mayo that is flexible enough
7 to take into account that innovation and to deal with
8 particular claims in context which is why at the end
9 of the day we have to come back to these patents and
10 decide which shyshy
11 JUSTICE KAGAN Mr Perry before we get
12 back to these matters you said to Justice Scalia if a
13 patent sufficiently describes how a computer will
14 implement an idea then its patentable So how
15 sufficiently does one have to describe it What do we
16 want a judge to do at this threshold level in terms of
17 trying to figure out whether the description is
18 sufficient to get you past it
19 MR PERRY If I can answer in two steps
20 Justice Kagan First in the negative What the
21 applicant or patentee must do shyshy must not do is simply
22 describe the desired result That would take us back to
23 State Street That would simply say I claim a magic
24 box that buys high and sells low or vice versa I
25 suppose I claim a magic box for investing Thats what
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1 these patents do
2 Then to put it in the affirmative and in the
3 language of Mayo the claim has to recite something
4 significantly more something significantly more than
5 the abstract idea itself That would be a contextual
6 analysis based on the claims and specifications and file
7 history and we know that some devices some methods
8 some programming will pass that
9 It is not going to be a brightshyline rule and
10 thats one of the tugshyofshywar issues that this Court and
11 the Federal Circuit have been having in these cases
12 The Federal Circuit wants brightshyline rules All
13 computers are in or all computers are out
14 This Court has been more contextual This
15 Court has been more nuanced This Court has looked at
16 things in a more robust way
17 JUSTICE KAGAN Youre not suggesting that
18 specific code is necessary
19 MR PERRY No Your Honor I think the shyshy
20 actual description of the programming is a 112 problem
21 I agree with that A 112 issue That is the realm of
22 the written description requirement What is a 101
23 problem is it is on the applicant to do more than simply
24 describe the results simply say A magic box that does
25 intermediate settlement And we can tie that back to
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1 this particular prosecution the 510 patent which is
2 the method patent
3 The examiner rejected it Under Section
4 101 the examiner said this is an abstract idea You
5 cant have this patent And the only change that this
6 applicant made was to add in the adjusting step
7 electronic adjustment It put in one word
8 electronic adjustment And under State Street which
9 is what this patent is prosecuted under that was
10 enough because the result of adjusting run through a
11 computer is enough
12 Under current law that cant be enough
13 That just cant get a patent over the line because this
14 Court said in Mayo and I got to quote this language
15 Simply implementing a fundamental principle on a
16 physical machine namely a computer is not a patentable
17 application of that principle Thats all that Alice
18 has done
19 These are preshyBilski patents They never
20 should have been issued General Verrilli will stand up
21 and address that point And certainly under current
22 law shyshy one point on the AIA Congress did not send all
23 this to the administrative process Congress created
24 two avenues the courts and the PTO to use the
25 standards Essentially it ratified Bilski and Mayo and
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1 said we agree with what you all are doing at the
2 Supreme Court and the existing standards are good enough
3 for us This is a judicial problem And that is a good
4 reason The abstract shyshy
5 JUSTICE GINSBURG The Federal Circuit in
6 this case split in many ways and it had our decisions
7 to deal with You said given Bilski and Mayo this is
8 an easy case What is the instruction that escaped a
9 good number of judges on the Federal Circuit How would
10 you state the rule
11 MR PERRY Your Honor I think theres a
12 significant element to the Federal Circuit that
13 disagrees with Mayo and has been resistant in applying
14 it Chief Judge shyshy former Chief Judge Michelle filed a
15 brief in this Court essentially saying Mayo is a
16 lifeshysciences case You should limit it to that because
17 if you apply it to everything else then these patents
18 are no good
19 Mayo we submit is a technologyshyneutral
20 industryshyneutral exceptionshyneutral framework that can
21 be used to answer all of these questions This is not
22 the death of software patents The software industry is
23 all before this Court saying this is fine with us
24 Every company in the United States practically except
25 for IBM is saying go ahead This will not affect
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1 software patents
2 Justice Ginsburg this Courts precedents
3 are clear They are unanimous They just need to be
4 applied To suggest that there is confusion that needs
5 to be addressed by retreating beating a retreat from
6 recent unanimous decisions would simply reward
7 intransigence difficulty refusal to adhere to what are
8 clear precedents because shyshy
9 JUSTICE KAGAN Should we be concerned
10 Mr Perry that there are old patents that in fact could
11 meet the test that you set forth but wont because they
12 were written in a different time and so used much more
13 general language
14 MR PERRY Your Honor the applicant or the
15 patent holder would have the opportunity to institute a
16 reexamination proceeding or some sort of administration
17 process to address that issue
18 And second it should be noted this is a
19 very small problem There are 2 million outstanding
20 patents in the United States In the last four fiscal
21 years there were 22000 infringement litigations
22 instituted but since Bilski there have only been 57
23 district court decisions on Section 101 issues There
24 have only been 12 Federal Circuit decisions total on
25 computer implementation
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1 We are talking about a group of patents
2 Justice Kagan thats way out at the tail end of
3 distribution Most patents never have a 101 challenge
4 This is not an issue with cotton gins and other things
5 This is a problem for the most marginal
6 most dubious most skeptical patents the ones that this
7 Court in Bilski shyshy and remember what Bilskis holding
8 is The majority said they are processes but it did
9 not say they are eligible
10 Thank you Mr Chief Justice
11 CHIEF JUSTICE ROBERTS Thank you counsel
12 General Verrilli
13 ORAL ARGUMENT OF DONALD B VERRILLI JR
14 ON BEHALF OF THE UNITED STATES AS AMICUS
15 CURIAE SUPPORTING RESPONDENTS
16 GENERAL VERRILLI Mr Chief Justice and
17 may it please the Court
18 An abstract idea does not become
19 patentshyeligible merely by tacking on an instruction to
20 use a computer to carry it out A computer makes a
21 difference under Section 101 when it imposes a
22 meaningful limit on the patent claim That occurs when
23 the claim is directed at improvement in computing
24 technology or an innovation that uses computing
25 technology to improve other technological functions
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1 Thats the test that we believe is most faithful to this
2 Courts precedents in Bilski and Mayo It keeps patents
3 within their traditional and appropriate domain and it
4 is capable of being administered consistently by Courts
5 and by PTO examiners
6 JUSTICE GINSBURG How do you answer the
7 argument that your view would extinguish businessshymethod
8 patents and make all software ineligible for patent
9 protection
10 GENERAL VERRILLI Yeah with shyshy let me
11 address software patents first because that I think is
12 obviously a significant question And its just not
13 correct to say that our approach would make software
14 patenting ineligible Any software patent that improves
15 the functioning of the computer technology is eligible
16 Any software patent that improves shyshy that is used to
17 improve another technology is eligible For example
18 the patent in the shyshy in the Diehr case is one in
19 which shyshy
20 JUSTICE SOTOMAYOR Why do we need to reach
21 this in that shyshy reach software patents at all in this
22 case
23 GENERAL VERRILLI Well shyshy
24 JUSTICE SOTOMAYOR Whats the necessity for
25 us to announce a general rule with respect to software
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1 There is no software being patented in this case
2 GENERAL VERRILLI Well I shyshy
3 JUSTICE SOTOMAYOR Theres a systems
4 GENERAL VERRILLI Well I shyshy I think shyshy
5 well they shyshy they shyshy theres a process being and shyshy and
6 one can think of software patents as process patents
7 And I think thats why my friends on the other side are
8 saying the sky is falling because they shyshy they are
9 interpreting what were saying about that when a
10 computer makes shyshy when a computers involvement makes
11 something eligible under 101 its calling those into
12 question and it doesnt
13 JUSTICE SOTOMAYOR Do you think we have to
14 reach the patentability of software to answer this case
15 GENERAL VERRILLI Well I think you can shyshy
16 I think the answer to that question is no not
17 necessarily You can decide it by saying that shyshy that
18 Bilski answers the question whether this is an abstract
19 idea because this form of hedging is really no
20 different than the form of hedging as a conceptual
21 matter at issue in Bilski And then Mayo answers the
22 question of whether the use of a computer in this case
23 adds enough to the abstract idea beyond conventional
24 steps because here all we have after all is just
25 conventional use of computing technology no computer
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1 innovation such that you dont qualify under 101 You
2 could take that approach
3 But it is important to the United States
4 that we shyshy and to our patent examiners that we get some
5 clarity if we can I think the clarity could come from
6 the text that I propose which I want to reiterate shyshy
7 JUSTICE SOTOMAYOR Well shyshy
8 JUSTICE BREYER Could shyshy could shyshy could you
9 go on with that because you were just getting to the
10 point where I think you say a computer improvement that
11 in fact leads to an improvement in harvesting cotton is
12 an improvement through a computer of technology so it
13 qualifies
14 But then I think you were going to say or I
15 got this also from the brief a computer improvement
16 that leads to an improvement in the methods of selling
17 bonds over the telephone is not an improvement in
18 technology reached by the computer Am I right about
19 the distinction youre making
20 GENERAL VERRILLI I dont think theres a
21 yes or no answer to that question
22 JUSTICE BREYER What is your view Yeah
23 what is shyshy how do we deal with just that problem
24 GENERAL VERRILLI If there is a genuine
25 innovation in the functioning of the computer shyshy
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1 JUSTICE BREYER Yes
2 GENERAL VERRILLI shyshy such that business
3 processes shyshy
4 JUSTICE BREYER Weve got that Yes yes
5 We got the computer But then it doesnt improve the
6 computer but rather it improves through the computer
7 the harvesting of cotton
8 Now youve got it in what you said was your
9 second category which is an improvement through the
10 computer of a technology And I thought in your brief
11 you were distinguishing an improvement through the
12 computer of a human activity that is not a technology
13 and in particular to pick an example of that
14 something in finance or something in business
15 Now am I right about the distinction youre
16 making
17 GENERAL VERRILLI Yeah that shyshy
18 JUSTICE BREYER If Im not right what is
19 the distinction
20 GENERAL VERRILLI That is generally the
21 line were drawing Frankly shyshy
22 JUSTICE BREYER And how is that justified
23 GENERAL VERRILLI I do want shyshy
24 JUSTICE BREYER That shyshy that is Judge Dyk
25 in shyshy in Bilski in the Federal circuit 4 people sort of
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1 picked it up maybe 5 didnt pick it up Would you say
2 a few words about it
3 GENERAL VERRILLI Sure About shyshy let me go
4 to Bilski there in that I do think while shyshy while
5 certainly the Court held that the term process got a
6 natural construction which could include business
7 methods it seems to me that thats not all the Court
8 said in Bilski The Court also said that it was
9 historically and traditionally quite rare that business
10 methods were patent eligible
11 It also said that shyshy that the shyshy that courts
12 and the PTO examiners should use the abstract ideas
13 exception to 101 to police the appropriate boundary
14 It also said that the
15 machineshyorshytransformation test that the United States
16 advocated remained a useful tool And of course that
17 directs to you seeing whether there is a technology
18 application
19 And of course the holding in Bilski was
20 that the shyshy the method for hedging risk was ineligible
21 because it was an abstract idea and I cant imagine
22 that if in Bilski the shyshy the claim had been exactly the
23 same but had added use a computer to carry out some of
24 these standard random analysis functions that are
25 claimed by the patent that you would have found it to
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1 be patent eligible
2 And I shyshy I would submit for the Court that
3 the key point here I think is that now given where
4 the Court shyshy what the Court has held in Bilski given
5 what its held in Mayo the abstract ideas exception is
6 really the only tool left to deal with what I shyshy what I
7 think I fairly read Bilski as saying is a significant
8 problem the proliferation of patents of business
9 methods
10 JUSTICE KENNEDY Is there an example that
11 you can give us of a shyshy what we can call a business
12 process that is patentable a process that doesnt
13 involve improving the workings of a computer
14 GENERAL VERRILLI I shyshy I think its going
15 to be difficult for me to do that I think for
16 example if you had a business method a process for
17 additional security pointshyofshysale credit card
18 transactions using particular encryption technology
19 that might well be patent eligible Its a technology
20 that it makes conduct of business more efficient or
21 effective
22 But there is a technological link here and
23 we do think thats critical to our shyshy to our point of
24 view with respect to the case And I shyshy and I do think
25 remember that when we say something is not patent
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1 eligible were not saying they cant do it Were
2 saying they cant monopolize it
3 And the concern in a situation like this one
4 is that if this is patent eligible its hard to see
5 why for example the first person who came up with a
6 frequent flier program wouldnt have been able to claim
7 a patent there because after all thats a business
8 method for improving customer loyalty implemented on a
9 computer
10 CHIEF JUSTICE ROBERTS General I shyshy you
11 mentioned a while ago the need for greater clarity and
12 certainty in this area And Im just wondering in your
13 brief youve got a nonshyexhaustive of factors to
14 consider and there are 6 different ones And Im just
15 doubtful that thats going to bring about greater
16 clarity and certainty
17 GENERAL VERRILLI I take shyshy I take the
18 point Mr Chief Justice but I think the key is that
19 they are all directed to answering the question of
20 whether the innovation that is claimed and is an
21 innovation in either A the improvement of a computers
22 functioning or B the use of computer technology to
23 improve the functioning of another technological
24 process and a case like Diehr would be in the latter
25 category
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1 And so I do think that thats the key
2 benchmark Thats the baseline Thats the test that
3 we do think can be applied clearly and consistently by
4 the courts or the PTO And it avoids the risk of things
5 like frequent flier programs or the Oakland As money
6 ball methods for evaluating the contributions in
7 individual baseball players make or any one of a host of
8 other things that our intuitions tell us just dont
9 belong in the patent system
10 Thats the shyshy drawing that line keeps them
11 out not drawing that line lets them in And with all
12 due respect I dont think that the novelty and
13 nonobviousness filters that 102 and 103 really deal with
14 that problem effectively because when you get to
15 nonobviousness in 103 for example youll be asking a
16 different question
17 If you take the frequent flier program you
18 would say well is this innovation in building consumer
19 loyalty something that would have been obvious to
20 somebody who runs an airline Its totally divorced
21 from the question of technology at that point and
22 therefore I dont think youre going to get the screen
23 that you need to get in order for the patent system to
24 be confined to its traditional and appropriate scope
25 If there are no further questions thank
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1 you
2 JUSTICE GINSBURG I have a question about
3 how do you identify an abstract concept The shyshy a
4 natural phenomenon a mathematical formula those are
5 easy to identify but there has been some confusion on
6 what qualifies as an abstract concept
7 GENERAL VERRILLI We would define
8 abstract shyshy an abstract concept as a claim that is not
9 directed to a concrete innovation in technology
10 science or the industrial arts So its the shyshy its
11 abstract in the sense that it is not a concrete
12 innovation in the traditional realm of patent law
13 Thank you
14 CHIEF JUSTICE ROBERTS Thank you General
15 Mr Phillips you have four minutes
16 remaining
17 REBUTTAL ARGUMENT OF CARTER G PHILLIPS
18 ON BEHALF OF THE PETITIONERS
19 MR PHILLIPS Thank you Mr Chief Justice
20 Id just like to make a few points
21 First of all with respect to the question
22 you asked which is looking at 159 et cetera all I can
23 tell you is that if you look at claim 33 it talks about
24 matched orders the matched orders that are described in
25 286 and 287 and then makes specific reference to 159
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1 and that flow chart thats there And its all designed
2 as a package Its only one element of the shyshy of the
3 invention but it is a central element and its an easy
4 one to understand And it goes well beyond simply the
5 notion of hedge shyshy hedge against settlement risk and do
6 it by a computer
7 JUSTICE SOTOMAYOR Your adversary says that
8 his shyshy the appendix to his brief are the only patents at
9 issue that the flow charts are not at issue in this
10 case
11 MR PHILLIPS Theres no basis for that
12 statement Your Honor There shyshy remember this went off
13 on a very truncated litigation process So theres shyshy
14 you know we shyshy we got cut off at the beginning of it
15 Theres been no construction of the shyshy of the claims
16 and shyshy and obviously these are specifications that go
17 to how you interpret the claim
18 JUSTICE SOTOMAYOR If we were to say that
19 there are no business patents shyshy
20 MR PHILLIPS Yes
21 JUSTICE SOTOMAYOR shyshy would your patent
22 survive at all
23 MR PHILLIPS No I dont shyshy I dont
24 believe so I think theres no question And you
25 know General Verrilli could not have been any plainer
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1 in his statement of how he wants to interpret the
2 abstract idea concept
3 JUSTICE SOTOMAYOR Yes he wants to say no
4 business patents
5 MR PHILLIPS No business shyshy just another
6 way of saying no business methods And you know the
7 Court rejected that And it seems to me extraordinary
8 to say Congress didnt reject no business methods in
9 101 but were going to do shyshy were going to manipulate
10 the judicial exception to accomplish precisely that same
11 thing It seems to me thats wholly inappropriate
12 Justice Ginsburg you asked my shyshy my friend
13 here you know whats his test He didnt answer that
14 question youll notice because he doesnt have an
15 answer His basic argument is whatever you do just
16 kill this patent
17 And if I were in his shoes I suppose Id
18 take that same position I think whats absolutely
19 clear is that the test ought to be one that is
20 structured as a very coarse filter not the kind of
21 filter that hes pushing for where it changes over time
22 I mean I thought his shyshy I thought his response to one
23 of the questions about eshymail and word processing that
24 Justice Sotomayor asked is over time it would change
25 Well thats exactly what 102 and 103 are for That is
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1 not the purpose of shyshy of Section 101
2 And then he uses the example of encryption
3 I guarantee you if we were arguing about encryption in
4 this case he would say to me that thats an abstract
5 principle because encryption is a concept thats been
6 around since time immemorial George Washington used
7 it Everybody has used encryption
8 And a question again thats not the
9 solution to these problems The question is how did we
10 go about doing it And we go beyond the basics of
11 simply saying use a computer and thats what we ask
12 this Court to focus on and to evaluate
13 As to the frequent flier program its
14 pretty clear to me that even though it was a novel idea
15 in some sense the concept itself would have been viewed
16 in shyshy in the KSR fashion as quite obvious as a means of
17 improving customer loyalty
18 There are solutions here Giving us 101
19 pass doesnt create a monopoly It just gets us to the
20 102 and 103 inquiries that are at the heart of what the
21 patent laws shyshy and 112 that are at the heart of what the
22 patent laws ought to be dealing with
23 If there are no further questions Your
24 Honor thank you
25 CHIEF JUSTICE ROBERTS Thank you counsel
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1 The case is submitted
2 (Whereupon at 1105 am the case in the
3 aboveshyentitled matter was submitted)
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
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58
A add 714 1023 algorithm 3320 41 automatically
As 525 3621 387 algorithms apply 72425 111
am 115 32 416 3013 3310 2019 281213 automobile 389
572 added 302 Alice 13 34 2822 3814 available 99
abacus 61213 4923 363 3717 4217 avenues 4124
710 1018 additional 5017 3822 4117 applying 4213 avoids 524
1325 3614 3617
address 4121 4317 4511
Alices 271 2919 3678
approach 226 395 4513 B
ability 1514 addressed 435 allow 94 472 B 121 29 4413
able 1511 167 addressing 181 allows 97 242 appropriate 5122
1919 516 adds 4623 amazing 2514 81516 1514 back 1621
aboveshyentitled adhere 437 amici 3825 453 4913 1922 2512
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absolutely 125 241 210 4414 Archimedes 3991222
1215 159 adjusting 3611 analysis 424 281122 3811 4025
5518 41610 364 406 area 219 5112 ball 526
abstract 4267 adjustment 417 4924 argue 2518 Bank 17 35
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721 8218 administered 1716 argument 114 bars 43
141920 1522 454 announce 4525 225812 33 baseball 527
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2621 277 administrative 3919 4221 26715 4413 basic 413 5515
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552 564 advances 3513 apparatus 2916 131 beating 435
accept 102 adversary 547 APPEARAN arrows 315 beginning 163
accomplish advice 1715 116 art 1919 5414
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account 55 618 affect 4225 appendix 1910 aside 1422 157 behalf 11719
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accounts 823 agent 52 3021 548 278 5322 214 38 2616
9356 3611 ago 318 2224 applicant 3220 551224 4414 5318
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activities 229 ahead 4225 applications 311618 benchmark 522
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actual 4020 AL 18 523 attention 3813 better 1610 albeit 923 applies 31418 Attorney 2021 216 2819
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3322 brightshyline 409 2313 37 71 4338 5519 beyond 115 4012 5317 checks 618 5614
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Bilski 313 46 broader 225 2022 213 31812 378 client 311416 415 1722 browsing 228 2211 2313 371416 386 close 2822 2224 2329 builder 2811 2625 311424 421414 4410 CLS 17 35 262020 271 building 5218 3314 36620 441116 5110 1120 2816 2999 built 2324 426816 5118 531419 coarse 247 3935 4125 business 168 451822 461 5625 5520 427 4322 1749 203 461422 5024 chits 611 code 1213 142 447 452 2124 222122 5124 5410 chronological 1916171720 461821 4825 2311 29613 564 5712 1512 2725 4018 49481922 32132323 cases 244 2816 chronologically coffee 1211 5047 3322525 4011 423 colleagues 116
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brief 211315 carefully 1725 chart 541 283 3118 516 621 710 2255 322 caricature 718 charted 2620 37517 398 71325 9113 4215 4715 72020 1417 charts 1911 406 5415 91824 1035 4810 5113 1716 549 clarity 4755 10725 1116 548 carry 4420 Charybdis 511116 124102024
briefs 1524 4923 1620 2619 class 59 13911 1479 1618 CARTER 117 checkbook 617 clear 1015 118 1421 15710
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1517 165 confess 1111 coterminous 4121 5324 181719 196 configured 383 2321 customer 518 describes 425 19814 206 confined 5224 cotton 914 444 5617 2918 3211 2025 211016 confirmed 2912 4711 487 cut 5414 3913 2117 2410 confusion 434 counsel 4411 description
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disclosure 328 413 302021 4220 figure 1146 discuss 164 economy 1516 ESQ 1171921 excerpted 323 311222 3917 discussion 299 effective 1223 236913 exhausted 1813 file 406 dispose 2625 5021 essence 211 exist 420 131 filed 4214 dispute 325 effectively 5214 essential 1224 existence 1119 fill 2818 disputed 3120 efficacy 1224 3425 175 filled 293
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Michele K Lee Comment on Interim 101 Guidance
October 27 2015 Page 2
bull Improvements to another technology or technical field
bull Improvements to the functioning of the computer itself
bull Applying the judicial exception with or by use of a particular machine
bull Effecting a transformation or reduction of a particular article to a different state or thing
bull Adding a specific limitation other than what is well-understood routine and conventional in the field or adding unconventional steps that confine the claim to a particular useful application or
bull Other meaningful limitations beyond generally linking the use of the judicial exception to a particular technological environment
Without evidence it is impossible to know when a claim element fits into one of the above categories especially when the category requires an understanding of what is wellshyunderstood routine and conventional in the field Examiners need to have guidance on how to determine when Applicant has submitted persuasive arguments
The Court in Alice said
The invention in Diehrused a thermocouple to record constant temperature measurements inside the rubber mold shysomething the industrv ha[dJ not been able to obtain The temperature measurements were then fed into a computer which repeatedly recalculated the remaining cure time by using the mathematical equation These additional steps we recently explained transformed the process into an inventive application of the formula 1
The only way to know if the industry has or has not been able to obtain a feature is with evidence In contrast a claim does not supply significantly more when a hypothetical programmer could be told about the abstract idea and then instructed to write a program to perform said idea During oral argument of Alice Justice Kennedy stated
Well let me put it this way If you describe that to a second year college class in engineering and said heresmy idea now you go home and you program over this weekend my guess isthat would be fairly easy to program2
1 134 sa at 2358 (citations omitted emphasis added) 2 Transcript of Oral Argument at 5 Alice 134 sa 2347 (No 13-298) (See Exhibit A at Page 5 Lines 7-12)
Michele K Lee Comment on Interim 101 Guidance
October 27 2015 Page 3
The basic point Justice Kennedy made is that if someone told a developer to create a computer program to mitigate settlement risk the computer programmer would program the claims The same holds true for why the patent failed in Ultramercial LLC v Hulu LLC and WildTangent No 2010-1544 (Fed Cir 2014) If a computer programmer was told to set up a system that displays advertisements before internet video content the programmer would end up with the Claims in Ultramercial
The Guidelines state that a prima facie case can be made without evidence It appears the reasoning by the Office comes from a reading of Supreme Court opinions as not citing evidence However if something the industry had not been able to obtain is enough to qualify as significantly more there must be evidence in the record for the Supreme Court to know this If Applicant cites evidence that a claim element or combination of claim elements is something the industry had not been able to obtain Applicant has met the burden of rebutting the prima facie case Otherwise the Guidelines would be inconsistent with Diehr
When a prima facie case can be made without evidence and Applicant points to evidence in the specification the examiner returns to the July 2015 update that says that the evidence is not needed for a prima facie case Examiners then submit another nearly identical rejection without evidence The real problem is that the second rejection is inconsistent with the evidence of record cited by Applicant and inconsistent with Diehr
Without guidance on what is persuasive and what examiners must do to respond to evidence examiners cannot know what is a quality rejection and a quality allowance
Thank you for taking the time to consider this letter
Very truly yours-
gt~~ c_Jorfathan A Winter
jwinterssjrcom GSWSBSJAW Enclosure
Exhibit A
1
Official shy Subject to Final Review
1 IN THE SUPREME COURT OF THE UNITED STATES
2 shy shy shy shy shy shy shy shy shy shy shy shy shy shy shy shy shy x
3 ALICE CORPORATION PTY
4 LTD
5 Petitioners No 13shy298
6 v
7 CLS BANK INTERNATIONAL
8 ET AL
9 shy shy shy shy shy shy shy shy shy shy shy shy shy shy shy shy shy x
10 Washington DC
11 Monday March 31 2014
12
13 The aboveshyentitled matter came on for oral
14 argument before the Supreme Court of the United States
15 at 1004 am
16 APPEARANCES
17 CARTER G PHILLIPS ESQ Washington DC on behalf
18 of Petitioners
19 MARK A PERRY ESQ Washington DC on behalf of
20 Respondents
21 DONALD B VERRILLI JR ESQ Solicitor General
22 Department of Justice Washington DC on behalf of
23 the United States as amicus curiae supporting
24 Respondents
25
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2
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1 C O N T E N T S
2 ORAL ARGUMENT OF PAGE
3 CARTER G PHILLIPS ESQ
4 On behalf of the Petitioners 3
5 ORAL ARGUMENT OF
6 MARK A PERRY ESQ
7 On behalf of the Respondents 26
8 ORAL ARGUMENT OF
9 DONALD B VERRILLI JR ESQ
10 On behalf of the United States as amicus
11 curiae supporting Respondents 44
12 REBUTTAL ARGUMENT OF
13 CARTER G PHILLIPS ESQ
14 On behalf of the Petitioners 53
15
16
17
18
19
20
21
22
23
24
25
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3
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1 P R O C E E D I N G S
2 (1004 am)
3 CHIEF JUSTICE ROBERTS Well hear argument
4 this morning in Case 13shy298 Alice Corporation versus
5 CLS Bank International
6 Mr Phillips
7 ORAL ARGUMENT OF CARTER G PHILLIPS
8 ON BEHALF OF THE PETITIONERS
9 MR PHILLIPS Thank you Mr Chief Justice
10 and may it please the Court
11 It is common ground between the parties in
12 this case that Section 101 by its terms and with the
13 sweeping interpretation this Court adopted in Bilski
14 applies directly to the patents here These are system
15 and process patents that speak directly to Section 101
16 The only issue then is whether the
17 judicially recognized exception that this Court adopted
18 many many years ago applies under these circumstances
19 JUSTICE KENNEDY And just repeat it is
20 common ground between the parties that shyshy
21 MR PHILLIPS That shyshy that our shyshy our
22 patents speak directly to the language of Section 101
23 that is they are a process and they are machines and
24 they are shyshy and they are improvements to the process and
25 the machines They dont shyshy they dont dispute that by
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1 its terms 101 applies The only argument between the
2 parties is the abstract idea exception that exists and
3 whether that bars us from otherwise satisfying
4 Section 101
5 JUSTICE GINSBURG Mr Phillips on the
6 abstract idea you know that the Bilski case held that
7 hedging qualified as an abstract idea So how is
8 intermediate settlement a less abstract than hedging
9 MR PHILLIPS If our shyshy if our patent
10 merely claimed intermediated settlements although I
11 have to say I dont really know exactly what that means
12 because I dont think thats the same kind of
13 economics shyshy basic economics concept that a hedge risk
14 treatment is But if it claimed that we wouldnt shyshy we
15 wouldnt have a distinction from Bilski
16 What we claim is a very specific way of
17 dealing with a problem that came into being in the early
18 1970s of how to try to eliminate the risk of
19 nonshysettlement in these very massive multiparty problems
20 in which you need to deal with difficulties that exist
21 at different time zones simultaneously and to do it with
22 a computer so that you not only take them on
23 chronologically deal with them sequentially based on
24 the kind software analysis that the patent specifically
25 describes by function
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5
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1 And it goes even further than that and does
2 something that no escrow agent and shyshy and no
3 intermediated settlement that I know of shyshy settler that
4 I know of It actually blocks specific transactions
5 that in the shadow account would violate the terms of
6 the settlement that would ultimately be implemented
7 JUSTICE KENNEDY Well let me put it this
8 way If you describe that to a secondshyyear college
9 class in engineering and said heres shyshy heres my idea
10 now you go home and you program over this weekend my
11 guess is shyshy my guess is that that would be fairly easy
12 to program
13 MR PHILLIPS I dont disagree with it
14 Justice shyshy
15 JUSTICE KENNEDY So the fact that the
16 computer is involved it shyshy it seems to me is necessary
17 to make it work But the shyshy but the innovative aspect
18 is certainly not in the creation of the program to make
19 that work All youre talking about is shyshy if I can use
20 the word shyshy an idea
21 MR PHILLIPS I prefer not to use that word
22 for obvious reasons
23 (Laughter)
24 MR PHILLIPS But shyshy but if you shyshy but if
25 you look at the Solicitor shyshy
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1 JUSTICE KENNEDY Or shyshy or a method or a
2 process
3 MR PHILLIPS Right But shyshy and shyshy and
4 obviously methods and processes are precisely what
5 Section 101 permits to be subject shyshy
6 JUSTICE BREYER Why is that less abstract
7 MR PHILLIPS Im sorry
8 JUSTICE BREYER Why is that less abstract
9 I mean imagine King Tut sitting in front of the pyramid
10 where all his gold is stored and he has the habit of
11 giving chits away Good for the gold which is given at
12 the end of the day And he hires a man with an abacus
13 and when the abacus keeping track sees that hes given
14 away more gold than he is in storage he says stop
15 You see
16 Or my mother who used to look at my
17 checkbook when she saw that in fact I had written
18 more checks than I had in the account she would grab
19 it Stop You see
20 So what is it here thats less abstract that
21 the computer says stop
22 MR PHILLIPS It is shyshy
23 JUSTICE BREYER How is that less abstract
24 than King Tut if we had the same thing with a grain
25 elevator if we had the same thing with a reservoir of
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1 water if we had the same thing with my checkbook You
2 see the point
3 MR PHILLIPS I do see the point Justice
4 Breyer and it seems to me that it goes to the question
5 of the methodology youre going to employ
6 JUSTICE BREYER Methodology is just that
7 you said stop
8 MR PHILLIPS Well we could shyshy
9 JUSTICE BREYER So what we have different
10 here is the computer stops rather than the abacus man
11 stopping or my mother stopping or the guy that the grain
12 elevator has that says stop So just saying what shyshy is
13 that it In other words if you say computer stop you
14 have an invention Useful add shyshy but if you say mother
15 stop you dont
16 MR PHILLIPS No Well I mean again it
17 seems to me that in some ways what shyshy what you described
18 there is a caricature of what this invention is
19 JUSTICE BREYER Of course its a
20 caricature Its a caricature designed to suggest that
21 there is an abstract idea here Its called solvency
22 MR PHILLIPS But shyshy
23 JUSTICE BREYER And what you do is you take
24 the idea of solvency and you say apply it And you say
25 apply it through the computer
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1 Is that enough to make it not just the
2 abstract idea And now were at the heart of why I used
3 my exaggerated examples shyshy
4 MR PHILLIPS Right
5 JUSTICE BREYER shyshy because you will tell me
6 why shyshy
7 MR PHILLIPS Right
8 JUSTICE BREYER shyshy this is enough
9 MR PHILLIPS Right Because Justice
10 Breyer the shyshy the shyshy the concept here is not simply to
11 say stop Stop is obviously part of the element of it
12 But its also designed to ensure that at the
13 end of the day this transaction in the midst of
14 literally a global set of shyshy of deals that are going on
15 simultaneously will be implemented at the appropriate
16 time in the appropriate way And whatever else that may
17 be it seems to me its difficult to say thats an
18 abstract idea as implemented
19 JUSTICE SOTOMAYOR Im sorry But shyshy but
20 what it appears to be it sounds like youre trying to
21 revive the patenting of a function You used the word
22 function earlier and thats all Im seeing in this
23 patent is the function of reconciling accounts the
24 function of making sure theyre paid on time But in
25 what particular way other than saying do it through a
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1 computer is this something new and not function
2 MR PHILLIPS Well it does it through shyshy
3 it creates the shadow accounts because of the concerns
4 for security You dont shyshy youre not going to allow
5 somebody to enter into a central banks own accounts
6 You create the shadow accounts You monitor through the
7 software that allows you to do that You evaluate each
8 of the transactions to ensure that the settlement will
9 be available You do it sequentially and you act on it
10 by the end of the day or whenever the transaction is to
11 take place and you implement that transaction
12 JUSTICE SCALIA Why isnt it shyshy why isnt
13 doing it through a computer not enough I mean was the
14 cotton gin not an invention because it just means youre
15 doing through a machine what people used to do by hand
16 Its not an invention Its the same old same old
17 MR PHILLIPS Justice Scalia shyshy
18 JUSTICE SCALIA Why shyshy why is a computer
19 any different in that respect
20 MR PHILLIPS At one level I agree with you
21 completely There is no difference between them
22 This Court has however said on more than a
23 few occasions albeit in dicta that coming up with an
24 idea and then say use a computer is not sufficient
25 And what Im trying to suggest to you is we dont fall
Alderson Reporting Company
10
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1 within that dicta
2 Now if you dont accept the dicta and you
3 say use a computer is fine then I think were done
4 JUSTICE SCALIA Well Im not saying use a
5 computer is shyshy is much of a novelty I mean thats shyshy
6 that goes to whether its novel or not If you just say
7 use a computer you havent invented anything But if
8 you come up with a serious program that shyshy that does it
9 then you know that may be novel But thats a novelty
10 issue isnt it
11 MR PHILLIPS To be sure Justice Scalia
12 JUSTICE BREYER And this is exactly the
13 question I really would like to you to focus on for me
14 Why is it shyshy and Im not saying this from a point of
15 view but it seems to me pretty clear that if what you
16 did was take the idea of solvency shyshy remember King Tut
17 Thats what I use the exaggeration shyshy and what you say
18 is implemented by having the abacus man keep track and
19 say stop okay shyshy
20 MR PHILLIPS Right
21 JUSTICE BREYER Then we implement it by
22 having somebody with a pencil and a piece of paper and
23 this is all that they add you see Say Have a man
24 with a pencil and a piece of paper keeping track and
25 saying stop or we say implement it in the computer
Alderson Reporting Company
11
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1 which will automatically keep track and say stop are
2 they all enough Are some of them enough Whats the
3 rule
4 And you realize I couldnt figure out much
5 in Prometheus to go beyond what I thought was an obvious
6 case leaving it up to you and your colleagues to figure
7 out how to go further Am I making enough shyshy making
8 clear enough whats bothering me And Id really like
9 to get your answer to this
10 MR PHILLIPS And shyshy and look theres
11 no shyshy Ill be the first one to shyshy to confess that trying
12 to use language to describe these things is not all that
13 easy But the way I think you can meaningfully look at
14 this is to say that this is not simply something that
15 was a fundamental truth this is not something that
16 simply says use a computer Its not simply something
17 that says maintain solvency It shyshy it operates in a
18 much more specific and concrete environment where youre
19 dealing with a problem thats been in existence since
20 the 1970s a solution in the 1990s that CLS itself
21 acknowledges needed a solution and came forward with
22 their own solution that looks a lot like ours
23 JUSTICE KENNEDY But my shyshy my initial
24 question and I think I can work this into King Tut
25 is shyshy
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12
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1 (Laughter)
2 JUSTICE KENNEDY shyshy is shyshy is whether or not
3 you could have patented that system idea process
4 method without attaching a computer program
5 MR PHILLIPS You cannot absolutely cannot
6 do that with this system because it is so complex and
7 so many interrelated parts
8 JUSTICE KENNEDY Suppose I thought shyshy and
9 again its just a thought because I dont have the
10 expertise shyshy that any computer group of people sitting
11 around a coffee shop in Silicon Valley could do this
12 over a weekend Suppose I thought that
13 MR PHILLIPS You mean wrote the code
14 JUSTICE KENNEDY Yes right
15 MR PHILLIPS Well thats absolutely shyshy
16 Im certain thats true
17 JUSTICE KENNEDY Well then shyshy then shyshy
18 MR PHILLIPS But thats true of almost all
19 software
20 JUSTICE KENNEDY Then why is the computer
21 program necessary to make the patent valid
22 MR PHILLIPS Well its shyshy its necessary
23 to make the invention effective As the Solicitor
24 General said the computer is essential to the efficacy
25 of this invention because of the complicated financial
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1 arrangements that exist and that can only be resolved on
2 a shyshy on a realtime basis Your abacus is great if you
3 happen to be waiting for the pyramids to be finished or
4 waiting for the gold to move in and out but it doesnt
5 help with you an abacus if youre dealing with literally
6 thousands of transactions simultaneously going on in
7 different countries at different points in time
8 JUSTICE KENNEDY But thats just an idea
9 hey lets use a computer
10 MR PHILLIPS But its not just shyshy I mean
11 obviously part of it is use the computer Justice
12 Kennedy But more fundamentally it goes beyond that
13 See I shyshy
14 JUSTICE SOTOMAYOR Is your software
15 copyrighted
16 MR PHILLIPS No I dont believe so
17 JUSTICE GINSBURG There is no special
18 software that comes with this shyshy thats part of this
19 patent is it shyshy is there
20 MR PHILLIPS No Justice Ginsburg what
21 we did here is what the Patent and Trademark Office
22 encourages us to do and encourages all software patent
23 writers to do which is to identify the functions that
24 you want to be provided for with the software and leave
25 it then to the software writers who I gather are you
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1 know quite capable of converting these functions into
2 very specific code
3 JUSTICE KAGAN Mr Phillips could you shyshy
4 could you disaggregate your argument for me Because
5 you just said look this Court has said its not
6 sufficient if you have an idea and then you say use a
7 computer to implement it right So are you saying that
8 your shyshy that shyshy are you saying that youre doing more
9 than saying use a computer to implement it or are you
10 saying that its shyshy that the idea itself is more than an
11 idea
12 MR PHILLIPS Yes Im saying shyshy
13 JUSTICE KAGAN Which part of what shyshy
14 MR PHILLIPS Im saying both actually I
15 mean Im making both of those arguments I shyshy I
16 believe that if you analyze the claims and you dont
17 caricature them and you dont strip them out of the
18 limitations that are embedded in there this is not some
19 kind of an abstract concept This is not some kind shyshy
20 its not an abstract idea Its a vary shyshy
21 JUSTICE KAGAN So putting the computer
22 stuff aside completely shyshy
23 MR PHILLIPS Right
24 JUSTICE KAGAN shyshy youre saying that youve
25 invented something or you shyshy
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1 MR PHILIPS Yes
2 JUSTICE KAGAN There is something that
3 youve patented that has shyshy that is not just simple use
4 a third party to do a settlement
5 MR PHILLIPS Right
6 JUSTICE KAGAN And what is that putting
7 the computer aside
8 MR PHILLIPS It is shyshy well shyshy and again
9 its difficult to do that because you absolutely need
10 the computer in order to implement this But the key to
11 the invention is the notion of being able
12 simultaneously dealing with it on a chronological basis
13 to stop transactions that will otherwise interfere with
14 the ability to settle on time and under the appropriate
15 circumstances And the only way you can do that in a
16 realtime basis when youre dealing with a global economy
17 is to use a computer It is necessary to the efficacy
18 of this
19 So in that sense I cant shyshy I cant
20 disaggregate it the way in some sense youre suggesting
21 It seems to me its bound up with in shyshy its bounds up
22 with the whole notion of is this an abstract concept
23 JUSTICE BREYER Can you in fact shyshy now
24 this is shyshy look there are 42 briefs in this case I
25 actually read them and I found them very very helpful
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1 up to the point where I have to make a decision because
2 theyre serious I mean you know shyshy now the problem
3 that I came away with is the one that youre beginning
4 to discuss that if you simply say take an idea thats
5 abstract and implement it on a computer there are shyshy
6 youre going to get it much faster youre going to be
7 able to do many many things and if thats good enough
8 there is a risk that you will take business in the
9 United States or large segments and instead of having
10 competition on price service and better production
11 methods well have competition on who has the best
12 patent lawyer You see where Im going on that one
13 MR PHILLIPS Yeah of course
14 JUSTICE BREYER And if you go the other way
15 and say never then what you do is you rule out real
16 inventions with computers
17 MR PHILLIPS Right
18 JUSTICE BREYER And so in those 42 briefs
19 there are a number of suggestions as to how to go
20 between Scylla and Charybdis Now I would like to
21 know shyshy I dont know if you can step back from your
22 representational model Thats a problem Youre all
23 we have now And shyshy and from my point of view I need
24 to know what in your opinion is the best way of sailing
25 between these two serious arms
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1 MR PHILLIPS Well Justice Breyer I guess
2 I would suggest to you that you might want to deal with
3 the problem you know as opposed to the problems you
4 dont know at this stage I mean we have had business
5 method patents and software patents in existence for
6 well over a decade and theyre obviously quite
7 significant in number And shyshy and we know what the
8 system is we have And Congress looked at that system
9 right and didnt say no to business methods patents
10 didnt say no to software patents instead said the
11 solution to this problem is to get it out of the
12 judicial process and create an administrative process
13 but leave the substantive standards intact
14 So my suggestion to you would be follow that
15 same advice a liberal interpretation of 101 and not a
16 caricature of the claims analyze the claims as written
17 and therefore say that the solution is 102 and 103 and
18 use the administrative process If you shyshy
19 JUSTICE GINSBURG Mr Phillips let me just
20 stop you there because four Justices of this Court did
21 not read that legislative history the way you do And
22 it was shyshy was in Bilski
23 MR PHILLIPS But this is postshyBilski
24 JUSTICE GINSBURG Justice Stevens went
25 carefully through that and he said Congress was
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1 reacting to a decision It had shyshy it was not addressing
2 101 So there are at least four Justices who say shyshy who
3 didnt buy that argument
4 MR PHILLIPS Well I mean it still seems
5 to me that the shyshy the natural inference is Congress did
6 not change 101 Congress created an entire
7 administrative system to deal with 101 102 and 103
8 And shyshy and I would hope shyshy
9 JUSTICE SCALIA And four is not five
10 anyway right
11 MR PHILLIPS Thats true
12 JUSTICE SCALIA Four is not five
13 MR PHILLIPS And youve exhausted my math
14 skills Your Honor
15 JUSTICE SCALIA By the way we shyshy we have
16 said that you cant take an abstract idea and then say
17 use a computer to implement it But we havent said
18 that you cant take an abstract idea and then say here
19 is how you use a computer to implement it shyshy
20 MR PHILLIPS Exactly
21 JUSTICE SCALIA shyshy which is basically what
22 youre doing
23 MR PHILLIPS And thats the argument were
24 doing and shyshy
25 JUSTICE SCALIA And thats a little
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1 different
2 MR PHILLIPS shyshy thats the line were
3 asking the Court to draw here
4 JUSTICE KAGAN Well how are you saying the
5 how Because I thought that your computers shyshy that your
6 patents really did just say do this on a computer as
7 opposed to saying anything substantive about how to do
8 it on a computer
9 MR PHILLIPS I would urge the Court to
10 look at Joint Appendix 159 285shy286 where it goes
11 through the flow charts This is shyshy and this is just a
12 specific example of the method by which you stop a
13 transaction and it goes through a varied series of
14 detailed steps and what the computer has to do in order
15 to do that It doesnt actually obviously put in the
16 code but thats what the PTO says dont do Dont put
17 in the code because nobody understands code so shyshy but
18 put in the functions and we know shyshy and we know that
19 someone skilled in the art will be able to put in the
20 code And if they arent if they cant do that then
21 its not enabled and thats a 112 problem
22 To go back Justice Breyer to your
23 question So on the one hand youve got a problem that
24 it seems to me Congress to some extent has said is okay
25 and weve got a solution and that solutions playing
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1 through On the other hand if this Court were to say
2 much more categorically either that theres no such
3 thing as business method patents or adopt the Solicitor
4 Generals interpretation which is to say that there
5 cannot be software unless the software somehow actually
6 improves the computer as opposed to software improving
7 every other device or any other mechanism that might be
8 out there
9 What we know is that this would inherently
10 declare and in one fell swoop hundreds of thousands of
11 patents invalid and the consequences of that it seems
12 to me are utterly unknowable And before the Court goes
13 down that path I would think it would think long and
14 hard about whether isnt that a judgment that Congress
15 ought to make And It seems to me in that sense youre
16 essentially where the Court was in Chakrabarty where
17 everybody was saying youve got to act in one way or the
18 other or the world comes to an end and the courts have
19 said well apply 101 directly
20 JUSTICE KENNEDY If we say that theres no
21 software patentability and agree with the Attorney
22 General do you lose in this case
23 MR PHILLIPS Well it would be very hard
24 for me to see how that shyshy how shyshy how I can get around
25 that particular problem because the computer is the
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1 essence of it so shyshy and a portion of it is clearly the
2 software So I think if you say there is no such thing
3 as software patentability I do lose in this case yes
4 Your Honor As do a whole lot of other people
5 JUSTICE KENNEDY Is there any common ground
6 between you and the government shyshy maybe a better
7 question to ask the government shyshy a common ground
8 between you and the government on something in the
9 software area thats patentable other than making the
10 computer itself work You understand the government to
11 say no software patents
12 MR PHILLIPS Thats the way I interpret
13 the governments shyshy the governments brief
14 JUSTICE BREYER It was like shyshy theres a
15 Bloomberg brief out here that was on this that said
16 no you can shyshy you can patent computer software when
17 its an improvement in the computer when its an
18 improvement in software when its an improvement in a
19 technology that is developed out of computers like
20 robotics when it is an improvement in a machine or
21 technology but you cannot improve it where it is simply
22 an improvement in an activity that is engaged in
23 primarily through mental processes But what they mean
24 by that is business finance and similar arts
25 Thats shyshy I mean thats shyshy it wasnt quite what shyshy I
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1 know Thats what I want to know what you dont agree
2 with about that because its a little more refined than
3 you suggested
4 MR PHILLIPS I read the Solicitor
5 Generals brief as broader than the Bloomberg brief
6 in shyshy in terms of the approach And IBMs argument is
7 if you knock out software patents you eliminate web
8 browsing word processing cellphones eshymail Those
9 are all activities that I dont think fall within the
10 meaning of the shyshy the meaning of the governments theory
11 of the case
12 JUSTICE BREYER But Im asking you shyshy Im
13 asking you what about this one that I just mentioned
14 You see I went through those five steps shyshy
15 MR PHILLIPS Right
16 JUSTICE BREYER shyshy and four of them you
17 could patent and the fifth one you cant
18 MR PHILLIPS Right But I shyshy and I guess
19 my answer to that is thats nowhere in the statute and
20 it doesnt seem to me to reflect an abstract idea Its
21 a shyshy its a line you draw that takes out business method
22 patents If the Court wants to eliminate business
23 method patents fine But you just said no to that in
24 Bilski two three terms ago
25 Now to be sure give the Solicitor General
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1 credit he comes here and says to you We didnt like
2 the result in Bilski we want you to say dont use
3 process in order to get there which is a statutory
4 interpretation come up with an extraordinarily
5 complicated way of looking at the exception and use that
6 to get to the exact same result
7 JUSTICE SOTOMAYOR Well youre doing a
8 very good job of proving shyshy
9 JUSTICE GINSBURG In Bilski Justice Breyer
10 did try to say that there wasnt that shyshy a whole lot of
11 distance between the four who thought business methods
12 were not patentable But he shyshy he also said something
13 else in shyshy in the other case Mayo Justice Scalia
14 asked you the question about doesnt that go to novelty
15 but didnt Justice Breyer say in Mayo that novelty can
16 be relevant to patent shyshy to patent eligibility He said
17 theres shyshy theres an overlap
18 MR PHILLIPS Well he said theres an
19 overlap Here in this context I think basically the
20 Respondents theory would mean that they are completely
21 coterminous And I dont think thats what the Court
22 meant And also we know from Diehr that theres got to
23 be at least some significant limitations on the extent
24 to which novelty has to be built into 101 That is the
25 province of 102 and 103 And as I said Congress
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1 modified the system of adjudication to create an
2 administrative mechanism that allows you to get to 102
3 and 103 And at least in context its important to
4 realize there have been 11 cases since that was created
5 9 of the 11 have been knocked down on 102 or 103 grounds
6 and not on 101 grounds And it seems to me thats the
7 answer to this problem is leave 101 as the coarse
8 filter If on its face it states these kinds of broad
9 abstract principles fundamental truths and even if it
10 says use a computer those should be struck down
11 JUSTICE SOTOMAYOR Which of the shyshy which of
12 the opinions below captures your position most
13 accurately
14 MR PHILLIPS I would guess it would be
15 Judge Moores opinion below that would capture ours most
16 correctly
17 JUSTICE SOTOMAYOR And if we were to think
18 your method claim is ineligible do you agree that your
19 systems and shyshy your medium and system claims fail as
20 well Do they rise and fall together
21 MR PHILLIPS No No I dont believe they
22 do rise and fall together I mean I think you could shyshy
23 if you wanted to interpret our medium claim shyshy I mean
24 our shyshy our method claims in a shyshy in particularly
25 abstract way I think you could still say that the
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1 system claims which clearly are shyshy are how to create a
2 computer system and how to implement it using that
3 method would be a much more concrete version of that in
4 a way that would take it out of 101 That said I
5 obviously believe that all of our claims satisfy 101
6 and should go on to the next stage
7 JUSTICE KAGAN Can I give you a
8 hypothetical Mr Phillips and you tell me how its
9 different or the same Lets say you know 30 years
10 somebody took a look around the world and said a lot of
11 people seem to order products by mail They get the
12 catalogues in the mail and then they send back their
13 return forms And lets say that one of the founders of
14 the Internet said wouldnt this be an amazing system
15 we could actually do this by computer and they had
16 patented that Is that the same
17 MR PHILLIPS I dont know if its the
18 same but I would shyshy I would argue that it could very
19 well be a patentable subject matter because shyshy but it
20 depends on how the claims play out
21 JUSTICE KAGAN No but exactly I mean
22 the claim would have said something along the lines of
23 you know theres this process by which people order
24 products and we want to do it over the Internet we want
25 to do it electronically and we will use a computer to
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1 do that to essentially take the process of mail order
2 catalogues and make it electronic
3 MR PHILLIPS I could certainly shyshy I think
4 I could write a claim shyshy a set of claims that I believe
5 would satisfy 101 And shyshy and to the extent that
6 youd shyshy that youd think those are no different than
7 the ones I have here then my argument is simply I think
8 I satisfy 101 with the claims we have before us Your
9 Honor
10 If there are no further questions then Id
11 like to reserve the rest of my time
12 CHIEF JUSTICE ROBERTS Thank you
13 Mr Phillips
14 Mr Perry
15 ORAL ARGUMENT OF MARK A PERRY
16 ON BEHALF OF THE RESPONDENTS
17 MR PERRY Mr Chief Justice and may it
18 please the Court
19 That path between Scylla and Charybdis was
20 charted in Bilski and Mayo Bilski holds that a
21 fundamental economic principle is an abstract idea and
22 Mayo holds that running such a principle on a computer
23 is quote not a patentable application of that
24 principle Those two propositions are sufficient to
25 dispose of this case
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1 If Bilski and Mayo stand Alices patents
2 fail Therefore Mr Phillips and his friends are
3 asking this Court to change the standard even though
4 this Court has had three unanimous decisions in the last
5 four terms establishing what the Court called a myriad
6 a wellshyestablished standard
7 On the abstract idea Justice Ginsburg you
8 asked Mr Phillips whats the difference between hedging
9 and this claim There is no difference This is
10 hedging It is hedging against credit default rather
11 than price fluctuation but it is simply hedging
12 And Mr Phillips stood up for 26 minutes and
13 never once referred to the patent Lets look at what
14 the inventor the soshycalled inventor said about this
15 invention This is at JA 293 to 94 in the
16 specification
17 This claim has simply two steps Its very
18 simple First debiting and crediting on a realtime
19 basis the relevant shadow records and second by
20 periodically affecting corresponding payment
21 instructions Those are direct quotes Debit credit
22 and pay Your Honor you cant get much more simple
23 than that
24 Mr Phillips suggests well we have
25 multilateral transactions global things chronological
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1 time zones and so forth None of those are claimed
2 Your Honor Those are all recited in specification
3 The claims read on a single transaction involving two
4 parties
5 JUSTICE BREYER Can I ask you at some
6 point not necessarily this second to say in my shyshy this
7 is just shyshy you know you have an opinion for a court
8 Different judges can have different interpretations
9 All youre getting is mine okay
10 But I think its pretty easy to say that
11 Archimedes cant just go to a boat builder and say
12 apply my idea All right Everybody agrees with that
13 But now we try to take that word apply and give
14 content to it
15 And what I suspect in my opinion Mayo did
16 and Bilski and the other cases is sketch an outer shell
17 of the content hoping that the experts you and the
18 other lawyers and the shyshy the circuit court could fill
19 in a little better than we had done the content of that
20 shell
21 So so far youre saying well this is
22 close enough to Archimedes saying apply it that we
23 neednt go further
24 Now will you at some point in the next few
25 minutes give me your impression of if it were necessary
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1 to go further what would the right words or example be
2 MR PERRY Your Honor as shyshy Justice
3 Breyer as to abstract ideas the PTO has filled in that
4 shell by listing economic concepts legal concepts
5 financial concepts teaching concepts dating and
6 interpersonal relationships and generally how business
7 should be conducted as examples of those things that are
8 likely abstract which of course all follow directly
9 from Bilski and the discussion this Court had in Bilski
10 And this patent shyshy these patents fall squarely within
11 that
12 Congress in the AIA confirmed that
13 reading Congress in the CBM method said business
14 methods that are subject to special scrutiny shyshy that is
15 dubious patents shyshy include methods and corresponding
16 apparatus which is what we have here that pertain to
17 data processing in the financial services industry and
18 do not offer a technological solution That describes
19 Alices patents to a letter Your Honor So that we
20 have shyshy
21 JUSTICE SOTOMAYOR What do you think is a
22 technological solution
23 MR PERRY Your Honor shyshy
24 JUSTICE SOTOMAYOR How could they if at
25 all written their patents to shyshy to make shyshy to make
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1 their software eligible What would shyshy what do they
2 need shyshy would have needed to have added
3 MR PERRY Justice Sotomayor they have no
4 software first Theyve never written software
5 Theyve never programmed a computer So thats a
6 nonexistent set
7 Second there are many technological
8 solutions to trading and settlement problems For
9 example data compression These shyshy these trading
10 platforms involve the movement of very large quantities
11 of data around the world The physical pipes that is
12 the fiber optic cables and data lines are limited
13 There are very sophisticated algorithms for both
14 security and speed to move data through the transmission
15 lines in novel and useful ways that could well be
16 patented
17 Nothing like that is claimed here To come
18 back to where I started if you look for example at
19 Claim 65 in the 510 patent as Mr Phillips reads it
20 it literally reads on a twoshyparty escrow to sell a
21 house so long as the escrow agent is typing this stuff
22 into the HUDshy1 using a computer That has nothing to do
23 with multilevel shyshy
24 CHIEF JUSTICE ROBERTS Well thats a
25 little more complicated He referred us to Joint
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1 Appendix Page 159 which is not a change in how
2 computers work But it is shyshy constitutes the
3 instructions about how to use the computer and where it
4 needs to be affected And just looking at it it looks
5 pretty complicated There are a lot of arrows and
6 they shyshy you know different things that go shyshy
7 (Laughter)
8 CHIEF JUSTICE ROBERTS Well but I mean
9 you know it shyshy in different directions And I
10 understand him to say that in each of those places
11 thats where the computer is needed
12 MR PERRY Mr Chief Justice Figure 16 has
13 nothing to do with the invention asserted against my
14 client in this case There are two inventions in this
15 patent One invention involving multilateral contract
16 formation is not asserted against my client And all of
17 these drawings pertain to that The only drawings that
18 pertain to the asserted claims are 25 and 33 to 37 And
19 that was established below and its established in this
20 Court And Mr Phillips has never disputed it
21 So the claim hes pointed the Court shyshy the
22 figure hes pointed the Court to has nothing to do with
23 the invention Its for a different invention that is
24 not at issue in this case
25 Remember there are hundreds and hundreds of
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1 pages of these patents They all pertain to the other
2 invention Thats why in the back of our red brief we
3 excerpted the very little bit that actually pertains to
4 this You sort of tack on patent shyshy the tack on claim
5 that Mr Phillips is asserting here Its 4 columns
6 Its less than five pages in the printed appendix that
7 actually pertains to this invention And it contains no
8 disclosure whatever
9 Justice Scalia to your question about how
10 the computer does it Of course a patent that
11 describes sufficiently how a computer does a new and
12 useful thing whether its data compression or any other
13 technological solution to a business problem a social
14 problem or a technological problem would be within the
15 realm of the shyshy of the patent laws That is what the
16 patent laws have always been for
17 This is not such a patent And the reason
18 for that is this is a preshyBilski set of patents These
19 were prosecuted under the old State Street test where
20 all the applicant had to claim was a result
21 JUSTICE KENNEDY Would you give me shyshy
22 again you already did it once shyshy an example of a
23 business process patent shyshy of a business process idea
24 and invention that is patentable
25 MR PERRY Your Honor there are many
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1 examples One would be a technological solution to a
2 business problem So that for example shyshy Ill give a
3 different example There are many applications today
4 The Court may be familiar with streaming video to watch
5 video on your computer
6 It is not possible to get enough data
7 through existing lines in its raw format The data has
8 to be manipulated in order to see live video So if you
9 want to watch TV on your phone for example
10 Those algorithms those inventions are
11 undoubtedly technological And if they are used in a
12 trading platform or a hedging system or something else
13 that wouldnt disable them And this is what the Diehr
14 case shyshy
15 JUSTICE KENNEDY Well I shyshy I shyshy in my
16 language Ive called that mechanical rather than
17 process Can you give me an example of process
18 MR PERRY Yes Your Honor The process in
19 that example would be a computer running the particular
20 data compression algorithm
21 JUSTICE KENNEDY But thats how to make
22 a shyshy thats how to make a machine work better
23 MR PERRY Yes Your Honor
24 JUSTICE KENNEDY Im asking you Is there
25 any business process any business activity that is
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1 susceptible to a patent a pure patent innovations that
2 deserve patents
3 MR PERRY Your Honor again a
4 technological solution to a business problem could well
5 be whether its a method or a process is equivalent
6 Again Congress said method in a corresponding shyshy
7 JUSTICE KENNEDY Can you give me an
8 example
9 MR PERRY I thought the data compression
10 example was a good one Ill try an encryption
11 technology Many of these trading platforms you know
12 dealing with securities and money would require some
13 sort of security devices You could have a process for
14 securely transmitting data would be another computer
15 implemented technological solution to a business
16 problem Again nothing like that claimed here
17 JUSTICE SOTOMAYOR How about eshymail and
18 just word processing programs
19 MR PERRY Your Honor a program shyshy let me
20 try it this way to both of your questions In our view
21 if what is claimed as the inventive contribution under
22 Mayo shyshy in other words if we have an abstract idea as
23 we do here and what is claimed is the inventive
24 contribution for Step 2 is the computer then the
25 computer must be essential to that operation and
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1 represent an advancement in computer science or other
2 technology And we know thats not met here Justice
3 Sotomayor because shyshy
4 JUSTICE SOTOMAYOR So youre saying no to
5 eshymail and word processing
6 MR PERRY Your Honor I think at a
7 point shyshy
8 JUSTICE SOTOMAYOR They certainly have
9 functionality and shyshy and improvement of functionality
10 for the user
11 MR PERRY At a point in time in the past
12 I think both of those would have been technological
13 advances that were patentable
14 JUSTICE SOTOMAYOR How
15 MR PERRY Today shyshy because they would have
16 provided a technological solution to a then unmet
17 problem Today reciting and do it on a word processor
18 is no different than and do it on a typewriter or shyshy and
19 do it on a calculator
20 The inventive contribution component which
21 uses specifically the language of conventional and
22 routine and well understood will evolve with
23 technology Thats why its different than the abstract
24 idea component
25 And here we know that these patents dont
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1 claim anything that was not conventional well
2 understood and routine We went through that in great
3 detail and Alice has never disputed a word of it They
4 just say youre not supposed to do that analysis even
5 though the Court 9shy0 in Mayo said we should
6 And in this case its very important to
7 look at what Alices own experts said on the subject
8 This is not our expert This is Alices expert And
9 this is at Page 1327shy28 of the Joint Appendix It is
10 possible to do the business methods of maintaining
11 accounts adjusting accounts and providing an
12 instruction without a computer or other hardware
13 And then Justice Breyer directly to your
14 abacus If someone had thought of this invention
15 soshycalled invention 100 years ago they might have
16 implemented it in a nonelectronic manner using various
17 precomputing tools such as an abacus or handwritten
18 ledgers
19 We know from Benson the Courts seminal
20 computer implementation case that if you can do it by
21 head and hand then the computer doesnt add anything
22 inventive within the meaning of the 101 exception That
23 is the holding of Benson And the Court reiterated that
24 in Mayo
25 Flook said exactly the same thing If you
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1 can do it with pencil and paper then the computer is
2 not offering anything that the patent laws are or should
3 be concerned with
4 It is only where the method will not work
5 without a computer which is not these claims and where
6 the computer itself is doing something that the patent
7 law is willing to protect
8 CHIEF JUSTICE ROBERTS What if shyshy what if
9 you can do it without a computer but its going to
10 take you know 20 people a hundred years In other
11 words theoretically you can replicate what the
12 computer does shyshy
13 MR PERRY Two answers
14 CHIEF JUSTICE ROBERTS shyshy but its
15 impractical without looking to do it on the computer
16 MR PERRY Mr Chief Justice first these
17 claims literally read as Alice reads them on a single
18 transaction between two parties so its not 20 people
19 for a hundred years Its one person sitting in a room
20 so thats not a problem
21 Second if what is being claimed is the
22 necessary speed or efficiency or data crunching
23 capabilities if you will of a computer then it would
24 have to be claimed and theres nothing claimed here
25 All that is claimed shyshy and my friend is going to stand
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1 up on rebuttal and tell you all that the expert said
2 well what is claimed is a computer but its just a
3 computer It just says a computer configured too It
4 doesnt say that the computer actually has to shyshy
5 JUSTICE BREYER Yeah but the trouble with
6 that particular test is as I think partly the Chief
7 Justice said how long et cetera and then add to that
8 though you could do it without a computer what happens
9 at the end of the line is the automobile engine goes off
10 or it begins to sputter or it turns left
11 You see its possible to take Archimedes shyshy
12 shyshy you know I use that example purposely to call
13 attention to the problem You can take those things
14 and youre not just saying apply it and youre not even
15 just saying shyshy you are saying use the computer but at
16 the end of the road something physical in the world
17 changes and everybody would say now thats shyshy that
18 will falls within I mean probably I mean my
19 hesitation shows Im looking for the right words
20 MR PERRY Justice Breyer your point is
21 the reason that it is equally fallacious to suggest on
22 the one hand as Alice and IBM does that simply
23 reciting a computer is a magic key that gets you through
24 101 and you never have to any other inquiry and what
25 some of folks the amici on the other side say which
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1 is that computers or software are never eligible Both
2 of those things have to be wrong because what the Court
3 said in Bilski was future innovation is too uncertain
4 We are not going to do that as a Court And the Court
5 laid out an approach using abstract ideas in Bilski and
6 inventive contribution in Mayo that is flexible enough
7 to take into account that innovation and to deal with
8 particular claims in context which is why at the end
9 of the day we have to come back to these patents and
10 decide which shyshy
11 JUSTICE KAGAN Mr Perry before we get
12 back to these matters you said to Justice Scalia if a
13 patent sufficiently describes how a computer will
14 implement an idea then its patentable So how
15 sufficiently does one have to describe it What do we
16 want a judge to do at this threshold level in terms of
17 trying to figure out whether the description is
18 sufficient to get you past it
19 MR PERRY If I can answer in two steps
20 Justice Kagan First in the negative What the
21 applicant or patentee must do shyshy must not do is simply
22 describe the desired result That would take us back to
23 State Street That would simply say I claim a magic
24 box that buys high and sells low or vice versa I
25 suppose I claim a magic box for investing Thats what
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1 these patents do
2 Then to put it in the affirmative and in the
3 language of Mayo the claim has to recite something
4 significantly more something significantly more than
5 the abstract idea itself That would be a contextual
6 analysis based on the claims and specifications and file
7 history and we know that some devices some methods
8 some programming will pass that
9 It is not going to be a brightshyline rule and
10 thats one of the tugshyofshywar issues that this Court and
11 the Federal Circuit have been having in these cases
12 The Federal Circuit wants brightshyline rules All
13 computers are in or all computers are out
14 This Court has been more contextual This
15 Court has been more nuanced This Court has looked at
16 things in a more robust way
17 JUSTICE KAGAN Youre not suggesting that
18 specific code is necessary
19 MR PERRY No Your Honor I think the shyshy
20 actual description of the programming is a 112 problem
21 I agree with that A 112 issue That is the realm of
22 the written description requirement What is a 101
23 problem is it is on the applicant to do more than simply
24 describe the results simply say A magic box that does
25 intermediate settlement And we can tie that back to
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1 this particular prosecution the 510 patent which is
2 the method patent
3 The examiner rejected it Under Section
4 101 the examiner said this is an abstract idea You
5 cant have this patent And the only change that this
6 applicant made was to add in the adjusting step
7 electronic adjustment It put in one word
8 electronic adjustment And under State Street which
9 is what this patent is prosecuted under that was
10 enough because the result of adjusting run through a
11 computer is enough
12 Under current law that cant be enough
13 That just cant get a patent over the line because this
14 Court said in Mayo and I got to quote this language
15 Simply implementing a fundamental principle on a
16 physical machine namely a computer is not a patentable
17 application of that principle Thats all that Alice
18 has done
19 These are preshyBilski patents They never
20 should have been issued General Verrilli will stand up
21 and address that point And certainly under current
22 law shyshy one point on the AIA Congress did not send all
23 this to the administrative process Congress created
24 two avenues the courts and the PTO to use the
25 standards Essentially it ratified Bilski and Mayo and
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1 said we agree with what you all are doing at the
2 Supreme Court and the existing standards are good enough
3 for us This is a judicial problem And that is a good
4 reason The abstract shyshy
5 JUSTICE GINSBURG The Federal Circuit in
6 this case split in many ways and it had our decisions
7 to deal with You said given Bilski and Mayo this is
8 an easy case What is the instruction that escaped a
9 good number of judges on the Federal Circuit How would
10 you state the rule
11 MR PERRY Your Honor I think theres a
12 significant element to the Federal Circuit that
13 disagrees with Mayo and has been resistant in applying
14 it Chief Judge shyshy former Chief Judge Michelle filed a
15 brief in this Court essentially saying Mayo is a
16 lifeshysciences case You should limit it to that because
17 if you apply it to everything else then these patents
18 are no good
19 Mayo we submit is a technologyshyneutral
20 industryshyneutral exceptionshyneutral framework that can
21 be used to answer all of these questions This is not
22 the death of software patents The software industry is
23 all before this Court saying this is fine with us
24 Every company in the United States practically except
25 for IBM is saying go ahead This will not affect
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1 software patents
2 Justice Ginsburg this Courts precedents
3 are clear They are unanimous They just need to be
4 applied To suggest that there is confusion that needs
5 to be addressed by retreating beating a retreat from
6 recent unanimous decisions would simply reward
7 intransigence difficulty refusal to adhere to what are
8 clear precedents because shyshy
9 JUSTICE KAGAN Should we be concerned
10 Mr Perry that there are old patents that in fact could
11 meet the test that you set forth but wont because they
12 were written in a different time and so used much more
13 general language
14 MR PERRY Your Honor the applicant or the
15 patent holder would have the opportunity to institute a
16 reexamination proceeding or some sort of administration
17 process to address that issue
18 And second it should be noted this is a
19 very small problem There are 2 million outstanding
20 patents in the United States In the last four fiscal
21 years there were 22000 infringement litigations
22 instituted but since Bilski there have only been 57
23 district court decisions on Section 101 issues There
24 have only been 12 Federal Circuit decisions total on
25 computer implementation
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1 We are talking about a group of patents
2 Justice Kagan thats way out at the tail end of
3 distribution Most patents never have a 101 challenge
4 This is not an issue with cotton gins and other things
5 This is a problem for the most marginal
6 most dubious most skeptical patents the ones that this
7 Court in Bilski shyshy and remember what Bilskis holding
8 is The majority said they are processes but it did
9 not say they are eligible
10 Thank you Mr Chief Justice
11 CHIEF JUSTICE ROBERTS Thank you counsel
12 General Verrilli
13 ORAL ARGUMENT OF DONALD B VERRILLI JR
14 ON BEHALF OF THE UNITED STATES AS AMICUS
15 CURIAE SUPPORTING RESPONDENTS
16 GENERAL VERRILLI Mr Chief Justice and
17 may it please the Court
18 An abstract idea does not become
19 patentshyeligible merely by tacking on an instruction to
20 use a computer to carry it out A computer makes a
21 difference under Section 101 when it imposes a
22 meaningful limit on the patent claim That occurs when
23 the claim is directed at improvement in computing
24 technology or an innovation that uses computing
25 technology to improve other technological functions
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1 Thats the test that we believe is most faithful to this
2 Courts precedents in Bilski and Mayo It keeps patents
3 within their traditional and appropriate domain and it
4 is capable of being administered consistently by Courts
5 and by PTO examiners
6 JUSTICE GINSBURG How do you answer the
7 argument that your view would extinguish businessshymethod
8 patents and make all software ineligible for patent
9 protection
10 GENERAL VERRILLI Yeah with shyshy let me
11 address software patents first because that I think is
12 obviously a significant question And its just not
13 correct to say that our approach would make software
14 patenting ineligible Any software patent that improves
15 the functioning of the computer technology is eligible
16 Any software patent that improves shyshy that is used to
17 improve another technology is eligible For example
18 the patent in the shyshy in the Diehr case is one in
19 which shyshy
20 JUSTICE SOTOMAYOR Why do we need to reach
21 this in that shyshy reach software patents at all in this
22 case
23 GENERAL VERRILLI Well shyshy
24 JUSTICE SOTOMAYOR Whats the necessity for
25 us to announce a general rule with respect to software
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1 There is no software being patented in this case
2 GENERAL VERRILLI Well I shyshy
3 JUSTICE SOTOMAYOR Theres a systems
4 GENERAL VERRILLI Well I shyshy I think shyshy
5 well they shyshy they shyshy theres a process being and shyshy and
6 one can think of software patents as process patents
7 And I think thats why my friends on the other side are
8 saying the sky is falling because they shyshy they are
9 interpreting what were saying about that when a
10 computer makes shyshy when a computers involvement makes
11 something eligible under 101 its calling those into
12 question and it doesnt
13 JUSTICE SOTOMAYOR Do you think we have to
14 reach the patentability of software to answer this case
15 GENERAL VERRILLI Well I think you can shyshy
16 I think the answer to that question is no not
17 necessarily You can decide it by saying that shyshy that
18 Bilski answers the question whether this is an abstract
19 idea because this form of hedging is really no
20 different than the form of hedging as a conceptual
21 matter at issue in Bilski And then Mayo answers the
22 question of whether the use of a computer in this case
23 adds enough to the abstract idea beyond conventional
24 steps because here all we have after all is just
25 conventional use of computing technology no computer
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1 innovation such that you dont qualify under 101 You
2 could take that approach
3 But it is important to the United States
4 that we shyshy and to our patent examiners that we get some
5 clarity if we can I think the clarity could come from
6 the text that I propose which I want to reiterate shyshy
7 JUSTICE SOTOMAYOR Well shyshy
8 JUSTICE BREYER Could shyshy could shyshy could you
9 go on with that because you were just getting to the
10 point where I think you say a computer improvement that
11 in fact leads to an improvement in harvesting cotton is
12 an improvement through a computer of technology so it
13 qualifies
14 But then I think you were going to say or I
15 got this also from the brief a computer improvement
16 that leads to an improvement in the methods of selling
17 bonds over the telephone is not an improvement in
18 technology reached by the computer Am I right about
19 the distinction youre making
20 GENERAL VERRILLI I dont think theres a
21 yes or no answer to that question
22 JUSTICE BREYER What is your view Yeah
23 what is shyshy how do we deal with just that problem
24 GENERAL VERRILLI If there is a genuine
25 innovation in the functioning of the computer shyshy
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1 JUSTICE BREYER Yes
2 GENERAL VERRILLI shyshy such that business
3 processes shyshy
4 JUSTICE BREYER Weve got that Yes yes
5 We got the computer But then it doesnt improve the
6 computer but rather it improves through the computer
7 the harvesting of cotton
8 Now youve got it in what you said was your
9 second category which is an improvement through the
10 computer of a technology And I thought in your brief
11 you were distinguishing an improvement through the
12 computer of a human activity that is not a technology
13 and in particular to pick an example of that
14 something in finance or something in business
15 Now am I right about the distinction youre
16 making
17 GENERAL VERRILLI Yeah that shyshy
18 JUSTICE BREYER If Im not right what is
19 the distinction
20 GENERAL VERRILLI That is generally the
21 line were drawing Frankly shyshy
22 JUSTICE BREYER And how is that justified
23 GENERAL VERRILLI I do want shyshy
24 JUSTICE BREYER That shyshy that is Judge Dyk
25 in shyshy in Bilski in the Federal circuit 4 people sort of
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1 picked it up maybe 5 didnt pick it up Would you say
2 a few words about it
3 GENERAL VERRILLI Sure About shyshy let me go
4 to Bilski there in that I do think while shyshy while
5 certainly the Court held that the term process got a
6 natural construction which could include business
7 methods it seems to me that thats not all the Court
8 said in Bilski The Court also said that it was
9 historically and traditionally quite rare that business
10 methods were patent eligible
11 It also said that shyshy that the shyshy that courts
12 and the PTO examiners should use the abstract ideas
13 exception to 101 to police the appropriate boundary
14 It also said that the
15 machineshyorshytransformation test that the United States
16 advocated remained a useful tool And of course that
17 directs to you seeing whether there is a technology
18 application
19 And of course the holding in Bilski was
20 that the shyshy the method for hedging risk was ineligible
21 because it was an abstract idea and I cant imagine
22 that if in Bilski the shyshy the claim had been exactly the
23 same but had added use a computer to carry out some of
24 these standard random analysis functions that are
25 claimed by the patent that you would have found it to
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1 be patent eligible
2 And I shyshy I would submit for the Court that
3 the key point here I think is that now given where
4 the Court shyshy what the Court has held in Bilski given
5 what its held in Mayo the abstract ideas exception is
6 really the only tool left to deal with what I shyshy what I
7 think I fairly read Bilski as saying is a significant
8 problem the proliferation of patents of business
9 methods
10 JUSTICE KENNEDY Is there an example that
11 you can give us of a shyshy what we can call a business
12 process that is patentable a process that doesnt
13 involve improving the workings of a computer
14 GENERAL VERRILLI I shyshy I think its going
15 to be difficult for me to do that I think for
16 example if you had a business method a process for
17 additional security pointshyofshysale credit card
18 transactions using particular encryption technology
19 that might well be patent eligible Its a technology
20 that it makes conduct of business more efficient or
21 effective
22 But there is a technological link here and
23 we do think thats critical to our shyshy to our point of
24 view with respect to the case And I shyshy and I do think
25 remember that when we say something is not patent
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1 eligible were not saying they cant do it Were
2 saying they cant monopolize it
3 And the concern in a situation like this one
4 is that if this is patent eligible its hard to see
5 why for example the first person who came up with a
6 frequent flier program wouldnt have been able to claim
7 a patent there because after all thats a business
8 method for improving customer loyalty implemented on a
9 computer
10 CHIEF JUSTICE ROBERTS General I shyshy you
11 mentioned a while ago the need for greater clarity and
12 certainty in this area And Im just wondering in your
13 brief youve got a nonshyexhaustive of factors to
14 consider and there are 6 different ones And Im just
15 doubtful that thats going to bring about greater
16 clarity and certainty
17 GENERAL VERRILLI I take shyshy I take the
18 point Mr Chief Justice but I think the key is that
19 they are all directed to answering the question of
20 whether the innovation that is claimed and is an
21 innovation in either A the improvement of a computers
22 functioning or B the use of computer technology to
23 improve the functioning of another technological
24 process and a case like Diehr would be in the latter
25 category
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1 And so I do think that thats the key
2 benchmark Thats the baseline Thats the test that
3 we do think can be applied clearly and consistently by
4 the courts or the PTO And it avoids the risk of things
5 like frequent flier programs or the Oakland As money
6 ball methods for evaluating the contributions in
7 individual baseball players make or any one of a host of
8 other things that our intuitions tell us just dont
9 belong in the patent system
10 Thats the shyshy drawing that line keeps them
11 out not drawing that line lets them in And with all
12 due respect I dont think that the novelty and
13 nonobviousness filters that 102 and 103 really deal with
14 that problem effectively because when you get to
15 nonobviousness in 103 for example youll be asking a
16 different question
17 If you take the frequent flier program you
18 would say well is this innovation in building consumer
19 loyalty something that would have been obvious to
20 somebody who runs an airline Its totally divorced
21 from the question of technology at that point and
22 therefore I dont think youre going to get the screen
23 that you need to get in order for the patent system to
24 be confined to its traditional and appropriate scope
25 If there are no further questions thank
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1 you
2 JUSTICE GINSBURG I have a question about
3 how do you identify an abstract concept The shyshy a
4 natural phenomenon a mathematical formula those are
5 easy to identify but there has been some confusion on
6 what qualifies as an abstract concept
7 GENERAL VERRILLI We would define
8 abstract shyshy an abstract concept as a claim that is not
9 directed to a concrete innovation in technology
10 science or the industrial arts So its the shyshy its
11 abstract in the sense that it is not a concrete
12 innovation in the traditional realm of patent law
13 Thank you
14 CHIEF JUSTICE ROBERTS Thank you General
15 Mr Phillips you have four minutes
16 remaining
17 REBUTTAL ARGUMENT OF CARTER G PHILLIPS
18 ON BEHALF OF THE PETITIONERS
19 MR PHILLIPS Thank you Mr Chief Justice
20 Id just like to make a few points
21 First of all with respect to the question
22 you asked which is looking at 159 et cetera all I can
23 tell you is that if you look at claim 33 it talks about
24 matched orders the matched orders that are described in
25 286 and 287 and then makes specific reference to 159
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1 and that flow chart thats there And its all designed
2 as a package Its only one element of the shyshy of the
3 invention but it is a central element and its an easy
4 one to understand And it goes well beyond simply the
5 notion of hedge shyshy hedge against settlement risk and do
6 it by a computer
7 JUSTICE SOTOMAYOR Your adversary says that
8 his shyshy the appendix to his brief are the only patents at
9 issue that the flow charts are not at issue in this
10 case
11 MR PHILLIPS Theres no basis for that
12 statement Your Honor There shyshy remember this went off
13 on a very truncated litigation process So theres shyshy
14 you know we shyshy we got cut off at the beginning of it
15 Theres been no construction of the shyshy of the claims
16 and shyshy and obviously these are specifications that go
17 to how you interpret the claim
18 JUSTICE SOTOMAYOR If we were to say that
19 there are no business patents shyshy
20 MR PHILLIPS Yes
21 JUSTICE SOTOMAYOR shyshy would your patent
22 survive at all
23 MR PHILLIPS No I dont shyshy I dont
24 believe so I think theres no question And you
25 know General Verrilli could not have been any plainer
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1 in his statement of how he wants to interpret the
2 abstract idea concept
3 JUSTICE SOTOMAYOR Yes he wants to say no
4 business patents
5 MR PHILLIPS No business shyshy just another
6 way of saying no business methods And you know the
7 Court rejected that And it seems to me extraordinary
8 to say Congress didnt reject no business methods in
9 101 but were going to do shyshy were going to manipulate
10 the judicial exception to accomplish precisely that same
11 thing It seems to me thats wholly inappropriate
12 Justice Ginsburg you asked my shyshy my friend
13 here you know whats his test He didnt answer that
14 question youll notice because he doesnt have an
15 answer His basic argument is whatever you do just
16 kill this patent
17 And if I were in his shoes I suppose Id
18 take that same position I think whats absolutely
19 clear is that the test ought to be one that is
20 structured as a very coarse filter not the kind of
21 filter that hes pushing for where it changes over time
22 I mean I thought his shyshy I thought his response to one
23 of the questions about eshymail and word processing that
24 Justice Sotomayor asked is over time it would change
25 Well thats exactly what 102 and 103 are for That is
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1 not the purpose of shyshy of Section 101
2 And then he uses the example of encryption
3 I guarantee you if we were arguing about encryption in
4 this case he would say to me that thats an abstract
5 principle because encryption is a concept thats been
6 around since time immemorial George Washington used
7 it Everybody has used encryption
8 And a question again thats not the
9 solution to these problems The question is how did we
10 go about doing it And we go beyond the basics of
11 simply saying use a computer and thats what we ask
12 this Court to focus on and to evaluate
13 As to the frequent flier program its
14 pretty clear to me that even though it was a novel idea
15 in some sense the concept itself would have been viewed
16 in shyshy in the KSR fashion as quite obvious as a means of
17 improving customer loyalty
18 There are solutions here Giving us 101
19 pass doesnt create a monopoly It just gets us to the
20 102 and 103 inquiries that are at the heart of what the
21 patent laws shyshy and 112 that are at the heart of what the
22 patent laws ought to be dealing with
23 If there are no further questions Your
24 Honor thank you
25 CHIEF JUSTICE ROBERTS Thank you counsel
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1 The case is submitted
2 (Whereupon at 1105 am the case in the
3 aboveshyentitled matter was submitted)
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
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25
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58
A add 714 1023 algorithm 3320 41 automatically
As 525 3621 387 algorithms apply 72425 111
am 115 32 416 3013 3310 2019 281213 automobile 389
572 added 302 Alice 13 34 2822 3814 available 99
abacus 61213 4923 363 3717 4217 avenues 4124
710 1018 additional 5017 3822 4117 applying 4213 avoids 524
1325 3614 3617
address 4121 4317 4511
Alices 271 2919 3678
approach 226 395 4513 B
ability 1514 addressed 435 allow 94 472 B 121 29 4413
able 1511 167 addressing 181 allows 97 242 appropriate 5122
1919 516 adds 4623 amazing 2514 81516 1514 back 1621
aboveshyentitled adhere 437 amici 3825 453 4913 1922 2512
113 573 adjudication amicus 123 5224 3018 322
absolutely 125 241 210 4414 Archimedes 3991222
1215 159 adjusting 3611 analysis 424 281122 3811 4025
5518 41610 364 406 area 219 5112 ball 526
abstract 4267 adjustment 417 4924 argue 2518 Bank 17 35
48 6682023 418 analyze 1416 arguing 563 banks 95
721 8218 administered 1716 argument 114 bars 43
141920 1522 454 announce 4525 225812 33 baseball 527
165 181618 administration answer 119 37 41 144 based 423 406
2220 24925 4316 2219 247 18323 226 baseline 522
2621 277 administrative 3919 4221 26715 4413 basic 413 5515
2938 3422 171218 187 456 461416 457 5317 basically 1821
3523 395 242 4123 4721 551315 5515 2319
405 414 424 adopt 203 answering 5119 arguments basics 5610
4418 461823 adopted 31317 answers 3713 1415 basis 132 1512
491221 505 advancement 461821 arms 1625 1516 2719
53368811 351 anyway 1810 arrangements 5411
552 564 advances 3513 apparatus 2916 131 beating 435
accept 102 adversary 547 APPEARAN arrows 315 beginning 163
accomplish advice 1715 116 art 1919 5414
5510 advocated 4916 appears 820 arts 2124 5310 begins 3810
account 55 618 affect 4225 appendix 1910 aside 1422 157 behalf 11719
397 affirmative 402 311 326 369 asked 2314 122 24710
accounts 823 agent 52 3021 548 278 5322 214 38 2616
9356 3611 ago 318 2224 applicant 3220 551224 4414 5318
3611 3615 5111 3921 4023 asking 193 believe 1316
accurately 2413 agree 920 2021 416 4314 221213 273 1416 2421
acknowledges 221 2418 application 3324 5215 255 264 451
1121 4021 421 2623 4117 aspect 517 5424
act 99 2017 agrees 2812 4918 asserted 3113 belong 529
activities 229 ahead 4225 applications 311618 benchmark 522
activity 2122 AIA 2912 4122 333 asserting 325 Benson 361923
3325 4812 airline 5220 applied 434 attaching 124 best 161124
actual 4020 AL 18 523 attention 3813 better 1610 albeit 923 applies 31418 Attorney 2021 216 2819
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59
3322 brightshyline 409 2313 37 71 4338 5519 beyond 115 4012 5317 checks 618 5614
1312 4623 bring 5115 case 3412 46 Chief 339 clearly 211 251 544 5610 broad 248 116 1524 261217 3024 523
Bilski 313 46 broader 225 2022 213 31812 378 client 311416 415 1722 browsing 228 2211 2313 371416 386 close 2822 2224 2329 builder 2811 2625 311424 421414 4410 CLS 17 35 262020 271 building 5218 3314 36620 441116 5110 1120 2816 2999 built 2324 426816 5118 531419 coarse 247 3935 4125 business 168 451822 461 5625 5520 427 4322 1749 203 461422 5024 chits 611 code 1213 142 447 452 2124 222122 5124 5410 chronological 1916171720 461821 4825 2311 29613 564 5712 1512 2725 4018 49481922 32132323 cases 244 2816 chronologically coffee 1211 5047 3322525 4011 423 colleagues 116
Bilskis 447 34415 3610 catalogues 2512 circuit 2818 college 58 bit 323 48214 4969 262 401112 425 columns 325 blocks 54 508111620 categorically 42912 4324 come 108 234 Bloomberg 517 5419 202 4825 3017 399
2115 225 554568 category 489 circumstances 475 boat 2811 businessshymeth 5125 318 1515 comes 1318 bonds 4717 457 CBM 2913 claim 416 2418 2018 231 bothering 118 buy 183 cellphones 228 2423 2522 coming 923 bound 1521 buys 3924 central 95 543 264 27917 common 31120 boundary 4913 certain 1216 3019 3121 2157 bounds 1521 C certainly 518 32420 361 company 4224 box 392425 C 21 31 263 358 392325 403 competition
4024 cables 3012 4121 495 442223 4922 161011 Breyer 66823 calculator 3519 certainty 5112 516 53823 completely 921
74691923 call 3812 5011 5116 5417 1422 2320 85810 1012 called 721 275 cetera 387 claimed 41014 complex 126 1021 1523 3316 5322 281 3017 complicated 161418 171 calling 4611 Chakrabarty 34162123 1225 235 1922 2114 capabilities 2016 3721242425 3025 315 221216 239 3723 challenge 443 382 4925 component 2315 285 capable 141 change 186 5120 352024 293 3613 454 273 311 415 claims 1416 compression 38520 478 capture 2415 5524 171616 2419 309 3212 4722 4814 captures 2412 changes 3817 2424 2515 3320 349 48182224 card 5017 5521 2520 2648 computer 422
brief 211315 carefully 1725 chart 541 283 3118 516 621 710 2255 322 caricature 718 charted 2620 37517 398 71325 9113 4215 4715 72020 1417 charts 1911 406 5415 91824 1035 4810 5113 1716 549 clarity 4755 10725 1116 548 carry 4420 Charybdis 511116 124102024
briefs 1524 4923 1620 2619 class 59 13911 1479 1618 CARTER 117 checkbook 617 clear 1015 118 1421 15710
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Michele K Lee Comment on Interim 101 Guidance
October 27 2015 Page 3
The basic point Justice Kennedy made is that if someone told a developer to create a computer program to mitigate settlement risk the computer programmer would program the claims The same holds true for why the patent failed in Ultramercial LLC v Hulu LLC and WildTangent No 2010-1544 (Fed Cir 2014) If a computer programmer was told to set up a system that displays advertisements before internet video content the programmer would end up with the Claims in Ultramercial
The Guidelines state that a prima facie case can be made without evidence It appears the reasoning by the Office comes from a reading of Supreme Court opinions as not citing evidence However if something the industry had not been able to obtain is enough to qualify as significantly more there must be evidence in the record for the Supreme Court to know this If Applicant cites evidence that a claim element or combination of claim elements is something the industry had not been able to obtain Applicant has met the burden of rebutting the prima facie case Otherwise the Guidelines would be inconsistent with Diehr
When a prima facie case can be made without evidence and Applicant points to evidence in the specification the examiner returns to the July 2015 update that says that the evidence is not needed for a prima facie case Examiners then submit another nearly identical rejection without evidence The real problem is that the second rejection is inconsistent with the evidence of record cited by Applicant and inconsistent with Diehr
Without guidance on what is persuasive and what examiners must do to respond to evidence examiners cannot know what is a quality rejection and a quality allowance
Thank you for taking the time to consider this letter
Very truly yours-
gt~~ c_Jorfathan A Winter
jwinterssjrcom GSWSBSJAW Enclosure
Exhibit A
1
Official shy Subject to Final Review
1 IN THE SUPREME COURT OF THE UNITED STATES
2 shy shy shy shy shy shy shy shy shy shy shy shy shy shy shy shy shy x
3 ALICE CORPORATION PTY
4 LTD
5 Petitioners No 13shy298
6 v
7 CLS BANK INTERNATIONAL
8 ET AL
9 shy shy shy shy shy shy shy shy shy shy shy shy shy shy shy shy shy x
10 Washington DC
11 Monday March 31 2014
12
13 The aboveshyentitled matter came on for oral
14 argument before the Supreme Court of the United States
15 at 1004 am
16 APPEARANCES
17 CARTER G PHILLIPS ESQ Washington DC on behalf
18 of Petitioners
19 MARK A PERRY ESQ Washington DC on behalf of
20 Respondents
21 DONALD B VERRILLI JR ESQ Solicitor General
22 Department of Justice Washington DC on behalf of
23 the United States as amicus curiae supporting
24 Respondents
25
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2
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1 C O N T E N T S
2 ORAL ARGUMENT OF PAGE
3 CARTER G PHILLIPS ESQ
4 On behalf of the Petitioners 3
5 ORAL ARGUMENT OF
6 MARK A PERRY ESQ
7 On behalf of the Respondents 26
8 ORAL ARGUMENT OF
9 DONALD B VERRILLI JR ESQ
10 On behalf of the United States as amicus
11 curiae supporting Respondents 44
12 REBUTTAL ARGUMENT OF
13 CARTER G PHILLIPS ESQ
14 On behalf of the Petitioners 53
15
16
17
18
19
20
21
22
23
24
25
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3
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1 P R O C E E D I N G S
2 (1004 am)
3 CHIEF JUSTICE ROBERTS Well hear argument
4 this morning in Case 13shy298 Alice Corporation versus
5 CLS Bank International
6 Mr Phillips
7 ORAL ARGUMENT OF CARTER G PHILLIPS
8 ON BEHALF OF THE PETITIONERS
9 MR PHILLIPS Thank you Mr Chief Justice
10 and may it please the Court
11 It is common ground between the parties in
12 this case that Section 101 by its terms and with the
13 sweeping interpretation this Court adopted in Bilski
14 applies directly to the patents here These are system
15 and process patents that speak directly to Section 101
16 The only issue then is whether the
17 judicially recognized exception that this Court adopted
18 many many years ago applies under these circumstances
19 JUSTICE KENNEDY And just repeat it is
20 common ground between the parties that shyshy
21 MR PHILLIPS That shyshy that our shyshy our
22 patents speak directly to the language of Section 101
23 that is they are a process and they are machines and
24 they are shyshy and they are improvements to the process and
25 the machines They dont shyshy they dont dispute that by
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1 its terms 101 applies The only argument between the
2 parties is the abstract idea exception that exists and
3 whether that bars us from otherwise satisfying
4 Section 101
5 JUSTICE GINSBURG Mr Phillips on the
6 abstract idea you know that the Bilski case held that
7 hedging qualified as an abstract idea So how is
8 intermediate settlement a less abstract than hedging
9 MR PHILLIPS If our shyshy if our patent
10 merely claimed intermediated settlements although I
11 have to say I dont really know exactly what that means
12 because I dont think thats the same kind of
13 economics shyshy basic economics concept that a hedge risk
14 treatment is But if it claimed that we wouldnt shyshy we
15 wouldnt have a distinction from Bilski
16 What we claim is a very specific way of
17 dealing with a problem that came into being in the early
18 1970s of how to try to eliminate the risk of
19 nonshysettlement in these very massive multiparty problems
20 in which you need to deal with difficulties that exist
21 at different time zones simultaneously and to do it with
22 a computer so that you not only take them on
23 chronologically deal with them sequentially based on
24 the kind software analysis that the patent specifically
25 describes by function
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1 And it goes even further than that and does
2 something that no escrow agent and shyshy and no
3 intermediated settlement that I know of shyshy settler that
4 I know of It actually blocks specific transactions
5 that in the shadow account would violate the terms of
6 the settlement that would ultimately be implemented
7 JUSTICE KENNEDY Well let me put it this
8 way If you describe that to a secondshyyear college
9 class in engineering and said heres shyshy heres my idea
10 now you go home and you program over this weekend my
11 guess is shyshy my guess is that that would be fairly easy
12 to program
13 MR PHILLIPS I dont disagree with it
14 Justice shyshy
15 JUSTICE KENNEDY So the fact that the
16 computer is involved it shyshy it seems to me is necessary
17 to make it work But the shyshy but the innovative aspect
18 is certainly not in the creation of the program to make
19 that work All youre talking about is shyshy if I can use
20 the word shyshy an idea
21 MR PHILLIPS I prefer not to use that word
22 for obvious reasons
23 (Laughter)
24 MR PHILLIPS But shyshy but if you shyshy but if
25 you look at the Solicitor shyshy
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1 JUSTICE KENNEDY Or shyshy or a method or a
2 process
3 MR PHILLIPS Right But shyshy and shyshy and
4 obviously methods and processes are precisely what
5 Section 101 permits to be subject shyshy
6 JUSTICE BREYER Why is that less abstract
7 MR PHILLIPS Im sorry
8 JUSTICE BREYER Why is that less abstract
9 I mean imagine King Tut sitting in front of the pyramid
10 where all his gold is stored and he has the habit of
11 giving chits away Good for the gold which is given at
12 the end of the day And he hires a man with an abacus
13 and when the abacus keeping track sees that hes given
14 away more gold than he is in storage he says stop
15 You see
16 Or my mother who used to look at my
17 checkbook when she saw that in fact I had written
18 more checks than I had in the account she would grab
19 it Stop You see
20 So what is it here thats less abstract that
21 the computer says stop
22 MR PHILLIPS It is shyshy
23 JUSTICE BREYER How is that less abstract
24 than King Tut if we had the same thing with a grain
25 elevator if we had the same thing with a reservoir of
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1 water if we had the same thing with my checkbook You
2 see the point
3 MR PHILLIPS I do see the point Justice
4 Breyer and it seems to me that it goes to the question
5 of the methodology youre going to employ
6 JUSTICE BREYER Methodology is just that
7 you said stop
8 MR PHILLIPS Well we could shyshy
9 JUSTICE BREYER So what we have different
10 here is the computer stops rather than the abacus man
11 stopping or my mother stopping or the guy that the grain
12 elevator has that says stop So just saying what shyshy is
13 that it In other words if you say computer stop you
14 have an invention Useful add shyshy but if you say mother
15 stop you dont
16 MR PHILLIPS No Well I mean again it
17 seems to me that in some ways what shyshy what you described
18 there is a caricature of what this invention is
19 JUSTICE BREYER Of course its a
20 caricature Its a caricature designed to suggest that
21 there is an abstract idea here Its called solvency
22 MR PHILLIPS But shyshy
23 JUSTICE BREYER And what you do is you take
24 the idea of solvency and you say apply it And you say
25 apply it through the computer
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1 Is that enough to make it not just the
2 abstract idea And now were at the heart of why I used
3 my exaggerated examples shyshy
4 MR PHILLIPS Right
5 JUSTICE BREYER shyshy because you will tell me
6 why shyshy
7 MR PHILLIPS Right
8 JUSTICE BREYER shyshy this is enough
9 MR PHILLIPS Right Because Justice
10 Breyer the shyshy the shyshy the concept here is not simply to
11 say stop Stop is obviously part of the element of it
12 But its also designed to ensure that at the
13 end of the day this transaction in the midst of
14 literally a global set of shyshy of deals that are going on
15 simultaneously will be implemented at the appropriate
16 time in the appropriate way And whatever else that may
17 be it seems to me its difficult to say thats an
18 abstract idea as implemented
19 JUSTICE SOTOMAYOR Im sorry But shyshy but
20 what it appears to be it sounds like youre trying to
21 revive the patenting of a function You used the word
22 function earlier and thats all Im seeing in this
23 patent is the function of reconciling accounts the
24 function of making sure theyre paid on time But in
25 what particular way other than saying do it through a
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1 computer is this something new and not function
2 MR PHILLIPS Well it does it through shyshy
3 it creates the shadow accounts because of the concerns
4 for security You dont shyshy youre not going to allow
5 somebody to enter into a central banks own accounts
6 You create the shadow accounts You monitor through the
7 software that allows you to do that You evaluate each
8 of the transactions to ensure that the settlement will
9 be available You do it sequentially and you act on it
10 by the end of the day or whenever the transaction is to
11 take place and you implement that transaction
12 JUSTICE SCALIA Why isnt it shyshy why isnt
13 doing it through a computer not enough I mean was the
14 cotton gin not an invention because it just means youre
15 doing through a machine what people used to do by hand
16 Its not an invention Its the same old same old
17 MR PHILLIPS Justice Scalia shyshy
18 JUSTICE SCALIA Why shyshy why is a computer
19 any different in that respect
20 MR PHILLIPS At one level I agree with you
21 completely There is no difference between them
22 This Court has however said on more than a
23 few occasions albeit in dicta that coming up with an
24 idea and then say use a computer is not sufficient
25 And what Im trying to suggest to you is we dont fall
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1 within that dicta
2 Now if you dont accept the dicta and you
3 say use a computer is fine then I think were done
4 JUSTICE SCALIA Well Im not saying use a
5 computer is shyshy is much of a novelty I mean thats shyshy
6 that goes to whether its novel or not If you just say
7 use a computer you havent invented anything But if
8 you come up with a serious program that shyshy that does it
9 then you know that may be novel But thats a novelty
10 issue isnt it
11 MR PHILLIPS To be sure Justice Scalia
12 JUSTICE BREYER And this is exactly the
13 question I really would like to you to focus on for me
14 Why is it shyshy and Im not saying this from a point of
15 view but it seems to me pretty clear that if what you
16 did was take the idea of solvency shyshy remember King Tut
17 Thats what I use the exaggeration shyshy and what you say
18 is implemented by having the abacus man keep track and
19 say stop okay shyshy
20 MR PHILLIPS Right
21 JUSTICE BREYER Then we implement it by
22 having somebody with a pencil and a piece of paper and
23 this is all that they add you see Say Have a man
24 with a pencil and a piece of paper keeping track and
25 saying stop or we say implement it in the computer
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1 which will automatically keep track and say stop are
2 they all enough Are some of them enough Whats the
3 rule
4 And you realize I couldnt figure out much
5 in Prometheus to go beyond what I thought was an obvious
6 case leaving it up to you and your colleagues to figure
7 out how to go further Am I making enough shyshy making
8 clear enough whats bothering me And Id really like
9 to get your answer to this
10 MR PHILLIPS And shyshy and look theres
11 no shyshy Ill be the first one to shyshy to confess that trying
12 to use language to describe these things is not all that
13 easy But the way I think you can meaningfully look at
14 this is to say that this is not simply something that
15 was a fundamental truth this is not something that
16 simply says use a computer Its not simply something
17 that says maintain solvency It shyshy it operates in a
18 much more specific and concrete environment where youre
19 dealing with a problem thats been in existence since
20 the 1970s a solution in the 1990s that CLS itself
21 acknowledges needed a solution and came forward with
22 their own solution that looks a lot like ours
23 JUSTICE KENNEDY But my shyshy my initial
24 question and I think I can work this into King Tut
25 is shyshy
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1 (Laughter)
2 JUSTICE KENNEDY shyshy is shyshy is whether or not
3 you could have patented that system idea process
4 method without attaching a computer program
5 MR PHILLIPS You cannot absolutely cannot
6 do that with this system because it is so complex and
7 so many interrelated parts
8 JUSTICE KENNEDY Suppose I thought shyshy and
9 again its just a thought because I dont have the
10 expertise shyshy that any computer group of people sitting
11 around a coffee shop in Silicon Valley could do this
12 over a weekend Suppose I thought that
13 MR PHILLIPS You mean wrote the code
14 JUSTICE KENNEDY Yes right
15 MR PHILLIPS Well thats absolutely shyshy
16 Im certain thats true
17 JUSTICE KENNEDY Well then shyshy then shyshy
18 MR PHILLIPS But thats true of almost all
19 software
20 JUSTICE KENNEDY Then why is the computer
21 program necessary to make the patent valid
22 MR PHILLIPS Well its shyshy its necessary
23 to make the invention effective As the Solicitor
24 General said the computer is essential to the efficacy
25 of this invention because of the complicated financial
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1 arrangements that exist and that can only be resolved on
2 a shyshy on a realtime basis Your abacus is great if you
3 happen to be waiting for the pyramids to be finished or
4 waiting for the gold to move in and out but it doesnt
5 help with you an abacus if youre dealing with literally
6 thousands of transactions simultaneously going on in
7 different countries at different points in time
8 JUSTICE KENNEDY But thats just an idea
9 hey lets use a computer
10 MR PHILLIPS But its not just shyshy I mean
11 obviously part of it is use the computer Justice
12 Kennedy But more fundamentally it goes beyond that
13 See I shyshy
14 JUSTICE SOTOMAYOR Is your software
15 copyrighted
16 MR PHILLIPS No I dont believe so
17 JUSTICE GINSBURG There is no special
18 software that comes with this shyshy thats part of this
19 patent is it shyshy is there
20 MR PHILLIPS No Justice Ginsburg what
21 we did here is what the Patent and Trademark Office
22 encourages us to do and encourages all software patent
23 writers to do which is to identify the functions that
24 you want to be provided for with the software and leave
25 it then to the software writers who I gather are you
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1 know quite capable of converting these functions into
2 very specific code
3 JUSTICE KAGAN Mr Phillips could you shyshy
4 could you disaggregate your argument for me Because
5 you just said look this Court has said its not
6 sufficient if you have an idea and then you say use a
7 computer to implement it right So are you saying that
8 your shyshy that shyshy are you saying that youre doing more
9 than saying use a computer to implement it or are you
10 saying that its shyshy that the idea itself is more than an
11 idea
12 MR PHILLIPS Yes Im saying shyshy
13 JUSTICE KAGAN Which part of what shyshy
14 MR PHILLIPS Im saying both actually I
15 mean Im making both of those arguments I shyshy I
16 believe that if you analyze the claims and you dont
17 caricature them and you dont strip them out of the
18 limitations that are embedded in there this is not some
19 kind of an abstract concept This is not some kind shyshy
20 its not an abstract idea Its a vary shyshy
21 JUSTICE KAGAN So putting the computer
22 stuff aside completely shyshy
23 MR PHILLIPS Right
24 JUSTICE KAGAN shyshy youre saying that youve
25 invented something or you shyshy
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1 MR PHILIPS Yes
2 JUSTICE KAGAN There is something that
3 youve patented that has shyshy that is not just simple use
4 a third party to do a settlement
5 MR PHILLIPS Right
6 JUSTICE KAGAN And what is that putting
7 the computer aside
8 MR PHILLIPS It is shyshy well shyshy and again
9 its difficult to do that because you absolutely need
10 the computer in order to implement this But the key to
11 the invention is the notion of being able
12 simultaneously dealing with it on a chronological basis
13 to stop transactions that will otherwise interfere with
14 the ability to settle on time and under the appropriate
15 circumstances And the only way you can do that in a
16 realtime basis when youre dealing with a global economy
17 is to use a computer It is necessary to the efficacy
18 of this
19 So in that sense I cant shyshy I cant
20 disaggregate it the way in some sense youre suggesting
21 It seems to me its bound up with in shyshy its bounds up
22 with the whole notion of is this an abstract concept
23 JUSTICE BREYER Can you in fact shyshy now
24 this is shyshy look there are 42 briefs in this case I
25 actually read them and I found them very very helpful
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16
1 up to the point where I have to make a decision because
2 theyre serious I mean you know shyshy now the problem
3 that I came away with is the one that youre beginning
4 to discuss that if you simply say take an idea thats
5 abstract and implement it on a computer there are shyshy
6 youre going to get it much faster youre going to be
7 able to do many many things and if thats good enough
8 there is a risk that you will take business in the
9 United States or large segments and instead of having
10 competition on price service and better production
11 methods well have competition on who has the best
12 patent lawyer You see where Im going on that one
13 MR PHILLIPS Yeah of course
14 JUSTICE BREYER And if you go the other way
15 and say never then what you do is you rule out real
16 inventions with computers
17 MR PHILLIPS Right
18 JUSTICE BREYER And so in those 42 briefs
19 there are a number of suggestions as to how to go
20 between Scylla and Charybdis Now I would like to
21 know shyshy I dont know if you can step back from your
22 representational model Thats a problem Youre all
23 we have now And shyshy and from my point of view I need
24 to know what in your opinion is the best way of sailing
25 between these two serious arms
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1 MR PHILLIPS Well Justice Breyer I guess
2 I would suggest to you that you might want to deal with
3 the problem you know as opposed to the problems you
4 dont know at this stage I mean we have had business
5 method patents and software patents in existence for
6 well over a decade and theyre obviously quite
7 significant in number And shyshy and we know what the
8 system is we have And Congress looked at that system
9 right and didnt say no to business methods patents
10 didnt say no to software patents instead said the
11 solution to this problem is to get it out of the
12 judicial process and create an administrative process
13 but leave the substantive standards intact
14 So my suggestion to you would be follow that
15 same advice a liberal interpretation of 101 and not a
16 caricature of the claims analyze the claims as written
17 and therefore say that the solution is 102 and 103 and
18 use the administrative process If you shyshy
19 JUSTICE GINSBURG Mr Phillips let me just
20 stop you there because four Justices of this Court did
21 not read that legislative history the way you do And
22 it was shyshy was in Bilski
23 MR PHILLIPS But this is postshyBilski
24 JUSTICE GINSBURG Justice Stevens went
25 carefully through that and he said Congress was
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1 reacting to a decision It had shyshy it was not addressing
2 101 So there are at least four Justices who say shyshy who
3 didnt buy that argument
4 MR PHILLIPS Well I mean it still seems
5 to me that the shyshy the natural inference is Congress did
6 not change 101 Congress created an entire
7 administrative system to deal with 101 102 and 103
8 And shyshy and I would hope shyshy
9 JUSTICE SCALIA And four is not five
10 anyway right
11 MR PHILLIPS Thats true
12 JUSTICE SCALIA Four is not five
13 MR PHILLIPS And youve exhausted my math
14 skills Your Honor
15 JUSTICE SCALIA By the way we shyshy we have
16 said that you cant take an abstract idea and then say
17 use a computer to implement it But we havent said
18 that you cant take an abstract idea and then say here
19 is how you use a computer to implement it shyshy
20 MR PHILLIPS Exactly
21 JUSTICE SCALIA shyshy which is basically what
22 youre doing
23 MR PHILLIPS And thats the argument were
24 doing and shyshy
25 JUSTICE SCALIA And thats a little
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1 different
2 MR PHILLIPS shyshy thats the line were
3 asking the Court to draw here
4 JUSTICE KAGAN Well how are you saying the
5 how Because I thought that your computers shyshy that your
6 patents really did just say do this on a computer as
7 opposed to saying anything substantive about how to do
8 it on a computer
9 MR PHILLIPS I would urge the Court to
10 look at Joint Appendix 159 285shy286 where it goes
11 through the flow charts This is shyshy and this is just a
12 specific example of the method by which you stop a
13 transaction and it goes through a varied series of
14 detailed steps and what the computer has to do in order
15 to do that It doesnt actually obviously put in the
16 code but thats what the PTO says dont do Dont put
17 in the code because nobody understands code so shyshy but
18 put in the functions and we know shyshy and we know that
19 someone skilled in the art will be able to put in the
20 code And if they arent if they cant do that then
21 its not enabled and thats a 112 problem
22 To go back Justice Breyer to your
23 question So on the one hand youve got a problem that
24 it seems to me Congress to some extent has said is okay
25 and weve got a solution and that solutions playing
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1 through On the other hand if this Court were to say
2 much more categorically either that theres no such
3 thing as business method patents or adopt the Solicitor
4 Generals interpretation which is to say that there
5 cannot be software unless the software somehow actually
6 improves the computer as opposed to software improving
7 every other device or any other mechanism that might be
8 out there
9 What we know is that this would inherently
10 declare and in one fell swoop hundreds of thousands of
11 patents invalid and the consequences of that it seems
12 to me are utterly unknowable And before the Court goes
13 down that path I would think it would think long and
14 hard about whether isnt that a judgment that Congress
15 ought to make And It seems to me in that sense youre
16 essentially where the Court was in Chakrabarty where
17 everybody was saying youve got to act in one way or the
18 other or the world comes to an end and the courts have
19 said well apply 101 directly
20 JUSTICE KENNEDY If we say that theres no
21 software patentability and agree with the Attorney
22 General do you lose in this case
23 MR PHILLIPS Well it would be very hard
24 for me to see how that shyshy how shyshy how I can get around
25 that particular problem because the computer is the
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1 essence of it so shyshy and a portion of it is clearly the
2 software So I think if you say there is no such thing
3 as software patentability I do lose in this case yes
4 Your Honor As do a whole lot of other people
5 JUSTICE KENNEDY Is there any common ground
6 between you and the government shyshy maybe a better
7 question to ask the government shyshy a common ground
8 between you and the government on something in the
9 software area thats patentable other than making the
10 computer itself work You understand the government to
11 say no software patents
12 MR PHILLIPS Thats the way I interpret
13 the governments shyshy the governments brief
14 JUSTICE BREYER It was like shyshy theres a
15 Bloomberg brief out here that was on this that said
16 no you can shyshy you can patent computer software when
17 its an improvement in the computer when its an
18 improvement in software when its an improvement in a
19 technology that is developed out of computers like
20 robotics when it is an improvement in a machine or
21 technology but you cannot improve it where it is simply
22 an improvement in an activity that is engaged in
23 primarily through mental processes But what they mean
24 by that is business finance and similar arts
25 Thats shyshy I mean thats shyshy it wasnt quite what shyshy I
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1 know Thats what I want to know what you dont agree
2 with about that because its a little more refined than
3 you suggested
4 MR PHILLIPS I read the Solicitor
5 Generals brief as broader than the Bloomberg brief
6 in shyshy in terms of the approach And IBMs argument is
7 if you knock out software patents you eliminate web
8 browsing word processing cellphones eshymail Those
9 are all activities that I dont think fall within the
10 meaning of the shyshy the meaning of the governments theory
11 of the case
12 JUSTICE BREYER But Im asking you shyshy Im
13 asking you what about this one that I just mentioned
14 You see I went through those five steps shyshy
15 MR PHILLIPS Right
16 JUSTICE BREYER shyshy and four of them you
17 could patent and the fifth one you cant
18 MR PHILLIPS Right But I shyshy and I guess
19 my answer to that is thats nowhere in the statute and
20 it doesnt seem to me to reflect an abstract idea Its
21 a shyshy its a line you draw that takes out business method
22 patents If the Court wants to eliminate business
23 method patents fine But you just said no to that in
24 Bilski two three terms ago
25 Now to be sure give the Solicitor General
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1 credit he comes here and says to you We didnt like
2 the result in Bilski we want you to say dont use
3 process in order to get there which is a statutory
4 interpretation come up with an extraordinarily
5 complicated way of looking at the exception and use that
6 to get to the exact same result
7 JUSTICE SOTOMAYOR Well youre doing a
8 very good job of proving shyshy
9 JUSTICE GINSBURG In Bilski Justice Breyer
10 did try to say that there wasnt that shyshy a whole lot of
11 distance between the four who thought business methods
12 were not patentable But he shyshy he also said something
13 else in shyshy in the other case Mayo Justice Scalia
14 asked you the question about doesnt that go to novelty
15 but didnt Justice Breyer say in Mayo that novelty can
16 be relevant to patent shyshy to patent eligibility He said
17 theres shyshy theres an overlap
18 MR PHILLIPS Well he said theres an
19 overlap Here in this context I think basically the
20 Respondents theory would mean that they are completely
21 coterminous And I dont think thats what the Court
22 meant And also we know from Diehr that theres got to
23 be at least some significant limitations on the extent
24 to which novelty has to be built into 101 That is the
25 province of 102 and 103 And as I said Congress
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1 modified the system of adjudication to create an
2 administrative mechanism that allows you to get to 102
3 and 103 And at least in context its important to
4 realize there have been 11 cases since that was created
5 9 of the 11 have been knocked down on 102 or 103 grounds
6 and not on 101 grounds And it seems to me thats the
7 answer to this problem is leave 101 as the coarse
8 filter If on its face it states these kinds of broad
9 abstract principles fundamental truths and even if it
10 says use a computer those should be struck down
11 JUSTICE SOTOMAYOR Which of the shyshy which of
12 the opinions below captures your position most
13 accurately
14 MR PHILLIPS I would guess it would be
15 Judge Moores opinion below that would capture ours most
16 correctly
17 JUSTICE SOTOMAYOR And if we were to think
18 your method claim is ineligible do you agree that your
19 systems and shyshy your medium and system claims fail as
20 well Do they rise and fall together
21 MR PHILLIPS No No I dont believe they
22 do rise and fall together I mean I think you could shyshy
23 if you wanted to interpret our medium claim shyshy I mean
24 our shyshy our method claims in a shyshy in particularly
25 abstract way I think you could still say that the
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1 system claims which clearly are shyshy are how to create a
2 computer system and how to implement it using that
3 method would be a much more concrete version of that in
4 a way that would take it out of 101 That said I
5 obviously believe that all of our claims satisfy 101
6 and should go on to the next stage
7 JUSTICE KAGAN Can I give you a
8 hypothetical Mr Phillips and you tell me how its
9 different or the same Lets say you know 30 years
10 somebody took a look around the world and said a lot of
11 people seem to order products by mail They get the
12 catalogues in the mail and then they send back their
13 return forms And lets say that one of the founders of
14 the Internet said wouldnt this be an amazing system
15 we could actually do this by computer and they had
16 patented that Is that the same
17 MR PHILLIPS I dont know if its the
18 same but I would shyshy I would argue that it could very
19 well be a patentable subject matter because shyshy but it
20 depends on how the claims play out
21 JUSTICE KAGAN No but exactly I mean
22 the claim would have said something along the lines of
23 you know theres this process by which people order
24 products and we want to do it over the Internet we want
25 to do it electronically and we will use a computer to
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1 do that to essentially take the process of mail order
2 catalogues and make it electronic
3 MR PHILLIPS I could certainly shyshy I think
4 I could write a claim shyshy a set of claims that I believe
5 would satisfy 101 And shyshy and to the extent that
6 youd shyshy that youd think those are no different than
7 the ones I have here then my argument is simply I think
8 I satisfy 101 with the claims we have before us Your
9 Honor
10 If there are no further questions then Id
11 like to reserve the rest of my time
12 CHIEF JUSTICE ROBERTS Thank you
13 Mr Phillips
14 Mr Perry
15 ORAL ARGUMENT OF MARK A PERRY
16 ON BEHALF OF THE RESPONDENTS
17 MR PERRY Mr Chief Justice and may it
18 please the Court
19 That path between Scylla and Charybdis was
20 charted in Bilski and Mayo Bilski holds that a
21 fundamental economic principle is an abstract idea and
22 Mayo holds that running such a principle on a computer
23 is quote not a patentable application of that
24 principle Those two propositions are sufficient to
25 dispose of this case
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1 If Bilski and Mayo stand Alices patents
2 fail Therefore Mr Phillips and his friends are
3 asking this Court to change the standard even though
4 this Court has had three unanimous decisions in the last
5 four terms establishing what the Court called a myriad
6 a wellshyestablished standard
7 On the abstract idea Justice Ginsburg you
8 asked Mr Phillips whats the difference between hedging
9 and this claim There is no difference This is
10 hedging It is hedging against credit default rather
11 than price fluctuation but it is simply hedging
12 And Mr Phillips stood up for 26 minutes and
13 never once referred to the patent Lets look at what
14 the inventor the soshycalled inventor said about this
15 invention This is at JA 293 to 94 in the
16 specification
17 This claim has simply two steps Its very
18 simple First debiting and crediting on a realtime
19 basis the relevant shadow records and second by
20 periodically affecting corresponding payment
21 instructions Those are direct quotes Debit credit
22 and pay Your Honor you cant get much more simple
23 than that
24 Mr Phillips suggests well we have
25 multilateral transactions global things chronological
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1 time zones and so forth None of those are claimed
2 Your Honor Those are all recited in specification
3 The claims read on a single transaction involving two
4 parties
5 JUSTICE BREYER Can I ask you at some
6 point not necessarily this second to say in my shyshy this
7 is just shyshy you know you have an opinion for a court
8 Different judges can have different interpretations
9 All youre getting is mine okay
10 But I think its pretty easy to say that
11 Archimedes cant just go to a boat builder and say
12 apply my idea All right Everybody agrees with that
13 But now we try to take that word apply and give
14 content to it
15 And what I suspect in my opinion Mayo did
16 and Bilski and the other cases is sketch an outer shell
17 of the content hoping that the experts you and the
18 other lawyers and the shyshy the circuit court could fill
19 in a little better than we had done the content of that
20 shell
21 So so far youre saying well this is
22 close enough to Archimedes saying apply it that we
23 neednt go further
24 Now will you at some point in the next few
25 minutes give me your impression of if it were necessary
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1 to go further what would the right words or example be
2 MR PERRY Your Honor as shyshy Justice
3 Breyer as to abstract ideas the PTO has filled in that
4 shell by listing economic concepts legal concepts
5 financial concepts teaching concepts dating and
6 interpersonal relationships and generally how business
7 should be conducted as examples of those things that are
8 likely abstract which of course all follow directly
9 from Bilski and the discussion this Court had in Bilski
10 And this patent shyshy these patents fall squarely within
11 that
12 Congress in the AIA confirmed that
13 reading Congress in the CBM method said business
14 methods that are subject to special scrutiny shyshy that is
15 dubious patents shyshy include methods and corresponding
16 apparatus which is what we have here that pertain to
17 data processing in the financial services industry and
18 do not offer a technological solution That describes
19 Alices patents to a letter Your Honor So that we
20 have shyshy
21 JUSTICE SOTOMAYOR What do you think is a
22 technological solution
23 MR PERRY Your Honor shyshy
24 JUSTICE SOTOMAYOR How could they if at
25 all written their patents to shyshy to make shyshy to make
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1 their software eligible What would shyshy what do they
2 need shyshy would have needed to have added
3 MR PERRY Justice Sotomayor they have no
4 software first Theyve never written software
5 Theyve never programmed a computer So thats a
6 nonexistent set
7 Second there are many technological
8 solutions to trading and settlement problems For
9 example data compression These shyshy these trading
10 platforms involve the movement of very large quantities
11 of data around the world The physical pipes that is
12 the fiber optic cables and data lines are limited
13 There are very sophisticated algorithms for both
14 security and speed to move data through the transmission
15 lines in novel and useful ways that could well be
16 patented
17 Nothing like that is claimed here To come
18 back to where I started if you look for example at
19 Claim 65 in the 510 patent as Mr Phillips reads it
20 it literally reads on a twoshyparty escrow to sell a
21 house so long as the escrow agent is typing this stuff
22 into the HUDshy1 using a computer That has nothing to do
23 with multilevel shyshy
24 CHIEF JUSTICE ROBERTS Well thats a
25 little more complicated He referred us to Joint
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1 Appendix Page 159 which is not a change in how
2 computers work But it is shyshy constitutes the
3 instructions about how to use the computer and where it
4 needs to be affected And just looking at it it looks
5 pretty complicated There are a lot of arrows and
6 they shyshy you know different things that go shyshy
7 (Laughter)
8 CHIEF JUSTICE ROBERTS Well but I mean
9 you know it shyshy in different directions And I
10 understand him to say that in each of those places
11 thats where the computer is needed
12 MR PERRY Mr Chief Justice Figure 16 has
13 nothing to do with the invention asserted against my
14 client in this case There are two inventions in this
15 patent One invention involving multilateral contract
16 formation is not asserted against my client And all of
17 these drawings pertain to that The only drawings that
18 pertain to the asserted claims are 25 and 33 to 37 And
19 that was established below and its established in this
20 Court And Mr Phillips has never disputed it
21 So the claim hes pointed the Court shyshy the
22 figure hes pointed the Court to has nothing to do with
23 the invention Its for a different invention that is
24 not at issue in this case
25 Remember there are hundreds and hundreds of
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1 pages of these patents They all pertain to the other
2 invention Thats why in the back of our red brief we
3 excerpted the very little bit that actually pertains to
4 this You sort of tack on patent shyshy the tack on claim
5 that Mr Phillips is asserting here Its 4 columns
6 Its less than five pages in the printed appendix that
7 actually pertains to this invention And it contains no
8 disclosure whatever
9 Justice Scalia to your question about how
10 the computer does it Of course a patent that
11 describes sufficiently how a computer does a new and
12 useful thing whether its data compression or any other
13 technological solution to a business problem a social
14 problem or a technological problem would be within the
15 realm of the shyshy of the patent laws That is what the
16 patent laws have always been for
17 This is not such a patent And the reason
18 for that is this is a preshyBilski set of patents These
19 were prosecuted under the old State Street test where
20 all the applicant had to claim was a result
21 JUSTICE KENNEDY Would you give me shyshy
22 again you already did it once shyshy an example of a
23 business process patent shyshy of a business process idea
24 and invention that is patentable
25 MR PERRY Your Honor there are many
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1 examples One would be a technological solution to a
2 business problem So that for example shyshy Ill give a
3 different example There are many applications today
4 The Court may be familiar with streaming video to watch
5 video on your computer
6 It is not possible to get enough data
7 through existing lines in its raw format The data has
8 to be manipulated in order to see live video So if you
9 want to watch TV on your phone for example
10 Those algorithms those inventions are
11 undoubtedly technological And if they are used in a
12 trading platform or a hedging system or something else
13 that wouldnt disable them And this is what the Diehr
14 case shyshy
15 JUSTICE KENNEDY Well I shyshy I shyshy in my
16 language Ive called that mechanical rather than
17 process Can you give me an example of process
18 MR PERRY Yes Your Honor The process in
19 that example would be a computer running the particular
20 data compression algorithm
21 JUSTICE KENNEDY But thats how to make
22 a shyshy thats how to make a machine work better
23 MR PERRY Yes Your Honor
24 JUSTICE KENNEDY Im asking you Is there
25 any business process any business activity that is
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1 susceptible to a patent a pure patent innovations that
2 deserve patents
3 MR PERRY Your Honor again a
4 technological solution to a business problem could well
5 be whether its a method or a process is equivalent
6 Again Congress said method in a corresponding shyshy
7 JUSTICE KENNEDY Can you give me an
8 example
9 MR PERRY I thought the data compression
10 example was a good one Ill try an encryption
11 technology Many of these trading platforms you know
12 dealing with securities and money would require some
13 sort of security devices You could have a process for
14 securely transmitting data would be another computer
15 implemented technological solution to a business
16 problem Again nothing like that claimed here
17 JUSTICE SOTOMAYOR How about eshymail and
18 just word processing programs
19 MR PERRY Your Honor a program shyshy let me
20 try it this way to both of your questions In our view
21 if what is claimed as the inventive contribution under
22 Mayo shyshy in other words if we have an abstract idea as
23 we do here and what is claimed is the inventive
24 contribution for Step 2 is the computer then the
25 computer must be essential to that operation and
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1 represent an advancement in computer science or other
2 technology And we know thats not met here Justice
3 Sotomayor because shyshy
4 JUSTICE SOTOMAYOR So youre saying no to
5 eshymail and word processing
6 MR PERRY Your Honor I think at a
7 point shyshy
8 JUSTICE SOTOMAYOR They certainly have
9 functionality and shyshy and improvement of functionality
10 for the user
11 MR PERRY At a point in time in the past
12 I think both of those would have been technological
13 advances that were patentable
14 JUSTICE SOTOMAYOR How
15 MR PERRY Today shyshy because they would have
16 provided a technological solution to a then unmet
17 problem Today reciting and do it on a word processor
18 is no different than and do it on a typewriter or shyshy and
19 do it on a calculator
20 The inventive contribution component which
21 uses specifically the language of conventional and
22 routine and well understood will evolve with
23 technology Thats why its different than the abstract
24 idea component
25 And here we know that these patents dont
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1 claim anything that was not conventional well
2 understood and routine We went through that in great
3 detail and Alice has never disputed a word of it They
4 just say youre not supposed to do that analysis even
5 though the Court 9shy0 in Mayo said we should
6 And in this case its very important to
7 look at what Alices own experts said on the subject
8 This is not our expert This is Alices expert And
9 this is at Page 1327shy28 of the Joint Appendix It is
10 possible to do the business methods of maintaining
11 accounts adjusting accounts and providing an
12 instruction without a computer or other hardware
13 And then Justice Breyer directly to your
14 abacus If someone had thought of this invention
15 soshycalled invention 100 years ago they might have
16 implemented it in a nonelectronic manner using various
17 precomputing tools such as an abacus or handwritten
18 ledgers
19 We know from Benson the Courts seminal
20 computer implementation case that if you can do it by
21 head and hand then the computer doesnt add anything
22 inventive within the meaning of the 101 exception That
23 is the holding of Benson And the Court reiterated that
24 in Mayo
25 Flook said exactly the same thing If you
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1 can do it with pencil and paper then the computer is
2 not offering anything that the patent laws are or should
3 be concerned with
4 It is only where the method will not work
5 without a computer which is not these claims and where
6 the computer itself is doing something that the patent
7 law is willing to protect
8 CHIEF JUSTICE ROBERTS What if shyshy what if
9 you can do it without a computer but its going to
10 take you know 20 people a hundred years In other
11 words theoretically you can replicate what the
12 computer does shyshy
13 MR PERRY Two answers
14 CHIEF JUSTICE ROBERTS shyshy but its
15 impractical without looking to do it on the computer
16 MR PERRY Mr Chief Justice first these
17 claims literally read as Alice reads them on a single
18 transaction between two parties so its not 20 people
19 for a hundred years Its one person sitting in a room
20 so thats not a problem
21 Second if what is being claimed is the
22 necessary speed or efficiency or data crunching
23 capabilities if you will of a computer then it would
24 have to be claimed and theres nothing claimed here
25 All that is claimed shyshy and my friend is going to stand
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1 up on rebuttal and tell you all that the expert said
2 well what is claimed is a computer but its just a
3 computer It just says a computer configured too It
4 doesnt say that the computer actually has to shyshy
5 JUSTICE BREYER Yeah but the trouble with
6 that particular test is as I think partly the Chief
7 Justice said how long et cetera and then add to that
8 though you could do it without a computer what happens
9 at the end of the line is the automobile engine goes off
10 or it begins to sputter or it turns left
11 You see its possible to take Archimedes shyshy
12 shyshy you know I use that example purposely to call
13 attention to the problem You can take those things
14 and youre not just saying apply it and youre not even
15 just saying shyshy you are saying use the computer but at
16 the end of the road something physical in the world
17 changes and everybody would say now thats shyshy that
18 will falls within I mean probably I mean my
19 hesitation shows Im looking for the right words
20 MR PERRY Justice Breyer your point is
21 the reason that it is equally fallacious to suggest on
22 the one hand as Alice and IBM does that simply
23 reciting a computer is a magic key that gets you through
24 101 and you never have to any other inquiry and what
25 some of folks the amici on the other side say which
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1 is that computers or software are never eligible Both
2 of those things have to be wrong because what the Court
3 said in Bilski was future innovation is too uncertain
4 We are not going to do that as a Court And the Court
5 laid out an approach using abstract ideas in Bilski and
6 inventive contribution in Mayo that is flexible enough
7 to take into account that innovation and to deal with
8 particular claims in context which is why at the end
9 of the day we have to come back to these patents and
10 decide which shyshy
11 JUSTICE KAGAN Mr Perry before we get
12 back to these matters you said to Justice Scalia if a
13 patent sufficiently describes how a computer will
14 implement an idea then its patentable So how
15 sufficiently does one have to describe it What do we
16 want a judge to do at this threshold level in terms of
17 trying to figure out whether the description is
18 sufficient to get you past it
19 MR PERRY If I can answer in two steps
20 Justice Kagan First in the negative What the
21 applicant or patentee must do shyshy must not do is simply
22 describe the desired result That would take us back to
23 State Street That would simply say I claim a magic
24 box that buys high and sells low or vice versa I
25 suppose I claim a magic box for investing Thats what
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1 these patents do
2 Then to put it in the affirmative and in the
3 language of Mayo the claim has to recite something
4 significantly more something significantly more than
5 the abstract idea itself That would be a contextual
6 analysis based on the claims and specifications and file
7 history and we know that some devices some methods
8 some programming will pass that
9 It is not going to be a brightshyline rule and
10 thats one of the tugshyofshywar issues that this Court and
11 the Federal Circuit have been having in these cases
12 The Federal Circuit wants brightshyline rules All
13 computers are in or all computers are out
14 This Court has been more contextual This
15 Court has been more nuanced This Court has looked at
16 things in a more robust way
17 JUSTICE KAGAN Youre not suggesting that
18 specific code is necessary
19 MR PERRY No Your Honor I think the shyshy
20 actual description of the programming is a 112 problem
21 I agree with that A 112 issue That is the realm of
22 the written description requirement What is a 101
23 problem is it is on the applicant to do more than simply
24 describe the results simply say A magic box that does
25 intermediate settlement And we can tie that back to
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1 this particular prosecution the 510 patent which is
2 the method patent
3 The examiner rejected it Under Section
4 101 the examiner said this is an abstract idea You
5 cant have this patent And the only change that this
6 applicant made was to add in the adjusting step
7 electronic adjustment It put in one word
8 electronic adjustment And under State Street which
9 is what this patent is prosecuted under that was
10 enough because the result of adjusting run through a
11 computer is enough
12 Under current law that cant be enough
13 That just cant get a patent over the line because this
14 Court said in Mayo and I got to quote this language
15 Simply implementing a fundamental principle on a
16 physical machine namely a computer is not a patentable
17 application of that principle Thats all that Alice
18 has done
19 These are preshyBilski patents They never
20 should have been issued General Verrilli will stand up
21 and address that point And certainly under current
22 law shyshy one point on the AIA Congress did not send all
23 this to the administrative process Congress created
24 two avenues the courts and the PTO to use the
25 standards Essentially it ratified Bilski and Mayo and
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1 said we agree with what you all are doing at the
2 Supreme Court and the existing standards are good enough
3 for us This is a judicial problem And that is a good
4 reason The abstract shyshy
5 JUSTICE GINSBURG The Federal Circuit in
6 this case split in many ways and it had our decisions
7 to deal with You said given Bilski and Mayo this is
8 an easy case What is the instruction that escaped a
9 good number of judges on the Federal Circuit How would
10 you state the rule
11 MR PERRY Your Honor I think theres a
12 significant element to the Federal Circuit that
13 disagrees with Mayo and has been resistant in applying
14 it Chief Judge shyshy former Chief Judge Michelle filed a
15 brief in this Court essentially saying Mayo is a
16 lifeshysciences case You should limit it to that because
17 if you apply it to everything else then these patents
18 are no good
19 Mayo we submit is a technologyshyneutral
20 industryshyneutral exceptionshyneutral framework that can
21 be used to answer all of these questions This is not
22 the death of software patents The software industry is
23 all before this Court saying this is fine with us
24 Every company in the United States practically except
25 for IBM is saying go ahead This will not affect
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1 software patents
2 Justice Ginsburg this Courts precedents
3 are clear They are unanimous They just need to be
4 applied To suggest that there is confusion that needs
5 to be addressed by retreating beating a retreat from
6 recent unanimous decisions would simply reward
7 intransigence difficulty refusal to adhere to what are
8 clear precedents because shyshy
9 JUSTICE KAGAN Should we be concerned
10 Mr Perry that there are old patents that in fact could
11 meet the test that you set forth but wont because they
12 were written in a different time and so used much more
13 general language
14 MR PERRY Your Honor the applicant or the
15 patent holder would have the opportunity to institute a
16 reexamination proceeding or some sort of administration
17 process to address that issue
18 And second it should be noted this is a
19 very small problem There are 2 million outstanding
20 patents in the United States In the last four fiscal
21 years there were 22000 infringement litigations
22 instituted but since Bilski there have only been 57
23 district court decisions on Section 101 issues There
24 have only been 12 Federal Circuit decisions total on
25 computer implementation
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1 We are talking about a group of patents
2 Justice Kagan thats way out at the tail end of
3 distribution Most patents never have a 101 challenge
4 This is not an issue with cotton gins and other things
5 This is a problem for the most marginal
6 most dubious most skeptical patents the ones that this
7 Court in Bilski shyshy and remember what Bilskis holding
8 is The majority said they are processes but it did
9 not say they are eligible
10 Thank you Mr Chief Justice
11 CHIEF JUSTICE ROBERTS Thank you counsel
12 General Verrilli
13 ORAL ARGUMENT OF DONALD B VERRILLI JR
14 ON BEHALF OF THE UNITED STATES AS AMICUS
15 CURIAE SUPPORTING RESPONDENTS
16 GENERAL VERRILLI Mr Chief Justice and
17 may it please the Court
18 An abstract idea does not become
19 patentshyeligible merely by tacking on an instruction to
20 use a computer to carry it out A computer makes a
21 difference under Section 101 when it imposes a
22 meaningful limit on the patent claim That occurs when
23 the claim is directed at improvement in computing
24 technology or an innovation that uses computing
25 technology to improve other technological functions
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1 Thats the test that we believe is most faithful to this
2 Courts precedents in Bilski and Mayo It keeps patents
3 within their traditional and appropriate domain and it
4 is capable of being administered consistently by Courts
5 and by PTO examiners
6 JUSTICE GINSBURG How do you answer the
7 argument that your view would extinguish businessshymethod
8 patents and make all software ineligible for patent
9 protection
10 GENERAL VERRILLI Yeah with shyshy let me
11 address software patents first because that I think is
12 obviously a significant question And its just not
13 correct to say that our approach would make software
14 patenting ineligible Any software patent that improves
15 the functioning of the computer technology is eligible
16 Any software patent that improves shyshy that is used to
17 improve another technology is eligible For example
18 the patent in the shyshy in the Diehr case is one in
19 which shyshy
20 JUSTICE SOTOMAYOR Why do we need to reach
21 this in that shyshy reach software patents at all in this
22 case
23 GENERAL VERRILLI Well shyshy
24 JUSTICE SOTOMAYOR Whats the necessity for
25 us to announce a general rule with respect to software
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1 There is no software being patented in this case
2 GENERAL VERRILLI Well I shyshy
3 JUSTICE SOTOMAYOR Theres a systems
4 GENERAL VERRILLI Well I shyshy I think shyshy
5 well they shyshy they shyshy theres a process being and shyshy and
6 one can think of software patents as process patents
7 And I think thats why my friends on the other side are
8 saying the sky is falling because they shyshy they are
9 interpreting what were saying about that when a
10 computer makes shyshy when a computers involvement makes
11 something eligible under 101 its calling those into
12 question and it doesnt
13 JUSTICE SOTOMAYOR Do you think we have to
14 reach the patentability of software to answer this case
15 GENERAL VERRILLI Well I think you can shyshy
16 I think the answer to that question is no not
17 necessarily You can decide it by saying that shyshy that
18 Bilski answers the question whether this is an abstract
19 idea because this form of hedging is really no
20 different than the form of hedging as a conceptual
21 matter at issue in Bilski And then Mayo answers the
22 question of whether the use of a computer in this case
23 adds enough to the abstract idea beyond conventional
24 steps because here all we have after all is just
25 conventional use of computing technology no computer
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1 innovation such that you dont qualify under 101 You
2 could take that approach
3 But it is important to the United States
4 that we shyshy and to our patent examiners that we get some
5 clarity if we can I think the clarity could come from
6 the text that I propose which I want to reiterate shyshy
7 JUSTICE SOTOMAYOR Well shyshy
8 JUSTICE BREYER Could shyshy could shyshy could you
9 go on with that because you were just getting to the
10 point where I think you say a computer improvement that
11 in fact leads to an improvement in harvesting cotton is
12 an improvement through a computer of technology so it
13 qualifies
14 But then I think you were going to say or I
15 got this also from the brief a computer improvement
16 that leads to an improvement in the methods of selling
17 bonds over the telephone is not an improvement in
18 technology reached by the computer Am I right about
19 the distinction youre making
20 GENERAL VERRILLI I dont think theres a
21 yes or no answer to that question
22 JUSTICE BREYER What is your view Yeah
23 what is shyshy how do we deal with just that problem
24 GENERAL VERRILLI If there is a genuine
25 innovation in the functioning of the computer shyshy
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1 JUSTICE BREYER Yes
2 GENERAL VERRILLI shyshy such that business
3 processes shyshy
4 JUSTICE BREYER Weve got that Yes yes
5 We got the computer But then it doesnt improve the
6 computer but rather it improves through the computer
7 the harvesting of cotton
8 Now youve got it in what you said was your
9 second category which is an improvement through the
10 computer of a technology And I thought in your brief
11 you were distinguishing an improvement through the
12 computer of a human activity that is not a technology
13 and in particular to pick an example of that
14 something in finance or something in business
15 Now am I right about the distinction youre
16 making
17 GENERAL VERRILLI Yeah that shyshy
18 JUSTICE BREYER If Im not right what is
19 the distinction
20 GENERAL VERRILLI That is generally the
21 line were drawing Frankly shyshy
22 JUSTICE BREYER And how is that justified
23 GENERAL VERRILLI I do want shyshy
24 JUSTICE BREYER That shyshy that is Judge Dyk
25 in shyshy in Bilski in the Federal circuit 4 people sort of
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1 picked it up maybe 5 didnt pick it up Would you say
2 a few words about it
3 GENERAL VERRILLI Sure About shyshy let me go
4 to Bilski there in that I do think while shyshy while
5 certainly the Court held that the term process got a
6 natural construction which could include business
7 methods it seems to me that thats not all the Court
8 said in Bilski The Court also said that it was
9 historically and traditionally quite rare that business
10 methods were patent eligible
11 It also said that shyshy that the shyshy that courts
12 and the PTO examiners should use the abstract ideas
13 exception to 101 to police the appropriate boundary
14 It also said that the
15 machineshyorshytransformation test that the United States
16 advocated remained a useful tool And of course that
17 directs to you seeing whether there is a technology
18 application
19 And of course the holding in Bilski was
20 that the shyshy the method for hedging risk was ineligible
21 because it was an abstract idea and I cant imagine
22 that if in Bilski the shyshy the claim had been exactly the
23 same but had added use a computer to carry out some of
24 these standard random analysis functions that are
25 claimed by the patent that you would have found it to
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1 be patent eligible
2 And I shyshy I would submit for the Court that
3 the key point here I think is that now given where
4 the Court shyshy what the Court has held in Bilski given
5 what its held in Mayo the abstract ideas exception is
6 really the only tool left to deal with what I shyshy what I
7 think I fairly read Bilski as saying is a significant
8 problem the proliferation of patents of business
9 methods
10 JUSTICE KENNEDY Is there an example that
11 you can give us of a shyshy what we can call a business
12 process that is patentable a process that doesnt
13 involve improving the workings of a computer
14 GENERAL VERRILLI I shyshy I think its going
15 to be difficult for me to do that I think for
16 example if you had a business method a process for
17 additional security pointshyofshysale credit card
18 transactions using particular encryption technology
19 that might well be patent eligible Its a technology
20 that it makes conduct of business more efficient or
21 effective
22 But there is a technological link here and
23 we do think thats critical to our shyshy to our point of
24 view with respect to the case And I shyshy and I do think
25 remember that when we say something is not patent
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1 eligible were not saying they cant do it Were
2 saying they cant monopolize it
3 And the concern in a situation like this one
4 is that if this is patent eligible its hard to see
5 why for example the first person who came up with a
6 frequent flier program wouldnt have been able to claim
7 a patent there because after all thats a business
8 method for improving customer loyalty implemented on a
9 computer
10 CHIEF JUSTICE ROBERTS General I shyshy you
11 mentioned a while ago the need for greater clarity and
12 certainty in this area And Im just wondering in your
13 brief youve got a nonshyexhaustive of factors to
14 consider and there are 6 different ones And Im just
15 doubtful that thats going to bring about greater
16 clarity and certainty
17 GENERAL VERRILLI I take shyshy I take the
18 point Mr Chief Justice but I think the key is that
19 they are all directed to answering the question of
20 whether the innovation that is claimed and is an
21 innovation in either A the improvement of a computers
22 functioning or B the use of computer technology to
23 improve the functioning of another technological
24 process and a case like Diehr would be in the latter
25 category
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1 And so I do think that thats the key
2 benchmark Thats the baseline Thats the test that
3 we do think can be applied clearly and consistently by
4 the courts or the PTO And it avoids the risk of things
5 like frequent flier programs or the Oakland As money
6 ball methods for evaluating the contributions in
7 individual baseball players make or any one of a host of
8 other things that our intuitions tell us just dont
9 belong in the patent system
10 Thats the shyshy drawing that line keeps them
11 out not drawing that line lets them in And with all
12 due respect I dont think that the novelty and
13 nonobviousness filters that 102 and 103 really deal with
14 that problem effectively because when you get to
15 nonobviousness in 103 for example youll be asking a
16 different question
17 If you take the frequent flier program you
18 would say well is this innovation in building consumer
19 loyalty something that would have been obvious to
20 somebody who runs an airline Its totally divorced
21 from the question of technology at that point and
22 therefore I dont think youre going to get the screen
23 that you need to get in order for the patent system to
24 be confined to its traditional and appropriate scope
25 If there are no further questions thank
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1 you
2 JUSTICE GINSBURG I have a question about
3 how do you identify an abstract concept The shyshy a
4 natural phenomenon a mathematical formula those are
5 easy to identify but there has been some confusion on
6 what qualifies as an abstract concept
7 GENERAL VERRILLI We would define
8 abstract shyshy an abstract concept as a claim that is not
9 directed to a concrete innovation in technology
10 science or the industrial arts So its the shyshy its
11 abstract in the sense that it is not a concrete
12 innovation in the traditional realm of patent law
13 Thank you
14 CHIEF JUSTICE ROBERTS Thank you General
15 Mr Phillips you have four minutes
16 remaining
17 REBUTTAL ARGUMENT OF CARTER G PHILLIPS
18 ON BEHALF OF THE PETITIONERS
19 MR PHILLIPS Thank you Mr Chief Justice
20 Id just like to make a few points
21 First of all with respect to the question
22 you asked which is looking at 159 et cetera all I can
23 tell you is that if you look at claim 33 it talks about
24 matched orders the matched orders that are described in
25 286 and 287 and then makes specific reference to 159
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1 and that flow chart thats there And its all designed
2 as a package Its only one element of the shyshy of the
3 invention but it is a central element and its an easy
4 one to understand And it goes well beyond simply the
5 notion of hedge shyshy hedge against settlement risk and do
6 it by a computer
7 JUSTICE SOTOMAYOR Your adversary says that
8 his shyshy the appendix to his brief are the only patents at
9 issue that the flow charts are not at issue in this
10 case
11 MR PHILLIPS Theres no basis for that
12 statement Your Honor There shyshy remember this went off
13 on a very truncated litigation process So theres shyshy
14 you know we shyshy we got cut off at the beginning of it
15 Theres been no construction of the shyshy of the claims
16 and shyshy and obviously these are specifications that go
17 to how you interpret the claim
18 JUSTICE SOTOMAYOR If we were to say that
19 there are no business patents shyshy
20 MR PHILLIPS Yes
21 JUSTICE SOTOMAYOR shyshy would your patent
22 survive at all
23 MR PHILLIPS No I dont shyshy I dont
24 believe so I think theres no question And you
25 know General Verrilli could not have been any plainer
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1 in his statement of how he wants to interpret the
2 abstract idea concept
3 JUSTICE SOTOMAYOR Yes he wants to say no
4 business patents
5 MR PHILLIPS No business shyshy just another
6 way of saying no business methods And you know the
7 Court rejected that And it seems to me extraordinary
8 to say Congress didnt reject no business methods in
9 101 but were going to do shyshy were going to manipulate
10 the judicial exception to accomplish precisely that same
11 thing It seems to me thats wholly inappropriate
12 Justice Ginsburg you asked my shyshy my friend
13 here you know whats his test He didnt answer that
14 question youll notice because he doesnt have an
15 answer His basic argument is whatever you do just
16 kill this patent
17 And if I were in his shoes I suppose Id
18 take that same position I think whats absolutely
19 clear is that the test ought to be one that is
20 structured as a very coarse filter not the kind of
21 filter that hes pushing for where it changes over time
22 I mean I thought his shyshy I thought his response to one
23 of the questions about eshymail and word processing that
24 Justice Sotomayor asked is over time it would change
25 Well thats exactly what 102 and 103 are for That is
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1 not the purpose of shyshy of Section 101
2 And then he uses the example of encryption
3 I guarantee you if we were arguing about encryption in
4 this case he would say to me that thats an abstract
5 principle because encryption is a concept thats been
6 around since time immemorial George Washington used
7 it Everybody has used encryption
8 And a question again thats not the
9 solution to these problems The question is how did we
10 go about doing it And we go beyond the basics of
11 simply saying use a computer and thats what we ask
12 this Court to focus on and to evaluate
13 As to the frequent flier program its
14 pretty clear to me that even though it was a novel idea
15 in some sense the concept itself would have been viewed
16 in shyshy in the KSR fashion as quite obvious as a means of
17 improving customer loyalty
18 There are solutions here Giving us 101
19 pass doesnt create a monopoly It just gets us to the
20 102 and 103 inquiries that are at the heart of what the
21 patent laws shyshy and 112 that are at the heart of what the
22 patent laws ought to be dealing with
23 If there are no further questions Your
24 Honor thank you
25 CHIEF JUSTICE ROBERTS Thank you counsel
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1 The case is submitted
2 (Whereupon at 1105 am the case in the
3 aboveshyentitled matter was submitted)
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6 6 5114 65 3019
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Exhibit A
1
Official shy Subject to Final Review
1 IN THE SUPREME COURT OF THE UNITED STATES
2 shy shy shy shy shy shy shy shy shy shy shy shy shy shy shy shy shy x
3 ALICE CORPORATION PTY
4 LTD
5 Petitioners No 13shy298
6 v
7 CLS BANK INTERNATIONAL
8 ET AL
9 shy shy shy shy shy shy shy shy shy shy shy shy shy shy shy shy shy x
10 Washington DC
11 Monday March 31 2014
12
13 The aboveshyentitled matter came on for oral
14 argument before the Supreme Court of the United States
15 at 1004 am
16 APPEARANCES
17 CARTER G PHILLIPS ESQ Washington DC on behalf
18 of Petitioners
19 MARK A PERRY ESQ Washington DC on behalf of
20 Respondents
21 DONALD B VERRILLI JR ESQ Solicitor General
22 Department of Justice Washington DC on behalf of
23 the United States as amicus curiae supporting
24 Respondents
25
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1 C O N T E N T S
2 ORAL ARGUMENT OF PAGE
3 CARTER G PHILLIPS ESQ
4 On behalf of the Petitioners 3
5 ORAL ARGUMENT OF
6 MARK A PERRY ESQ
7 On behalf of the Respondents 26
8 ORAL ARGUMENT OF
9 DONALD B VERRILLI JR ESQ
10 On behalf of the United States as amicus
11 curiae supporting Respondents 44
12 REBUTTAL ARGUMENT OF
13 CARTER G PHILLIPS ESQ
14 On behalf of the Petitioners 53
15
16
17
18
19
20
21
22
23
24
25
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1 P R O C E E D I N G S
2 (1004 am)
3 CHIEF JUSTICE ROBERTS Well hear argument
4 this morning in Case 13shy298 Alice Corporation versus
5 CLS Bank International
6 Mr Phillips
7 ORAL ARGUMENT OF CARTER G PHILLIPS
8 ON BEHALF OF THE PETITIONERS
9 MR PHILLIPS Thank you Mr Chief Justice
10 and may it please the Court
11 It is common ground between the parties in
12 this case that Section 101 by its terms and with the
13 sweeping interpretation this Court adopted in Bilski
14 applies directly to the patents here These are system
15 and process patents that speak directly to Section 101
16 The only issue then is whether the
17 judicially recognized exception that this Court adopted
18 many many years ago applies under these circumstances
19 JUSTICE KENNEDY And just repeat it is
20 common ground between the parties that shyshy
21 MR PHILLIPS That shyshy that our shyshy our
22 patents speak directly to the language of Section 101
23 that is they are a process and they are machines and
24 they are shyshy and they are improvements to the process and
25 the machines They dont shyshy they dont dispute that by
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1 its terms 101 applies The only argument between the
2 parties is the abstract idea exception that exists and
3 whether that bars us from otherwise satisfying
4 Section 101
5 JUSTICE GINSBURG Mr Phillips on the
6 abstract idea you know that the Bilski case held that
7 hedging qualified as an abstract idea So how is
8 intermediate settlement a less abstract than hedging
9 MR PHILLIPS If our shyshy if our patent
10 merely claimed intermediated settlements although I
11 have to say I dont really know exactly what that means
12 because I dont think thats the same kind of
13 economics shyshy basic economics concept that a hedge risk
14 treatment is But if it claimed that we wouldnt shyshy we
15 wouldnt have a distinction from Bilski
16 What we claim is a very specific way of
17 dealing with a problem that came into being in the early
18 1970s of how to try to eliminate the risk of
19 nonshysettlement in these very massive multiparty problems
20 in which you need to deal with difficulties that exist
21 at different time zones simultaneously and to do it with
22 a computer so that you not only take them on
23 chronologically deal with them sequentially based on
24 the kind software analysis that the patent specifically
25 describes by function
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1 And it goes even further than that and does
2 something that no escrow agent and shyshy and no
3 intermediated settlement that I know of shyshy settler that
4 I know of It actually blocks specific transactions
5 that in the shadow account would violate the terms of
6 the settlement that would ultimately be implemented
7 JUSTICE KENNEDY Well let me put it this
8 way If you describe that to a secondshyyear college
9 class in engineering and said heres shyshy heres my idea
10 now you go home and you program over this weekend my
11 guess is shyshy my guess is that that would be fairly easy
12 to program
13 MR PHILLIPS I dont disagree with it
14 Justice shyshy
15 JUSTICE KENNEDY So the fact that the
16 computer is involved it shyshy it seems to me is necessary
17 to make it work But the shyshy but the innovative aspect
18 is certainly not in the creation of the program to make
19 that work All youre talking about is shyshy if I can use
20 the word shyshy an idea
21 MR PHILLIPS I prefer not to use that word
22 for obvious reasons
23 (Laughter)
24 MR PHILLIPS But shyshy but if you shyshy but if
25 you look at the Solicitor shyshy
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1 JUSTICE KENNEDY Or shyshy or a method or a
2 process
3 MR PHILLIPS Right But shyshy and shyshy and
4 obviously methods and processes are precisely what
5 Section 101 permits to be subject shyshy
6 JUSTICE BREYER Why is that less abstract
7 MR PHILLIPS Im sorry
8 JUSTICE BREYER Why is that less abstract
9 I mean imagine King Tut sitting in front of the pyramid
10 where all his gold is stored and he has the habit of
11 giving chits away Good for the gold which is given at
12 the end of the day And he hires a man with an abacus
13 and when the abacus keeping track sees that hes given
14 away more gold than he is in storage he says stop
15 You see
16 Or my mother who used to look at my
17 checkbook when she saw that in fact I had written
18 more checks than I had in the account she would grab
19 it Stop You see
20 So what is it here thats less abstract that
21 the computer says stop
22 MR PHILLIPS It is shyshy
23 JUSTICE BREYER How is that less abstract
24 than King Tut if we had the same thing with a grain
25 elevator if we had the same thing with a reservoir of
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1 water if we had the same thing with my checkbook You
2 see the point
3 MR PHILLIPS I do see the point Justice
4 Breyer and it seems to me that it goes to the question
5 of the methodology youre going to employ
6 JUSTICE BREYER Methodology is just that
7 you said stop
8 MR PHILLIPS Well we could shyshy
9 JUSTICE BREYER So what we have different
10 here is the computer stops rather than the abacus man
11 stopping or my mother stopping or the guy that the grain
12 elevator has that says stop So just saying what shyshy is
13 that it In other words if you say computer stop you
14 have an invention Useful add shyshy but if you say mother
15 stop you dont
16 MR PHILLIPS No Well I mean again it
17 seems to me that in some ways what shyshy what you described
18 there is a caricature of what this invention is
19 JUSTICE BREYER Of course its a
20 caricature Its a caricature designed to suggest that
21 there is an abstract idea here Its called solvency
22 MR PHILLIPS But shyshy
23 JUSTICE BREYER And what you do is you take
24 the idea of solvency and you say apply it And you say
25 apply it through the computer
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1 Is that enough to make it not just the
2 abstract idea And now were at the heart of why I used
3 my exaggerated examples shyshy
4 MR PHILLIPS Right
5 JUSTICE BREYER shyshy because you will tell me
6 why shyshy
7 MR PHILLIPS Right
8 JUSTICE BREYER shyshy this is enough
9 MR PHILLIPS Right Because Justice
10 Breyer the shyshy the shyshy the concept here is not simply to
11 say stop Stop is obviously part of the element of it
12 But its also designed to ensure that at the
13 end of the day this transaction in the midst of
14 literally a global set of shyshy of deals that are going on
15 simultaneously will be implemented at the appropriate
16 time in the appropriate way And whatever else that may
17 be it seems to me its difficult to say thats an
18 abstract idea as implemented
19 JUSTICE SOTOMAYOR Im sorry But shyshy but
20 what it appears to be it sounds like youre trying to
21 revive the patenting of a function You used the word
22 function earlier and thats all Im seeing in this
23 patent is the function of reconciling accounts the
24 function of making sure theyre paid on time But in
25 what particular way other than saying do it through a
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1 computer is this something new and not function
2 MR PHILLIPS Well it does it through shyshy
3 it creates the shadow accounts because of the concerns
4 for security You dont shyshy youre not going to allow
5 somebody to enter into a central banks own accounts
6 You create the shadow accounts You monitor through the
7 software that allows you to do that You evaluate each
8 of the transactions to ensure that the settlement will
9 be available You do it sequentially and you act on it
10 by the end of the day or whenever the transaction is to
11 take place and you implement that transaction
12 JUSTICE SCALIA Why isnt it shyshy why isnt
13 doing it through a computer not enough I mean was the
14 cotton gin not an invention because it just means youre
15 doing through a machine what people used to do by hand
16 Its not an invention Its the same old same old
17 MR PHILLIPS Justice Scalia shyshy
18 JUSTICE SCALIA Why shyshy why is a computer
19 any different in that respect
20 MR PHILLIPS At one level I agree with you
21 completely There is no difference between them
22 This Court has however said on more than a
23 few occasions albeit in dicta that coming up with an
24 idea and then say use a computer is not sufficient
25 And what Im trying to suggest to you is we dont fall
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1 within that dicta
2 Now if you dont accept the dicta and you
3 say use a computer is fine then I think were done
4 JUSTICE SCALIA Well Im not saying use a
5 computer is shyshy is much of a novelty I mean thats shyshy
6 that goes to whether its novel or not If you just say
7 use a computer you havent invented anything But if
8 you come up with a serious program that shyshy that does it
9 then you know that may be novel But thats a novelty
10 issue isnt it
11 MR PHILLIPS To be sure Justice Scalia
12 JUSTICE BREYER And this is exactly the
13 question I really would like to you to focus on for me
14 Why is it shyshy and Im not saying this from a point of
15 view but it seems to me pretty clear that if what you
16 did was take the idea of solvency shyshy remember King Tut
17 Thats what I use the exaggeration shyshy and what you say
18 is implemented by having the abacus man keep track and
19 say stop okay shyshy
20 MR PHILLIPS Right
21 JUSTICE BREYER Then we implement it by
22 having somebody with a pencil and a piece of paper and
23 this is all that they add you see Say Have a man
24 with a pencil and a piece of paper keeping track and
25 saying stop or we say implement it in the computer
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1 which will automatically keep track and say stop are
2 they all enough Are some of them enough Whats the
3 rule
4 And you realize I couldnt figure out much
5 in Prometheus to go beyond what I thought was an obvious
6 case leaving it up to you and your colleagues to figure
7 out how to go further Am I making enough shyshy making
8 clear enough whats bothering me And Id really like
9 to get your answer to this
10 MR PHILLIPS And shyshy and look theres
11 no shyshy Ill be the first one to shyshy to confess that trying
12 to use language to describe these things is not all that
13 easy But the way I think you can meaningfully look at
14 this is to say that this is not simply something that
15 was a fundamental truth this is not something that
16 simply says use a computer Its not simply something
17 that says maintain solvency It shyshy it operates in a
18 much more specific and concrete environment where youre
19 dealing with a problem thats been in existence since
20 the 1970s a solution in the 1990s that CLS itself
21 acknowledges needed a solution and came forward with
22 their own solution that looks a lot like ours
23 JUSTICE KENNEDY But my shyshy my initial
24 question and I think I can work this into King Tut
25 is shyshy
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1 (Laughter)
2 JUSTICE KENNEDY shyshy is shyshy is whether or not
3 you could have patented that system idea process
4 method without attaching a computer program
5 MR PHILLIPS You cannot absolutely cannot
6 do that with this system because it is so complex and
7 so many interrelated parts
8 JUSTICE KENNEDY Suppose I thought shyshy and
9 again its just a thought because I dont have the
10 expertise shyshy that any computer group of people sitting
11 around a coffee shop in Silicon Valley could do this
12 over a weekend Suppose I thought that
13 MR PHILLIPS You mean wrote the code
14 JUSTICE KENNEDY Yes right
15 MR PHILLIPS Well thats absolutely shyshy
16 Im certain thats true
17 JUSTICE KENNEDY Well then shyshy then shyshy
18 MR PHILLIPS But thats true of almost all
19 software
20 JUSTICE KENNEDY Then why is the computer
21 program necessary to make the patent valid
22 MR PHILLIPS Well its shyshy its necessary
23 to make the invention effective As the Solicitor
24 General said the computer is essential to the efficacy
25 of this invention because of the complicated financial
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1 arrangements that exist and that can only be resolved on
2 a shyshy on a realtime basis Your abacus is great if you
3 happen to be waiting for the pyramids to be finished or
4 waiting for the gold to move in and out but it doesnt
5 help with you an abacus if youre dealing with literally
6 thousands of transactions simultaneously going on in
7 different countries at different points in time
8 JUSTICE KENNEDY But thats just an idea
9 hey lets use a computer
10 MR PHILLIPS But its not just shyshy I mean
11 obviously part of it is use the computer Justice
12 Kennedy But more fundamentally it goes beyond that
13 See I shyshy
14 JUSTICE SOTOMAYOR Is your software
15 copyrighted
16 MR PHILLIPS No I dont believe so
17 JUSTICE GINSBURG There is no special
18 software that comes with this shyshy thats part of this
19 patent is it shyshy is there
20 MR PHILLIPS No Justice Ginsburg what
21 we did here is what the Patent and Trademark Office
22 encourages us to do and encourages all software patent
23 writers to do which is to identify the functions that
24 you want to be provided for with the software and leave
25 it then to the software writers who I gather are you
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1 know quite capable of converting these functions into
2 very specific code
3 JUSTICE KAGAN Mr Phillips could you shyshy
4 could you disaggregate your argument for me Because
5 you just said look this Court has said its not
6 sufficient if you have an idea and then you say use a
7 computer to implement it right So are you saying that
8 your shyshy that shyshy are you saying that youre doing more
9 than saying use a computer to implement it or are you
10 saying that its shyshy that the idea itself is more than an
11 idea
12 MR PHILLIPS Yes Im saying shyshy
13 JUSTICE KAGAN Which part of what shyshy
14 MR PHILLIPS Im saying both actually I
15 mean Im making both of those arguments I shyshy I
16 believe that if you analyze the claims and you dont
17 caricature them and you dont strip them out of the
18 limitations that are embedded in there this is not some
19 kind of an abstract concept This is not some kind shyshy
20 its not an abstract idea Its a vary shyshy
21 JUSTICE KAGAN So putting the computer
22 stuff aside completely shyshy
23 MR PHILLIPS Right
24 JUSTICE KAGAN shyshy youre saying that youve
25 invented something or you shyshy
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1 MR PHILIPS Yes
2 JUSTICE KAGAN There is something that
3 youve patented that has shyshy that is not just simple use
4 a third party to do a settlement
5 MR PHILLIPS Right
6 JUSTICE KAGAN And what is that putting
7 the computer aside
8 MR PHILLIPS It is shyshy well shyshy and again
9 its difficult to do that because you absolutely need
10 the computer in order to implement this But the key to
11 the invention is the notion of being able
12 simultaneously dealing with it on a chronological basis
13 to stop transactions that will otherwise interfere with
14 the ability to settle on time and under the appropriate
15 circumstances And the only way you can do that in a
16 realtime basis when youre dealing with a global economy
17 is to use a computer It is necessary to the efficacy
18 of this
19 So in that sense I cant shyshy I cant
20 disaggregate it the way in some sense youre suggesting
21 It seems to me its bound up with in shyshy its bounds up
22 with the whole notion of is this an abstract concept
23 JUSTICE BREYER Can you in fact shyshy now
24 this is shyshy look there are 42 briefs in this case I
25 actually read them and I found them very very helpful
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1 up to the point where I have to make a decision because
2 theyre serious I mean you know shyshy now the problem
3 that I came away with is the one that youre beginning
4 to discuss that if you simply say take an idea thats
5 abstract and implement it on a computer there are shyshy
6 youre going to get it much faster youre going to be
7 able to do many many things and if thats good enough
8 there is a risk that you will take business in the
9 United States or large segments and instead of having
10 competition on price service and better production
11 methods well have competition on who has the best
12 patent lawyer You see where Im going on that one
13 MR PHILLIPS Yeah of course
14 JUSTICE BREYER And if you go the other way
15 and say never then what you do is you rule out real
16 inventions with computers
17 MR PHILLIPS Right
18 JUSTICE BREYER And so in those 42 briefs
19 there are a number of suggestions as to how to go
20 between Scylla and Charybdis Now I would like to
21 know shyshy I dont know if you can step back from your
22 representational model Thats a problem Youre all
23 we have now And shyshy and from my point of view I need
24 to know what in your opinion is the best way of sailing
25 between these two serious arms
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1 MR PHILLIPS Well Justice Breyer I guess
2 I would suggest to you that you might want to deal with
3 the problem you know as opposed to the problems you
4 dont know at this stage I mean we have had business
5 method patents and software patents in existence for
6 well over a decade and theyre obviously quite
7 significant in number And shyshy and we know what the
8 system is we have And Congress looked at that system
9 right and didnt say no to business methods patents
10 didnt say no to software patents instead said the
11 solution to this problem is to get it out of the
12 judicial process and create an administrative process
13 but leave the substantive standards intact
14 So my suggestion to you would be follow that
15 same advice a liberal interpretation of 101 and not a
16 caricature of the claims analyze the claims as written
17 and therefore say that the solution is 102 and 103 and
18 use the administrative process If you shyshy
19 JUSTICE GINSBURG Mr Phillips let me just
20 stop you there because four Justices of this Court did
21 not read that legislative history the way you do And
22 it was shyshy was in Bilski
23 MR PHILLIPS But this is postshyBilski
24 JUSTICE GINSBURG Justice Stevens went
25 carefully through that and he said Congress was
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1 reacting to a decision It had shyshy it was not addressing
2 101 So there are at least four Justices who say shyshy who
3 didnt buy that argument
4 MR PHILLIPS Well I mean it still seems
5 to me that the shyshy the natural inference is Congress did
6 not change 101 Congress created an entire
7 administrative system to deal with 101 102 and 103
8 And shyshy and I would hope shyshy
9 JUSTICE SCALIA And four is not five
10 anyway right
11 MR PHILLIPS Thats true
12 JUSTICE SCALIA Four is not five
13 MR PHILLIPS And youve exhausted my math
14 skills Your Honor
15 JUSTICE SCALIA By the way we shyshy we have
16 said that you cant take an abstract idea and then say
17 use a computer to implement it But we havent said
18 that you cant take an abstract idea and then say here
19 is how you use a computer to implement it shyshy
20 MR PHILLIPS Exactly
21 JUSTICE SCALIA shyshy which is basically what
22 youre doing
23 MR PHILLIPS And thats the argument were
24 doing and shyshy
25 JUSTICE SCALIA And thats a little
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1 different
2 MR PHILLIPS shyshy thats the line were
3 asking the Court to draw here
4 JUSTICE KAGAN Well how are you saying the
5 how Because I thought that your computers shyshy that your
6 patents really did just say do this on a computer as
7 opposed to saying anything substantive about how to do
8 it on a computer
9 MR PHILLIPS I would urge the Court to
10 look at Joint Appendix 159 285shy286 where it goes
11 through the flow charts This is shyshy and this is just a
12 specific example of the method by which you stop a
13 transaction and it goes through a varied series of
14 detailed steps and what the computer has to do in order
15 to do that It doesnt actually obviously put in the
16 code but thats what the PTO says dont do Dont put
17 in the code because nobody understands code so shyshy but
18 put in the functions and we know shyshy and we know that
19 someone skilled in the art will be able to put in the
20 code And if they arent if they cant do that then
21 its not enabled and thats a 112 problem
22 To go back Justice Breyer to your
23 question So on the one hand youve got a problem that
24 it seems to me Congress to some extent has said is okay
25 and weve got a solution and that solutions playing
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1 through On the other hand if this Court were to say
2 much more categorically either that theres no such
3 thing as business method patents or adopt the Solicitor
4 Generals interpretation which is to say that there
5 cannot be software unless the software somehow actually
6 improves the computer as opposed to software improving
7 every other device or any other mechanism that might be
8 out there
9 What we know is that this would inherently
10 declare and in one fell swoop hundreds of thousands of
11 patents invalid and the consequences of that it seems
12 to me are utterly unknowable And before the Court goes
13 down that path I would think it would think long and
14 hard about whether isnt that a judgment that Congress
15 ought to make And It seems to me in that sense youre
16 essentially where the Court was in Chakrabarty where
17 everybody was saying youve got to act in one way or the
18 other or the world comes to an end and the courts have
19 said well apply 101 directly
20 JUSTICE KENNEDY If we say that theres no
21 software patentability and agree with the Attorney
22 General do you lose in this case
23 MR PHILLIPS Well it would be very hard
24 for me to see how that shyshy how shyshy how I can get around
25 that particular problem because the computer is the
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1 essence of it so shyshy and a portion of it is clearly the
2 software So I think if you say there is no such thing
3 as software patentability I do lose in this case yes
4 Your Honor As do a whole lot of other people
5 JUSTICE KENNEDY Is there any common ground
6 between you and the government shyshy maybe a better
7 question to ask the government shyshy a common ground
8 between you and the government on something in the
9 software area thats patentable other than making the
10 computer itself work You understand the government to
11 say no software patents
12 MR PHILLIPS Thats the way I interpret
13 the governments shyshy the governments brief
14 JUSTICE BREYER It was like shyshy theres a
15 Bloomberg brief out here that was on this that said
16 no you can shyshy you can patent computer software when
17 its an improvement in the computer when its an
18 improvement in software when its an improvement in a
19 technology that is developed out of computers like
20 robotics when it is an improvement in a machine or
21 technology but you cannot improve it where it is simply
22 an improvement in an activity that is engaged in
23 primarily through mental processes But what they mean
24 by that is business finance and similar arts
25 Thats shyshy I mean thats shyshy it wasnt quite what shyshy I
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1 know Thats what I want to know what you dont agree
2 with about that because its a little more refined than
3 you suggested
4 MR PHILLIPS I read the Solicitor
5 Generals brief as broader than the Bloomberg brief
6 in shyshy in terms of the approach And IBMs argument is
7 if you knock out software patents you eliminate web
8 browsing word processing cellphones eshymail Those
9 are all activities that I dont think fall within the
10 meaning of the shyshy the meaning of the governments theory
11 of the case
12 JUSTICE BREYER But Im asking you shyshy Im
13 asking you what about this one that I just mentioned
14 You see I went through those five steps shyshy
15 MR PHILLIPS Right
16 JUSTICE BREYER shyshy and four of them you
17 could patent and the fifth one you cant
18 MR PHILLIPS Right But I shyshy and I guess
19 my answer to that is thats nowhere in the statute and
20 it doesnt seem to me to reflect an abstract idea Its
21 a shyshy its a line you draw that takes out business method
22 patents If the Court wants to eliminate business
23 method patents fine But you just said no to that in
24 Bilski two three terms ago
25 Now to be sure give the Solicitor General
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1 credit he comes here and says to you We didnt like
2 the result in Bilski we want you to say dont use
3 process in order to get there which is a statutory
4 interpretation come up with an extraordinarily
5 complicated way of looking at the exception and use that
6 to get to the exact same result
7 JUSTICE SOTOMAYOR Well youre doing a
8 very good job of proving shyshy
9 JUSTICE GINSBURG In Bilski Justice Breyer
10 did try to say that there wasnt that shyshy a whole lot of
11 distance between the four who thought business methods
12 were not patentable But he shyshy he also said something
13 else in shyshy in the other case Mayo Justice Scalia
14 asked you the question about doesnt that go to novelty
15 but didnt Justice Breyer say in Mayo that novelty can
16 be relevant to patent shyshy to patent eligibility He said
17 theres shyshy theres an overlap
18 MR PHILLIPS Well he said theres an
19 overlap Here in this context I think basically the
20 Respondents theory would mean that they are completely
21 coterminous And I dont think thats what the Court
22 meant And also we know from Diehr that theres got to
23 be at least some significant limitations on the extent
24 to which novelty has to be built into 101 That is the
25 province of 102 and 103 And as I said Congress
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1 modified the system of adjudication to create an
2 administrative mechanism that allows you to get to 102
3 and 103 And at least in context its important to
4 realize there have been 11 cases since that was created
5 9 of the 11 have been knocked down on 102 or 103 grounds
6 and not on 101 grounds And it seems to me thats the
7 answer to this problem is leave 101 as the coarse
8 filter If on its face it states these kinds of broad
9 abstract principles fundamental truths and even if it
10 says use a computer those should be struck down
11 JUSTICE SOTOMAYOR Which of the shyshy which of
12 the opinions below captures your position most
13 accurately
14 MR PHILLIPS I would guess it would be
15 Judge Moores opinion below that would capture ours most
16 correctly
17 JUSTICE SOTOMAYOR And if we were to think
18 your method claim is ineligible do you agree that your
19 systems and shyshy your medium and system claims fail as
20 well Do they rise and fall together
21 MR PHILLIPS No No I dont believe they
22 do rise and fall together I mean I think you could shyshy
23 if you wanted to interpret our medium claim shyshy I mean
24 our shyshy our method claims in a shyshy in particularly
25 abstract way I think you could still say that the
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1 system claims which clearly are shyshy are how to create a
2 computer system and how to implement it using that
3 method would be a much more concrete version of that in
4 a way that would take it out of 101 That said I
5 obviously believe that all of our claims satisfy 101
6 and should go on to the next stage
7 JUSTICE KAGAN Can I give you a
8 hypothetical Mr Phillips and you tell me how its
9 different or the same Lets say you know 30 years
10 somebody took a look around the world and said a lot of
11 people seem to order products by mail They get the
12 catalogues in the mail and then they send back their
13 return forms And lets say that one of the founders of
14 the Internet said wouldnt this be an amazing system
15 we could actually do this by computer and they had
16 patented that Is that the same
17 MR PHILLIPS I dont know if its the
18 same but I would shyshy I would argue that it could very
19 well be a patentable subject matter because shyshy but it
20 depends on how the claims play out
21 JUSTICE KAGAN No but exactly I mean
22 the claim would have said something along the lines of
23 you know theres this process by which people order
24 products and we want to do it over the Internet we want
25 to do it electronically and we will use a computer to
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1 do that to essentially take the process of mail order
2 catalogues and make it electronic
3 MR PHILLIPS I could certainly shyshy I think
4 I could write a claim shyshy a set of claims that I believe
5 would satisfy 101 And shyshy and to the extent that
6 youd shyshy that youd think those are no different than
7 the ones I have here then my argument is simply I think
8 I satisfy 101 with the claims we have before us Your
9 Honor
10 If there are no further questions then Id
11 like to reserve the rest of my time
12 CHIEF JUSTICE ROBERTS Thank you
13 Mr Phillips
14 Mr Perry
15 ORAL ARGUMENT OF MARK A PERRY
16 ON BEHALF OF THE RESPONDENTS
17 MR PERRY Mr Chief Justice and may it
18 please the Court
19 That path between Scylla and Charybdis was
20 charted in Bilski and Mayo Bilski holds that a
21 fundamental economic principle is an abstract idea and
22 Mayo holds that running such a principle on a computer
23 is quote not a patentable application of that
24 principle Those two propositions are sufficient to
25 dispose of this case
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1 If Bilski and Mayo stand Alices patents
2 fail Therefore Mr Phillips and his friends are
3 asking this Court to change the standard even though
4 this Court has had three unanimous decisions in the last
5 four terms establishing what the Court called a myriad
6 a wellshyestablished standard
7 On the abstract idea Justice Ginsburg you
8 asked Mr Phillips whats the difference between hedging
9 and this claim There is no difference This is
10 hedging It is hedging against credit default rather
11 than price fluctuation but it is simply hedging
12 And Mr Phillips stood up for 26 minutes and
13 never once referred to the patent Lets look at what
14 the inventor the soshycalled inventor said about this
15 invention This is at JA 293 to 94 in the
16 specification
17 This claim has simply two steps Its very
18 simple First debiting and crediting on a realtime
19 basis the relevant shadow records and second by
20 periodically affecting corresponding payment
21 instructions Those are direct quotes Debit credit
22 and pay Your Honor you cant get much more simple
23 than that
24 Mr Phillips suggests well we have
25 multilateral transactions global things chronological
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1 time zones and so forth None of those are claimed
2 Your Honor Those are all recited in specification
3 The claims read on a single transaction involving two
4 parties
5 JUSTICE BREYER Can I ask you at some
6 point not necessarily this second to say in my shyshy this
7 is just shyshy you know you have an opinion for a court
8 Different judges can have different interpretations
9 All youre getting is mine okay
10 But I think its pretty easy to say that
11 Archimedes cant just go to a boat builder and say
12 apply my idea All right Everybody agrees with that
13 But now we try to take that word apply and give
14 content to it
15 And what I suspect in my opinion Mayo did
16 and Bilski and the other cases is sketch an outer shell
17 of the content hoping that the experts you and the
18 other lawyers and the shyshy the circuit court could fill
19 in a little better than we had done the content of that
20 shell
21 So so far youre saying well this is
22 close enough to Archimedes saying apply it that we
23 neednt go further
24 Now will you at some point in the next few
25 minutes give me your impression of if it were necessary
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1 to go further what would the right words or example be
2 MR PERRY Your Honor as shyshy Justice
3 Breyer as to abstract ideas the PTO has filled in that
4 shell by listing economic concepts legal concepts
5 financial concepts teaching concepts dating and
6 interpersonal relationships and generally how business
7 should be conducted as examples of those things that are
8 likely abstract which of course all follow directly
9 from Bilski and the discussion this Court had in Bilski
10 And this patent shyshy these patents fall squarely within
11 that
12 Congress in the AIA confirmed that
13 reading Congress in the CBM method said business
14 methods that are subject to special scrutiny shyshy that is
15 dubious patents shyshy include methods and corresponding
16 apparatus which is what we have here that pertain to
17 data processing in the financial services industry and
18 do not offer a technological solution That describes
19 Alices patents to a letter Your Honor So that we
20 have shyshy
21 JUSTICE SOTOMAYOR What do you think is a
22 technological solution
23 MR PERRY Your Honor shyshy
24 JUSTICE SOTOMAYOR How could they if at
25 all written their patents to shyshy to make shyshy to make
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1 their software eligible What would shyshy what do they
2 need shyshy would have needed to have added
3 MR PERRY Justice Sotomayor they have no
4 software first Theyve never written software
5 Theyve never programmed a computer So thats a
6 nonexistent set
7 Second there are many technological
8 solutions to trading and settlement problems For
9 example data compression These shyshy these trading
10 platforms involve the movement of very large quantities
11 of data around the world The physical pipes that is
12 the fiber optic cables and data lines are limited
13 There are very sophisticated algorithms for both
14 security and speed to move data through the transmission
15 lines in novel and useful ways that could well be
16 patented
17 Nothing like that is claimed here To come
18 back to where I started if you look for example at
19 Claim 65 in the 510 patent as Mr Phillips reads it
20 it literally reads on a twoshyparty escrow to sell a
21 house so long as the escrow agent is typing this stuff
22 into the HUDshy1 using a computer That has nothing to do
23 with multilevel shyshy
24 CHIEF JUSTICE ROBERTS Well thats a
25 little more complicated He referred us to Joint
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1 Appendix Page 159 which is not a change in how
2 computers work But it is shyshy constitutes the
3 instructions about how to use the computer and where it
4 needs to be affected And just looking at it it looks
5 pretty complicated There are a lot of arrows and
6 they shyshy you know different things that go shyshy
7 (Laughter)
8 CHIEF JUSTICE ROBERTS Well but I mean
9 you know it shyshy in different directions And I
10 understand him to say that in each of those places
11 thats where the computer is needed
12 MR PERRY Mr Chief Justice Figure 16 has
13 nothing to do with the invention asserted against my
14 client in this case There are two inventions in this
15 patent One invention involving multilateral contract
16 formation is not asserted against my client And all of
17 these drawings pertain to that The only drawings that
18 pertain to the asserted claims are 25 and 33 to 37 And
19 that was established below and its established in this
20 Court And Mr Phillips has never disputed it
21 So the claim hes pointed the Court shyshy the
22 figure hes pointed the Court to has nothing to do with
23 the invention Its for a different invention that is
24 not at issue in this case
25 Remember there are hundreds and hundreds of
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1 pages of these patents They all pertain to the other
2 invention Thats why in the back of our red brief we
3 excerpted the very little bit that actually pertains to
4 this You sort of tack on patent shyshy the tack on claim
5 that Mr Phillips is asserting here Its 4 columns
6 Its less than five pages in the printed appendix that
7 actually pertains to this invention And it contains no
8 disclosure whatever
9 Justice Scalia to your question about how
10 the computer does it Of course a patent that
11 describes sufficiently how a computer does a new and
12 useful thing whether its data compression or any other
13 technological solution to a business problem a social
14 problem or a technological problem would be within the
15 realm of the shyshy of the patent laws That is what the
16 patent laws have always been for
17 This is not such a patent And the reason
18 for that is this is a preshyBilski set of patents These
19 were prosecuted under the old State Street test where
20 all the applicant had to claim was a result
21 JUSTICE KENNEDY Would you give me shyshy
22 again you already did it once shyshy an example of a
23 business process patent shyshy of a business process idea
24 and invention that is patentable
25 MR PERRY Your Honor there are many
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1 examples One would be a technological solution to a
2 business problem So that for example shyshy Ill give a
3 different example There are many applications today
4 The Court may be familiar with streaming video to watch
5 video on your computer
6 It is not possible to get enough data
7 through existing lines in its raw format The data has
8 to be manipulated in order to see live video So if you
9 want to watch TV on your phone for example
10 Those algorithms those inventions are
11 undoubtedly technological And if they are used in a
12 trading platform or a hedging system or something else
13 that wouldnt disable them And this is what the Diehr
14 case shyshy
15 JUSTICE KENNEDY Well I shyshy I shyshy in my
16 language Ive called that mechanical rather than
17 process Can you give me an example of process
18 MR PERRY Yes Your Honor The process in
19 that example would be a computer running the particular
20 data compression algorithm
21 JUSTICE KENNEDY But thats how to make
22 a shyshy thats how to make a machine work better
23 MR PERRY Yes Your Honor
24 JUSTICE KENNEDY Im asking you Is there
25 any business process any business activity that is
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1 susceptible to a patent a pure patent innovations that
2 deserve patents
3 MR PERRY Your Honor again a
4 technological solution to a business problem could well
5 be whether its a method or a process is equivalent
6 Again Congress said method in a corresponding shyshy
7 JUSTICE KENNEDY Can you give me an
8 example
9 MR PERRY I thought the data compression
10 example was a good one Ill try an encryption
11 technology Many of these trading platforms you know
12 dealing with securities and money would require some
13 sort of security devices You could have a process for
14 securely transmitting data would be another computer
15 implemented technological solution to a business
16 problem Again nothing like that claimed here
17 JUSTICE SOTOMAYOR How about eshymail and
18 just word processing programs
19 MR PERRY Your Honor a program shyshy let me
20 try it this way to both of your questions In our view
21 if what is claimed as the inventive contribution under
22 Mayo shyshy in other words if we have an abstract idea as
23 we do here and what is claimed is the inventive
24 contribution for Step 2 is the computer then the
25 computer must be essential to that operation and
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1 represent an advancement in computer science or other
2 technology And we know thats not met here Justice
3 Sotomayor because shyshy
4 JUSTICE SOTOMAYOR So youre saying no to
5 eshymail and word processing
6 MR PERRY Your Honor I think at a
7 point shyshy
8 JUSTICE SOTOMAYOR They certainly have
9 functionality and shyshy and improvement of functionality
10 for the user
11 MR PERRY At a point in time in the past
12 I think both of those would have been technological
13 advances that were patentable
14 JUSTICE SOTOMAYOR How
15 MR PERRY Today shyshy because they would have
16 provided a technological solution to a then unmet
17 problem Today reciting and do it on a word processor
18 is no different than and do it on a typewriter or shyshy and
19 do it on a calculator
20 The inventive contribution component which
21 uses specifically the language of conventional and
22 routine and well understood will evolve with
23 technology Thats why its different than the abstract
24 idea component
25 And here we know that these patents dont
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1 claim anything that was not conventional well
2 understood and routine We went through that in great
3 detail and Alice has never disputed a word of it They
4 just say youre not supposed to do that analysis even
5 though the Court 9shy0 in Mayo said we should
6 And in this case its very important to
7 look at what Alices own experts said on the subject
8 This is not our expert This is Alices expert And
9 this is at Page 1327shy28 of the Joint Appendix It is
10 possible to do the business methods of maintaining
11 accounts adjusting accounts and providing an
12 instruction without a computer or other hardware
13 And then Justice Breyer directly to your
14 abacus If someone had thought of this invention
15 soshycalled invention 100 years ago they might have
16 implemented it in a nonelectronic manner using various
17 precomputing tools such as an abacus or handwritten
18 ledgers
19 We know from Benson the Courts seminal
20 computer implementation case that if you can do it by
21 head and hand then the computer doesnt add anything
22 inventive within the meaning of the 101 exception That
23 is the holding of Benson And the Court reiterated that
24 in Mayo
25 Flook said exactly the same thing If you
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1 can do it with pencil and paper then the computer is
2 not offering anything that the patent laws are or should
3 be concerned with
4 It is only where the method will not work
5 without a computer which is not these claims and where
6 the computer itself is doing something that the patent
7 law is willing to protect
8 CHIEF JUSTICE ROBERTS What if shyshy what if
9 you can do it without a computer but its going to
10 take you know 20 people a hundred years In other
11 words theoretically you can replicate what the
12 computer does shyshy
13 MR PERRY Two answers
14 CHIEF JUSTICE ROBERTS shyshy but its
15 impractical without looking to do it on the computer
16 MR PERRY Mr Chief Justice first these
17 claims literally read as Alice reads them on a single
18 transaction between two parties so its not 20 people
19 for a hundred years Its one person sitting in a room
20 so thats not a problem
21 Second if what is being claimed is the
22 necessary speed or efficiency or data crunching
23 capabilities if you will of a computer then it would
24 have to be claimed and theres nothing claimed here
25 All that is claimed shyshy and my friend is going to stand
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1 up on rebuttal and tell you all that the expert said
2 well what is claimed is a computer but its just a
3 computer It just says a computer configured too It
4 doesnt say that the computer actually has to shyshy
5 JUSTICE BREYER Yeah but the trouble with
6 that particular test is as I think partly the Chief
7 Justice said how long et cetera and then add to that
8 though you could do it without a computer what happens
9 at the end of the line is the automobile engine goes off
10 or it begins to sputter or it turns left
11 You see its possible to take Archimedes shyshy
12 shyshy you know I use that example purposely to call
13 attention to the problem You can take those things
14 and youre not just saying apply it and youre not even
15 just saying shyshy you are saying use the computer but at
16 the end of the road something physical in the world
17 changes and everybody would say now thats shyshy that
18 will falls within I mean probably I mean my
19 hesitation shows Im looking for the right words
20 MR PERRY Justice Breyer your point is
21 the reason that it is equally fallacious to suggest on
22 the one hand as Alice and IBM does that simply
23 reciting a computer is a magic key that gets you through
24 101 and you never have to any other inquiry and what
25 some of folks the amici on the other side say which
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1 is that computers or software are never eligible Both
2 of those things have to be wrong because what the Court
3 said in Bilski was future innovation is too uncertain
4 We are not going to do that as a Court And the Court
5 laid out an approach using abstract ideas in Bilski and
6 inventive contribution in Mayo that is flexible enough
7 to take into account that innovation and to deal with
8 particular claims in context which is why at the end
9 of the day we have to come back to these patents and
10 decide which shyshy
11 JUSTICE KAGAN Mr Perry before we get
12 back to these matters you said to Justice Scalia if a
13 patent sufficiently describes how a computer will
14 implement an idea then its patentable So how
15 sufficiently does one have to describe it What do we
16 want a judge to do at this threshold level in terms of
17 trying to figure out whether the description is
18 sufficient to get you past it
19 MR PERRY If I can answer in two steps
20 Justice Kagan First in the negative What the
21 applicant or patentee must do shyshy must not do is simply
22 describe the desired result That would take us back to
23 State Street That would simply say I claim a magic
24 box that buys high and sells low or vice versa I
25 suppose I claim a magic box for investing Thats what
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1 these patents do
2 Then to put it in the affirmative and in the
3 language of Mayo the claim has to recite something
4 significantly more something significantly more than
5 the abstract idea itself That would be a contextual
6 analysis based on the claims and specifications and file
7 history and we know that some devices some methods
8 some programming will pass that
9 It is not going to be a brightshyline rule and
10 thats one of the tugshyofshywar issues that this Court and
11 the Federal Circuit have been having in these cases
12 The Federal Circuit wants brightshyline rules All
13 computers are in or all computers are out
14 This Court has been more contextual This
15 Court has been more nuanced This Court has looked at
16 things in a more robust way
17 JUSTICE KAGAN Youre not suggesting that
18 specific code is necessary
19 MR PERRY No Your Honor I think the shyshy
20 actual description of the programming is a 112 problem
21 I agree with that A 112 issue That is the realm of
22 the written description requirement What is a 101
23 problem is it is on the applicant to do more than simply
24 describe the results simply say A magic box that does
25 intermediate settlement And we can tie that back to
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1 this particular prosecution the 510 patent which is
2 the method patent
3 The examiner rejected it Under Section
4 101 the examiner said this is an abstract idea You
5 cant have this patent And the only change that this
6 applicant made was to add in the adjusting step
7 electronic adjustment It put in one word
8 electronic adjustment And under State Street which
9 is what this patent is prosecuted under that was
10 enough because the result of adjusting run through a
11 computer is enough
12 Under current law that cant be enough
13 That just cant get a patent over the line because this
14 Court said in Mayo and I got to quote this language
15 Simply implementing a fundamental principle on a
16 physical machine namely a computer is not a patentable
17 application of that principle Thats all that Alice
18 has done
19 These are preshyBilski patents They never
20 should have been issued General Verrilli will stand up
21 and address that point And certainly under current
22 law shyshy one point on the AIA Congress did not send all
23 this to the administrative process Congress created
24 two avenues the courts and the PTO to use the
25 standards Essentially it ratified Bilski and Mayo and
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1 said we agree with what you all are doing at the
2 Supreme Court and the existing standards are good enough
3 for us This is a judicial problem And that is a good
4 reason The abstract shyshy
5 JUSTICE GINSBURG The Federal Circuit in
6 this case split in many ways and it had our decisions
7 to deal with You said given Bilski and Mayo this is
8 an easy case What is the instruction that escaped a
9 good number of judges on the Federal Circuit How would
10 you state the rule
11 MR PERRY Your Honor I think theres a
12 significant element to the Federal Circuit that
13 disagrees with Mayo and has been resistant in applying
14 it Chief Judge shyshy former Chief Judge Michelle filed a
15 brief in this Court essentially saying Mayo is a
16 lifeshysciences case You should limit it to that because
17 if you apply it to everything else then these patents
18 are no good
19 Mayo we submit is a technologyshyneutral
20 industryshyneutral exceptionshyneutral framework that can
21 be used to answer all of these questions This is not
22 the death of software patents The software industry is
23 all before this Court saying this is fine with us
24 Every company in the United States practically except
25 for IBM is saying go ahead This will not affect
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1 software patents
2 Justice Ginsburg this Courts precedents
3 are clear They are unanimous They just need to be
4 applied To suggest that there is confusion that needs
5 to be addressed by retreating beating a retreat from
6 recent unanimous decisions would simply reward
7 intransigence difficulty refusal to adhere to what are
8 clear precedents because shyshy
9 JUSTICE KAGAN Should we be concerned
10 Mr Perry that there are old patents that in fact could
11 meet the test that you set forth but wont because they
12 were written in a different time and so used much more
13 general language
14 MR PERRY Your Honor the applicant or the
15 patent holder would have the opportunity to institute a
16 reexamination proceeding or some sort of administration
17 process to address that issue
18 And second it should be noted this is a
19 very small problem There are 2 million outstanding
20 patents in the United States In the last four fiscal
21 years there were 22000 infringement litigations
22 instituted but since Bilski there have only been 57
23 district court decisions on Section 101 issues There
24 have only been 12 Federal Circuit decisions total on
25 computer implementation
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1 We are talking about a group of patents
2 Justice Kagan thats way out at the tail end of
3 distribution Most patents never have a 101 challenge
4 This is not an issue with cotton gins and other things
5 This is a problem for the most marginal
6 most dubious most skeptical patents the ones that this
7 Court in Bilski shyshy and remember what Bilskis holding
8 is The majority said they are processes but it did
9 not say they are eligible
10 Thank you Mr Chief Justice
11 CHIEF JUSTICE ROBERTS Thank you counsel
12 General Verrilli
13 ORAL ARGUMENT OF DONALD B VERRILLI JR
14 ON BEHALF OF THE UNITED STATES AS AMICUS
15 CURIAE SUPPORTING RESPONDENTS
16 GENERAL VERRILLI Mr Chief Justice and
17 may it please the Court
18 An abstract idea does not become
19 patentshyeligible merely by tacking on an instruction to
20 use a computer to carry it out A computer makes a
21 difference under Section 101 when it imposes a
22 meaningful limit on the patent claim That occurs when
23 the claim is directed at improvement in computing
24 technology or an innovation that uses computing
25 technology to improve other technological functions
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1 Thats the test that we believe is most faithful to this
2 Courts precedents in Bilski and Mayo It keeps patents
3 within their traditional and appropriate domain and it
4 is capable of being administered consistently by Courts
5 and by PTO examiners
6 JUSTICE GINSBURG How do you answer the
7 argument that your view would extinguish businessshymethod
8 patents and make all software ineligible for patent
9 protection
10 GENERAL VERRILLI Yeah with shyshy let me
11 address software patents first because that I think is
12 obviously a significant question And its just not
13 correct to say that our approach would make software
14 patenting ineligible Any software patent that improves
15 the functioning of the computer technology is eligible
16 Any software patent that improves shyshy that is used to
17 improve another technology is eligible For example
18 the patent in the shyshy in the Diehr case is one in
19 which shyshy
20 JUSTICE SOTOMAYOR Why do we need to reach
21 this in that shyshy reach software patents at all in this
22 case
23 GENERAL VERRILLI Well shyshy
24 JUSTICE SOTOMAYOR Whats the necessity for
25 us to announce a general rule with respect to software
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1 There is no software being patented in this case
2 GENERAL VERRILLI Well I shyshy
3 JUSTICE SOTOMAYOR Theres a systems
4 GENERAL VERRILLI Well I shyshy I think shyshy
5 well they shyshy they shyshy theres a process being and shyshy and
6 one can think of software patents as process patents
7 And I think thats why my friends on the other side are
8 saying the sky is falling because they shyshy they are
9 interpreting what were saying about that when a
10 computer makes shyshy when a computers involvement makes
11 something eligible under 101 its calling those into
12 question and it doesnt
13 JUSTICE SOTOMAYOR Do you think we have to
14 reach the patentability of software to answer this case
15 GENERAL VERRILLI Well I think you can shyshy
16 I think the answer to that question is no not
17 necessarily You can decide it by saying that shyshy that
18 Bilski answers the question whether this is an abstract
19 idea because this form of hedging is really no
20 different than the form of hedging as a conceptual
21 matter at issue in Bilski And then Mayo answers the
22 question of whether the use of a computer in this case
23 adds enough to the abstract idea beyond conventional
24 steps because here all we have after all is just
25 conventional use of computing technology no computer
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1 innovation such that you dont qualify under 101 You
2 could take that approach
3 But it is important to the United States
4 that we shyshy and to our patent examiners that we get some
5 clarity if we can I think the clarity could come from
6 the text that I propose which I want to reiterate shyshy
7 JUSTICE SOTOMAYOR Well shyshy
8 JUSTICE BREYER Could shyshy could shyshy could you
9 go on with that because you were just getting to the
10 point where I think you say a computer improvement that
11 in fact leads to an improvement in harvesting cotton is
12 an improvement through a computer of technology so it
13 qualifies
14 But then I think you were going to say or I
15 got this also from the brief a computer improvement
16 that leads to an improvement in the methods of selling
17 bonds over the telephone is not an improvement in
18 technology reached by the computer Am I right about
19 the distinction youre making
20 GENERAL VERRILLI I dont think theres a
21 yes or no answer to that question
22 JUSTICE BREYER What is your view Yeah
23 what is shyshy how do we deal with just that problem
24 GENERAL VERRILLI If there is a genuine
25 innovation in the functioning of the computer shyshy
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1 JUSTICE BREYER Yes
2 GENERAL VERRILLI shyshy such that business
3 processes shyshy
4 JUSTICE BREYER Weve got that Yes yes
5 We got the computer But then it doesnt improve the
6 computer but rather it improves through the computer
7 the harvesting of cotton
8 Now youve got it in what you said was your
9 second category which is an improvement through the
10 computer of a technology And I thought in your brief
11 you were distinguishing an improvement through the
12 computer of a human activity that is not a technology
13 and in particular to pick an example of that
14 something in finance or something in business
15 Now am I right about the distinction youre
16 making
17 GENERAL VERRILLI Yeah that shyshy
18 JUSTICE BREYER If Im not right what is
19 the distinction
20 GENERAL VERRILLI That is generally the
21 line were drawing Frankly shyshy
22 JUSTICE BREYER And how is that justified
23 GENERAL VERRILLI I do want shyshy
24 JUSTICE BREYER That shyshy that is Judge Dyk
25 in shyshy in Bilski in the Federal circuit 4 people sort of
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1 picked it up maybe 5 didnt pick it up Would you say
2 a few words about it
3 GENERAL VERRILLI Sure About shyshy let me go
4 to Bilski there in that I do think while shyshy while
5 certainly the Court held that the term process got a
6 natural construction which could include business
7 methods it seems to me that thats not all the Court
8 said in Bilski The Court also said that it was
9 historically and traditionally quite rare that business
10 methods were patent eligible
11 It also said that shyshy that the shyshy that courts
12 and the PTO examiners should use the abstract ideas
13 exception to 101 to police the appropriate boundary
14 It also said that the
15 machineshyorshytransformation test that the United States
16 advocated remained a useful tool And of course that
17 directs to you seeing whether there is a technology
18 application
19 And of course the holding in Bilski was
20 that the shyshy the method for hedging risk was ineligible
21 because it was an abstract idea and I cant imagine
22 that if in Bilski the shyshy the claim had been exactly the
23 same but had added use a computer to carry out some of
24 these standard random analysis functions that are
25 claimed by the patent that you would have found it to
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1 be patent eligible
2 And I shyshy I would submit for the Court that
3 the key point here I think is that now given where
4 the Court shyshy what the Court has held in Bilski given
5 what its held in Mayo the abstract ideas exception is
6 really the only tool left to deal with what I shyshy what I
7 think I fairly read Bilski as saying is a significant
8 problem the proliferation of patents of business
9 methods
10 JUSTICE KENNEDY Is there an example that
11 you can give us of a shyshy what we can call a business
12 process that is patentable a process that doesnt
13 involve improving the workings of a computer
14 GENERAL VERRILLI I shyshy I think its going
15 to be difficult for me to do that I think for
16 example if you had a business method a process for
17 additional security pointshyofshysale credit card
18 transactions using particular encryption technology
19 that might well be patent eligible Its a technology
20 that it makes conduct of business more efficient or
21 effective
22 But there is a technological link here and
23 we do think thats critical to our shyshy to our point of
24 view with respect to the case And I shyshy and I do think
25 remember that when we say something is not patent
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1 eligible were not saying they cant do it Were
2 saying they cant monopolize it
3 And the concern in a situation like this one
4 is that if this is patent eligible its hard to see
5 why for example the first person who came up with a
6 frequent flier program wouldnt have been able to claim
7 a patent there because after all thats a business
8 method for improving customer loyalty implemented on a
9 computer
10 CHIEF JUSTICE ROBERTS General I shyshy you
11 mentioned a while ago the need for greater clarity and
12 certainty in this area And Im just wondering in your
13 brief youve got a nonshyexhaustive of factors to
14 consider and there are 6 different ones And Im just
15 doubtful that thats going to bring about greater
16 clarity and certainty
17 GENERAL VERRILLI I take shyshy I take the
18 point Mr Chief Justice but I think the key is that
19 they are all directed to answering the question of
20 whether the innovation that is claimed and is an
21 innovation in either A the improvement of a computers
22 functioning or B the use of computer technology to
23 improve the functioning of another technological
24 process and a case like Diehr would be in the latter
25 category
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1 And so I do think that thats the key
2 benchmark Thats the baseline Thats the test that
3 we do think can be applied clearly and consistently by
4 the courts or the PTO And it avoids the risk of things
5 like frequent flier programs or the Oakland As money
6 ball methods for evaluating the contributions in
7 individual baseball players make or any one of a host of
8 other things that our intuitions tell us just dont
9 belong in the patent system
10 Thats the shyshy drawing that line keeps them
11 out not drawing that line lets them in And with all
12 due respect I dont think that the novelty and
13 nonobviousness filters that 102 and 103 really deal with
14 that problem effectively because when you get to
15 nonobviousness in 103 for example youll be asking a
16 different question
17 If you take the frequent flier program you
18 would say well is this innovation in building consumer
19 loyalty something that would have been obvious to
20 somebody who runs an airline Its totally divorced
21 from the question of technology at that point and
22 therefore I dont think youre going to get the screen
23 that you need to get in order for the patent system to
24 be confined to its traditional and appropriate scope
25 If there are no further questions thank
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1 you
2 JUSTICE GINSBURG I have a question about
3 how do you identify an abstract concept The shyshy a
4 natural phenomenon a mathematical formula those are
5 easy to identify but there has been some confusion on
6 what qualifies as an abstract concept
7 GENERAL VERRILLI We would define
8 abstract shyshy an abstract concept as a claim that is not
9 directed to a concrete innovation in technology
10 science or the industrial arts So its the shyshy its
11 abstract in the sense that it is not a concrete
12 innovation in the traditional realm of patent law
13 Thank you
14 CHIEF JUSTICE ROBERTS Thank you General
15 Mr Phillips you have four minutes
16 remaining
17 REBUTTAL ARGUMENT OF CARTER G PHILLIPS
18 ON BEHALF OF THE PETITIONERS
19 MR PHILLIPS Thank you Mr Chief Justice
20 Id just like to make a few points
21 First of all with respect to the question
22 you asked which is looking at 159 et cetera all I can
23 tell you is that if you look at claim 33 it talks about
24 matched orders the matched orders that are described in
25 286 and 287 and then makes specific reference to 159
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54
1 and that flow chart thats there And its all designed
2 as a package Its only one element of the shyshy of the
3 invention but it is a central element and its an easy
4 one to understand And it goes well beyond simply the
5 notion of hedge shyshy hedge against settlement risk and do
6 it by a computer
7 JUSTICE SOTOMAYOR Your adversary says that
8 his shyshy the appendix to his brief are the only patents at
9 issue that the flow charts are not at issue in this
10 case
11 MR PHILLIPS Theres no basis for that
12 statement Your Honor There shyshy remember this went off
13 on a very truncated litigation process So theres shyshy
14 you know we shyshy we got cut off at the beginning of it
15 Theres been no construction of the shyshy of the claims
16 and shyshy and obviously these are specifications that go
17 to how you interpret the claim
18 JUSTICE SOTOMAYOR If we were to say that
19 there are no business patents shyshy
20 MR PHILLIPS Yes
21 JUSTICE SOTOMAYOR shyshy would your patent
22 survive at all
23 MR PHILLIPS No I dont shyshy I dont
24 believe so I think theres no question And you
25 know General Verrilli could not have been any plainer
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1 in his statement of how he wants to interpret the
2 abstract idea concept
3 JUSTICE SOTOMAYOR Yes he wants to say no
4 business patents
5 MR PHILLIPS No business shyshy just another
6 way of saying no business methods And you know the
7 Court rejected that And it seems to me extraordinary
8 to say Congress didnt reject no business methods in
9 101 but were going to do shyshy were going to manipulate
10 the judicial exception to accomplish precisely that same
11 thing It seems to me thats wholly inappropriate
12 Justice Ginsburg you asked my shyshy my friend
13 here you know whats his test He didnt answer that
14 question youll notice because he doesnt have an
15 answer His basic argument is whatever you do just
16 kill this patent
17 And if I were in his shoes I suppose Id
18 take that same position I think whats absolutely
19 clear is that the test ought to be one that is
20 structured as a very coarse filter not the kind of
21 filter that hes pushing for where it changes over time
22 I mean I thought his shyshy I thought his response to one
23 of the questions about eshymail and word processing that
24 Justice Sotomayor asked is over time it would change
25 Well thats exactly what 102 and 103 are for That is
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1 not the purpose of shyshy of Section 101
2 And then he uses the example of encryption
3 I guarantee you if we were arguing about encryption in
4 this case he would say to me that thats an abstract
5 principle because encryption is a concept thats been
6 around since time immemorial George Washington used
7 it Everybody has used encryption
8 And a question again thats not the
9 solution to these problems The question is how did we
10 go about doing it And we go beyond the basics of
11 simply saying use a computer and thats what we ask
12 this Court to focus on and to evaluate
13 As to the frequent flier program its
14 pretty clear to me that even though it was a novel idea
15 in some sense the concept itself would have been viewed
16 in shyshy in the KSR fashion as quite obvious as a means of
17 improving customer loyalty
18 There are solutions here Giving us 101
19 pass doesnt create a monopoly It just gets us to the
20 102 and 103 inquiries that are at the heart of what the
21 patent laws shyshy and 112 that are at the heart of what the
22 patent laws ought to be dealing with
23 If there are no further questions Your
24 Honor thank you
25 CHIEF JUSTICE ROBERTS Thank you counsel
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1 The case is submitted
2 (Whereupon at 1105 am the case in the
3 aboveshyentitled matter was submitted)
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
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58
A add 714 1023 algorithm 3320 41 automatically
As 525 3621 387 algorithms apply 72425 111
am 115 32 416 3013 3310 2019 281213 automobile 389
572 added 302 Alice 13 34 2822 3814 available 99
abacus 61213 4923 363 3717 4217 avenues 4124
710 1018 additional 5017 3822 4117 applying 4213 avoids 524
1325 3614 3617
address 4121 4317 4511
Alices 271 2919 3678
approach 226 395 4513 B
ability 1514 addressed 435 allow 94 472 B 121 29 4413
able 1511 167 addressing 181 allows 97 242 appropriate 5122
1919 516 adds 4623 amazing 2514 81516 1514 back 1621
aboveshyentitled adhere 437 amici 3825 453 4913 1922 2512
113 573 adjudication amicus 123 5224 3018 322
absolutely 125 241 210 4414 Archimedes 3991222
1215 159 adjusting 3611 analysis 424 281122 3811 4025
5518 41610 364 406 area 219 5112 ball 526
abstract 4267 adjustment 417 4924 argue 2518 Bank 17 35
48 6682023 418 analyze 1416 arguing 563 banks 95
721 8218 administered 1716 argument 114 bars 43
141920 1522 454 announce 4525 225812 33 baseball 527
165 181618 administration answer 119 37 41 144 based 423 406
2220 24925 4316 2219 247 18323 226 baseline 522
2621 277 administrative 3919 4221 26715 4413 basic 413 5515
2938 3422 171218 187 456 461416 457 5317 basically 1821
3523 395 242 4123 4721 551315 5515 2319
405 414 424 adopt 203 answering 5119 arguments basics 5610
4418 461823 adopted 31317 answers 3713 1415 basis 132 1512
491221 505 advancement 461821 arms 1625 1516 2719
53368811 351 anyway 1810 arrangements 5411
552 564 advances 3513 apparatus 2916 131 beating 435
accept 102 adversary 547 APPEARAN arrows 315 beginning 163
accomplish advice 1715 116 art 1919 5414
5510 advocated 4916 appears 820 arts 2124 5310 begins 3810
account 55 618 affect 4225 appendix 1910 aside 1422 157 behalf 11719
397 affirmative 402 311 326 369 asked 2314 122 24710
accounts 823 agent 52 3021 548 278 5322 214 38 2616
9356 3611 ago 318 2224 applicant 3220 551224 4414 5318
3611 3615 5111 3921 4023 asking 193 believe 1316
accurately 2413 agree 920 2021 416 4314 221213 273 1416 2421
acknowledges 221 2418 application 3324 5215 255 264 451
1121 4021 421 2623 4117 aspect 517 5424
act 99 2017 agrees 2812 4918 asserted 3113 belong 529
activities 229 ahead 4225 applications 311618 benchmark 522
activity 2122 AIA 2912 4122 333 asserting 325 Benson 361923
3325 4812 airline 5220 applied 434 attaching 124 best 161124
actual 4020 AL 18 523 attention 3813 better 1610 albeit 923 applies 31418 Attorney 2021 216 2819
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59
3322 brightshyline 409 2313 37 71 4338 5519 beyond 115 4012 5317 checks 618 5614
1312 4623 bring 5115 case 3412 46 Chief 339 clearly 211 251 544 5610 broad 248 116 1524 261217 3024 523
Bilski 313 46 broader 225 2022 213 31812 378 client 311416 415 1722 browsing 228 2211 2313 371416 386 close 2822 2224 2329 builder 2811 2625 311424 421414 4410 CLS 17 35 262020 271 building 5218 3314 36620 441116 5110 1120 2816 2999 built 2324 426816 5118 531419 coarse 247 3935 4125 business 168 451822 461 5625 5520 427 4322 1749 203 461422 5024 chits 611 code 1213 142 447 452 2124 222122 5124 5410 chronological 1916171720 461821 4825 2311 29613 564 5712 1512 2725 4018 49481922 32132323 cases 244 2816 chronologically coffee 1211 5047 3322525 4011 423 colleagues 116
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2115 225 554568 category 489 circumstances 475 boat 2811 businessshymeth 5125 318 1515 comes 1318 bonds 4717 457 CBM 2913 claim 416 2418 2018 231 bothering 118 buy 183 cellphones 228 2423 2522 coming 923 bound 1521 buys 3924 central 95 543 264 27917 common 31120 boundary 4913 certain 1216 3019 3121 2157 bounds 1521 C certainly 518 32420 361 company 4224 box 392425 C 21 31 263 358 392325 403 competition
4024 cables 3012 4121 495 442223 4922 161011 Breyer 66823 calculator 3519 certainty 5112 516 53823 completely 921
74691923 call 3812 5011 5116 5417 1422 2320 85810 1012 called 721 275 cetera 387 claimed 41014 complex 126 1021 1523 3316 5322 281 3017 complicated 161418 171 calling 4611 Chakrabarty 34162123 1225 235 1922 2114 capabilities 2016 3721242425 3025 315 221216 239 3723 challenge 443 382 4925 component 2315 285 capable 141 change 186 5120 352024 293 3613 454 273 311 415 claims 1416 compression 38520 478 capture 2415 5524 171616 2419 309 3212 4722 4814 captures 2412 changes 3817 2424 2515 3320 349 48182224 card 5017 5521 2520 2648 computer 422
brief 211315 carefully 1725 chart 541 283 3118 516 621 710 2255 322 caricature 718 charted 2620 37517 398 71325 9113 4215 4715 72020 1417 charts 1911 406 5415 91824 1035 4810 5113 1716 549 clarity 4755 10725 1116 548 carry 4420 Charybdis 511116 124102024
briefs 1524 4923 1620 2619 class 59 13911 1479 1618 CARTER 117 checkbook 617 clear 1015 118 1421 15710
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1517 165 confess 1111 coterminous 4121 5324 181719 196 configured 383 2321 customer 518 describes 425 19814 206 confined 5224 cotton 914 444 5617 2918 3211 2025 211016 confirmed 2912 4711 487 cut 5414 3913 2117 2410 confusion 434 counsel 4411 description
D2521525 535 5625 3917 402022 D 312622 30522 Congress 178 countries 137 deserve 342 DC 1101719 31311 3210 1725 1856 course 719 designed 720
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dealing 4175013 51922 contains 327 40141515 2789 4421 1119 135546 5611 content 281417 4114 42215 different 421 151216 3412 computers 2819 4223 4323 79 919 1377 56224610 5121 context 2319 44717 4957 191 259 266
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1112 391522 253 53911 corresponding curiae 123 211 144 1520 4024conduct 5020 2720 2915 4415 disagree 513
described 717conducted 297 346 current 4112 disagrees 4213
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disclosure 328 413 302021 4220 figure 1146 discuss 164 economy 1516 ESQ 1171921 excerpted 323 311222 3917 discussion 299 effective 1223 236913 exhausted 1813 file 406 dispose 2625 5021 essence 211 exist 420 131 filed 4214 dispute 325 effectively 5214 essential 1224 existence 1119 fill 2818 disputed 3120 efficacy 1224 3425 175 filled 293
363 1517 essentially 2016 existing 337 filter 248 5520 distance 2311 efficiency 3722 261 4125 422 5521 distinction 415 efficient 5020 4215 exists 42 filters 5213
4719 481519 either 202 established expert 3688 finance 2124 distinguishing 5121 311919 381 4814
4811 electronic 262 establishing expertise 1210 financial 1225 distribution 4178 275 experts 2817 29517
443 electronically et 18 387 5322 367 fine 103 2223 district 4323 2525 evaluate 97 extent 1924 4223 divorced 5220 element 811 5612 2323 265 finished 133 doing 91315 4212 5423 evaluating 526 extinguish 457 first 1111 2718
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four 1720 182 48172023 5599 3312 461920 1016 123 18912 2216 493 5014 gold 6101114 4920 138 14610 2311 275 511017 537 134 held 46 495 141120 164 4320 5315 5314 5425 good 611 167 5045 181618 2220
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functionality 277 425 432 group 1210 home 510 immemorial 3599 456 532 441 Honor 1814 566
functioning 5512 guarantee 563 214 269 implement 911 4515 4725 give 2225 257 guess 51111 2722 282 102125 147 512223 281325 3221 171 2218 2921923 149 1510
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future 393 316 4225 hard 201423 3719 imposes 4421 479 493 514 hundreds 2010 impractical
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317 5317 1312 191013 4711 487 258 2825 gather 1325 2012 389 head 3621 improve 2121 general 121 544 hear 33 I 4425 4517
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48911 5121 410 53 issue 316 1010 31812 329 141919 5520 improvements International 3124 4021 3221 331521 kinds 248
324 17 35 4317 444 3324 34717 King 6924 improves 206 Internet 2514 4621 5499 3524814 1016 1124
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45814 4920 intransigence judgment 2014 Justices 1720 KSR 5616 inference 185 437 judicial 1712 182 infringement intuitions 528 423 5510 justified 4822 L
4321 invalid 2011 judicially 317 laid 395 inherently 209 invented 107 Justice 122 33 K language 322 initial 1123 1425 3919 45 57 Kagan 14313 1112 3316 innovation 393 invention 714 51415 6168 142124 152 3521 403
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1 IN THE SUPREME COURT OF THE UNITED STATES
2 shy shy shy shy shy shy shy shy shy shy shy shy shy shy shy shy shy x
3 ALICE CORPORATION PTY
4 LTD
5 Petitioners No 13shy298
6 v
7 CLS BANK INTERNATIONAL
8 ET AL
9 shy shy shy shy shy shy shy shy shy shy shy shy shy shy shy shy shy x
10 Washington DC
11 Monday March 31 2014
12
13 The aboveshyentitled matter came on for oral
14 argument before the Supreme Court of the United States
15 at 1004 am
16 APPEARANCES
17 CARTER G PHILLIPS ESQ Washington DC on behalf
18 of Petitioners
19 MARK A PERRY ESQ Washington DC on behalf of
20 Respondents
21 DONALD B VERRILLI JR ESQ Solicitor General
22 Department of Justice Washington DC on behalf of
23 the United States as amicus curiae supporting
24 Respondents
25
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1 C O N T E N T S
2 ORAL ARGUMENT OF PAGE
3 CARTER G PHILLIPS ESQ
4 On behalf of the Petitioners 3
5 ORAL ARGUMENT OF
6 MARK A PERRY ESQ
7 On behalf of the Respondents 26
8 ORAL ARGUMENT OF
9 DONALD B VERRILLI JR ESQ
10 On behalf of the United States as amicus
11 curiae supporting Respondents 44
12 REBUTTAL ARGUMENT OF
13 CARTER G PHILLIPS ESQ
14 On behalf of the Petitioners 53
15
16
17
18
19
20
21
22
23
24
25
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1 P R O C E E D I N G S
2 (1004 am)
3 CHIEF JUSTICE ROBERTS Well hear argument
4 this morning in Case 13shy298 Alice Corporation versus
5 CLS Bank International
6 Mr Phillips
7 ORAL ARGUMENT OF CARTER G PHILLIPS
8 ON BEHALF OF THE PETITIONERS
9 MR PHILLIPS Thank you Mr Chief Justice
10 and may it please the Court
11 It is common ground between the parties in
12 this case that Section 101 by its terms and with the
13 sweeping interpretation this Court adopted in Bilski
14 applies directly to the patents here These are system
15 and process patents that speak directly to Section 101
16 The only issue then is whether the
17 judicially recognized exception that this Court adopted
18 many many years ago applies under these circumstances
19 JUSTICE KENNEDY And just repeat it is
20 common ground between the parties that shyshy
21 MR PHILLIPS That shyshy that our shyshy our
22 patents speak directly to the language of Section 101
23 that is they are a process and they are machines and
24 they are shyshy and they are improvements to the process and
25 the machines They dont shyshy they dont dispute that by
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1 its terms 101 applies The only argument between the
2 parties is the abstract idea exception that exists and
3 whether that bars us from otherwise satisfying
4 Section 101
5 JUSTICE GINSBURG Mr Phillips on the
6 abstract idea you know that the Bilski case held that
7 hedging qualified as an abstract idea So how is
8 intermediate settlement a less abstract than hedging
9 MR PHILLIPS If our shyshy if our patent
10 merely claimed intermediated settlements although I
11 have to say I dont really know exactly what that means
12 because I dont think thats the same kind of
13 economics shyshy basic economics concept that a hedge risk
14 treatment is But if it claimed that we wouldnt shyshy we
15 wouldnt have a distinction from Bilski
16 What we claim is a very specific way of
17 dealing with a problem that came into being in the early
18 1970s of how to try to eliminate the risk of
19 nonshysettlement in these very massive multiparty problems
20 in which you need to deal with difficulties that exist
21 at different time zones simultaneously and to do it with
22 a computer so that you not only take them on
23 chronologically deal with them sequentially based on
24 the kind software analysis that the patent specifically
25 describes by function
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1 And it goes even further than that and does
2 something that no escrow agent and shyshy and no
3 intermediated settlement that I know of shyshy settler that
4 I know of It actually blocks specific transactions
5 that in the shadow account would violate the terms of
6 the settlement that would ultimately be implemented
7 JUSTICE KENNEDY Well let me put it this
8 way If you describe that to a secondshyyear college
9 class in engineering and said heres shyshy heres my idea
10 now you go home and you program over this weekend my
11 guess is shyshy my guess is that that would be fairly easy
12 to program
13 MR PHILLIPS I dont disagree with it
14 Justice shyshy
15 JUSTICE KENNEDY So the fact that the
16 computer is involved it shyshy it seems to me is necessary
17 to make it work But the shyshy but the innovative aspect
18 is certainly not in the creation of the program to make
19 that work All youre talking about is shyshy if I can use
20 the word shyshy an idea
21 MR PHILLIPS I prefer not to use that word
22 for obvious reasons
23 (Laughter)
24 MR PHILLIPS But shyshy but if you shyshy but if
25 you look at the Solicitor shyshy
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1 JUSTICE KENNEDY Or shyshy or a method or a
2 process
3 MR PHILLIPS Right But shyshy and shyshy and
4 obviously methods and processes are precisely what
5 Section 101 permits to be subject shyshy
6 JUSTICE BREYER Why is that less abstract
7 MR PHILLIPS Im sorry
8 JUSTICE BREYER Why is that less abstract
9 I mean imagine King Tut sitting in front of the pyramid
10 where all his gold is stored and he has the habit of
11 giving chits away Good for the gold which is given at
12 the end of the day And he hires a man with an abacus
13 and when the abacus keeping track sees that hes given
14 away more gold than he is in storage he says stop
15 You see
16 Or my mother who used to look at my
17 checkbook when she saw that in fact I had written
18 more checks than I had in the account she would grab
19 it Stop You see
20 So what is it here thats less abstract that
21 the computer says stop
22 MR PHILLIPS It is shyshy
23 JUSTICE BREYER How is that less abstract
24 than King Tut if we had the same thing with a grain
25 elevator if we had the same thing with a reservoir of
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1 water if we had the same thing with my checkbook You
2 see the point
3 MR PHILLIPS I do see the point Justice
4 Breyer and it seems to me that it goes to the question
5 of the methodology youre going to employ
6 JUSTICE BREYER Methodology is just that
7 you said stop
8 MR PHILLIPS Well we could shyshy
9 JUSTICE BREYER So what we have different
10 here is the computer stops rather than the abacus man
11 stopping or my mother stopping or the guy that the grain
12 elevator has that says stop So just saying what shyshy is
13 that it In other words if you say computer stop you
14 have an invention Useful add shyshy but if you say mother
15 stop you dont
16 MR PHILLIPS No Well I mean again it
17 seems to me that in some ways what shyshy what you described
18 there is a caricature of what this invention is
19 JUSTICE BREYER Of course its a
20 caricature Its a caricature designed to suggest that
21 there is an abstract idea here Its called solvency
22 MR PHILLIPS But shyshy
23 JUSTICE BREYER And what you do is you take
24 the idea of solvency and you say apply it And you say
25 apply it through the computer
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1 Is that enough to make it not just the
2 abstract idea And now were at the heart of why I used
3 my exaggerated examples shyshy
4 MR PHILLIPS Right
5 JUSTICE BREYER shyshy because you will tell me
6 why shyshy
7 MR PHILLIPS Right
8 JUSTICE BREYER shyshy this is enough
9 MR PHILLIPS Right Because Justice
10 Breyer the shyshy the shyshy the concept here is not simply to
11 say stop Stop is obviously part of the element of it
12 But its also designed to ensure that at the
13 end of the day this transaction in the midst of
14 literally a global set of shyshy of deals that are going on
15 simultaneously will be implemented at the appropriate
16 time in the appropriate way And whatever else that may
17 be it seems to me its difficult to say thats an
18 abstract idea as implemented
19 JUSTICE SOTOMAYOR Im sorry But shyshy but
20 what it appears to be it sounds like youre trying to
21 revive the patenting of a function You used the word
22 function earlier and thats all Im seeing in this
23 patent is the function of reconciling accounts the
24 function of making sure theyre paid on time But in
25 what particular way other than saying do it through a
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1 computer is this something new and not function
2 MR PHILLIPS Well it does it through shyshy
3 it creates the shadow accounts because of the concerns
4 for security You dont shyshy youre not going to allow
5 somebody to enter into a central banks own accounts
6 You create the shadow accounts You monitor through the
7 software that allows you to do that You evaluate each
8 of the transactions to ensure that the settlement will
9 be available You do it sequentially and you act on it
10 by the end of the day or whenever the transaction is to
11 take place and you implement that transaction
12 JUSTICE SCALIA Why isnt it shyshy why isnt
13 doing it through a computer not enough I mean was the
14 cotton gin not an invention because it just means youre
15 doing through a machine what people used to do by hand
16 Its not an invention Its the same old same old
17 MR PHILLIPS Justice Scalia shyshy
18 JUSTICE SCALIA Why shyshy why is a computer
19 any different in that respect
20 MR PHILLIPS At one level I agree with you
21 completely There is no difference between them
22 This Court has however said on more than a
23 few occasions albeit in dicta that coming up with an
24 idea and then say use a computer is not sufficient
25 And what Im trying to suggest to you is we dont fall
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1 within that dicta
2 Now if you dont accept the dicta and you
3 say use a computer is fine then I think were done
4 JUSTICE SCALIA Well Im not saying use a
5 computer is shyshy is much of a novelty I mean thats shyshy
6 that goes to whether its novel or not If you just say
7 use a computer you havent invented anything But if
8 you come up with a serious program that shyshy that does it
9 then you know that may be novel But thats a novelty
10 issue isnt it
11 MR PHILLIPS To be sure Justice Scalia
12 JUSTICE BREYER And this is exactly the
13 question I really would like to you to focus on for me
14 Why is it shyshy and Im not saying this from a point of
15 view but it seems to me pretty clear that if what you
16 did was take the idea of solvency shyshy remember King Tut
17 Thats what I use the exaggeration shyshy and what you say
18 is implemented by having the abacus man keep track and
19 say stop okay shyshy
20 MR PHILLIPS Right
21 JUSTICE BREYER Then we implement it by
22 having somebody with a pencil and a piece of paper and
23 this is all that they add you see Say Have a man
24 with a pencil and a piece of paper keeping track and
25 saying stop or we say implement it in the computer
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1 which will automatically keep track and say stop are
2 they all enough Are some of them enough Whats the
3 rule
4 And you realize I couldnt figure out much
5 in Prometheus to go beyond what I thought was an obvious
6 case leaving it up to you and your colleagues to figure
7 out how to go further Am I making enough shyshy making
8 clear enough whats bothering me And Id really like
9 to get your answer to this
10 MR PHILLIPS And shyshy and look theres
11 no shyshy Ill be the first one to shyshy to confess that trying
12 to use language to describe these things is not all that
13 easy But the way I think you can meaningfully look at
14 this is to say that this is not simply something that
15 was a fundamental truth this is not something that
16 simply says use a computer Its not simply something
17 that says maintain solvency It shyshy it operates in a
18 much more specific and concrete environment where youre
19 dealing with a problem thats been in existence since
20 the 1970s a solution in the 1990s that CLS itself
21 acknowledges needed a solution and came forward with
22 their own solution that looks a lot like ours
23 JUSTICE KENNEDY But my shyshy my initial
24 question and I think I can work this into King Tut
25 is shyshy
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1 (Laughter)
2 JUSTICE KENNEDY shyshy is shyshy is whether or not
3 you could have patented that system idea process
4 method without attaching a computer program
5 MR PHILLIPS You cannot absolutely cannot
6 do that with this system because it is so complex and
7 so many interrelated parts
8 JUSTICE KENNEDY Suppose I thought shyshy and
9 again its just a thought because I dont have the
10 expertise shyshy that any computer group of people sitting
11 around a coffee shop in Silicon Valley could do this
12 over a weekend Suppose I thought that
13 MR PHILLIPS You mean wrote the code
14 JUSTICE KENNEDY Yes right
15 MR PHILLIPS Well thats absolutely shyshy
16 Im certain thats true
17 JUSTICE KENNEDY Well then shyshy then shyshy
18 MR PHILLIPS But thats true of almost all
19 software
20 JUSTICE KENNEDY Then why is the computer
21 program necessary to make the patent valid
22 MR PHILLIPS Well its shyshy its necessary
23 to make the invention effective As the Solicitor
24 General said the computer is essential to the efficacy
25 of this invention because of the complicated financial
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1 arrangements that exist and that can only be resolved on
2 a shyshy on a realtime basis Your abacus is great if you
3 happen to be waiting for the pyramids to be finished or
4 waiting for the gold to move in and out but it doesnt
5 help with you an abacus if youre dealing with literally
6 thousands of transactions simultaneously going on in
7 different countries at different points in time
8 JUSTICE KENNEDY But thats just an idea
9 hey lets use a computer
10 MR PHILLIPS But its not just shyshy I mean
11 obviously part of it is use the computer Justice
12 Kennedy But more fundamentally it goes beyond that
13 See I shyshy
14 JUSTICE SOTOMAYOR Is your software
15 copyrighted
16 MR PHILLIPS No I dont believe so
17 JUSTICE GINSBURG There is no special
18 software that comes with this shyshy thats part of this
19 patent is it shyshy is there
20 MR PHILLIPS No Justice Ginsburg what
21 we did here is what the Patent and Trademark Office
22 encourages us to do and encourages all software patent
23 writers to do which is to identify the functions that
24 you want to be provided for with the software and leave
25 it then to the software writers who I gather are you
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1 know quite capable of converting these functions into
2 very specific code
3 JUSTICE KAGAN Mr Phillips could you shyshy
4 could you disaggregate your argument for me Because
5 you just said look this Court has said its not
6 sufficient if you have an idea and then you say use a
7 computer to implement it right So are you saying that
8 your shyshy that shyshy are you saying that youre doing more
9 than saying use a computer to implement it or are you
10 saying that its shyshy that the idea itself is more than an
11 idea
12 MR PHILLIPS Yes Im saying shyshy
13 JUSTICE KAGAN Which part of what shyshy
14 MR PHILLIPS Im saying both actually I
15 mean Im making both of those arguments I shyshy I
16 believe that if you analyze the claims and you dont
17 caricature them and you dont strip them out of the
18 limitations that are embedded in there this is not some
19 kind of an abstract concept This is not some kind shyshy
20 its not an abstract idea Its a vary shyshy
21 JUSTICE KAGAN So putting the computer
22 stuff aside completely shyshy
23 MR PHILLIPS Right
24 JUSTICE KAGAN shyshy youre saying that youve
25 invented something or you shyshy
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1 MR PHILIPS Yes
2 JUSTICE KAGAN There is something that
3 youve patented that has shyshy that is not just simple use
4 a third party to do a settlement
5 MR PHILLIPS Right
6 JUSTICE KAGAN And what is that putting
7 the computer aside
8 MR PHILLIPS It is shyshy well shyshy and again
9 its difficult to do that because you absolutely need
10 the computer in order to implement this But the key to
11 the invention is the notion of being able
12 simultaneously dealing with it on a chronological basis
13 to stop transactions that will otherwise interfere with
14 the ability to settle on time and under the appropriate
15 circumstances And the only way you can do that in a
16 realtime basis when youre dealing with a global economy
17 is to use a computer It is necessary to the efficacy
18 of this
19 So in that sense I cant shyshy I cant
20 disaggregate it the way in some sense youre suggesting
21 It seems to me its bound up with in shyshy its bounds up
22 with the whole notion of is this an abstract concept
23 JUSTICE BREYER Can you in fact shyshy now
24 this is shyshy look there are 42 briefs in this case I
25 actually read them and I found them very very helpful
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1 up to the point where I have to make a decision because
2 theyre serious I mean you know shyshy now the problem
3 that I came away with is the one that youre beginning
4 to discuss that if you simply say take an idea thats
5 abstract and implement it on a computer there are shyshy
6 youre going to get it much faster youre going to be
7 able to do many many things and if thats good enough
8 there is a risk that you will take business in the
9 United States or large segments and instead of having
10 competition on price service and better production
11 methods well have competition on who has the best
12 patent lawyer You see where Im going on that one
13 MR PHILLIPS Yeah of course
14 JUSTICE BREYER And if you go the other way
15 and say never then what you do is you rule out real
16 inventions with computers
17 MR PHILLIPS Right
18 JUSTICE BREYER And so in those 42 briefs
19 there are a number of suggestions as to how to go
20 between Scylla and Charybdis Now I would like to
21 know shyshy I dont know if you can step back from your
22 representational model Thats a problem Youre all
23 we have now And shyshy and from my point of view I need
24 to know what in your opinion is the best way of sailing
25 between these two serious arms
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1 MR PHILLIPS Well Justice Breyer I guess
2 I would suggest to you that you might want to deal with
3 the problem you know as opposed to the problems you
4 dont know at this stage I mean we have had business
5 method patents and software patents in existence for
6 well over a decade and theyre obviously quite
7 significant in number And shyshy and we know what the
8 system is we have And Congress looked at that system
9 right and didnt say no to business methods patents
10 didnt say no to software patents instead said the
11 solution to this problem is to get it out of the
12 judicial process and create an administrative process
13 but leave the substantive standards intact
14 So my suggestion to you would be follow that
15 same advice a liberal interpretation of 101 and not a
16 caricature of the claims analyze the claims as written
17 and therefore say that the solution is 102 and 103 and
18 use the administrative process If you shyshy
19 JUSTICE GINSBURG Mr Phillips let me just
20 stop you there because four Justices of this Court did
21 not read that legislative history the way you do And
22 it was shyshy was in Bilski
23 MR PHILLIPS But this is postshyBilski
24 JUSTICE GINSBURG Justice Stevens went
25 carefully through that and he said Congress was
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1 reacting to a decision It had shyshy it was not addressing
2 101 So there are at least four Justices who say shyshy who
3 didnt buy that argument
4 MR PHILLIPS Well I mean it still seems
5 to me that the shyshy the natural inference is Congress did
6 not change 101 Congress created an entire
7 administrative system to deal with 101 102 and 103
8 And shyshy and I would hope shyshy
9 JUSTICE SCALIA And four is not five
10 anyway right
11 MR PHILLIPS Thats true
12 JUSTICE SCALIA Four is not five
13 MR PHILLIPS And youve exhausted my math
14 skills Your Honor
15 JUSTICE SCALIA By the way we shyshy we have
16 said that you cant take an abstract idea and then say
17 use a computer to implement it But we havent said
18 that you cant take an abstract idea and then say here
19 is how you use a computer to implement it shyshy
20 MR PHILLIPS Exactly
21 JUSTICE SCALIA shyshy which is basically what
22 youre doing
23 MR PHILLIPS And thats the argument were
24 doing and shyshy
25 JUSTICE SCALIA And thats a little
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1 different
2 MR PHILLIPS shyshy thats the line were
3 asking the Court to draw here
4 JUSTICE KAGAN Well how are you saying the
5 how Because I thought that your computers shyshy that your
6 patents really did just say do this on a computer as
7 opposed to saying anything substantive about how to do
8 it on a computer
9 MR PHILLIPS I would urge the Court to
10 look at Joint Appendix 159 285shy286 where it goes
11 through the flow charts This is shyshy and this is just a
12 specific example of the method by which you stop a
13 transaction and it goes through a varied series of
14 detailed steps and what the computer has to do in order
15 to do that It doesnt actually obviously put in the
16 code but thats what the PTO says dont do Dont put
17 in the code because nobody understands code so shyshy but
18 put in the functions and we know shyshy and we know that
19 someone skilled in the art will be able to put in the
20 code And if they arent if they cant do that then
21 its not enabled and thats a 112 problem
22 To go back Justice Breyer to your
23 question So on the one hand youve got a problem that
24 it seems to me Congress to some extent has said is okay
25 and weve got a solution and that solutions playing
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1 through On the other hand if this Court were to say
2 much more categorically either that theres no such
3 thing as business method patents or adopt the Solicitor
4 Generals interpretation which is to say that there
5 cannot be software unless the software somehow actually
6 improves the computer as opposed to software improving
7 every other device or any other mechanism that might be
8 out there
9 What we know is that this would inherently
10 declare and in one fell swoop hundreds of thousands of
11 patents invalid and the consequences of that it seems
12 to me are utterly unknowable And before the Court goes
13 down that path I would think it would think long and
14 hard about whether isnt that a judgment that Congress
15 ought to make And It seems to me in that sense youre
16 essentially where the Court was in Chakrabarty where
17 everybody was saying youve got to act in one way or the
18 other or the world comes to an end and the courts have
19 said well apply 101 directly
20 JUSTICE KENNEDY If we say that theres no
21 software patentability and agree with the Attorney
22 General do you lose in this case
23 MR PHILLIPS Well it would be very hard
24 for me to see how that shyshy how shyshy how I can get around
25 that particular problem because the computer is the
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1 essence of it so shyshy and a portion of it is clearly the
2 software So I think if you say there is no such thing
3 as software patentability I do lose in this case yes
4 Your Honor As do a whole lot of other people
5 JUSTICE KENNEDY Is there any common ground
6 between you and the government shyshy maybe a better
7 question to ask the government shyshy a common ground
8 between you and the government on something in the
9 software area thats patentable other than making the
10 computer itself work You understand the government to
11 say no software patents
12 MR PHILLIPS Thats the way I interpret
13 the governments shyshy the governments brief
14 JUSTICE BREYER It was like shyshy theres a
15 Bloomberg brief out here that was on this that said
16 no you can shyshy you can patent computer software when
17 its an improvement in the computer when its an
18 improvement in software when its an improvement in a
19 technology that is developed out of computers like
20 robotics when it is an improvement in a machine or
21 technology but you cannot improve it where it is simply
22 an improvement in an activity that is engaged in
23 primarily through mental processes But what they mean
24 by that is business finance and similar arts
25 Thats shyshy I mean thats shyshy it wasnt quite what shyshy I
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1 know Thats what I want to know what you dont agree
2 with about that because its a little more refined than
3 you suggested
4 MR PHILLIPS I read the Solicitor
5 Generals brief as broader than the Bloomberg brief
6 in shyshy in terms of the approach And IBMs argument is
7 if you knock out software patents you eliminate web
8 browsing word processing cellphones eshymail Those
9 are all activities that I dont think fall within the
10 meaning of the shyshy the meaning of the governments theory
11 of the case
12 JUSTICE BREYER But Im asking you shyshy Im
13 asking you what about this one that I just mentioned
14 You see I went through those five steps shyshy
15 MR PHILLIPS Right
16 JUSTICE BREYER shyshy and four of them you
17 could patent and the fifth one you cant
18 MR PHILLIPS Right But I shyshy and I guess
19 my answer to that is thats nowhere in the statute and
20 it doesnt seem to me to reflect an abstract idea Its
21 a shyshy its a line you draw that takes out business method
22 patents If the Court wants to eliminate business
23 method patents fine But you just said no to that in
24 Bilski two three terms ago
25 Now to be sure give the Solicitor General
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1 credit he comes here and says to you We didnt like
2 the result in Bilski we want you to say dont use
3 process in order to get there which is a statutory
4 interpretation come up with an extraordinarily
5 complicated way of looking at the exception and use that
6 to get to the exact same result
7 JUSTICE SOTOMAYOR Well youre doing a
8 very good job of proving shyshy
9 JUSTICE GINSBURG In Bilski Justice Breyer
10 did try to say that there wasnt that shyshy a whole lot of
11 distance between the four who thought business methods
12 were not patentable But he shyshy he also said something
13 else in shyshy in the other case Mayo Justice Scalia
14 asked you the question about doesnt that go to novelty
15 but didnt Justice Breyer say in Mayo that novelty can
16 be relevant to patent shyshy to patent eligibility He said
17 theres shyshy theres an overlap
18 MR PHILLIPS Well he said theres an
19 overlap Here in this context I think basically the
20 Respondents theory would mean that they are completely
21 coterminous And I dont think thats what the Court
22 meant And also we know from Diehr that theres got to
23 be at least some significant limitations on the extent
24 to which novelty has to be built into 101 That is the
25 province of 102 and 103 And as I said Congress
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1 modified the system of adjudication to create an
2 administrative mechanism that allows you to get to 102
3 and 103 And at least in context its important to
4 realize there have been 11 cases since that was created
5 9 of the 11 have been knocked down on 102 or 103 grounds
6 and not on 101 grounds And it seems to me thats the
7 answer to this problem is leave 101 as the coarse
8 filter If on its face it states these kinds of broad
9 abstract principles fundamental truths and even if it
10 says use a computer those should be struck down
11 JUSTICE SOTOMAYOR Which of the shyshy which of
12 the opinions below captures your position most
13 accurately
14 MR PHILLIPS I would guess it would be
15 Judge Moores opinion below that would capture ours most
16 correctly
17 JUSTICE SOTOMAYOR And if we were to think
18 your method claim is ineligible do you agree that your
19 systems and shyshy your medium and system claims fail as
20 well Do they rise and fall together
21 MR PHILLIPS No No I dont believe they
22 do rise and fall together I mean I think you could shyshy
23 if you wanted to interpret our medium claim shyshy I mean
24 our shyshy our method claims in a shyshy in particularly
25 abstract way I think you could still say that the
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1 system claims which clearly are shyshy are how to create a
2 computer system and how to implement it using that
3 method would be a much more concrete version of that in
4 a way that would take it out of 101 That said I
5 obviously believe that all of our claims satisfy 101
6 and should go on to the next stage
7 JUSTICE KAGAN Can I give you a
8 hypothetical Mr Phillips and you tell me how its
9 different or the same Lets say you know 30 years
10 somebody took a look around the world and said a lot of
11 people seem to order products by mail They get the
12 catalogues in the mail and then they send back their
13 return forms And lets say that one of the founders of
14 the Internet said wouldnt this be an amazing system
15 we could actually do this by computer and they had
16 patented that Is that the same
17 MR PHILLIPS I dont know if its the
18 same but I would shyshy I would argue that it could very
19 well be a patentable subject matter because shyshy but it
20 depends on how the claims play out
21 JUSTICE KAGAN No but exactly I mean
22 the claim would have said something along the lines of
23 you know theres this process by which people order
24 products and we want to do it over the Internet we want
25 to do it electronically and we will use a computer to
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1 do that to essentially take the process of mail order
2 catalogues and make it electronic
3 MR PHILLIPS I could certainly shyshy I think
4 I could write a claim shyshy a set of claims that I believe
5 would satisfy 101 And shyshy and to the extent that
6 youd shyshy that youd think those are no different than
7 the ones I have here then my argument is simply I think
8 I satisfy 101 with the claims we have before us Your
9 Honor
10 If there are no further questions then Id
11 like to reserve the rest of my time
12 CHIEF JUSTICE ROBERTS Thank you
13 Mr Phillips
14 Mr Perry
15 ORAL ARGUMENT OF MARK A PERRY
16 ON BEHALF OF THE RESPONDENTS
17 MR PERRY Mr Chief Justice and may it
18 please the Court
19 That path between Scylla and Charybdis was
20 charted in Bilski and Mayo Bilski holds that a
21 fundamental economic principle is an abstract idea and
22 Mayo holds that running such a principle on a computer
23 is quote not a patentable application of that
24 principle Those two propositions are sufficient to
25 dispose of this case
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1 If Bilski and Mayo stand Alices patents
2 fail Therefore Mr Phillips and his friends are
3 asking this Court to change the standard even though
4 this Court has had three unanimous decisions in the last
5 four terms establishing what the Court called a myriad
6 a wellshyestablished standard
7 On the abstract idea Justice Ginsburg you
8 asked Mr Phillips whats the difference between hedging
9 and this claim There is no difference This is
10 hedging It is hedging against credit default rather
11 than price fluctuation but it is simply hedging
12 And Mr Phillips stood up for 26 minutes and
13 never once referred to the patent Lets look at what
14 the inventor the soshycalled inventor said about this
15 invention This is at JA 293 to 94 in the
16 specification
17 This claim has simply two steps Its very
18 simple First debiting and crediting on a realtime
19 basis the relevant shadow records and second by
20 periodically affecting corresponding payment
21 instructions Those are direct quotes Debit credit
22 and pay Your Honor you cant get much more simple
23 than that
24 Mr Phillips suggests well we have
25 multilateral transactions global things chronological
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1 time zones and so forth None of those are claimed
2 Your Honor Those are all recited in specification
3 The claims read on a single transaction involving two
4 parties
5 JUSTICE BREYER Can I ask you at some
6 point not necessarily this second to say in my shyshy this
7 is just shyshy you know you have an opinion for a court
8 Different judges can have different interpretations
9 All youre getting is mine okay
10 But I think its pretty easy to say that
11 Archimedes cant just go to a boat builder and say
12 apply my idea All right Everybody agrees with that
13 But now we try to take that word apply and give
14 content to it
15 And what I suspect in my opinion Mayo did
16 and Bilski and the other cases is sketch an outer shell
17 of the content hoping that the experts you and the
18 other lawyers and the shyshy the circuit court could fill
19 in a little better than we had done the content of that
20 shell
21 So so far youre saying well this is
22 close enough to Archimedes saying apply it that we
23 neednt go further
24 Now will you at some point in the next few
25 minutes give me your impression of if it were necessary
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1 to go further what would the right words or example be
2 MR PERRY Your Honor as shyshy Justice
3 Breyer as to abstract ideas the PTO has filled in that
4 shell by listing economic concepts legal concepts
5 financial concepts teaching concepts dating and
6 interpersonal relationships and generally how business
7 should be conducted as examples of those things that are
8 likely abstract which of course all follow directly
9 from Bilski and the discussion this Court had in Bilski
10 And this patent shyshy these patents fall squarely within
11 that
12 Congress in the AIA confirmed that
13 reading Congress in the CBM method said business
14 methods that are subject to special scrutiny shyshy that is
15 dubious patents shyshy include methods and corresponding
16 apparatus which is what we have here that pertain to
17 data processing in the financial services industry and
18 do not offer a technological solution That describes
19 Alices patents to a letter Your Honor So that we
20 have shyshy
21 JUSTICE SOTOMAYOR What do you think is a
22 technological solution
23 MR PERRY Your Honor shyshy
24 JUSTICE SOTOMAYOR How could they if at
25 all written their patents to shyshy to make shyshy to make
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1 their software eligible What would shyshy what do they
2 need shyshy would have needed to have added
3 MR PERRY Justice Sotomayor they have no
4 software first Theyve never written software
5 Theyve never programmed a computer So thats a
6 nonexistent set
7 Second there are many technological
8 solutions to trading and settlement problems For
9 example data compression These shyshy these trading
10 platforms involve the movement of very large quantities
11 of data around the world The physical pipes that is
12 the fiber optic cables and data lines are limited
13 There are very sophisticated algorithms for both
14 security and speed to move data through the transmission
15 lines in novel and useful ways that could well be
16 patented
17 Nothing like that is claimed here To come
18 back to where I started if you look for example at
19 Claim 65 in the 510 patent as Mr Phillips reads it
20 it literally reads on a twoshyparty escrow to sell a
21 house so long as the escrow agent is typing this stuff
22 into the HUDshy1 using a computer That has nothing to do
23 with multilevel shyshy
24 CHIEF JUSTICE ROBERTS Well thats a
25 little more complicated He referred us to Joint
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1 Appendix Page 159 which is not a change in how
2 computers work But it is shyshy constitutes the
3 instructions about how to use the computer and where it
4 needs to be affected And just looking at it it looks
5 pretty complicated There are a lot of arrows and
6 they shyshy you know different things that go shyshy
7 (Laughter)
8 CHIEF JUSTICE ROBERTS Well but I mean
9 you know it shyshy in different directions And I
10 understand him to say that in each of those places
11 thats where the computer is needed
12 MR PERRY Mr Chief Justice Figure 16 has
13 nothing to do with the invention asserted against my
14 client in this case There are two inventions in this
15 patent One invention involving multilateral contract
16 formation is not asserted against my client And all of
17 these drawings pertain to that The only drawings that
18 pertain to the asserted claims are 25 and 33 to 37 And
19 that was established below and its established in this
20 Court And Mr Phillips has never disputed it
21 So the claim hes pointed the Court shyshy the
22 figure hes pointed the Court to has nothing to do with
23 the invention Its for a different invention that is
24 not at issue in this case
25 Remember there are hundreds and hundreds of
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1 pages of these patents They all pertain to the other
2 invention Thats why in the back of our red brief we
3 excerpted the very little bit that actually pertains to
4 this You sort of tack on patent shyshy the tack on claim
5 that Mr Phillips is asserting here Its 4 columns
6 Its less than five pages in the printed appendix that
7 actually pertains to this invention And it contains no
8 disclosure whatever
9 Justice Scalia to your question about how
10 the computer does it Of course a patent that
11 describes sufficiently how a computer does a new and
12 useful thing whether its data compression or any other
13 technological solution to a business problem a social
14 problem or a technological problem would be within the
15 realm of the shyshy of the patent laws That is what the
16 patent laws have always been for
17 This is not such a patent And the reason
18 for that is this is a preshyBilski set of patents These
19 were prosecuted under the old State Street test where
20 all the applicant had to claim was a result
21 JUSTICE KENNEDY Would you give me shyshy
22 again you already did it once shyshy an example of a
23 business process patent shyshy of a business process idea
24 and invention that is patentable
25 MR PERRY Your Honor there are many
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1 examples One would be a technological solution to a
2 business problem So that for example shyshy Ill give a
3 different example There are many applications today
4 The Court may be familiar with streaming video to watch
5 video on your computer
6 It is not possible to get enough data
7 through existing lines in its raw format The data has
8 to be manipulated in order to see live video So if you
9 want to watch TV on your phone for example
10 Those algorithms those inventions are
11 undoubtedly technological And if they are used in a
12 trading platform or a hedging system or something else
13 that wouldnt disable them And this is what the Diehr
14 case shyshy
15 JUSTICE KENNEDY Well I shyshy I shyshy in my
16 language Ive called that mechanical rather than
17 process Can you give me an example of process
18 MR PERRY Yes Your Honor The process in
19 that example would be a computer running the particular
20 data compression algorithm
21 JUSTICE KENNEDY But thats how to make
22 a shyshy thats how to make a machine work better
23 MR PERRY Yes Your Honor
24 JUSTICE KENNEDY Im asking you Is there
25 any business process any business activity that is
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1 susceptible to a patent a pure patent innovations that
2 deserve patents
3 MR PERRY Your Honor again a
4 technological solution to a business problem could well
5 be whether its a method or a process is equivalent
6 Again Congress said method in a corresponding shyshy
7 JUSTICE KENNEDY Can you give me an
8 example
9 MR PERRY I thought the data compression
10 example was a good one Ill try an encryption
11 technology Many of these trading platforms you know
12 dealing with securities and money would require some
13 sort of security devices You could have a process for
14 securely transmitting data would be another computer
15 implemented technological solution to a business
16 problem Again nothing like that claimed here
17 JUSTICE SOTOMAYOR How about eshymail and
18 just word processing programs
19 MR PERRY Your Honor a program shyshy let me
20 try it this way to both of your questions In our view
21 if what is claimed as the inventive contribution under
22 Mayo shyshy in other words if we have an abstract idea as
23 we do here and what is claimed is the inventive
24 contribution for Step 2 is the computer then the
25 computer must be essential to that operation and
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1 represent an advancement in computer science or other
2 technology And we know thats not met here Justice
3 Sotomayor because shyshy
4 JUSTICE SOTOMAYOR So youre saying no to
5 eshymail and word processing
6 MR PERRY Your Honor I think at a
7 point shyshy
8 JUSTICE SOTOMAYOR They certainly have
9 functionality and shyshy and improvement of functionality
10 for the user
11 MR PERRY At a point in time in the past
12 I think both of those would have been technological
13 advances that were patentable
14 JUSTICE SOTOMAYOR How
15 MR PERRY Today shyshy because they would have
16 provided a technological solution to a then unmet
17 problem Today reciting and do it on a word processor
18 is no different than and do it on a typewriter or shyshy and
19 do it on a calculator
20 The inventive contribution component which
21 uses specifically the language of conventional and
22 routine and well understood will evolve with
23 technology Thats why its different than the abstract
24 idea component
25 And here we know that these patents dont
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1 claim anything that was not conventional well
2 understood and routine We went through that in great
3 detail and Alice has never disputed a word of it They
4 just say youre not supposed to do that analysis even
5 though the Court 9shy0 in Mayo said we should
6 And in this case its very important to
7 look at what Alices own experts said on the subject
8 This is not our expert This is Alices expert And
9 this is at Page 1327shy28 of the Joint Appendix It is
10 possible to do the business methods of maintaining
11 accounts adjusting accounts and providing an
12 instruction without a computer or other hardware
13 And then Justice Breyer directly to your
14 abacus If someone had thought of this invention
15 soshycalled invention 100 years ago they might have
16 implemented it in a nonelectronic manner using various
17 precomputing tools such as an abacus or handwritten
18 ledgers
19 We know from Benson the Courts seminal
20 computer implementation case that if you can do it by
21 head and hand then the computer doesnt add anything
22 inventive within the meaning of the 101 exception That
23 is the holding of Benson And the Court reiterated that
24 in Mayo
25 Flook said exactly the same thing If you
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1 can do it with pencil and paper then the computer is
2 not offering anything that the patent laws are or should
3 be concerned with
4 It is only where the method will not work
5 without a computer which is not these claims and where
6 the computer itself is doing something that the patent
7 law is willing to protect
8 CHIEF JUSTICE ROBERTS What if shyshy what if
9 you can do it without a computer but its going to
10 take you know 20 people a hundred years In other
11 words theoretically you can replicate what the
12 computer does shyshy
13 MR PERRY Two answers
14 CHIEF JUSTICE ROBERTS shyshy but its
15 impractical without looking to do it on the computer
16 MR PERRY Mr Chief Justice first these
17 claims literally read as Alice reads them on a single
18 transaction between two parties so its not 20 people
19 for a hundred years Its one person sitting in a room
20 so thats not a problem
21 Second if what is being claimed is the
22 necessary speed or efficiency or data crunching
23 capabilities if you will of a computer then it would
24 have to be claimed and theres nothing claimed here
25 All that is claimed shyshy and my friend is going to stand
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1 up on rebuttal and tell you all that the expert said
2 well what is claimed is a computer but its just a
3 computer It just says a computer configured too It
4 doesnt say that the computer actually has to shyshy
5 JUSTICE BREYER Yeah but the trouble with
6 that particular test is as I think partly the Chief
7 Justice said how long et cetera and then add to that
8 though you could do it without a computer what happens
9 at the end of the line is the automobile engine goes off
10 or it begins to sputter or it turns left
11 You see its possible to take Archimedes shyshy
12 shyshy you know I use that example purposely to call
13 attention to the problem You can take those things
14 and youre not just saying apply it and youre not even
15 just saying shyshy you are saying use the computer but at
16 the end of the road something physical in the world
17 changes and everybody would say now thats shyshy that
18 will falls within I mean probably I mean my
19 hesitation shows Im looking for the right words
20 MR PERRY Justice Breyer your point is
21 the reason that it is equally fallacious to suggest on
22 the one hand as Alice and IBM does that simply
23 reciting a computer is a magic key that gets you through
24 101 and you never have to any other inquiry and what
25 some of folks the amici on the other side say which
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1 is that computers or software are never eligible Both
2 of those things have to be wrong because what the Court
3 said in Bilski was future innovation is too uncertain
4 We are not going to do that as a Court And the Court
5 laid out an approach using abstract ideas in Bilski and
6 inventive contribution in Mayo that is flexible enough
7 to take into account that innovation and to deal with
8 particular claims in context which is why at the end
9 of the day we have to come back to these patents and
10 decide which shyshy
11 JUSTICE KAGAN Mr Perry before we get
12 back to these matters you said to Justice Scalia if a
13 patent sufficiently describes how a computer will
14 implement an idea then its patentable So how
15 sufficiently does one have to describe it What do we
16 want a judge to do at this threshold level in terms of
17 trying to figure out whether the description is
18 sufficient to get you past it
19 MR PERRY If I can answer in two steps
20 Justice Kagan First in the negative What the
21 applicant or patentee must do shyshy must not do is simply
22 describe the desired result That would take us back to
23 State Street That would simply say I claim a magic
24 box that buys high and sells low or vice versa I
25 suppose I claim a magic box for investing Thats what
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1 these patents do
2 Then to put it in the affirmative and in the
3 language of Mayo the claim has to recite something
4 significantly more something significantly more than
5 the abstract idea itself That would be a contextual
6 analysis based on the claims and specifications and file
7 history and we know that some devices some methods
8 some programming will pass that
9 It is not going to be a brightshyline rule and
10 thats one of the tugshyofshywar issues that this Court and
11 the Federal Circuit have been having in these cases
12 The Federal Circuit wants brightshyline rules All
13 computers are in or all computers are out
14 This Court has been more contextual This
15 Court has been more nuanced This Court has looked at
16 things in a more robust way
17 JUSTICE KAGAN Youre not suggesting that
18 specific code is necessary
19 MR PERRY No Your Honor I think the shyshy
20 actual description of the programming is a 112 problem
21 I agree with that A 112 issue That is the realm of
22 the written description requirement What is a 101
23 problem is it is on the applicant to do more than simply
24 describe the results simply say A magic box that does
25 intermediate settlement And we can tie that back to
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1 this particular prosecution the 510 patent which is
2 the method patent
3 The examiner rejected it Under Section
4 101 the examiner said this is an abstract idea You
5 cant have this patent And the only change that this
6 applicant made was to add in the adjusting step
7 electronic adjustment It put in one word
8 electronic adjustment And under State Street which
9 is what this patent is prosecuted under that was
10 enough because the result of adjusting run through a
11 computer is enough
12 Under current law that cant be enough
13 That just cant get a patent over the line because this
14 Court said in Mayo and I got to quote this language
15 Simply implementing a fundamental principle on a
16 physical machine namely a computer is not a patentable
17 application of that principle Thats all that Alice
18 has done
19 These are preshyBilski patents They never
20 should have been issued General Verrilli will stand up
21 and address that point And certainly under current
22 law shyshy one point on the AIA Congress did not send all
23 this to the administrative process Congress created
24 two avenues the courts and the PTO to use the
25 standards Essentially it ratified Bilski and Mayo and
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1 said we agree with what you all are doing at the
2 Supreme Court and the existing standards are good enough
3 for us This is a judicial problem And that is a good
4 reason The abstract shyshy
5 JUSTICE GINSBURG The Federal Circuit in
6 this case split in many ways and it had our decisions
7 to deal with You said given Bilski and Mayo this is
8 an easy case What is the instruction that escaped a
9 good number of judges on the Federal Circuit How would
10 you state the rule
11 MR PERRY Your Honor I think theres a
12 significant element to the Federal Circuit that
13 disagrees with Mayo and has been resistant in applying
14 it Chief Judge shyshy former Chief Judge Michelle filed a
15 brief in this Court essentially saying Mayo is a
16 lifeshysciences case You should limit it to that because
17 if you apply it to everything else then these patents
18 are no good
19 Mayo we submit is a technologyshyneutral
20 industryshyneutral exceptionshyneutral framework that can
21 be used to answer all of these questions This is not
22 the death of software patents The software industry is
23 all before this Court saying this is fine with us
24 Every company in the United States practically except
25 for IBM is saying go ahead This will not affect
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1 software patents
2 Justice Ginsburg this Courts precedents
3 are clear They are unanimous They just need to be
4 applied To suggest that there is confusion that needs
5 to be addressed by retreating beating a retreat from
6 recent unanimous decisions would simply reward
7 intransigence difficulty refusal to adhere to what are
8 clear precedents because shyshy
9 JUSTICE KAGAN Should we be concerned
10 Mr Perry that there are old patents that in fact could
11 meet the test that you set forth but wont because they
12 were written in a different time and so used much more
13 general language
14 MR PERRY Your Honor the applicant or the
15 patent holder would have the opportunity to institute a
16 reexamination proceeding or some sort of administration
17 process to address that issue
18 And second it should be noted this is a
19 very small problem There are 2 million outstanding
20 patents in the United States In the last four fiscal
21 years there were 22000 infringement litigations
22 instituted but since Bilski there have only been 57
23 district court decisions on Section 101 issues There
24 have only been 12 Federal Circuit decisions total on
25 computer implementation
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1 We are talking about a group of patents
2 Justice Kagan thats way out at the tail end of
3 distribution Most patents never have a 101 challenge
4 This is not an issue with cotton gins and other things
5 This is a problem for the most marginal
6 most dubious most skeptical patents the ones that this
7 Court in Bilski shyshy and remember what Bilskis holding
8 is The majority said they are processes but it did
9 not say they are eligible
10 Thank you Mr Chief Justice
11 CHIEF JUSTICE ROBERTS Thank you counsel
12 General Verrilli
13 ORAL ARGUMENT OF DONALD B VERRILLI JR
14 ON BEHALF OF THE UNITED STATES AS AMICUS
15 CURIAE SUPPORTING RESPONDENTS
16 GENERAL VERRILLI Mr Chief Justice and
17 may it please the Court
18 An abstract idea does not become
19 patentshyeligible merely by tacking on an instruction to
20 use a computer to carry it out A computer makes a
21 difference under Section 101 when it imposes a
22 meaningful limit on the patent claim That occurs when
23 the claim is directed at improvement in computing
24 technology or an innovation that uses computing
25 technology to improve other technological functions
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1 Thats the test that we believe is most faithful to this
2 Courts precedents in Bilski and Mayo It keeps patents
3 within their traditional and appropriate domain and it
4 is capable of being administered consistently by Courts
5 and by PTO examiners
6 JUSTICE GINSBURG How do you answer the
7 argument that your view would extinguish businessshymethod
8 patents and make all software ineligible for patent
9 protection
10 GENERAL VERRILLI Yeah with shyshy let me
11 address software patents first because that I think is
12 obviously a significant question And its just not
13 correct to say that our approach would make software
14 patenting ineligible Any software patent that improves
15 the functioning of the computer technology is eligible
16 Any software patent that improves shyshy that is used to
17 improve another technology is eligible For example
18 the patent in the shyshy in the Diehr case is one in
19 which shyshy
20 JUSTICE SOTOMAYOR Why do we need to reach
21 this in that shyshy reach software patents at all in this
22 case
23 GENERAL VERRILLI Well shyshy
24 JUSTICE SOTOMAYOR Whats the necessity for
25 us to announce a general rule with respect to software
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1 There is no software being patented in this case
2 GENERAL VERRILLI Well I shyshy
3 JUSTICE SOTOMAYOR Theres a systems
4 GENERAL VERRILLI Well I shyshy I think shyshy
5 well they shyshy they shyshy theres a process being and shyshy and
6 one can think of software patents as process patents
7 And I think thats why my friends on the other side are
8 saying the sky is falling because they shyshy they are
9 interpreting what were saying about that when a
10 computer makes shyshy when a computers involvement makes
11 something eligible under 101 its calling those into
12 question and it doesnt
13 JUSTICE SOTOMAYOR Do you think we have to
14 reach the patentability of software to answer this case
15 GENERAL VERRILLI Well I think you can shyshy
16 I think the answer to that question is no not
17 necessarily You can decide it by saying that shyshy that
18 Bilski answers the question whether this is an abstract
19 idea because this form of hedging is really no
20 different than the form of hedging as a conceptual
21 matter at issue in Bilski And then Mayo answers the
22 question of whether the use of a computer in this case
23 adds enough to the abstract idea beyond conventional
24 steps because here all we have after all is just
25 conventional use of computing technology no computer
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1 innovation such that you dont qualify under 101 You
2 could take that approach
3 But it is important to the United States
4 that we shyshy and to our patent examiners that we get some
5 clarity if we can I think the clarity could come from
6 the text that I propose which I want to reiterate shyshy
7 JUSTICE SOTOMAYOR Well shyshy
8 JUSTICE BREYER Could shyshy could shyshy could you
9 go on with that because you were just getting to the
10 point where I think you say a computer improvement that
11 in fact leads to an improvement in harvesting cotton is
12 an improvement through a computer of technology so it
13 qualifies
14 But then I think you were going to say or I
15 got this also from the brief a computer improvement
16 that leads to an improvement in the methods of selling
17 bonds over the telephone is not an improvement in
18 technology reached by the computer Am I right about
19 the distinction youre making
20 GENERAL VERRILLI I dont think theres a
21 yes or no answer to that question
22 JUSTICE BREYER What is your view Yeah
23 what is shyshy how do we deal with just that problem
24 GENERAL VERRILLI If there is a genuine
25 innovation in the functioning of the computer shyshy
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1 JUSTICE BREYER Yes
2 GENERAL VERRILLI shyshy such that business
3 processes shyshy
4 JUSTICE BREYER Weve got that Yes yes
5 We got the computer But then it doesnt improve the
6 computer but rather it improves through the computer
7 the harvesting of cotton
8 Now youve got it in what you said was your
9 second category which is an improvement through the
10 computer of a technology And I thought in your brief
11 you were distinguishing an improvement through the
12 computer of a human activity that is not a technology
13 and in particular to pick an example of that
14 something in finance or something in business
15 Now am I right about the distinction youre
16 making
17 GENERAL VERRILLI Yeah that shyshy
18 JUSTICE BREYER If Im not right what is
19 the distinction
20 GENERAL VERRILLI That is generally the
21 line were drawing Frankly shyshy
22 JUSTICE BREYER And how is that justified
23 GENERAL VERRILLI I do want shyshy
24 JUSTICE BREYER That shyshy that is Judge Dyk
25 in shyshy in Bilski in the Federal circuit 4 people sort of
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1 picked it up maybe 5 didnt pick it up Would you say
2 a few words about it
3 GENERAL VERRILLI Sure About shyshy let me go
4 to Bilski there in that I do think while shyshy while
5 certainly the Court held that the term process got a
6 natural construction which could include business
7 methods it seems to me that thats not all the Court
8 said in Bilski The Court also said that it was
9 historically and traditionally quite rare that business
10 methods were patent eligible
11 It also said that shyshy that the shyshy that courts
12 and the PTO examiners should use the abstract ideas
13 exception to 101 to police the appropriate boundary
14 It also said that the
15 machineshyorshytransformation test that the United States
16 advocated remained a useful tool And of course that
17 directs to you seeing whether there is a technology
18 application
19 And of course the holding in Bilski was
20 that the shyshy the method for hedging risk was ineligible
21 because it was an abstract idea and I cant imagine
22 that if in Bilski the shyshy the claim had been exactly the
23 same but had added use a computer to carry out some of
24 these standard random analysis functions that are
25 claimed by the patent that you would have found it to
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1 be patent eligible
2 And I shyshy I would submit for the Court that
3 the key point here I think is that now given where
4 the Court shyshy what the Court has held in Bilski given
5 what its held in Mayo the abstract ideas exception is
6 really the only tool left to deal with what I shyshy what I
7 think I fairly read Bilski as saying is a significant
8 problem the proliferation of patents of business
9 methods
10 JUSTICE KENNEDY Is there an example that
11 you can give us of a shyshy what we can call a business
12 process that is patentable a process that doesnt
13 involve improving the workings of a computer
14 GENERAL VERRILLI I shyshy I think its going
15 to be difficult for me to do that I think for
16 example if you had a business method a process for
17 additional security pointshyofshysale credit card
18 transactions using particular encryption technology
19 that might well be patent eligible Its a technology
20 that it makes conduct of business more efficient or
21 effective
22 But there is a technological link here and
23 we do think thats critical to our shyshy to our point of
24 view with respect to the case And I shyshy and I do think
25 remember that when we say something is not patent
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1 eligible were not saying they cant do it Were
2 saying they cant monopolize it
3 And the concern in a situation like this one
4 is that if this is patent eligible its hard to see
5 why for example the first person who came up with a
6 frequent flier program wouldnt have been able to claim
7 a patent there because after all thats a business
8 method for improving customer loyalty implemented on a
9 computer
10 CHIEF JUSTICE ROBERTS General I shyshy you
11 mentioned a while ago the need for greater clarity and
12 certainty in this area And Im just wondering in your
13 brief youve got a nonshyexhaustive of factors to
14 consider and there are 6 different ones And Im just
15 doubtful that thats going to bring about greater
16 clarity and certainty
17 GENERAL VERRILLI I take shyshy I take the
18 point Mr Chief Justice but I think the key is that
19 they are all directed to answering the question of
20 whether the innovation that is claimed and is an
21 innovation in either A the improvement of a computers
22 functioning or B the use of computer technology to
23 improve the functioning of another technological
24 process and a case like Diehr would be in the latter
25 category
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1 And so I do think that thats the key
2 benchmark Thats the baseline Thats the test that
3 we do think can be applied clearly and consistently by
4 the courts or the PTO And it avoids the risk of things
5 like frequent flier programs or the Oakland As money
6 ball methods for evaluating the contributions in
7 individual baseball players make or any one of a host of
8 other things that our intuitions tell us just dont
9 belong in the patent system
10 Thats the shyshy drawing that line keeps them
11 out not drawing that line lets them in And with all
12 due respect I dont think that the novelty and
13 nonobviousness filters that 102 and 103 really deal with
14 that problem effectively because when you get to
15 nonobviousness in 103 for example youll be asking a
16 different question
17 If you take the frequent flier program you
18 would say well is this innovation in building consumer
19 loyalty something that would have been obvious to
20 somebody who runs an airline Its totally divorced
21 from the question of technology at that point and
22 therefore I dont think youre going to get the screen
23 that you need to get in order for the patent system to
24 be confined to its traditional and appropriate scope
25 If there are no further questions thank
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1 you
2 JUSTICE GINSBURG I have a question about
3 how do you identify an abstract concept The shyshy a
4 natural phenomenon a mathematical formula those are
5 easy to identify but there has been some confusion on
6 what qualifies as an abstract concept
7 GENERAL VERRILLI We would define
8 abstract shyshy an abstract concept as a claim that is not
9 directed to a concrete innovation in technology
10 science or the industrial arts So its the shyshy its
11 abstract in the sense that it is not a concrete
12 innovation in the traditional realm of patent law
13 Thank you
14 CHIEF JUSTICE ROBERTS Thank you General
15 Mr Phillips you have four minutes
16 remaining
17 REBUTTAL ARGUMENT OF CARTER G PHILLIPS
18 ON BEHALF OF THE PETITIONERS
19 MR PHILLIPS Thank you Mr Chief Justice
20 Id just like to make a few points
21 First of all with respect to the question
22 you asked which is looking at 159 et cetera all I can
23 tell you is that if you look at claim 33 it talks about
24 matched orders the matched orders that are described in
25 286 and 287 and then makes specific reference to 159
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1 and that flow chart thats there And its all designed
2 as a package Its only one element of the shyshy of the
3 invention but it is a central element and its an easy
4 one to understand And it goes well beyond simply the
5 notion of hedge shyshy hedge against settlement risk and do
6 it by a computer
7 JUSTICE SOTOMAYOR Your adversary says that
8 his shyshy the appendix to his brief are the only patents at
9 issue that the flow charts are not at issue in this
10 case
11 MR PHILLIPS Theres no basis for that
12 statement Your Honor There shyshy remember this went off
13 on a very truncated litigation process So theres shyshy
14 you know we shyshy we got cut off at the beginning of it
15 Theres been no construction of the shyshy of the claims
16 and shyshy and obviously these are specifications that go
17 to how you interpret the claim
18 JUSTICE SOTOMAYOR If we were to say that
19 there are no business patents shyshy
20 MR PHILLIPS Yes
21 JUSTICE SOTOMAYOR shyshy would your patent
22 survive at all
23 MR PHILLIPS No I dont shyshy I dont
24 believe so I think theres no question And you
25 know General Verrilli could not have been any plainer
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1 in his statement of how he wants to interpret the
2 abstract idea concept
3 JUSTICE SOTOMAYOR Yes he wants to say no
4 business patents
5 MR PHILLIPS No business shyshy just another
6 way of saying no business methods And you know the
7 Court rejected that And it seems to me extraordinary
8 to say Congress didnt reject no business methods in
9 101 but were going to do shyshy were going to manipulate
10 the judicial exception to accomplish precisely that same
11 thing It seems to me thats wholly inappropriate
12 Justice Ginsburg you asked my shyshy my friend
13 here you know whats his test He didnt answer that
14 question youll notice because he doesnt have an
15 answer His basic argument is whatever you do just
16 kill this patent
17 And if I were in his shoes I suppose Id
18 take that same position I think whats absolutely
19 clear is that the test ought to be one that is
20 structured as a very coarse filter not the kind of
21 filter that hes pushing for where it changes over time
22 I mean I thought his shyshy I thought his response to one
23 of the questions about eshymail and word processing that
24 Justice Sotomayor asked is over time it would change
25 Well thats exactly what 102 and 103 are for That is
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1 not the purpose of shyshy of Section 101
2 And then he uses the example of encryption
3 I guarantee you if we were arguing about encryption in
4 this case he would say to me that thats an abstract
5 principle because encryption is a concept thats been
6 around since time immemorial George Washington used
7 it Everybody has used encryption
8 And a question again thats not the
9 solution to these problems The question is how did we
10 go about doing it And we go beyond the basics of
11 simply saying use a computer and thats what we ask
12 this Court to focus on and to evaluate
13 As to the frequent flier program its
14 pretty clear to me that even though it was a novel idea
15 in some sense the concept itself would have been viewed
16 in shyshy in the KSR fashion as quite obvious as a means of
17 improving customer loyalty
18 There are solutions here Giving us 101
19 pass doesnt create a monopoly It just gets us to the
20 102 and 103 inquiries that are at the heart of what the
21 patent laws shyshy and 112 that are at the heart of what the
22 patent laws ought to be dealing with
23 If there are no further questions Your
24 Honor thank you
25 CHIEF JUSTICE ROBERTS Thank you counsel
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1 The case is submitted
2 (Whereupon at 1105 am the case in the
3 aboveshyentitled matter was submitted)
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
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25
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58
A add 714 1023 algorithm 3320 41 automatically
As 525 3621 387 algorithms apply 72425 111
am 115 32 416 3013 3310 2019 281213 automobile 389
572 added 302 Alice 13 34 2822 3814 available 99
abacus 61213 4923 363 3717 4217 avenues 4124
710 1018 additional 5017 3822 4117 applying 4213 avoids 524
1325 3614 3617
address 4121 4317 4511
Alices 271 2919 3678
approach 226 395 4513 B
ability 1514 addressed 435 allow 94 472 B 121 29 4413
able 1511 167 addressing 181 allows 97 242 appropriate 5122
1919 516 adds 4623 amazing 2514 81516 1514 back 1621
aboveshyentitled adhere 437 amici 3825 453 4913 1922 2512
113 573 adjudication amicus 123 5224 3018 322
absolutely 125 241 210 4414 Archimedes 3991222
1215 159 adjusting 3611 analysis 424 281122 3811 4025
5518 41610 364 406 area 219 5112 ball 526
abstract 4267 adjustment 417 4924 argue 2518 Bank 17 35
48 6682023 418 analyze 1416 arguing 563 banks 95
721 8218 administered 1716 argument 114 bars 43
141920 1522 454 announce 4525 225812 33 baseball 527
165 181618 administration answer 119 37 41 144 based 423 406
2220 24925 4316 2219 247 18323 226 baseline 522
2621 277 administrative 3919 4221 26715 4413 basic 413 5515
2938 3422 171218 187 456 461416 457 5317 basically 1821
3523 395 242 4123 4721 551315 5515 2319
405 414 424 adopt 203 answering 5119 arguments basics 5610
4418 461823 adopted 31317 answers 3713 1415 basis 132 1512
491221 505 advancement 461821 arms 1625 1516 2719
53368811 351 anyway 1810 arrangements 5411
552 564 advances 3513 apparatus 2916 131 beating 435
accept 102 adversary 547 APPEARAN arrows 315 beginning 163
accomplish advice 1715 116 art 1919 5414
5510 advocated 4916 appears 820 arts 2124 5310 begins 3810
account 55 618 affect 4225 appendix 1910 aside 1422 157 behalf 11719
397 affirmative 402 311 326 369 asked 2314 122 24710
accounts 823 agent 52 3021 548 278 5322 214 38 2616
9356 3611 ago 318 2224 applicant 3220 551224 4414 5318
3611 3615 5111 3921 4023 asking 193 believe 1316
accurately 2413 agree 920 2021 416 4314 221213 273 1416 2421
acknowledges 221 2418 application 3324 5215 255 264 451
1121 4021 421 2623 4117 aspect 517 5424
act 99 2017 agrees 2812 4918 asserted 3113 belong 529
activities 229 ahead 4225 applications 311618 benchmark 522
activity 2122 AIA 2912 4122 333 asserting 325 Benson 361923
3325 4812 airline 5220 applied 434 attaching 124 best 161124
actual 4020 AL 18 523 attention 3813 better 1610 albeit 923 applies 31418 Attorney 2021 216 2819
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3322 brightshyline 409 2313 37 71 4338 5519 beyond 115 4012 5317 checks 618 5614
1312 4623 bring 5115 case 3412 46 Chief 339 clearly 211 251 544 5610 broad 248 116 1524 261217 3024 523
Bilski 313 46 broader 225 2022 213 31812 378 client 311416 415 1722 browsing 228 2211 2313 371416 386 close 2822 2224 2329 builder 2811 2625 311424 421414 4410 CLS 17 35 262020 271 building 5218 3314 36620 441116 5110 1120 2816 2999 built 2324 426816 5118 531419 coarse 247 3935 4125 business 168 451822 461 5625 5520 427 4322 1749 203 461422 5024 chits 611 code 1213 142 447 452 2124 222122 5124 5410 chronological 1916171720 461821 4825 2311 29613 564 5712 1512 2725 4018 49481922 32132323 cases 244 2816 chronologically coffee 1211 5047 3322525 4011 423 colleagues 116
Bilskis 447 34415 3610 catalogues 2512 circuit 2818 college 58 bit 323 48214 4969 262 401112 425 columns 325 blocks 54 508111620 categorically 42912 4324 come 108 234 Bloomberg 517 5419 202 4825 3017 399
2115 225 554568 category 489 circumstances 475 boat 2811 businessshymeth 5125 318 1515 comes 1318 bonds 4717 457 CBM 2913 claim 416 2418 2018 231 bothering 118 buy 183 cellphones 228 2423 2522 coming 923 bound 1521 buys 3924 central 95 543 264 27917 common 31120 boundary 4913 certain 1216 3019 3121 2157 bounds 1521 C certainly 518 32420 361 company 4224 box 392425 C 21 31 263 358 392325 403 competition
4024 cables 3012 4121 495 442223 4922 161011 Breyer 66823 calculator 3519 certainty 5112 516 53823 completely 921
74691923 call 3812 5011 5116 5417 1422 2320 85810 1012 called 721 275 cetera 387 claimed 41014 complex 126 1021 1523 3316 5322 281 3017 complicated 161418 171 calling 4611 Chakrabarty 34162123 1225 235 1922 2114 capabilities 2016 3721242425 3025 315 221216 239 3723 challenge 443 382 4925 component 2315 285 capable 141 change 186 5120 352024 293 3613 454 273 311 415 claims 1416 compression 38520 478 capture 2415 5524 171616 2419 309 3212 4722 4814 captures 2412 changes 3817 2424 2515 3320 349 48182224 card 5017 5521 2520 2648 computer 422
brief 211315 carefully 1725 chart 541 283 3118 516 621 710 2255 322 caricature 718 charted 2620 37517 398 71325 9113 4215 4715 72020 1417 charts 1911 406 5415 91824 1035 4810 5113 1716 549 clarity 4755 10725 1116 548 carry 4420 Charybdis 511116 124102024
briefs 1524 4923 1620 2619 class 59 13911 1479 1618 CARTER 117 checkbook 617 clear 1015 118 1421 15710
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1 C O N T E N T S
2 ORAL ARGUMENT OF PAGE
3 CARTER G PHILLIPS ESQ
4 On behalf of the Petitioners 3
5 ORAL ARGUMENT OF
6 MARK A PERRY ESQ
7 On behalf of the Respondents 26
8 ORAL ARGUMENT OF
9 DONALD B VERRILLI JR ESQ
10 On behalf of the United States as amicus
11 curiae supporting Respondents 44
12 REBUTTAL ARGUMENT OF
13 CARTER G PHILLIPS ESQ
14 On behalf of the Petitioners 53
15
16
17
18
19
20
21
22
23
24
25
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1 P R O C E E D I N G S
2 (1004 am)
3 CHIEF JUSTICE ROBERTS Well hear argument
4 this morning in Case 13shy298 Alice Corporation versus
5 CLS Bank International
6 Mr Phillips
7 ORAL ARGUMENT OF CARTER G PHILLIPS
8 ON BEHALF OF THE PETITIONERS
9 MR PHILLIPS Thank you Mr Chief Justice
10 and may it please the Court
11 It is common ground between the parties in
12 this case that Section 101 by its terms and with the
13 sweeping interpretation this Court adopted in Bilski
14 applies directly to the patents here These are system
15 and process patents that speak directly to Section 101
16 The only issue then is whether the
17 judicially recognized exception that this Court adopted
18 many many years ago applies under these circumstances
19 JUSTICE KENNEDY And just repeat it is
20 common ground between the parties that shyshy
21 MR PHILLIPS That shyshy that our shyshy our
22 patents speak directly to the language of Section 101
23 that is they are a process and they are machines and
24 they are shyshy and they are improvements to the process and
25 the machines They dont shyshy they dont dispute that by
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1 its terms 101 applies The only argument between the
2 parties is the abstract idea exception that exists and
3 whether that bars us from otherwise satisfying
4 Section 101
5 JUSTICE GINSBURG Mr Phillips on the
6 abstract idea you know that the Bilski case held that
7 hedging qualified as an abstract idea So how is
8 intermediate settlement a less abstract than hedging
9 MR PHILLIPS If our shyshy if our patent
10 merely claimed intermediated settlements although I
11 have to say I dont really know exactly what that means
12 because I dont think thats the same kind of
13 economics shyshy basic economics concept that a hedge risk
14 treatment is But if it claimed that we wouldnt shyshy we
15 wouldnt have a distinction from Bilski
16 What we claim is a very specific way of
17 dealing with a problem that came into being in the early
18 1970s of how to try to eliminate the risk of
19 nonshysettlement in these very massive multiparty problems
20 in which you need to deal with difficulties that exist
21 at different time zones simultaneously and to do it with
22 a computer so that you not only take them on
23 chronologically deal with them sequentially based on
24 the kind software analysis that the patent specifically
25 describes by function
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1 And it goes even further than that and does
2 something that no escrow agent and shyshy and no
3 intermediated settlement that I know of shyshy settler that
4 I know of It actually blocks specific transactions
5 that in the shadow account would violate the terms of
6 the settlement that would ultimately be implemented
7 JUSTICE KENNEDY Well let me put it this
8 way If you describe that to a secondshyyear college
9 class in engineering and said heres shyshy heres my idea
10 now you go home and you program over this weekend my
11 guess is shyshy my guess is that that would be fairly easy
12 to program
13 MR PHILLIPS I dont disagree with it
14 Justice shyshy
15 JUSTICE KENNEDY So the fact that the
16 computer is involved it shyshy it seems to me is necessary
17 to make it work But the shyshy but the innovative aspect
18 is certainly not in the creation of the program to make
19 that work All youre talking about is shyshy if I can use
20 the word shyshy an idea
21 MR PHILLIPS I prefer not to use that word
22 for obvious reasons
23 (Laughter)
24 MR PHILLIPS But shyshy but if you shyshy but if
25 you look at the Solicitor shyshy
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1 JUSTICE KENNEDY Or shyshy or a method or a
2 process
3 MR PHILLIPS Right But shyshy and shyshy and
4 obviously methods and processes are precisely what
5 Section 101 permits to be subject shyshy
6 JUSTICE BREYER Why is that less abstract
7 MR PHILLIPS Im sorry
8 JUSTICE BREYER Why is that less abstract
9 I mean imagine King Tut sitting in front of the pyramid
10 where all his gold is stored and he has the habit of
11 giving chits away Good for the gold which is given at
12 the end of the day And he hires a man with an abacus
13 and when the abacus keeping track sees that hes given
14 away more gold than he is in storage he says stop
15 You see
16 Or my mother who used to look at my
17 checkbook when she saw that in fact I had written
18 more checks than I had in the account she would grab
19 it Stop You see
20 So what is it here thats less abstract that
21 the computer says stop
22 MR PHILLIPS It is shyshy
23 JUSTICE BREYER How is that less abstract
24 than King Tut if we had the same thing with a grain
25 elevator if we had the same thing with a reservoir of
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1 water if we had the same thing with my checkbook You
2 see the point
3 MR PHILLIPS I do see the point Justice
4 Breyer and it seems to me that it goes to the question
5 of the methodology youre going to employ
6 JUSTICE BREYER Methodology is just that
7 you said stop
8 MR PHILLIPS Well we could shyshy
9 JUSTICE BREYER So what we have different
10 here is the computer stops rather than the abacus man
11 stopping or my mother stopping or the guy that the grain
12 elevator has that says stop So just saying what shyshy is
13 that it In other words if you say computer stop you
14 have an invention Useful add shyshy but if you say mother
15 stop you dont
16 MR PHILLIPS No Well I mean again it
17 seems to me that in some ways what shyshy what you described
18 there is a caricature of what this invention is
19 JUSTICE BREYER Of course its a
20 caricature Its a caricature designed to suggest that
21 there is an abstract idea here Its called solvency
22 MR PHILLIPS But shyshy
23 JUSTICE BREYER And what you do is you take
24 the idea of solvency and you say apply it And you say
25 apply it through the computer
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1 Is that enough to make it not just the
2 abstract idea And now were at the heart of why I used
3 my exaggerated examples shyshy
4 MR PHILLIPS Right
5 JUSTICE BREYER shyshy because you will tell me
6 why shyshy
7 MR PHILLIPS Right
8 JUSTICE BREYER shyshy this is enough
9 MR PHILLIPS Right Because Justice
10 Breyer the shyshy the shyshy the concept here is not simply to
11 say stop Stop is obviously part of the element of it
12 But its also designed to ensure that at the
13 end of the day this transaction in the midst of
14 literally a global set of shyshy of deals that are going on
15 simultaneously will be implemented at the appropriate
16 time in the appropriate way And whatever else that may
17 be it seems to me its difficult to say thats an
18 abstract idea as implemented
19 JUSTICE SOTOMAYOR Im sorry But shyshy but
20 what it appears to be it sounds like youre trying to
21 revive the patenting of a function You used the word
22 function earlier and thats all Im seeing in this
23 patent is the function of reconciling accounts the
24 function of making sure theyre paid on time But in
25 what particular way other than saying do it through a
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1 computer is this something new and not function
2 MR PHILLIPS Well it does it through shyshy
3 it creates the shadow accounts because of the concerns
4 for security You dont shyshy youre not going to allow
5 somebody to enter into a central banks own accounts
6 You create the shadow accounts You monitor through the
7 software that allows you to do that You evaluate each
8 of the transactions to ensure that the settlement will
9 be available You do it sequentially and you act on it
10 by the end of the day or whenever the transaction is to
11 take place and you implement that transaction
12 JUSTICE SCALIA Why isnt it shyshy why isnt
13 doing it through a computer not enough I mean was the
14 cotton gin not an invention because it just means youre
15 doing through a machine what people used to do by hand
16 Its not an invention Its the same old same old
17 MR PHILLIPS Justice Scalia shyshy
18 JUSTICE SCALIA Why shyshy why is a computer
19 any different in that respect
20 MR PHILLIPS At one level I agree with you
21 completely There is no difference between them
22 This Court has however said on more than a
23 few occasions albeit in dicta that coming up with an
24 idea and then say use a computer is not sufficient
25 And what Im trying to suggest to you is we dont fall
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1 within that dicta
2 Now if you dont accept the dicta and you
3 say use a computer is fine then I think were done
4 JUSTICE SCALIA Well Im not saying use a
5 computer is shyshy is much of a novelty I mean thats shyshy
6 that goes to whether its novel or not If you just say
7 use a computer you havent invented anything But if
8 you come up with a serious program that shyshy that does it
9 then you know that may be novel But thats a novelty
10 issue isnt it
11 MR PHILLIPS To be sure Justice Scalia
12 JUSTICE BREYER And this is exactly the
13 question I really would like to you to focus on for me
14 Why is it shyshy and Im not saying this from a point of
15 view but it seems to me pretty clear that if what you
16 did was take the idea of solvency shyshy remember King Tut
17 Thats what I use the exaggeration shyshy and what you say
18 is implemented by having the abacus man keep track and
19 say stop okay shyshy
20 MR PHILLIPS Right
21 JUSTICE BREYER Then we implement it by
22 having somebody with a pencil and a piece of paper and
23 this is all that they add you see Say Have a man
24 with a pencil and a piece of paper keeping track and
25 saying stop or we say implement it in the computer
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1 which will automatically keep track and say stop are
2 they all enough Are some of them enough Whats the
3 rule
4 And you realize I couldnt figure out much
5 in Prometheus to go beyond what I thought was an obvious
6 case leaving it up to you and your colleagues to figure
7 out how to go further Am I making enough shyshy making
8 clear enough whats bothering me And Id really like
9 to get your answer to this
10 MR PHILLIPS And shyshy and look theres
11 no shyshy Ill be the first one to shyshy to confess that trying
12 to use language to describe these things is not all that
13 easy But the way I think you can meaningfully look at
14 this is to say that this is not simply something that
15 was a fundamental truth this is not something that
16 simply says use a computer Its not simply something
17 that says maintain solvency It shyshy it operates in a
18 much more specific and concrete environment where youre
19 dealing with a problem thats been in existence since
20 the 1970s a solution in the 1990s that CLS itself
21 acknowledges needed a solution and came forward with
22 their own solution that looks a lot like ours
23 JUSTICE KENNEDY But my shyshy my initial
24 question and I think I can work this into King Tut
25 is shyshy
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1 (Laughter)
2 JUSTICE KENNEDY shyshy is shyshy is whether or not
3 you could have patented that system idea process
4 method without attaching a computer program
5 MR PHILLIPS You cannot absolutely cannot
6 do that with this system because it is so complex and
7 so many interrelated parts
8 JUSTICE KENNEDY Suppose I thought shyshy and
9 again its just a thought because I dont have the
10 expertise shyshy that any computer group of people sitting
11 around a coffee shop in Silicon Valley could do this
12 over a weekend Suppose I thought that
13 MR PHILLIPS You mean wrote the code
14 JUSTICE KENNEDY Yes right
15 MR PHILLIPS Well thats absolutely shyshy
16 Im certain thats true
17 JUSTICE KENNEDY Well then shyshy then shyshy
18 MR PHILLIPS But thats true of almost all
19 software
20 JUSTICE KENNEDY Then why is the computer
21 program necessary to make the patent valid
22 MR PHILLIPS Well its shyshy its necessary
23 to make the invention effective As the Solicitor
24 General said the computer is essential to the efficacy
25 of this invention because of the complicated financial
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1 arrangements that exist and that can only be resolved on
2 a shyshy on a realtime basis Your abacus is great if you
3 happen to be waiting for the pyramids to be finished or
4 waiting for the gold to move in and out but it doesnt
5 help with you an abacus if youre dealing with literally
6 thousands of transactions simultaneously going on in
7 different countries at different points in time
8 JUSTICE KENNEDY But thats just an idea
9 hey lets use a computer
10 MR PHILLIPS But its not just shyshy I mean
11 obviously part of it is use the computer Justice
12 Kennedy But more fundamentally it goes beyond that
13 See I shyshy
14 JUSTICE SOTOMAYOR Is your software
15 copyrighted
16 MR PHILLIPS No I dont believe so
17 JUSTICE GINSBURG There is no special
18 software that comes with this shyshy thats part of this
19 patent is it shyshy is there
20 MR PHILLIPS No Justice Ginsburg what
21 we did here is what the Patent and Trademark Office
22 encourages us to do and encourages all software patent
23 writers to do which is to identify the functions that
24 you want to be provided for with the software and leave
25 it then to the software writers who I gather are you
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1 know quite capable of converting these functions into
2 very specific code
3 JUSTICE KAGAN Mr Phillips could you shyshy
4 could you disaggregate your argument for me Because
5 you just said look this Court has said its not
6 sufficient if you have an idea and then you say use a
7 computer to implement it right So are you saying that
8 your shyshy that shyshy are you saying that youre doing more
9 than saying use a computer to implement it or are you
10 saying that its shyshy that the idea itself is more than an
11 idea
12 MR PHILLIPS Yes Im saying shyshy
13 JUSTICE KAGAN Which part of what shyshy
14 MR PHILLIPS Im saying both actually I
15 mean Im making both of those arguments I shyshy I
16 believe that if you analyze the claims and you dont
17 caricature them and you dont strip them out of the
18 limitations that are embedded in there this is not some
19 kind of an abstract concept This is not some kind shyshy
20 its not an abstract idea Its a vary shyshy
21 JUSTICE KAGAN So putting the computer
22 stuff aside completely shyshy
23 MR PHILLIPS Right
24 JUSTICE KAGAN shyshy youre saying that youve
25 invented something or you shyshy
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1 MR PHILIPS Yes
2 JUSTICE KAGAN There is something that
3 youve patented that has shyshy that is not just simple use
4 a third party to do a settlement
5 MR PHILLIPS Right
6 JUSTICE KAGAN And what is that putting
7 the computer aside
8 MR PHILLIPS It is shyshy well shyshy and again
9 its difficult to do that because you absolutely need
10 the computer in order to implement this But the key to
11 the invention is the notion of being able
12 simultaneously dealing with it on a chronological basis
13 to stop transactions that will otherwise interfere with
14 the ability to settle on time and under the appropriate
15 circumstances And the only way you can do that in a
16 realtime basis when youre dealing with a global economy
17 is to use a computer It is necessary to the efficacy
18 of this
19 So in that sense I cant shyshy I cant
20 disaggregate it the way in some sense youre suggesting
21 It seems to me its bound up with in shyshy its bounds up
22 with the whole notion of is this an abstract concept
23 JUSTICE BREYER Can you in fact shyshy now
24 this is shyshy look there are 42 briefs in this case I
25 actually read them and I found them very very helpful
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1 up to the point where I have to make a decision because
2 theyre serious I mean you know shyshy now the problem
3 that I came away with is the one that youre beginning
4 to discuss that if you simply say take an idea thats
5 abstract and implement it on a computer there are shyshy
6 youre going to get it much faster youre going to be
7 able to do many many things and if thats good enough
8 there is a risk that you will take business in the
9 United States or large segments and instead of having
10 competition on price service and better production
11 methods well have competition on who has the best
12 patent lawyer You see where Im going on that one
13 MR PHILLIPS Yeah of course
14 JUSTICE BREYER And if you go the other way
15 and say never then what you do is you rule out real
16 inventions with computers
17 MR PHILLIPS Right
18 JUSTICE BREYER And so in those 42 briefs
19 there are a number of suggestions as to how to go
20 between Scylla and Charybdis Now I would like to
21 know shyshy I dont know if you can step back from your
22 representational model Thats a problem Youre all
23 we have now And shyshy and from my point of view I need
24 to know what in your opinion is the best way of sailing
25 between these two serious arms
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1 MR PHILLIPS Well Justice Breyer I guess
2 I would suggest to you that you might want to deal with
3 the problem you know as opposed to the problems you
4 dont know at this stage I mean we have had business
5 method patents and software patents in existence for
6 well over a decade and theyre obviously quite
7 significant in number And shyshy and we know what the
8 system is we have And Congress looked at that system
9 right and didnt say no to business methods patents
10 didnt say no to software patents instead said the
11 solution to this problem is to get it out of the
12 judicial process and create an administrative process
13 but leave the substantive standards intact
14 So my suggestion to you would be follow that
15 same advice a liberal interpretation of 101 and not a
16 caricature of the claims analyze the claims as written
17 and therefore say that the solution is 102 and 103 and
18 use the administrative process If you shyshy
19 JUSTICE GINSBURG Mr Phillips let me just
20 stop you there because four Justices of this Court did
21 not read that legislative history the way you do And
22 it was shyshy was in Bilski
23 MR PHILLIPS But this is postshyBilski
24 JUSTICE GINSBURG Justice Stevens went
25 carefully through that and he said Congress was
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1 reacting to a decision It had shyshy it was not addressing
2 101 So there are at least four Justices who say shyshy who
3 didnt buy that argument
4 MR PHILLIPS Well I mean it still seems
5 to me that the shyshy the natural inference is Congress did
6 not change 101 Congress created an entire
7 administrative system to deal with 101 102 and 103
8 And shyshy and I would hope shyshy
9 JUSTICE SCALIA And four is not five
10 anyway right
11 MR PHILLIPS Thats true
12 JUSTICE SCALIA Four is not five
13 MR PHILLIPS And youve exhausted my math
14 skills Your Honor
15 JUSTICE SCALIA By the way we shyshy we have
16 said that you cant take an abstract idea and then say
17 use a computer to implement it But we havent said
18 that you cant take an abstract idea and then say here
19 is how you use a computer to implement it shyshy
20 MR PHILLIPS Exactly
21 JUSTICE SCALIA shyshy which is basically what
22 youre doing
23 MR PHILLIPS And thats the argument were
24 doing and shyshy
25 JUSTICE SCALIA And thats a little
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1 different
2 MR PHILLIPS shyshy thats the line were
3 asking the Court to draw here
4 JUSTICE KAGAN Well how are you saying the
5 how Because I thought that your computers shyshy that your
6 patents really did just say do this on a computer as
7 opposed to saying anything substantive about how to do
8 it on a computer
9 MR PHILLIPS I would urge the Court to
10 look at Joint Appendix 159 285shy286 where it goes
11 through the flow charts This is shyshy and this is just a
12 specific example of the method by which you stop a
13 transaction and it goes through a varied series of
14 detailed steps and what the computer has to do in order
15 to do that It doesnt actually obviously put in the
16 code but thats what the PTO says dont do Dont put
17 in the code because nobody understands code so shyshy but
18 put in the functions and we know shyshy and we know that
19 someone skilled in the art will be able to put in the
20 code And if they arent if they cant do that then
21 its not enabled and thats a 112 problem
22 To go back Justice Breyer to your
23 question So on the one hand youve got a problem that
24 it seems to me Congress to some extent has said is okay
25 and weve got a solution and that solutions playing
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1 through On the other hand if this Court were to say
2 much more categorically either that theres no such
3 thing as business method patents or adopt the Solicitor
4 Generals interpretation which is to say that there
5 cannot be software unless the software somehow actually
6 improves the computer as opposed to software improving
7 every other device or any other mechanism that might be
8 out there
9 What we know is that this would inherently
10 declare and in one fell swoop hundreds of thousands of
11 patents invalid and the consequences of that it seems
12 to me are utterly unknowable And before the Court goes
13 down that path I would think it would think long and
14 hard about whether isnt that a judgment that Congress
15 ought to make And It seems to me in that sense youre
16 essentially where the Court was in Chakrabarty where
17 everybody was saying youve got to act in one way or the
18 other or the world comes to an end and the courts have
19 said well apply 101 directly
20 JUSTICE KENNEDY If we say that theres no
21 software patentability and agree with the Attorney
22 General do you lose in this case
23 MR PHILLIPS Well it would be very hard
24 for me to see how that shyshy how shyshy how I can get around
25 that particular problem because the computer is the
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1 essence of it so shyshy and a portion of it is clearly the
2 software So I think if you say there is no such thing
3 as software patentability I do lose in this case yes
4 Your Honor As do a whole lot of other people
5 JUSTICE KENNEDY Is there any common ground
6 between you and the government shyshy maybe a better
7 question to ask the government shyshy a common ground
8 between you and the government on something in the
9 software area thats patentable other than making the
10 computer itself work You understand the government to
11 say no software patents
12 MR PHILLIPS Thats the way I interpret
13 the governments shyshy the governments brief
14 JUSTICE BREYER It was like shyshy theres a
15 Bloomberg brief out here that was on this that said
16 no you can shyshy you can patent computer software when
17 its an improvement in the computer when its an
18 improvement in software when its an improvement in a
19 technology that is developed out of computers like
20 robotics when it is an improvement in a machine or
21 technology but you cannot improve it where it is simply
22 an improvement in an activity that is engaged in
23 primarily through mental processes But what they mean
24 by that is business finance and similar arts
25 Thats shyshy I mean thats shyshy it wasnt quite what shyshy I
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1 know Thats what I want to know what you dont agree
2 with about that because its a little more refined than
3 you suggested
4 MR PHILLIPS I read the Solicitor
5 Generals brief as broader than the Bloomberg brief
6 in shyshy in terms of the approach And IBMs argument is
7 if you knock out software patents you eliminate web
8 browsing word processing cellphones eshymail Those
9 are all activities that I dont think fall within the
10 meaning of the shyshy the meaning of the governments theory
11 of the case
12 JUSTICE BREYER But Im asking you shyshy Im
13 asking you what about this one that I just mentioned
14 You see I went through those five steps shyshy
15 MR PHILLIPS Right
16 JUSTICE BREYER shyshy and four of them you
17 could patent and the fifth one you cant
18 MR PHILLIPS Right But I shyshy and I guess
19 my answer to that is thats nowhere in the statute and
20 it doesnt seem to me to reflect an abstract idea Its
21 a shyshy its a line you draw that takes out business method
22 patents If the Court wants to eliminate business
23 method patents fine But you just said no to that in
24 Bilski two three terms ago
25 Now to be sure give the Solicitor General
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1 credit he comes here and says to you We didnt like
2 the result in Bilski we want you to say dont use
3 process in order to get there which is a statutory
4 interpretation come up with an extraordinarily
5 complicated way of looking at the exception and use that
6 to get to the exact same result
7 JUSTICE SOTOMAYOR Well youre doing a
8 very good job of proving shyshy
9 JUSTICE GINSBURG In Bilski Justice Breyer
10 did try to say that there wasnt that shyshy a whole lot of
11 distance between the four who thought business methods
12 were not patentable But he shyshy he also said something
13 else in shyshy in the other case Mayo Justice Scalia
14 asked you the question about doesnt that go to novelty
15 but didnt Justice Breyer say in Mayo that novelty can
16 be relevant to patent shyshy to patent eligibility He said
17 theres shyshy theres an overlap
18 MR PHILLIPS Well he said theres an
19 overlap Here in this context I think basically the
20 Respondents theory would mean that they are completely
21 coterminous And I dont think thats what the Court
22 meant And also we know from Diehr that theres got to
23 be at least some significant limitations on the extent
24 to which novelty has to be built into 101 That is the
25 province of 102 and 103 And as I said Congress
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1 modified the system of adjudication to create an
2 administrative mechanism that allows you to get to 102
3 and 103 And at least in context its important to
4 realize there have been 11 cases since that was created
5 9 of the 11 have been knocked down on 102 or 103 grounds
6 and not on 101 grounds And it seems to me thats the
7 answer to this problem is leave 101 as the coarse
8 filter If on its face it states these kinds of broad
9 abstract principles fundamental truths and even if it
10 says use a computer those should be struck down
11 JUSTICE SOTOMAYOR Which of the shyshy which of
12 the opinions below captures your position most
13 accurately
14 MR PHILLIPS I would guess it would be
15 Judge Moores opinion below that would capture ours most
16 correctly
17 JUSTICE SOTOMAYOR And if we were to think
18 your method claim is ineligible do you agree that your
19 systems and shyshy your medium and system claims fail as
20 well Do they rise and fall together
21 MR PHILLIPS No No I dont believe they
22 do rise and fall together I mean I think you could shyshy
23 if you wanted to interpret our medium claim shyshy I mean
24 our shyshy our method claims in a shyshy in particularly
25 abstract way I think you could still say that the
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1 system claims which clearly are shyshy are how to create a
2 computer system and how to implement it using that
3 method would be a much more concrete version of that in
4 a way that would take it out of 101 That said I
5 obviously believe that all of our claims satisfy 101
6 and should go on to the next stage
7 JUSTICE KAGAN Can I give you a
8 hypothetical Mr Phillips and you tell me how its
9 different or the same Lets say you know 30 years
10 somebody took a look around the world and said a lot of
11 people seem to order products by mail They get the
12 catalogues in the mail and then they send back their
13 return forms And lets say that one of the founders of
14 the Internet said wouldnt this be an amazing system
15 we could actually do this by computer and they had
16 patented that Is that the same
17 MR PHILLIPS I dont know if its the
18 same but I would shyshy I would argue that it could very
19 well be a patentable subject matter because shyshy but it
20 depends on how the claims play out
21 JUSTICE KAGAN No but exactly I mean
22 the claim would have said something along the lines of
23 you know theres this process by which people order
24 products and we want to do it over the Internet we want
25 to do it electronically and we will use a computer to
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1 do that to essentially take the process of mail order
2 catalogues and make it electronic
3 MR PHILLIPS I could certainly shyshy I think
4 I could write a claim shyshy a set of claims that I believe
5 would satisfy 101 And shyshy and to the extent that
6 youd shyshy that youd think those are no different than
7 the ones I have here then my argument is simply I think
8 I satisfy 101 with the claims we have before us Your
9 Honor
10 If there are no further questions then Id
11 like to reserve the rest of my time
12 CHIEF JUSTICE ROBERTS Thank you
13 Mr Phillips
14 Mr Perry
15 ORAL ARGUMENT OF MARK A PERRY
16 ON BEHALF OF THE RESPONDENTS
17 MR PERRY Mr Chief Justice and may it
18 please the Court
19 That path between Scylla and Charybdis was
20 charted in Bilski and Mayo Bilski holds that a
21 fundamental economic principle is an abstract idea and
22 Mayo holds that running such a principle on a computer
23 is quote not a patentable application of that
24 principle Those two propositions are sufficient to
25 dispose of this case
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1 If Bilski and Mayo stand Alices patents
2 fail Therefore Mr Phillips and his friends are
3 asking this Court to change the standard even though
4 this Court has had three unanimous decisions in the last
5 four terms establishing what the Court called a myriad
6 a wellshyestablished standard
7 On the abstract idea Justice Ginsburg you
8 asked Mr Phillips whats the difference between hedging
9 and this claim There is no difference This is
10 hedging It is hedging against credit default rather
11 than price fluctuation but it is simply hedging
12 And Mr Phillips stood up for 26 minutes and
13 never once referred to the patent Lets look at what
14 the inventor the soshycalled inventor said about this
15 invention This is at JA 293 to 94 in the
16 specification
17 This claim has simply two steps Its very
18 simple First debiting and crediting on a realtime
19 basis the relevant shadow records and second by
20 periodically affecting corresponding payment
21 instructions Those are direct quotes Debit credit
22 and pay Your Honor you cant get much more simple
23 than that
24 Mr Phillips suggests well we have
25 multilateral transactions global things chronological
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1 time zones and so forth None of those are claimed
2 Your Honor Those are all recited in specification
3 The claims read on a single transaction involving two
4 parties
5 JUSTICE BREYER Can I ask you at some
6 point not necessarily this second to say in my shyshy this
7 is just shyshy you know you have an opinion for a court
8 Different judges can have different interpretations
9 All youre getting is mine okay
10 But I think its pretty easy to say that
11 Archimedes cant just go to a boat builder and say
12 apply my idea All right Everybody agrees with that
13 But now we try to take that word apply and give
14 content to it
15 And what I suspect in my opinion Mayo did
16 and Bilski and the other cases is sketch an outer shell
17 of the content hoping that the experts you and the
18 other lawyers and the shyshy the circuit court could fill
19 in a little better than we had done the content of that
20 shell
21 So so far youre saying well this is
22 close enough to Archimedes saying apply it that we
23 neednt go further
24 Now will you at some point in the next few
25 minutes give me your impression of if it were necessary
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1 to go further what would the right words or example be
2 MR PERRY Your Honor as shyshy Justice
3 Breyer as to abstract ideas the PTO has filled in that
4 shell by listing economic concepts legal concepts
5 financial concepts teaching concepts dating and
6 interpersonal relationships and generally how business
7 should be conducted as examples of those things that are
8 likely abstract which of course all follow directly
9 from Bilski and the discussion this Court had in Bilski
10 And this patent shyshy these patents fall squarely within
11 that
12 Congress in the AIA confirmed that
13 reading Congress in the CBM method said business
14 methods that are subject to special scrutiny shyshy that is
15 dubious patents shyshy include methods and corresponding
16 apparatus which is what we have here that pertain to
17 data processing in the financial services industry and
18 do not offer a technological solution That describes
19 Alices patents to a letter Your Honor So that we
20 have shyshy
21 JUSTICE SOTOMAYOR What do you think is a
22 technological solution
23 MR PERRY Your Honor shyshy
24 JUSTICE SOTOMAYOR How could they if at
25 all written their patents to shyshy to make shyshy to make
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1 their software eligible What would shyshy what do they
2 need shyshy would have needed to have added
3 MR PERRY Justice Sotomayor they have no
4 software first Theyve never written software
5 Theyve never programmed a computer So thats a
6 nonexistent set
7 Second there are many technological
8 solutions to trading and settlement problems For
9 example data compression These shyshy these trading
10 platforms involve the movement of very large quantities
11 of data around the world The physical pipes that is
12 the fiber optic cables and data lines are limited
13 There are very sophisticated algorithms for both
14 security and speed to move data through the transmission
15 lines in novel and useful ways that could well be
16 patented
17 Nothing like that is claimed here To come
18 back to where I started if you look for example at
19 Claim 65 in the 510 patent as Mr Phillips reads it
20 it literally reads on a twoshyparty escrow to sell a
21 house so long as the escrow agent is typing this stuff
22 into the HUDshy1 using a computer That has nothing to do
23 with multilevel shyshy
24 CHIEF JUSTICE ROBERTS Well thats a
25 little more complicated He referred us to Joint
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1 Appendix Page 159 which is not a change in how
2 computers work But it is shyshy constitutes the
3 instructions about how to use the computer and where it
4 needs to be affected And just looking at it it looks
5 pretty complicated There are a lot of arrows and
6 they shyshy you know different things that go shyshy
7 (Laughter)
8 CHIEF JUSTICE ROBERTS Well but I mean
9 you know it shyshy in different directions And I
10 understand him to say that in each of those places
11 thats where the computer is needed
12 MR PERRY Mr Chief Justice Figure 16 has
13 nothing to do with the invention asserted against my
14 client in this case There are two inventions in this
15 patent One invention involving multilateral contract
16 formation is not asserted against my client And all of
17 these drawings pertain to that The only drawings that
18 pertain to the asserted claims are 25 and 33 to 37 And
19 that was established below and its established in this
20 Court And Mr Phillips has never disputed it
21 So the claim hes pointed the Court shyshy the
22 figure hes pointed the Court to has nothing to do with
23 the invention Its for a different invention that is
24 not at issue in this case
25 Remember there are hundreds and hundreds of
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1 pages of these patents They all pertain to the other
2 invention Thats why in the back of our red brief we
3 excerpted the very little bit that actually pertains to
4 this You sort of tack on patent shyshy the tack on claim
5 that Mr Phillips is asserting here Its 4 columns
6 Its less than five pages in the printed appendix that
7 actually pertains to this invention And it contains no
8 disclosure whatever
9 Justice Scalia to your question about how
10 the computer does it Of course a patent that
11 describes sufficiently how a computer does a new and
12 useful thing whether its data compression or any other
13 technological solution to a business problem a social
14 problem or a technological problem would be within the
15 realm of the shyshy of the patent laws That is what the
16 patent laws have always been for
17 This is not such a patent And the reason
18 for that is this is a preshyBilski set of patents These
19 were prosecuted under the old State Street test where
20 all the applicant had to claim was a result
21 JUSTICE KENNEDY Would you give me shyshy
22 again you already did it once shyshy an example of a
23 business process patent shyshy of a business process idea
24 and invention that is patentable
25 MR PERRY Your Honor there are many
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1 examples One would be a technological solution to a
2 business problem So that for example shyshy Ill give a
3 different example There are many applications today
4 The Court may be familiar with streaming video to watch
5 video on your computer
6 It is not possible to get enough data
7 through existing lines in its raw format The data has
8 to be manipulated in order to see live video So if you
9 want to watch TV on your phone for example
10 Those algorithms those inventions are
11 undoubtedly technological And if they are used in a
12 trading platform or a hedging system or something else
13 that wouldnt disable them And this is what the Diehr
14 case shyshy
15 JUSTICE KENNEDY Well I shyshy I shyshy in my
16 language Ive called that mechanical rather than
17 process Can you give me an example of process
18 MR PERRY Yes Your Honor The process in
19 that example would be a computer running the particular
20 data compression algorithm
21 JUSTICE KENNEDY But thats how to make
22 a shyshy thats how to make a machine work better
23 MR PERRY Yes Your Honor
24 JUSTICE KENNEDY Im asking you Is there
25 any business process any business activity that is
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1 susceptible to a patent a pure patent innovations that
2 deserve patents
3 MR PERRY Your Honor again a
4 technological solution to a business problem could well
5 be whether its a method or a process is equivalent
6 Again Congress said method in a corresponding shyshy
7 JUSTICE KENNEDY Can you give me an
8 example
9 MR PERRY I thought the data compression
10 example was a good one Ill try an encryption
11 technology Many of these trading platforms you know
12 dealing with securities and money would require some
13 sort of security devices You could have a process for
14 securely transmitting data would be another computer
15 implemented technological solution to a business
16 problem Again nothing like that claimed here
17 JUSTICE SOTOMAYOR How about eshymail and
18 just word processing programs
19 MR PERRY Your Honor a program shyshy let me
20 try it this way to both of your questions In our view
21 if what is claimed as the inventive contribution under
22 Mayo shyshy in other words if we have an abstract idea as
23 we do here and what is claimed is the inventive
24 contribution for Step 2 is the computer then the
25 computer must be essential to that operation and
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1 represent an advancement in computer science or other
2 technology And we know thats not met here Justice
3 Sotomayor because shyshy
4 JUSTICE SOTOMAYOR So youre saying no to
5 eshymail and word processing
6 MR PERRY Your Honor I think at a
7 point shyshy
8 JUSTICE SOTOMAYOR They certainly have
9 functionality and shyshy and improvement of functionality
10 for the user
11 MR PERRY At a point in time in the past
12 I think both of those would have been technological
13 advances that were patentable
14 JUSTICE SOTOMAYOR How
15 MR PERRY Today shyshy because they would have
16 provided a technological solution to a then unmet
17 problem Today reciting and do it on a word processor
18 is no different than and do it on a typewriter or shyshy and
19 do it on a calculator
20 The inventive contribution component which
21 uses specifically the language of conventional and
22 routine and well understood will evolve with
23 technology Thats why its different than the abstract
24 idea component
25 And here we know that these patents dont
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1 claim anything that was not conventional well
2 understood and routine We went through that in great
3 detail and Alice has never disputed a word of it They
4 just say youre not supposed to do that analysis even
5 though the Court 9shy0 in Mayo said we should
6 And in this case its very important to
7 look at what Alices own experts said on the subject
8 This is not our expert This is Alices expert And
9 this is at Page 1327shy28 of the Joint Appendix It is
10 possible to do the business methods of maintaining
11 accounts adjusting accounts and providing an
12 instruction without a computer or other hardware
13 And then Justice Breyer directly to your
14 abacus If someone had thought of this invention
15 soshycalled invention 100 years ago they might have
16 implemented it in a nonelectronic manner using various
17 precomputing tools such as an abacus or handwritten
18 ledgers
19 We know from Benson the Courts seminal
20 computer implementation case that if you can do it by
21 head and hand then the computer doesnt add anything
22 inventive within the meaning of the 101 exception That
23 is the holding of Benson And the Court reiterated that
24 in Mayo
25 Flook said exactly the same thing If you
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1 can do it with pencil and paper then the computer is
2 not offering anything that the patent laws are or should
3 be concerned with
4 It is only where the method will not work
5 without a computer which is not these claims and where
6 the computer itself is doing something that the patent
7 law is willing to protect
8 CHIEF JUSTICE ROBERTS What if shyshy what if
9 you can do it without a computer but its going to
10 take you know 20 people a hundred years In other
11 words theoretically you can replicate what the
12 computer does shyshy
13 MR PERRY Two answers
14 CHIEF JUSTICE ROBERTS shyshy but its
15 impractical without looking to do it on the computer
16 MR PERRY Mr Chief Justice first these
17 claims literally read as Alice reads them on a single
18 transaction between two parties so its not 20 people
19 for a hundred years Its one person sitting in a room
20 so thats not a problem
21 Second if what is being claimed is the
22 necessary speed or efficiency or data crunching
23 capabilities if you will of a computer then it would
24 have to be claimed and theres nothing claimed here
25 All that is claimed shyshy and my friend is going to stand
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1 up on rebuttal and tell you all that the expert said
2 well what is claimed is a computer but its just a
3 computer It just says a computer configured too It
4 doesnt say that the computer actually has to shyshy
5 JUSTICE BREYER Yeah but the trouble with
6 that particular test is as I think partly the Chief
7 Justice said how long et cetera and then add to that
8 though you could do it without a computer what happens
9 at the end of the line is the automobile engine goes off
10 or it begins to sputter or it turns left
11 You see its possible to take Archimedes shyshy
12 shyshy you know I use that example purposely to call
13 attention to the problem You can take those things
14 and youre not just saying apply it and youre not even
15 just saying shyshy you are saying use the computer but at
16 the end of the road something physical in the world
17 changes and everybody would say now thats shyshy that
18 will falls within I mean probably I mean my
19 hesitation shows Im looking for the right words
20 MR PERRY Justice Breyer your point is
21 the reason that it is equally fallacious to suggest on
22 the one hand as Alice and IBM does that simply
23 reciting a computer is a magic key that gets you through
24 101 and you never have to any other inquiry and what
25 some of folks the amici on the other side say which
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1 is that computers or software are never eligible Both
2 of those things have to be wrong because what the Court
3 said in Bilski was future innovation is too uncertain
4 We are not going to do that as a Court And the Court
5 laid out an approach using abstract ideas in Bilski and
6 inventive contribution in Mayo that is flexible enough
7 to take into account that innovation and to deal with
8 particular claims in context which is why at the end
9 of the day we have to come back to these patents and
10 decide which shyshy
11 JUSTICE KAGAN Mr Perry before we get
12 back to these matters you said to Justice Scalia if a
13 patent sufficiently describes how a computer will
14 implement an idea then its patentable So how
15 sufficiently does one have to describe it What do we
16 want a judge to do at this threshold level in terms of
17 trying to figure out whether the description is
18 sufficient to get you past it
19 MR PERRY If I can answer in two steps
20 Justice Kagan First in the negative What the
21 applicant or patentee must do shyshy must not do is simply
22 describe the desired result That would take us back to
23 State Street That would simply say I claim a magic
24 box that buys high and sells low or vice versa I
25 suppose I claim a magic box for investing Thats what
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1 these patents do
2 Then to put it in the affirmative and in the
3 language of Mayo the claim has to recite something
4 significantly more something significantly more than
5 the abstract idea itself That would be a contextual
6 analysis based on the claims and specifications and file
7 history and we know that some devices some methods
8 some programming will pass that
9 It is not going to be a brightshyline rule and
10 thats one of the tugshyofshywar issues that this Court and
11 the Federal Circuit have been having in these cases
12 The Federal Circuit wants brightshyline rules All
13 computers are in or all computers are out
14 This Court has been more contextual This
15 Court has been more nuanced This Court has looked at
16 things in a more robust way
17 JUSTICE KAGAN Youre not suggesting that
18 specific code is necessary
19 MR PERRY No Your Honor I think the shyshy
20 actual description of the programming is a 112 problem
21 I agree with that A 112 issue That is the realm of
22 the written description requirement What is a 101
23 problem is it is on the applicant to do more than simply
24 describe the results simply say A magic box that does
25 intermediate settlement And we can tie that back to
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1 this particular prosecution the 510 patent which is
2 the method patent
3 The examiner rejected it Under Section
4 101 the examiner said this is an abstract idea You
5 cant have this patent And the only change that this
6 applicant made was to add in the adjusting step
7 electronic adjustment It put in one word
8 electronic adjustment And under State Street which
9 is what this patent is prosecuted under that was
10 enough because the result of adjusting run through a
11 computer is enough
12 Under current law that cant be enough
13 That just cant get a patent over the line because this
14 Court said in Mayo and I got to quote this language
15 Simply implementing a fundamental principle on a
16 physical machine namely a computer is not a patentable
17 application of that principle Thats all that Alice
18 has done
19 These are preshyBilski patents They never
20 should have been issued General Verrilli will stand up
21 and address that point And certainly under current
22 law shyshy one point on the AIA Congress did not send all
23 this to the administrative process Congress created
24 two avenues the courts and the PTO to use the
25 standards Essentially it ratified Bilski and Mayo and
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1 said we agree with what you all are doing at the
2 Supreme Court and the existing standards are good enough
3 for us This is a judicial problem And that is a good
4 reason The abstract shyshy
5 JUSTICE GINSBURG The Federal Circuit in
6 this case split in many ways and it had our decisions
7 to deal with You said given Bilski and Mayo this is
8 an easy case What is the instruction that escaped a
9 good number of judges on the Federal Circuit How would
10 you state the rule
11 MR PERRY Your Honor I think theres a
12 significant element to the Federal Circuit that
13 disagrees with Mayo and has been resistant in applying
14 it Chief Judge shyshy former Chief Judge Michelle filed a
15 brief in this Court essentially saying Mayo is a
16 lifeshysciences case You should limit it to that because
17 if you apply it to everything else then these patents
18 are no good
19 Mayo we submit is a technologyshyneutral
20 industryshyneutral exceptionshyneutral framework that can
21 be used to answer all of these questions This is not
22 the death of software patents The software industry is
23 all before this Court saying this is fine with us
24 Every company in the United States practically except
25 for IBM is saying go ahead This will not affect
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1 software patents
2 Justice Ginsburg this Courts precedents
3 are clear They are unanimous They just need to be
4 applied To suggest that there is confusion that needs
5 to be addressed by retreating beating a retreat from
6 recent unanimous decisions would simply reward
7 intransigence difficulty refusal to adhere to what are
8 clear precedents because shyshy
9 JUSTICE KAGAN Should we be concerned
10 Mr Perry that there are old patents that in fact could
11 meet the test that you set forth but wont because they
12 were written in a different time and so used much more
13 general language
14 MR PERRY Your Honor the applicant or the
15 patent holder would have the opportunity to institute a
16 reexamination proceeding or some sort of administration
17 process to address that issue
18 And second it should be noted this is a
19 very small problem There are 2 million outstanding
20 patents in the United States In the last four fiscal
21 years there were 22000 infringement litigations
22 instituted but since Bilski there have only been 57
23 district court decisions on Section 101 issues There
24 have only been 12 Federal Circuit decisions total on
25 computer implementation
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1 We are talking about a group of patents
2 Justice Kagan thats way out at the tail end of
3 distribution Most patents never have a 101 challenge
4 This is not an issue with cotton gins and other things
5 This is a problem for the most marginal
6 most dubious most skeptical patents the ones that this
7 Court in Bilski shyshy and remember what Bilskis holding
8 is The majority said they are processes but it did
9 not say they are eligible
10 Thank you Mr Chief Justice
11 CHIEF JUSTICE ROBERTS Thank you counsel
12 General Verrilli
13 ORAL ARGUMENT OF DONALD B VERRILLI JR
14 ON BEHALF OF THE UNITED STATES AS AMICUS
15 CURIAE SUPPORTING RESPONDENTS
16 GENERAL VERRILLI Mr Chief Justice and
17 may it please the Court
18 An abstract idea does not become
19 patentshyeligible merely by tacking on an instruction to
20 use a computer to carry it out A computer makes a
21 difference under Section 101 when it imposes a
22 meaningful limit on the patent claim That occurs when
23 the claim is directed at improvement in computing
24 technology or an innovation that uses computing
25 technology to improve other technological functions
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1 Thats the test that we believe is most faithful to this
2 Courts precedents in Bilski and Mayo It keeps patents
3 within their traditional and appropriate domain and it
4 is capable of being administered consistently by Courts
5 and by PTO examiners
6 JUSTICE GINSBURG How do you answer the
7 argument that your view would extinguish businessshymethod
8 patents and make all software ineligible for patent
9 protection
10 GENERAL VERRILLI Yeah with shyshy let me
11 address software patents first because that I think is
12 obviously a significant question And its just not
13 correct to say that our approach would make software
14 patenting ineligible Any software patent that improves
15 the functioning of the computer technology is eligible
16 Any software patent that improves shyshy that is used to
17 improve another technology is eligible For example
18 the patent in the shyshy in the Diehr case is one in
19 which shyshy
20 JUSTICE SOTOMAYOR Why do we need to reach
21 this in that shyshy reach software patents at all in this
22 case
23 GENERAL VERRILLI Well shyshy
24 JUSTICE SOTOMAYOR Whats the necessity for
25 us to announce a general rule with respect to software
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1 There is no software being patented in this case
2 GENERAL VERRILLI Well I shyshy
3 JUSTICE SOTOMAYOR Theres a systems
4 GENERAL VERRILLI Well I shyshy I think shyshy
5 well they shyshy they shyshy theres a process being and shyshy and
6 one can think of software patents as process patents
7 And I think thats why my friends on the other side are
8 saying the sky is falling because they shyshy they are
9 interpreting what were saying about that when a
10 computer makes shyshy when a computers involvement makes
11 something eligible under 101 its calling those into
12 question and it doesnt
13 JUSTICE SOTOMAYOR Do you think we have to
14 reach the patentability of software to answer this case
15 GENERAL VERRILLI Well I think you can shyshy
16 I think the answer to that question is no not
17 necessarily You can decide it by saying that shyshy that
18 Bilski answers the question whether this is an abstract
19 idea because this form of hedging is really no
20 different than the form of hedging as a conceptual
21 matter at issue in Bilski And then Mayo answers the
22 question of whether the use of a computer in this case
23 adds enough to the abstract idea beyond conventional
24 steps because here all we have after all is just
25 conventional use of computing technology no computer
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1 innovation such that you dont qualify under 101 You
2 could take that approach
3 But it is important to the United States
4 that we shyshy and to our patent examiners that we get some
5 clarity if we can I think the clarity could come from
6 the text that I propose which I want to reiterate shyshy
7 JUSTICE SOTOMAYOR Well shyshy
8 JUSTICE BREYER Could shyshy could shyshy could you
9 go on with that because you were just getting to the
10 point where I think you say a computer improvement that
11 in fact leads to an improvement in harvesting cotton is
12 an improvement through a computer of technology so it
13 qualifies
14 But then I think you were going to say or I
15 got this also from the brief a computer improvement
16 that leads to an improvement in the methods of selling
17 bonds over the telephone is not an improvement in
18 technology reached by the computer Am I right about
19 the distinction youre making
20 GENERAL VERRILLI I dont think theres a
21 yes or no answer to that question
22 JUSTICE BREYER What is your view Yeah
23 what is shyshy how do we deal with just that problem
24 GENERAL VERRILLI If there is a genuine
25 innovation in the functioning of the computer shyshy
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1 JUSTICE BREYER Yes
2 GENERAL VERRILLI shyshy such that business
3 processes shyshy
4 JUSTICE BREYER Weve got that Yes yes
5 We got the computer But then it doesnt improve the
6 computer but rather it improves through the computer
7 the harvesting of cotton
8 Now youve got it in what you said was your
9 second category which is an improvement through the
10 computer of a technology And I thought in your brief
11 you were distinguishing an improvement through the
12 computer of a human activity that is not a technology
13 and in particular to pick an example of that
14 something in finance or something in business
15 Now am I right about the distinction youre
16 making
17 GENERAL VERRILLI Yeah that shyshy
18 JUSTICE BREYER If Im not right what is
19 the distinction
20 GENERAL VERRILLI That is generally the
21 line were drawing Frankly shyshy
22 JUSTICE BREYER And how is that justified
23 GENERAL VERRILLI I do want shyshy
24 JUSTICE BREYER That shyshy that is Judge Dyk
25 in shyshy in Bilski in the Federal circuit 4 people sort of
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1 picked it up maybe 5 didnt pick it up Would you say
2 a few words about it
3 GENERAL VERRILLI Sure About shyshy let me go
4 to Bilski there in that I do think while shyshy while
5 certainly the Court held that the term process got a
6 natural construction which could include business
7 methods it seems to me that thats not all the Court
8 said in Bilski The Court also said that it was
9 historically and traditionally quite rare that business
10 methods were patent eligible
11 It also said that shyshy that the shyshy that courts
12 and the PTO examiners should use the abstract ideas
13 exception to 101 to police the appropriate boundary
14 It also said that the
15 machineshyorshytransformation test that the United States
16 advocated remained a useful tool And of course that
17 directs to you seeing whether there is a technology
18 application
19 And of course the holding in Bilski was
20 that the shyshy the method for hedging risk was ineligible
21 because it was an abstract idea and I cant imagine
22 that if in Bilski the shyshy the claim had been exactly the
23 same but had added use a computer to carry out some of
24 these standard random analysis functions that are
25 claimed by the patent that you would have found it to
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1 be patent eligible
2 And I shyshy I would submit for the Court that
3 the key point here I think is that now given where
4 the Court shyshy what the Court has held in Bilski given
5 what its held in Mayo the abstract ideas exception is
6 really the only tool left to deal with what I shyshy what I
7 think I fairly read Bilski as saying is a significant
8 problem the proliferation of patents of business
9 methods
10 JUSTICE KENNEDY Is there an example that
11 you can give us of a shyshy what we can call a business
12 process that is patentable a process that doesnt
13 involve improving the workings of a computer
14 GENERAL VERRILLI I shyshy I think its going
15 to be difficult for me to do that I think for
16 example if you had a business method a process for
17 additional security pointshyofshysale credit card
18 transactions using particular encryption technology
19 that might well be patent eligible Its a technology
20 that it makes conduct of business more efficient or
21 effective
22 But there is a technological link here and
23 we do think thats critical to our shyshy to our point of
24 view with respect to the case And I shyshy and I do think
25 remember that when we say something is not patent
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1 eligible were not saying they cant do it Were
2 saying they cant monopolize it
3 And the concern in a situation like this one
4 is that if this is patent eligible its hard to see
5 why for example the first person who came up with a
6 frequent flier program wouldnt have been able to claim
7 a patent there because after all thats a business
8 method for improving customer loyalty implemented on a
9 computer
10 CHIEF JUSTICE ROBERTS General I shyshy you
11 mentioned a while ago the need for greater clarity and
12 certainty in this area And Im just wondering in your
13 brief youve got a nonshyexhaustive of factors to
14 consider and there are 6 different ones And Im just
15 doubtful that thats going to bring about greater
16 clarity and certainty
17 GENERAL VERRILLI I take shyshy I take the
18 point Mr Chief Justice but I think the key is that
19 they are all directed to answering the question of
20 whether the innovation that is claimed and is an
21 innovation in either A the improvement of a computers
22 functioning or B the use of computer technology to
23 improve the functioning of another technological
24 process and a case like Diehr would be in the latter
25 category
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1 And so I do think that thats the key
2 benchmark Thats the baseline Thats the test that
3 we do think can be applied clearly and consistently by
4 the courts or the PTO And it avoids the risk of things
5 like frequent flier programs or the Oakland As money
6 ball methods for evaluating the contributions in
7 individual baseball players make or any one of a host of
8 other things that our intuitions tell us just dont
9 belong in the patent system
10 Thats the shyshy drawing that line keeps them
11 out not drawing that line lets them in And with all
12 due respect I dont think that the novelty and
13 nonobviousness filters that 102 and 103 really deal with
14 that problem effectively because when you get to
15 nonobviousness in 103 for example youll be asking a
16 different question
17 If you take the frequent flier program you
18 would say well is this innovation in building consumer
19 loyalty something that would have been obvious to
20 somebody who runs an airline Its totally divorced
21 from the question of technology at that point and
22 therefore I dont think youre going to get the screen
23 that you need to get in order for the patent system to
24 be confined to its traditional and appropriate scope
25 If there are no further questions thank
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1 you
2 JUSTICE GINSBURG I have a question about
3 how do you identify an abstract concept The shyshy a
4 natural phenomenon a mathematical formula those are
5 easy to identify but there has been some confusion on
6 what qualifies as an abstract concept
7 GENERAL VERRILLI We would define
8 abstract shyshy an abstract concept as a claim that is not
9 directed to a concrete innovation in technology
10 science or the industrial arts So its the shyshy its
11 abstract in the sense that it is not a concrete
12 innovation in the traditional realm of patent law
13 Thank you
14 CHIEF JUSTICE ROBERTS Thank you General
15 Mr Phillips you have four minutes
16 remaining
17 REBUTTAL ARGUMENT OF CARTER G PHILLIPS
18 ON BEHALF OF THE PETITIONERS
19 MR PHILLIPS Thank you Mr Chief Justice
20 Id just like to make a few points
21 First of all with respect to the question
22 you asked which is looking at 159 et cetera all I can
23 tell you is that if you look at claim 33 it talks about
24 matched orders the matched orders that are described in
25 286 and 287 and then makes specific reference to 159
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1 and that flow chart thats there And its all designed
2 as a package Its only one element of the shyshy of the
3 invention but it is a central element and its an easy
4 one to understand And it goes well beyond simply the
5 notion of hedge shyshy hedge against settlement risk and do
6 it by a computer
7 JUSTICE SOTOMAYOR Your adversary says that
8 his shyshy the appendix to his brief are the only patents at
9 issue that the flow charts are not at issue in this
10 case
11 MR PHILLIPS Theres no basis for that
12 statement Your Honor There shyshy remember this went off
13 on a very truncated litigation process So theres shyshy
14 you know we shyshy we got cut off at the beginning of it
15 Theres been no construction of the shyshy of the claims
16 and shyshy and obviously these are specifications that go
17 to how you interpret the claim
18 JUSTICE SOTOMAYOR If we were to say that
19 there are no business patents shyshy
20 MR PHILLIPS Yes
21 JUSTICE SOTOMAYOR shyshy would your patent
22 survive at all
23 MR PHILLIPS No I dont shyshy I dont
24 believe so I think theres no question And you
25 know General Verrilli could not have been any plainer
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1 in his statement of how he wants to interpret the
2 abstract idea concept
3 JUSTICE SOTOMAYOR Yes he wants to say no
4 business patents
5 MR PHILLIPS No business shyshy just another
6 way of saying no business methods And you know the
7 Court rejected that And it seems to me extraordinary
8 to say Congress didnt reject no business methods in
9 101 but were going to do shyshy were going to manipulate
10 the judicial exception to accomplish precisely that same
11 thing It seems to me thats wholly inappropriate
12 Justice Ginsburg you asked my shyshy my friend
13 here you know whats his test He didnt answer that
14 question youll notice because he doesnt have an
15 answer His basic argument is whatever you do just
16 kill this patent
17 And if I were in his shoes I suppose Id
18 take that same position I think whats absolutely
19 clear is that the test ought to be one that is
20 structured as a very coarse filter not the kind of
21 filter that hes pushing for where it changes over time
22 I mean I thought his shyshy I thought his response to one
23 of the questions about eshymail and word processing that
24 Justice Sotomayor asked is over time it would change
25 Well thats exactly what 102 and 103 are for That is
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1 not the purpose of shyshy of Section 101
2 And then he uses the example of encryption
3 I guarantee you if we were arguing about encryption in
4 this case he would say to me that thats an abstract
5 principle because encryption is a concept thats been
6 around since time immemorial George Washington used
7 it Everybody has used encryption
8 And a question again thats not the
9 solution to these problems The question is how did we
10 go about doing it And we go beyond the basics of
11 simply saying use a computer and thats what we ask
12 this Court to focus on and to evaluate
13 As to the frequent flier program its
14 pretty clear to me that even though it was a novel idea
15 in some sense the concept itself would have been viewed
16 in shyshy in the KSR fashion as quite obvious as a means of
17 improving customer loyalty
18 There are solutions here Giving us 101
19 pass doesnt create a monopoly It just gets us to the
20 102 and 103 inquiries that are at the heart of what the
21 patent laws shyshy and 112 that are at the heart of what the
22 patent laws ought to be dealing with
23 If there are no further questions Your
24 Honor thank you
25 CHIEF JUSTICE ROBERTS Thank you counsel
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1 The case is submitted
2 (Whereupon at 1105 am the case in the
3 aboveshyentitled matter was submitted)
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2 2 3424 4319 20 371018 2014 111 22000 4321 25 3118 26 27 2712
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6 6 5114 65 3019
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1 P R O C E E D I N G S
2 (1004 am)
3 CHIEF JUSTICE ROBERTS Well hear argument
4 this morning in Case 13shy298 Alice Corporation versus
5 CLS Bank International
6 Mr Phillips
7 ORAL ARGUMENT OF CARTER G PHILLIPS
8 ON BEHALF OF THE PETITIONERS
9 MR PHILLIPS Thank you Mr Chief Justice
10 and may it please the Court
11 It is common ground between the parties in
12 this case that Section 101 by its terms and with the
13 sweeping interpretation this Court adopted in Bilski
14 applies directly to the patents here These are system
15 and process patents that speak directly to Section 101
16 The only issue then is whether the
17 judicially recognized exception that this Court adopted
18 many many years ago applies under these circumstances
19 JUSTICE KENNEDY And just repeat it is
20 common ground between the parties that shyshy
21 MR PHILLIPS That shyshy that our shyshy our
22 patents speak directly to the language of Section 101
23 that is they are a process and they are machines and
24 they are shyshy and they are improvements to the process and
25 the machines They dont shyshy they dont dispute that by
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1 its terms 101 applies The only argument between the
2 parties is the abstract idea exception that exists and
3 whether that bars us from otherwise satisfying
4 Section 101
5 JUSTICE GINSBURG Mr Phillips on the
6 abstract idea you know that the Bilski case held that
7 hedging qualified as an abstract idea So how is
8 intermediate settlement a less abstract than hedging
9 MR PHILLIPS If our shyshy if our patent
10 merely claimed intermediated settlements although I
11 have to say I dont really know exactly what that means
12 because I dont think thats the same kind of
13 economics shyshy basic economics concept that a hedge risk
14 treatment is But if it claimed that we wouldnt shyshy we
15 wouldnt have a distinction from Bilski
16 What we claim is a very specific way of
17 dealing with a problem that came into being in the early
18 1970s of how to try to eliminate the risk of
19 nonshysettlement in these very massive multiparty problems
20 in which you need to deal with difficulties that exist
21 at different time zones simultaneously and to do it with
22 a computer so that you not only take them on
23 chronologically deal with them sequentially based on
24 the kind software analysis that the patent specifically
25 describes by function
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1 And it goes even further than that and does
2 something that no escrow agent and shyshy and no
3 intermediated settlement that I know of shyshy settler that
4 I know of It actually blocks specific transactions
5 that in the shadow account would violate the terms of
6 the settlement that would ultimately be implemented
7 JUSTICE KENNEDY Well let me put it this
8 way If you describe that to a secondshyyear college
9 class in engineering and said heres shyshy heres my idea
10 now you go home and you program over this weekend my
11 guess is shyshy my guess is that that would be fairly easy
12 to program
13 MR PHILLIPS I dont disagree with it
14 Justice shyshy
15 JUSTICE KENNEDY So the fact that the
16 computer is involved it shyshy it seems to me is necessary
17 to make it work But the shyshy but the innovative aspect
18 is certainly not in the creation of the program to make
19 that work All youre talking about is shyshy if I can use
20 the word shyshy an idea
21 MR PHILLIPS I prefer not to use that word
22 for obvious reasons
23 (Laughter)
24 MR PHILLIPS But shyshy but if you shyshy but if
25 you look at the Solicitor shyshy
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1 JUSTICE KENNEDY Or shyshy or a method or a
2 process
3 MR PHILLIPS Right But shyshy and shyshy and
4 obviously methods and processes are precisely what
5 Section 101 permits to be subject shyshy
6 JUSTICE BREYER Why is that less abstract
7 MR PHILLIPS Im sorry
8 JUSTICE BREYER Why is that less abstract
9 I mean imagine King Tut sitting in front of the pyramid
10 where all his gold is stored and he has the habit of
11 giving chits away Good for the gold which is given at
12 the end of the day And he hires a man with an abacus
13 and when the abacus keeping track sees that hes given
14 away more gold than he is in storage he says stop
15 You see
16 Or my mother who used to look at my
17 checkbook when she saw that in fact I had written
18 more checks than I had in the account she would grab
19 it Stop You see
20 So what is it here thats less abstract that
21 the computer says stop
22 MR PHILLIPS It is shyshy
23 JUSTICE BREYER How is that less abstract
24 than King Tut if we had the same thing with a grain
25 elevator if we had the same thing with a reservoir of
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1 water if we had the same thing with my checkbook You
2 see the point
3 MR PHILLIPS I do see the point Justice
4 Breyer and it seems to me that it goes to the question
5 of the methodology youre going to employ
6 JUSTICE BREYER Methodology is just that
7 you said stop
8 MR PHILLIPS Well we could shyshy
9 JUSTICE BREYER So what we have different
10 here is the computer stops rather than the abacus man
11 stopping or my mother stopping or the guy that the grain
12 elevator has that says stop So just saying what shyshy is
13 that it In other words if you say computer stop you
14 have an invention Useful add shyshy but if you say mother
15 stop you dont
16 MR PHILLIPS No Well I mean again it
17 seems to me that in some ways what shyshy what you described
18 there is a caricature of what this invention is
19 JUSTICE BREYER Of course its a
20 caricature Its a caricature designed to suggest that
21 there is an abstract idea here Its called solvency
22 MR PHILLIPS But shyshy
23 JUSTICE BREYER And what you do is you take
24 the idea of solvency and you say apply it And you say
25 apply it through the computer
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1 Is that enough to make it not just the
2 abstract idea And now were at the heart of why I used
3 my exaggerated examples shyshy
4 MR PHILLIPS Right
5 JUSTICE BREYER shyshy because you will tell me
6 why shyshy
7 MR PHILLIPS Right
8 JUSTICE BREYER shyshy this is enough
9 MR PHILLIPS Right Because Justice
10 Breyer the shyshy the shyshy the concept here is not simply to
11 say stop Stop is obviously part of the element of it
12 But its also designed to ensure that at the
13 end of the day this transaction in the midst of
14 literally a global set of shyshy of deals that are going on
15 simultaneously will be implemented at the appropriate
16 time in the appropriate way And whatever else that may
17 be it seems to me its difficult to say thats an
18 abstract idea as implemented
19 JUSTICE SOTOMAYOR Im sorry But shyshy but
20 what it appears to be it sounds like youre trying to
21 revive the patenting of a function You used the word
22 function earlier and thats all Im seeing in this
23 patent is the function of reconciling accounts the
24 function of making sure theyre paid on time But in
25 what particular way other than saying do it through a
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1 computer is this something new and not function
2 MR PHILLIPS Well it does it through shyshy
3 it creates the shadow accounts because of the concerns
4 for security You dont shyshy youre not going to allow
5 somebody to enter into a central banks own accounts
6 You create the shadow accounts You monitor through the
7 software that allows you to do that You evaluate each
8 of the transactions to ensure that the settlement will
9 be available You do it sequentially and you act on it
10 by the end of the day or whenever the transaction is to
11 take place and you implement that transaction
12 JUSTICE SCALIA Why isnt it shyshy why isnt
13 doing it through a computer not enough I mean was the
14 cotton gin not an invention because it just means youre
15 doing through a machine what people used to do by hand
16 Its not an invention Its the same old same old
17 MR PHILLIPS Justice Scalia shyshy
18 JUSTICE SCALIA Why shyshy why is a computer
19 any different in that respect
20 MR PHILLIPS At one level I agree with you
21 completely There is no difference between them
22 This Court has however said on more than a
23 few occasions albeit in dicta that coming up with an
24 idea and then say use a computer is not sufficient
25 And what Im trying to suggest to you is we dont fall
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1 within that dicta
2 Now if you dont accept the dicta and you
3 say use a computer is fine then I think were done
4 JUSTICE SCALIA Well Im not saying use a
5 computer is shyshy is much of a novelty I mean thats shyshy
6 that goes to whether its novel or not If you just say
7 use a computer you havent invented anything But if
8 you come up with a serious program that shyshy that does it
9 then you know that may be novel But thats a novelty
10 issue isnt it
11 MR PHILLIPS To be sure Justice Scalia
12 JUSTICE BREYER And this is exactly the
13 question I really would like to you to focus on for me
14 Why is it shyshy and Im not saying this from a point of
15 view but it seems to me pretty clear that if what you
16 did was take the idea of solvency shyshy remember King Tut
17 Thats what I use the exaggeration shyshy and what you say
18 is implemented by having the abacus man keep track and
19 say stop okay shyshy
20 MR PHILLIPS Right
21 JUSTICE BREYER Then we implement it by
22 having somebody with a pencil and a piece of paper and
23 this is all that they add you see Say Have a man
24 with a pencil and a piece of paper keeping track and
25 saying stop or we say implement it in the computer
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1 which will automatically keep track and say stop are
2 they all enough Are some of them enough Whats the
3 rule
4 And you realize I couldnt figure out much
5 in Prometheus to go beyond what I thought was an obvious
6 case leaving it up to you and your colleagues to figure
7 out how to go further Am I making enough shyshy making
8 clear enough whats bothering me And Id really like
9 to get your answer to this
10 MR PHILLIPS And shyshy and look theres
11 no shyshy Ill be the first one to shyshy to confess that trying
12 to use language to describe these things is not all that
13 easy But the way I think you can meaningfully look at
14 this is to say that this is not simply something that
15 was a fundamental truth this is not something that
16 simply says use a computer Its not simply something
17 that says maintain solvency It shyshy it operates in a
18 much more specific and concrete environment where youre
19 dealing with a problem thats been in existence since
20 the 1970s a solution in the 1990s that CLS itself
21 acknowledges needed a solution and came forward with
22 their own solution that looks a lot like ours
23 JUSTICE KENNEDY But my shyshy my initial
24 question and I think I can work this into King Tut
25 is shyshy
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1 (Laughter)
2 JUSTICE KENNEDY shyshy is shyshy is whether or not
3 you could have patented that system idea process
4 method without attaching a computer program
5 MR PHILLIPS You cannot absolutely cannot
6 do that with this system because it is so complex and
7 so many interrelated parts
8 JUSTICE KENNEDY Suppose I thought shyshy and
9 again its just a thought because I dont have the
10 expertise shyshy that any computer group of people sitting
11 around a coffee shop in Silicon Valley could do this
12 over a weekend Suppose I thought that
13 MR PHILLIPS You mean wrote the code
14 JUSTICE KENNEDY Yes right
15 MR PHILLIPS Well thats absolutely shyshy
16 Im certain thats true
17 JUSTICE KENNEDY Well then shyshy then shyshy
18 MR PHILLIPS But thats true of almost all
19 software
20 JUSTICE KENNEDY Then why is the computer
21 program necessary to make the patent valid
22 MR PHILLIPS Well its shyshy its necessary
23 to make the invention effective As the Solicitor
24 General said the computer is essential to the efficacy
25 of this invention because of the complicated financial
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1 arrangements that exist and that can only be resolved on
2 a shyshy on a realtime basis Your abacus is great if you
3 happen to be waiting for the pyramids to be finished or
4 waiting for the gold to move in and out but it doesnt
5 help with you an abacus if youre dealing with literally
6 thousands of transactions simultaneously going on in
7 different countries at different points in time
8 JUSTICE KENNEDY But thats just an idea
9 hey lets use a computer
10 MR PHILLIPS But its not just shyshy I mean
11 obviously part of it is use the computer Justice
12 Kennedy But more fundamentally it goes beyond that
13 See I shyshy
14 JUSTICE SOTOMAYOR Is your software
15 copyrighted
16 MR PHILLIPS No I dont believe so
17 JUSTICE GINSBURG There is no special
18 software that comes with this shyshy thats part of this
19 patent is it shyshy is there
20 MR PHILLIPS No Justice Ginsburg what
21 we did here is what the Patent and Trademark Office
22 encourages us to do and encourages all software patent
23 writers to do which is to identify the functions that
24 you want to be provided for with the software and leave
25 it then to the software writers who I gather are you
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1 know quite capable of converting these functions into
2 very specific code
3 JUSTICE KAGAN Mr Phillips could you shyshy
4 could you disaggregate your argument for me Because
5 you just said look this Court has said its not
6 sufficient if you have an idea and then you say use a
7 computer to implement it right So are you saying that
8 your shyshy that shyshy are you saying that youre doing more
9 than saying use a computer to implement it or are you
10 saying that its shyshy that the idea itself is more than an
11 idea
12 MR PHILLIPS Yes Im saying shyshy
13 JUSTICE KAGAN Which part of what shyshy
14 MR PHILLIPS Im saying both actually I
15 mean Im making both of those arguments I shyshy I
16 believe that if you analyze the claims and you dont
17 caricature them and you dont strip them out of the
18 limitations that are embedded in there this is not some
19 kind of an abstract concept This is not some kind shyshy
20 its not an abstract idea Its a vary shyshy
21 JUSTICE KAGAN So putting the computer
22 stuff aside completely shyshy
23 MR PHILLIPS Right
24 JUSTICE KAGAN shyshy youre saying that youve
25 invented something or you shyshy
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1 MR PHILIPS Yes
2 JUSTICE KAGAN There is something that
3 youve patented that has shyshy that is not just simple use
4 a third party to do a settlement
5 MR PHILLIPS Right
6 JUSTICE KAGAN And what is that putting
7 the computer aside
8 MR PHILLIPS It is shyshy well shyshy and again
9 its difficult to do that because you absolutely need
10 the computer in order to implement this But the key to
11 the invention is the notion of being able
12 simultaneously dealing with it on a chronological basis
13 to stop transactions that will otherwise interfere with
14 the ability to settle on time and under the appropriate
15 circumstances And the only way you can do that in a
16 realtime basis when youre dealing with a global economy
17 is to use a computer It is necessary to the efficacy
18 of this
19 So in that sense I cant shyshy I cant
20 disaggregate it the way in some sense youre suggesting
21 It seems to me its bound up with in shyshy its bounds up
22 with the whole notion of is this an abstract concept
23 JUSTICE BREYER Can you in fact shyshy now
24 this is shyshy look there are 42 briefs in this case I
25 actually read them and I found them very very helpful
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16
1 up to the point where I have to make a decision because
2 theyre serious I mean you know shyshy now the problem
3 that I came away with is the one that youre beginning
4 to discuss that if you simply say take an idea thats
5 abstract and implement it on a computer there are shyshy
6 youre going to get it much faster youre going to be
7 able to do many many things and if thats good enough
8 there is a risk that you will take business in the
9 United States or large segments and instead of having
10 competition on price service and better production
11 methods well have competition on who has the best
12 patent lawyer You see where Im going on that one
13 MR PHILLIPS Yeah of course
14 JUSTICE BREYER And if you go the other way
15 and say never then what you do is you rule out real
16 inventions with computers
17 MR PHILLIPS Right
18 JUSTICE BREYER And so in those 42 briefs
19 there are a number of suggestions as to how to go
20 between Scylla and Charybdis Now I would like to
21 know shyshy I dont know if you can step back from your
22 representational model Thats a problem Youre all
23 we have now And shyshy and from my point of view I need
24 to know what in your opinion is the best way of sailing
25 between these two serious arms
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1 MR PHILLIPS Well Justice Breyer I guess
2 I would suggest to you that you might want to deal with
3 the problem you know as opposed to the problems you
4 dont know at this stage I mean we have had business
5 method patents and software patents in existence for
6 well over a decade and theyre obviously quite
7 significant in number And shyshy and we know what the
8 system is we have And Congress looked at that system
9 right and didnt say no to business methods patents
10 didnt say no to software patents instead said the
11 solution to this problem is to get it out of the
12 judicial process and create an administrative process
13 but leave the substantive standards intact
14 So my suggestion to you would be follow that
15 same advice a liberal interpretation of 101 and not a
16 caricature of the claims analyze the claims as written
17 and therefore say that the solution is 102 and 103 and
18 use the administrative process If you shyshy
19 JUSTICE GINSBURG Mr Phillips let me just
20 stop you there because four Justices of this Court did
21 not read that legislative history the way you do And
22 it was shyshy was in Bilski
23 MR PHILLIPS But this is postshyBilski
24 JUSTICE GINSBURG Justice Stevens went
25 carefully through that and he said Congress was
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1 reacting to a decision It had shyshy it was not addressing
2 101 So there are at least four Justices who say shyshy who
3 didnt buy that argument
4 MR PHILLIPS Well I mean it still seems
5 to me that the shyshy the natural inference is Congress did
6 not change 101 Congress created an entire
7 administrative system to deal with 101 102 and 103
8 And shyshy and I would hope shyshy
9 JUSTICE SCALIA And four is not five
10 anyway right
11 MR PHILLIPS Thats true
12 JUSTICE SCALIA Four is not five
13 MR PHILLIPS And youve exhausted my math
14 skills Your Honor
15 JUSTICE SCALIA By the way we shyshy we have
16 said that you cant take an abstract idea and then say
17 use a computer to implement it But we havent said
18 that you cant take an abstract idea and then say here
19 is how you use a computer to implement it shyshy
20 MR PHILLIPS Exactly
21 JUSTICE SCALIA shyshy which is basically what
22 youre doing
23 MR PHILLIPS And thats the argument were
24 doing and shyshy
25 JUSTICE SCALIA And thats a little
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1 different
2 MR PHILLIPS shyshy thats the line were
3 asking the Court to draw here
4 JUSTICE KAGAN Well how are you saying the
5 how Because I thought that your computers shyshy that your
6 patents really did just say do this on a computer as
7 opposed to saying anything substantive about how to do
8 it on a computer
9 MR PHILLIPS I would urge the Court to
10 look at Joint Appendix 159 285shy286 where it goes
11 through the flow charts This is shyshy and this is just a
12 specific example of the method by which you stop a
13 transaction and it goes through a varied series of
14 detailed steps and what the computer has to do in order
15 to do that It doesnt actually obviously put in the
16 code but thats what the PTO says dont do Dont put
17 in the code because nobody understands code so shyshy but
18 put in the functions and we know shyshy and we know that
19 someone skilled in the art will be able to put in the
20 code And if they arent if they cant do that then
21 its not enabled and thats a 112 problem
22 To go back Justice Breyer to your
23 question So on the one hand youve got a problem that
24 it seems to me Congress to some extent has said is okay
25 and weve got a solution and that solutions playing
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1 through On the other hand if this Court were to say
2 much more categorically either that theres no such
3 thing as business method patents or adopt the Solicitor
4 Generals interpretation which is to say that there
5 cannot be software unless the software somehow actually
6 improves the computer as opposed to software improving
7 every other device or any other mechanism that might be
8 out there
9 What we know is that this would inherently
10 declare and in one fell swoop hundreds of thousands of
11 patents invalid and the consequences of that it seems
12 to me are utterly unknowable And before the Court goes
13 down that path I would think it would think long and
14 hard about whether isnt that a judgment that Congress
15 ought to make And It seems to me in that sense youre
16 essentially where the Court was in Chakrabarty where
17 everybody was saying youve got to act in one way or the
18 other or the world comes to an end and the courts have
19 said well apply 101 directly
20 JUSTICE KENNEDY If we say that theres no
21 software patentability and agree with the Attorney
22 General do you lose in this case
23 MR PHILLIPS Well it would be very hard
24 for me to see how that shyshy how shyshy how I can get around
25 that particular problem because the computer is the
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1 essence of it so shyshy and a portion of it is clearly the
2 software So I think if you say there is no such thing
3 as software patentability I do lose in this case yes
4 Your Honor As do a whole lot of other people
5 JUSTICE KENNEDY Is there any common ground
6 between you and the government shyshy maybe a better
7 question to ask the government shyshy a common ground
8 between you and the government on something in the
9 software area thats patentable other than making the
10 computer itself work You understand the government to
11 say no software patents
12 MR PHILLIPS Thats the way I interpret
13 the governments shyshy the governments brief
14 JUSTICE BREYER It was like shyshy theres a
15 Bloomberg brief out here that was on this that said
16 no you can shyshy you can patent computer software when
17 its an improvement in the computer when its an
18 improvement in software when its an improvement in a
19 technology that is developed out of computers like
20 robotics when it is an improvement in a machine or
21 technology but you cannot improve it where it is simply
22 an improvement in an activity that is engaged in
23 primarily through mental processes But what they mean
24 by that is business finance and similar arts
25 Thats shyshy I mean thats shyshy it wasnt quite what shyshy I
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1 know Thats what I want to know what you dont agree
2 with about that because its a little more refined than
3 you suggested
4 MR PHILLIPS I read the Solicitor
5 Generals brief as broader than the Bloomberg brief
6 in shyshy in terms of the approach And IBMs argument is
7 if you knock out software patents you eliminate web
8 browsing word processing cellphones eshymail Those
9 are all activities that I dont think fall within the
10 meaning of the shyshy the meaning of the governments theory
11 of the case
12 JUSTICE BREYER But Im asking you shyshy Im
13 asking you what about this one that I just mentioned
14 You see I went through those five steps shyshy
15 MR PHILLIPS Right
16 JUSTICE BREYER shyshy and four of them you
17 could patent and the fifth one you cant
18 MR PHILLIPS Right But I shyshy and I guess
19 my answer to that is thats nowhere in the statute and
20 it doesnt seem to me to reflect an abstract idea Its
21 a shyshy its a line you draw that takes out business method
22 patents If the Court wants to eliminate business
23 method patents fine But you just said no to that in
24 Bilski two three terms ago
25 Now to be sure give the Solicitor General
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1 credit he comes here and says to you We didnt like
2 the result in Bilski we want you to say dont use
3 process in order to get there which is a statutory
4 interpretation come up with an extraordinarily
5 complicated way of looking at the exception and use that
6 to get to the exact same result
7 JUSTICE SOTOMAYOR Well youre doing a
8 very good job of proving shyshy
9 JUSTICE GINSBURG In Bilski Justice Breyer
10 did try to say that there wasnt that shyshy a whole lot of
11 distance between the four who thought business methods
12 were not patentable But he shyshy he also said something
13 else in shyshy in the other case Mayo Justice Scalia
14 asked you the question about doesnt that go to novelty
15 but didnt Justice Breyer say in Mayo that novelty can
16 be relevant to patent shyshy to patent eligibility He said
17 theres shyshy theres an overlap
18 MR PHILLIPS Well he said theres an
19 overlap Here in this context I think basically the
20 Respondents theory would mean that they are completely
21 coterminous And I dont think thats what the Court
22 meant And also we know from Diehr that theres got to
23 be at least some significant limitations on the extent
24 to which novelty has to be built into 101 That is the
25 province of 102 and 103 And as I said Congress
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1 modified the system of adjudication to create an
2 administrative mechanism that allows you to get to 102
3 and 103 And at least in context its important to
4 realize there have been 11 cases since that was created
5 9 of the 11 have been knocked down on 102 or 103 grounds
6 and not on 101 grounds And it seems to me thats the
7 answer to this problem is leave 101 as the coarse
8 filter If on its face it states these kinds of broad
9 abstract principles fundamental truths and even if it
10 says use a computer those should be struck down
11 JUSTICE SOTOMAYOR Which of the shyshy which of
12 the opinions below captures your position most
13 accurately
14 MR PHILLIPS I would guess it would be
15 Judge Moores opinion below that would capture ours most
16 correctly
17 JUSTICE SOTOMAYOR And if we were to think
18 your method claim is ineligible do you agree that your
19 systems and shyshy your medium and system claims fail as
20 well Do they rise and fall together
21 MR PHILLIPS No No I dont believe they
22 do rise and fall together I mean I think you could shyshy
23 if you wanted to interpret our medium claim shyshy I mean
24 our shyshy our method claims in a shyshy in particularly
25 abstract way I think you could still say that the
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1 system claims which clearly are shyshy are how to create a
2 computer system and how to implement it using that
3 method would be a much more concrete version of that in
4 a way that would take it out of 101 That said I
5 obviously believe that all of our claims satisfy 101
6 and should go on to the next stage
7 JUSTICE KAGAN Can I give you a
8 hypothetical Mr Phillips and you tell me how its
9 different or the same Lets say you know 30 years
10 somebody took a look around the world and said a lot of
11 people seem to order products by mail They get the
12 catalogues in the mail and then they send back their
13 return forms And lets say that one of the founders of
14 the Internet said wouldnt this be an amazing system
15 we could actually do this by computer and they had
16 patented that Is that the same
17 MR PHILLIPS I dont know if its the
18 same but I would shyshy I would argue that it could very
19 well be a patentable subject matter because shyshy but it
20 depends on how the claims play out
21 JUSTICE KAGAN No but exactly I mean
22 the claim would have said something along the lines of
23 you know theres this process by which people order
24 products and we want to do it over the Internet we want
25 to do it electronically and we will use a computer to
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1 do that to essentially take the process of mail order
2 catalogues and make it electronic
3 MR PHILLIPS I could certainly shyshy I think
4 I could write a claim shyshy a set of claims that I believe
5 would satisfy 101 And shyshy and to the extent that
6 youd shyshy that youd think those are no different than
7 the ones I have here then my argument is simply I think
8 I satisfy 101 with the claims we have before us Your
9 Honor
10 If there are no further questions then Id
11 like to reserve the rest of my time
12 CHIEF JUSTICE ROBERTS Thank you
13 Mr Phillips
14 Mr Perry
15 ORAL ARGUMENT OF MARK A PERRY
16 ON BEHALF OF THE RESPONDENTS
17 MR PERRY Mr Chief Justice and may it
18 please the Court
19 That path between Scylla and Charybdis was
20 charted in Bilski and Mayo Bilski holds that a
21 fundamental economic principle is an abstract idea and
22 Mayo holds that running such a principle on a computer
23 is quote not a patentable application of that
24 principle Those two propositions are sufficient to
25 dispose of this case
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1 If Bilski and Mayo stand Alices patents
2 fail Therefore Mr Phillips and his friends are
3 asking this Court to change the standard even though
4 this Court has had three unanimous decisions in the last
5 four terms establishing what the Court called a myriad
6 a wellshyestablished standard
7 On the abstract idea Justice Ginsburg you
8 asked Mr Phillips whats the difference between hedging
9 and this claim There is no difference This is
10 hedging It is hedging against credit default rather
11 than price fluctuation but it is simply hedging
12 And Mr Phillips stood up for 26 minutes and
13 never once referred to the patent Lets look at what
14 the inventor the soshycalled inventor said about this
15 invention This is at JA 293 to 94 in the
16 specification
17 This claim has simply two steps Its very
18 simple First debiting and crediting on a realtime
19 basis the relevant shadow records and second by
20 periodically affecting corresponding payment
21 instructions Those are direct quotes Debit credit
22 and pay Your Honor you cant get much more simple
23 than that
24 Mr Phillips suggests well we have
25 multilateral transactions global things chronological
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1 time zones and so forth None of those are claimed
2 Your Honor Those are all recited in specification
3 The claims read on a single transaction involving two
4 parties
5 JUSTICE BREYER Can I ask you at some
6 point not necessarily this second to say in my shyshy this
7 is just shyshy you know you have an opinion for a court
8 Different judges can have different interpretations
9 All youre getting is mine okay
10 But I think its pretty easy to say that
11 Archimedes cant just go to a boat builder and say
12 apply my idea All right Everybody agrees with that
13 But now we try to take that word apply and give
14 content to it
15 And what I suspect in my opinion Mayo did
16 and Bilski and the other cases is sketch an outer shell
17 of the content hoping that the experts you and the
18 other lawyers and the shyshy the circuit court could fill
19 in a little better than we had done the content of that
20 shell
21 So so far youre saying well this is
22 close enough to Archimedes saying apply it that we
23 neednt go further
24 Now will you at some point in the next few
25 minutes give me your impression of if it were necessary
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1 to go further what would the right words or example be
2 MR PERRY Your Honor as shyshy Justice
3 Breyer as to abstract ideas the PTO has filled in that
4 shell by listing economic concepts legal concepts
5 financial concepts teaching concepts dating and
6 interpersonal relationships and generally how business
7 should be conducted as examples of those things that are
8 likely abstract which of course all follow directly
9 from Bilski and the discussion this Court had in Bilski
10 And this patent shyshy these patents fall squarely within
11 that
12 Congress in the AIA confirmed that
13 reading Congress in the CBM method said business
14 methods that are subject to special scrutiny shyshy that is
15 dubious patents shyshy include methods and corresponding
16 apparatus which is what we have here that pertain to
17 data processing in the financial services industry and
18 do not offer a technological solution That describes
19 Alices patents to a letter Your Honor So that we
20 have shyshy
21 JUSTICE SOTOMAYOR What do you think is a
22 technological solution
23 MR PERRY Your Honor shyshy
24 JUSTICE SOTOMAYOR How could they if at
25 all written their patents to shyshy to make shyshy to make
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1 their software eligible What would shyshy what do they
2 need shyshy would have needed to have added
3 MR PERRY Justice Sotomayor they have no
4 software first Theyve never written software
5 Theyve never programmed a computer So thats a
6 nonexistent set
7 Second there are many technological
8 solutions to trading and settlement problems For
9 example data compression These shyshy these trading
10 platforms involve the movement of very large quantities
11 of data around the world The physical pipes that is
12 the fiber optic cables and data lines are limited
13 There are very sophisticated algorithms for both
14 security and speed to move data through the transmission
15 lines in novel and useful ways that could well be
16 patented
17 Nothing like that is claimed here To come
18 back to where I started if you look for example at
19 Claim 65 in the 510 patent as Mr Phillips reads it
20 it literally reads on a twoshyparty escrow to sell a
21 house so long as the escrow agent is typing this stuff
22 into the HUDshy1 using a computer That has nothing to do
23 with multilevel shyshy
24 CHIEF JUSTICE ROBERTS Well thats a
25 little more complicated He referred us to Joint
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1 Appendix Page 159 which is not a change in how
2 computers work But it is shyshy constitutes the
3 instructions about how to use the computer and where it
4 needs to be affected And just looking at it it looks
5 pretty complicated There are a lot of arrows and
6 they shyshy you know different things that go shyshy
7 (Laughter)
8 CHIEF JUSTICE ROBERTS Well but I mean
9 you know it shyshy in different directions And I
10 understand him to say that in each of those places
11 thats where the computer is needed
12 MR PERRY Mr Chief Justice Figure 16 has
13 nothing to do with the invention asserted against my
14 client in this case There are two inventions in this
15 patent One invention involving multilateral contract
16 formation is not asserted against my client And all of
17 these drawings pertain to that The only drawings that
18 pertain to the asserted claims are 25 and 33 to 37 And
19 that was established below and its established in this
20 Court And Mr Phillips has never disputed it
21 So the claim hes pointed the Court shyshy the
22 figure hes pointed the Court to has nothing to do with
23 the invention Its for a different invention that is
24 not at issue in this case
25 Remember there are hundreds and hundreds of
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1 pages of these patents They all pertain to the other
2 invention Thats why in the back of our red brief we
3 excerpted the very little bit that actually pertains to
4 this You sort of tack on patent shyshy the tack on claim
5 that Mr Phillips is asserting here Its 4 columns
6 Its less than five pages in the printed appendix that
7 actually pertains to this invention And it contains no
8 disclosure whatever
9 Justice Scalia to your question about how
10 the computer does it Of course a patent that
11 describes sufficiently how a computer does a new and
12 useful thing whether its data compression or any other
13 technological solution to a business problem a social
14 problem or a technological problem would be within the
15 realm of the shyshy of the patent laws That is what the
16 patent laws have always been for
17 This is not such a patent And the reason
18 for that is this is a preshyBilski set of patents These
19 were prosecuted under the old State Street test where
20 all the applicant had to claim was a result
21 JUSTICE KENNEDY Would you give me shyshy
22 again you already did it once shyshy an example of a
23 business process patent shyshy of a business process idea
24 and invention that is patentable
25 MR PERRY Your Honor there are many
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1 examples One would be a technological solution to a
2 business problem So that for example shyshy Ill give a
3 different example There are many applications today
4 The Court may be familiar with streaming video to watch
5 video on your computer
6 It is not possible to get enough data
7 through existing lines in its raw format The data has
8 to be manipulated in order to see live video So if you
9 want to watch TV on your phone for example
10 Those algorithms those inventions are
11 undoubtedly technological And if they are used in a
12 trading platform or a hedging system or something else
13 that wouldnt disable them And this is what the Diehr
14 case shyshy
15 JUSTICE KENNEDY Well I shyshy I shyshy in my
16 language Ive called that mechanical rather than
17 process Can you give me an example of process
18 MR PERRY Yes Your Honor The process in
19 that example would be a computer running the particular
20 data compression algorithm
21 JUSTICE KENNEDY But thats how to make
22 a shyshy thats how to make a machine work better
23 MR PERRY Yes Your Honor
24 JUSTICE KENNEDY Im asking you Is there
25 any business process any business activity that is
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1 susceptible to a patent a pure patent innovations that
2 deserve patents
3 MR PERRY Your Honor again a
4 technological solution to a business problem could well
5 be whether its a method or a process is equivalent
6 Again Congress said method in a corresponding shyshy
7 JUSTICE KENNEDY Can you give me an
8 example
9 MR PERRY I thought the data compression
10 example was a good one Ill try an encryption
11 technology Many of these trading platforms you know
12 dealing with securities and money would require some
13 sort of security devices You could have a process for
14 securely transmitting data would be another computer
15 implemented technological solution to a business
16 problem Again nothing like that claimed here
17 JUSTICE SOTOMAYOR How about eshymail and
18 just word processing programs
19 MR PERRY Your Honor a program shyshy let me
20 try it this way to both of your questions In our view
21 if what is claimed as the inventive contribution under
22 Mayo shyshy in other words if we have an abstract idea as
23 we do here and what is claimed is the inventive
24 contribution for Step 2 is the computer then the
25 computer must be essential to that operation and
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1 represent an advancement in computer science or other
2 technology And we know thats not met here Justice
3 Sotomayor because shyshy
4 JUSTICE SOTOMAYOR So youre saying no to
5 eshymail and word processing
6 MR PERRY Your Honor I think at a
7 point shyshy
8 JUSTICE SOTOMAYOR They certainly have
9 functionality and shyshy and improvement of functionality
10 for the user
11 MR PERRY At a point in time in the past
12 I think both of those would have been technological
13 advances that were patentable
14 JUSTICE SOTOMAYOR How
15 MR PERRY Today shyshy because they would have
16 provided a technological solution to a then unmet
17 problem Today reciting and do it on a word processor
18 is no different than and do it on a typewriter or shyshy and
19 do it on a calculator
20 The inventive contribution component which
21 uses specifically the language of conventional and
22 routine and well understood will evolve with
23 technology Thats why its different than the abstract
24 idea component
25 And here we know that these patents dont
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1 claim anything that was not conventional well
2 understood and routine We went through that in great
3 detail and Alice has never disputed a word of it They
4 just say youre not supposed to do that analysis even
5 though the Court 9shy0 in Mayo said we should
6 And in this case its very important to
7 look at what Alices own experts said on the subject
8 This is not our expert This is Alices expert And
9 this is at Page 1327shy28 of the Joint Appendix It is
10 possible to do the business methods of maintaining
11 accounts adjusting accounts and providing an
12 instruction without a computer or other hardware
13 And then Justice Breyer directly to your
14 abacus If someone had thought of this invention
15 soshycalled invention 100 years ago they might have
16 implemented it in a nonelectronic manner using various
17 precomputing tools such as an abacus or handwritten
18 ledgers
19 We know from Benson the Courts seminal
20 computer implementation case that if you can do it by
21 head and hand then the computer doesnt add anything
22 inventive within the meaning of the 101 exception That
23 is the holding of Benson And the Court reiterated that
24 in Mayo
25 Flook said exactly the same thing If you
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1 can do it with pencil and paper then the computer is
2 not offering anything that the patent laws are or should
3 be concerned with
4 It is only where the method will not work
5 without a computer which is not these claims and where
6 the computer itself is doing something that the patent
7 law is willing to protect
8 CHIEF JUSTICE ROBERTS What if shyshy what if
9 you can do it without a computer but its going to
10 take you know 20 people a hundred years In other
11 words theoretically you can replicate what the
12 computer does shyshy
13 MR PERRY Two answers
14 CHIEF JUSTICE ROBERTS shyshy but its
15 impractical without looking to do it on the computer
16 MR PERRY Mr Chief Justice first these
17 claims literally read as Alice reads them on a single
18 transaction between two parties so its not 20 people
19 for a hundred years Its one person sitting in a room
20 so thats not a problem
21 Second if what is being claimed is the
22 necessary speed or efficiency or data crunching
23 capabilities if you will of a computer then it would
24 have to be claimed and theres nothing claimed here
25 All that is claimed shyshy and my friend is going to stand
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1 up on rebuttal and tell you all that the expert said
2 well what is claimed is a computer but its just a
3 computer It just says a computer configured too It
4 doesnt say that the computer actually has to shyshy
5 JUSTICE BREYER Yeah but the trouble with
6 that particular test is as I think partly the Chief
7 Justice said how long et cetera and then add to that
8 though you could do it without a computer what happens
9 at the end of the line is the automobile engine goes off
10 or it begins to sputter or it turns left
11 You see its possible to take Archimedes shyshy
12 shyshy you know I use that example purposely to call
13 attention to the problem You can take those things
14 and youre not just saying apply it and youre not even
15 just saying shyshy you are saying use the computer but at
16 the end of the road something physical in the world
17 changes and everybody would say now thats shyshy that
18 will falls within I mean probably I mean my
19 hesitation shows Im looking for the right words
20 MR PERRY Justice Breyer your point is
21 the reason that it is equally fallacious to suggest on
22 the one hand as Alice and IBM does that simply
23 reciting a computer is a magic key that gets you through
24 101 and you never have to any other inquiry and what
25 some of folks the amici on the other side say which
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1 is that computers or software are never eligible Both
2 of those things have to be wrong because what the Court
3 said in Bilski was future innovation is too uncertain
4 We are not going to do that as a Court And the Court
5 laid out an approach using abstract ideas in Bilski and
6 inventive contribution in Mayo that is flexible enough
7 to take into account that innovation and to deal with
8 particular claims in context which is why at the end
9 of the day we have to come back to these patents and
10 decide which shyshy
11 JUSTICE KAGAN Mr Perry before we get
12 back to these matters you said to Justice Scalia if a
13 patent sufficiently describes how a computer will
14 implement an idea then its patentable So how
15 sufficiently does one have to describe it What do we
16 want a judge to do at this threshold level in terms of
17 trying to figure out whether the description is
18 sufficient to get you past it
19 MR PERRY If I can answer in two steps
20 Justice Kagan First in the negative What the
21 applicant or patentee must do shyshy must not do is simply
22 describe the desired result That would take us back to
23 State Street That would simply say I claim a magic
24 box that buys high and sells low or vice versa I
25 suppose I claim a magic box for investing Thats what
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1 these patents do
2 Then to put it in the affirmative and in the
3 language of Mayo the claim has to recite something
4 significantly more something significantly more than
5 the abstract idea itself That would be a contextual
6 analysis based on the claims and specifications and file
7 history and we know that some devices some methods
8 some programming will pass that
9 It is not going to be a brightshyline rule and
10 thats one of the tugshyofshywar issues that this Court and
11 the Federal Circuit have been having in these cases
12 The Federal Circuit wants brightshyline rules All
13 computers are in or all computers are out
14 This Court has been more contextual This
15 Court has been more nuanced This Court has looked at
16 things in a more robust way
17 JUSTICE KAGAN Youre not suggesting that
18 specific code is necessary
19 MR PERRY No Your Honor I think the shyshy
20 actual description of the programming is a 112 problem
21 I agree with that A 112 issue That is the realm of
22 the written description requirement What is a 101
23 problem is it is on the applicant to do more than simply
24 describe the results simply say A magic box that does
25 intermediate settlement And we can tie that back to
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1 this particular prosecution the 510 patent which is
2 the method patent
3 The examiner rejected it Under Section
4 101 the examiner said this is an abstract idea You
5 cant have this patent And the only change that this
6 applicant made was to add in the adjusting step
7 electronic adjustment It put in one word
8 electronic adjustment And under State Street which
9 is what this patent is prosecuted under that was
10 enough because the result of adjusting run through a
11 computer is enough
12 Under current law that cant be enough
13 That just cant get a patent over the line because this
14 Court said in Mayo and I got to quote this language
15 Simply implementing a fundamental principle on a
16 physical machine namely a computer is not a patentable
17 application of that principle Thats all that Alice
18 has done
19 These are preshyBilski patents They never
20 should have been issued General Verrilli will stand up
21 and address that point And certainly under current
22 law shyshy one point on the AIA Congress did not send all
23 this to the administrative process Congress created
24 two avenues the courts and the PTO to use the
25 standards Essentially it ratified Bilski and Mayo and
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1 said we agree with what you all are doing at the
2 Supreme Court and the existing standards are good enough
3 for us This is a judicial problem And that is a good
4 reason The abstract shyshy
5 JUSTICE GINSBURG The Federal Circuit in
6 this case split in many ways and it had our decisions
7 to deal with You said given Bilski and Mayo this is
8 an easy case What is the instruction that escaped a
9 good number of judges on the Federal Circuit How would
10 you state the rule
11 MR PERRY Your Honor I think theres a
12 significant element to the Federal Circuit that
13 disagrees with Mayo and has been resistant in applying
14 it Chief Judge shyshy former Chief Judge Michelle filed a
15 brief in this Court essentially saying Mayo is a
16 lifeshysciences case You should limit it to that because
17 if you apply it to everything else then these patents
18 are no good
19 Mayo we submit is a technologyshyneutral
20 industryshyneutral exceptionshyneutral framework that can
21 be used to answer all of these questions This is not
22 the death of software patents The software industry is
23 all before this Court saying this is fine with us
24 Every company in the United States practically except
25 for IBM is saying go ahead This will not affect
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1 software patents
2 Justice Ginsburg this Courts precedents
3 are clear They are unanimous They just need to be
4 applied To suggest that there is confusion that needs
5 to be addressed by retreating beating a retreat from
6 recent unanimous decisions would simply reward
7 intransigence difficulty refusal to adhere to what are
8 clear precedents because shyshy
9 JUSTICE KAGAN Should we be concerned
10 Mr Perry that there are old patents that in fact could
11 meet the test that you set forth but wont because they
12 were written in a different time and so used much more
13 general language
14 MR PERRY Your Honor the applicant or the
15 patent holder would have the opportunity to institute a
16 reexamination proceeding or some sort of administration
17 process to address that issue
18 And second it should be noted this is a
19 very small problem There are 2 million outstanding
20 patents in the United States In the last four fiscal
21 years there were 22000 infringement litigations
22 instituted but since Bilski there have only been 57
23 district court decisions on Section 101 issues There
24 have only been 12 Federal Circuit decisions total on
25 computer implementation
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1 We are talking about a group of patents
2 Justice Kagan thats way out at the tail end of
3 distribution Most patents never have a 101 challenge
4 This is not an issue with cotton gins and other things
5 This is a problem for the most marginal
6 most dubious most skeptical patents the ones that this
7 Court in Bilski shyshy and remember what Bilskis holding
8 is The majority said they are processes but it did
9 not say they are eligible
10 Thank you Mr Chief Justice
11 CHIEF JUSTICE ROBERTS Thank you counsel
12 General Verrilli
13 ORAL ARGUMENT OF DONALD B VERRILLI JR
14 ON BEHALF OF THE UNITED STATES AS AMICUS
15 CURIAE SUPPORTING RESPONDENTS
16 GENERAL VERRILLI Mr Chief Justice and
17 may it please the Court
18 An abstract idea does not become
19 patentshyeligible merely by tacking on an instruction to
20 use a computer to carry it out A computer makes a
21 difference under Section 101 when it imposes a
22 meaningful limit on the patent claim That occurs when
23 the claim is directed at improvement in computing
24 technology or an innovation that uses computing
25 technology to improve other technological functions
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1 Thats the test that we believe is most faithful to this
2 Courts precedents in Bilski and Mayo It keeps patents
3 within their traditional and appropriate domain and it
4 is capable of being administered consistently by Courts
5 and by PTO examiners
6 JUSTICE GINSBURG How do you answer the
7 argument that your view would extinguish businessshymethod
8 patents and make all software ineligible for patent
9 protection
10 GENERAL VERRILLI Yeah with shyshy let me
11 address software patents first because that I think is
12 obviously a significant question And its just not
13 correct to say that our approach would make software
14 patenting ineligible Any software patent that improves
15 the functioning of the computer technology is eligible
16 Any software patent that improves shyshy that is used to
17 improve another technology is eligible For example
18 the patent in the shyshy in the Diehr case is one in
19 which shyshy
20 JUSTICE SOTOMAYOR Why do we need to reach
21 this in that shyshy reach software patents at all in this
22 case
23 GENERAL VERRILLI Well shyshy
24 JUSTICE SOTOMAYOR Whats the necessity for
25 us to announce a general rule with respect to software
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1 There is no software being patented in this case
2 GENERAL VERRILLI Well I shyshy
3 JUSTICE SOTOMAYOR Theres a systems
4 GENERAL VERRILLI Well I shyshy I think shyshy
5 well they shyshy they shyshy theres a process being and shyshy and
6 one can think of software patents as process patents
7 And I think thats why my friends on the other side are
8 saying the sky is falling because they shyshy they are
9 interpreting what were saying about that when a
10 computer makes shyshy when a computers involvement makes
11 something eligible under 101 its calling those into
12 question and it doesnt
13 JUSTICE SOTOMAYOR Do you think we have to
14 reach the patentability of software to answer this case
15 GENERAL VERRILLI Well I think you can shyshy
16 I think the answer to that question is no not
17 necessarily You can decide it by saying that shyshy that
18 Bilski answers the question whether this is an abstract
19 idea because this form of hedging is really no
20 different than the form of hedging as a conceptual
21 matter at issue in Bilski And then Mayo answers the
22 question of whether the use of a computer in this case
23 adds enough to the abstract idea beyond conventional
24 steps because here all we have after all is just
25 conventional use of computing technology no computer
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1 innovation such that you dont qualify under 101 You
2 could take that approach
3 But it is important to the United States
4 that we shyshy and to our patent examiners that we get some
5 clarity if we can I think the clarity could come from
6 the text that I propose which I want to reiterate shyshy
7 JUSTICE SOTOMAYOR Well shyshy
8 JUSTICE BREYER Could shyshy could shyshy could you
9 go on with that because you were just getting to the
10 point where I think you say a computer improvement that
11 in fact leads to an improvement in harvesting cotton is
12 an improvement through a computer of technology so it
13 qualifies
14 But then I think you were going to say or I
15 got this also from the brief a computer improvement
16 that leads to an improvement in the methods of selling
17 bonds over the telephone is not an improvement in
18 technology reached by the computer Am I right about
19 the distinction youre making
20 GENERAL VERRILLI I dont think theres a
21 yes or no answer to that question
22 JUSTICE BREYER What is your view Yeah
23 what is shyshy how do we deal with just that problem
24 GENERAL VERRILLI If there is a genuine
25 innovation in the functioning of the computer shyshy
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1 JUSTICE BREYER Yes
2 GENERAL VERRILLI shyshy such that business
3 processes shyshy
4 JUSTICE BREYER Weve got that Yes yes
5 We got the computer But then it doesnt improve the
6 computer but rather it improves through the computer
7 the harvesting of cotton
8 Now youve got it in what you said was your
9 second category which is an improvement through the
10 computer of a technology And I thought in your brief
11 you were distinguishing an improvement through the
12 computer of a human activity that is not a technology
13 and in particular to pick an example of that
14 something in finance or something in business
15 Now am I right about the distinction youre
16 making
17 GENERAL VERRILLI Yeah that shyshy
18 JUSTICE BREYER If Im not right what is
19 the distinction
20 GENERAL VERRILLI That is generally the
21 line were drawing Frankly shyshy
22 JUSTICE BREYER And how is that justified
23 GENERAL VERRILLI I do want shyshy
24 JUSTICE BREYER That shyshy that is Judge Dyk
25 in shyshy in Bilski in the Federal circuit 4 people sort of
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1 picked it up maybe 5 didnt pick it up Would you say
2 a few words about it
3 GENERAL VERRILLI Sure About shyshy let me go
4 to Bilski there in that I do think while shyshy while
5 certainly the Court held that the term process got a
6 natural construction which could include business
7 methods it seems to me that thats not all the Court
8 said in Bilski The Court also said that it was
9 historically and traditionally quite rare that business
10 methods were patent eligible
11 It also said that shyshy that the shyshy that courts
12 and the PTO examiners should use the abstract ideas
13 exception to 101 to police the appropriate boundary
14 It also said that the
15 machineshyorshytransformation test that the United States
16 advocated remained a useful tool And of course that
17 directs to you seeing whether there is a technology
18 application
19 And of course the holding in Bilski was
20 that the shyshy the method for hedging risk was ineligible
21 because it was an abstract idea and I cant imagine
22 that if in Bilski the shyshy the claim had been exactly the
23 same but had added use a computer to carry out some of
24 these standard random analysis functions that are
25 claimed by the patent that you would have found it to
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1 be patent eligible
2 And I shyshy I would submit for the Court that
3 the key point here I think is that now given where
4 the Court shyshy what the Court has held in Bilski given
5 what its held in Mayo the abstract ideas exception is
6 really the only tool left to deal with what I shyshy what I
7 think I fairly read Bilski as saying is a significant
8 problem the proliferation of patents of business
9 methods
10 JUSTICE KENNEDY Is there an example that
11 you can give us of a shyshy what we can call a business
12 process that is patentable a process that doesnt
13 involve improving the workings of a computer
14 GENERAL VERRILLI I shyshy I think its going
15 to be difficult for me to do that I think for
16 example if you had a business method a process for
17 additional security pointshyofshysale credit card
18 transactions using particular encryption technology
19 that might well be patent eligible Its a technology
20 that it makes conduct of business more efficient or
21 effective
22 But there is a technological link here and
23 we do think thats critical to our shyshy to our point of
24 view with respect to the case And I shyshy and I do think
25 remember that when we say something is not patent
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1 eligible were not saying they cant do it Were
2 saying they cant monopolize it
3 And the concern in a situation like this one
4 is that if this is patent eligible its hard to see
5 why for example the first person who came up with a
6 frequent flier program wouldnt have been able to claim
7 a patent there because after all thats a business
8 method for improving customer loyalty implemented on a
9 computer
10 CHIEF JUSTICE ROBERTS General I shyshy you
11 mentioned a while ago the need for greater clarity and
12 certainty in this area And Im just wondering in your
13 brief youve got a nonshyexhaustive of factors to
14 consider and there are 6 different ones And Im just
15 doubtful that thats going to bring about greater
16 clarity and certainty
17 GENERAL VERRILLI I take shyshy I take the
18 point Mr Chief Justice but I think the key is that
19 they are all directed to answering the question of
20 whether the innovation that is claimed and is an
21 innovation in either A the improvement of a computers
22 functioning or B the use of computer technology to
23 improve the functioning of another technological
24 process and a case like Diehr would be in the latter
25 category
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1 And so I do think that thats the key
2 benchmark Thats the baseline Thats the test that
3 we do think can be applied clearly and consistently by
4 the courts or the PTO And it avoids the risk of things
5 like frequent flier programs or the Oakland As money
6 ball methods for evaluating the contributions in
7 individual baseball players make or any one of a host of
8 other things that our intuitions tell us just dont
9 belong in the patent system
10 Thats the shyshy drawing that line keeps them
11 out not drawing that line lets them in And with all
12 due respect I dont think that the novelty and
13 nonobviousness filters that 102 and 103 really deal with
14 that problem effectively because when you get to
15 nonobviousness in 103 for example youll be asking a
16 different question
17 If you take the frequent flier program you
18 would say well is this innovation in building consumer
19 loyalty something that would have been obvious to
20 somebody who runs an airline Its totally divorced
21 from the question of technology at that point and
22 therefore I dont think youre going to get the screen
23 that you need to get in order for the patent system to
24 be confined to its traditional and appropriate scope
25 If there are no further questions thank
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1 you
2 JUSTICE GINSBURG I have a question about
3 how do you identify an abstract concept The shyshy a
4 natural phenomenon a mathematical formula those are
5 easy to identify but there has been some confusion on
6 what qualifies as an abstract concept
7 GENERAL VERRILLI We would define
8 abstract shyshy an abstract concept as a claim that is not
9 directed to a concrete innovation in technology
10 science or the industrial arts So its the shyshy its
11 abstract in the sense that it is not a concrete
12 innovation in the traditional realm of patent law
13 Thank you
14 CHIEF JUSTICE ROBERTS Thank you General
15 Mr Phillips you have four minutes
16 remaining
17 REBUTTAL ARGUMENT OF CARTER G PHILLIPS
18 ON BEHALF OF THE PETITIONERS
19 MR PHILLIPS Thank you Mr Chief Justice
20 Id just like to make a few points
21 First of all with respect to the question
22 you asked which is looking at 159 et cetera all I can
23 tell you is that if you look at claim 33 it talks about
24 matched orders the matched orders that are described in
25 286 and 287 and then makes specific reference to 159
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1 and that flow chart thats there And its all designed
2 as a package Its only one element of the shyshy of the
3 invention but it is a central element and its an easy
4 one to understand And it goes well beyond simply the
5 notion of hedge shyshy hedge against settlement risk and do
6 it by a computer
7 JUSTICE SOTOMAYOR Your adversary says that
8 his shyshy the appendix to his brief are the only patents at
9 issue that the flow charts are not at issue in this
10 case
11 MR PHILLIPS Theres no basis for that
12 statement Your Honor There shyshy remember this went off
13 on a very truncated litigation process So theres shyshy
14 you know we shyshy we got cut off at the beginning of it
15 Theres been no construction of the shyshy of the claims
16 and shyshy and obviously these are specifications that go
17 to how you interpret the claim
18 JUSTICE SOTOMAYOR If we were to say that
19 there are no business patents shyshy
20 MR PHILLIPS Yes
21 JUSTICE SOTOMAYOR shyshy would your patent
22 survive at all
23 MR PHILLIPS No I dont shyshy I dont
24 believe so I think theres no question And you
25 know General Verrilli could not have been any plainer
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1 in his statement of how he wants to interpret the
2 abstract idea concept
3 JUSTICE SOTOMAYOR Yes he wants to say no
4 business patents
5 MR PHILLIPS No business shyshy just another
6 way of saying no business methods And you know the
7 Court rejected that And it seems to me extraordinary
8 to say Congress didnt reject no business methods in
9 101 but were going to do shyshy were going to manipulate
10 the judicial exception to accomplish precisely that same
11 thing It seems to me thats wholly inappropriate
12 Justice Ginsburg you asked my shyshy my friend
13 here you know whats his test He didnt answer that
14 question youll notice because he doesnt have an
15 answer His basic argument is whatever you do just
16 kill this patent
17 And if I were in his shoes I suppose Id
18 take that same position I think whats absolutely
19 clear is that the test ought to be one that is
20 structured as a very coarse filter not the kind of
21 filter that hes pushing for where it changes over time
22 I mean I thought his shyshy I thought his response to one
23 of the questions about eshymail and word processing that
24 Justice Sotomayor asked is over time it would change
25 Well thats exactly what 102 and 103 are for That is
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1 not the purpose of shyshy of Section 101
2 And then he uses the example of encryption
3 I guarantee you if we were arguing about encryption in
4 this case he would say to me that thats an abstract
5 principle because encryption is a concept thats been
6 around since time immemorial George Washington used
7 it Everybody has used encryption
8 And a question again thats not the
9 solution to these problems The question is how did we
10 go about doing it And we go beyond the basics of
11 simply saying use a computer and thats what we ask
12 this Court to focus on and to evaluate
13 As to the frequent flier program its
14 pretty clear to me that even though it was a novel idea
15 in some sense the concept itself would have been viewed
16 in shyshy in the KSR fashion as quite obvious as a means of
17 improving customer loyalty
18 There are solutions here Giving us 101
19 pass doesnt create a monopoly It just gets us to the
20 102 and 103 inquiries that are at the heart of what the
21 patent laws shyshy and 112 that are at the heart of what the
22 patent laws ought to be dealing with
23 If there are no further questions Your
24 Honor thank you
25 CHIEF JUSTICE ROBERTS Thank you counsel
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1 The case is submitted
2 (Whereupon at 1105 am the case in the
3 aboveshyentitled matter was submitted)
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
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58
A add 714 1023 algorithm 3320 41 automatically
As 525 3621 387 algorithms apply 72425 111
am 115 32 416 3013 3310 2019 281213 automobile 389
572 added 302 Alice 13 34 2822 3814 available 99
abacus 61213 4923 363 3717 4217 avenues 4124
710 1018 additional 5017 3822 4117 applying 4213 avoids 524
1325 3614 3617
address 4121 4317 4511
Alices 271 2919 3678
approach 226 395 4513 B
ability 1514 addressed 435 allow 94 472 B 121 29 4413
able 1511 167 addressing 181 allows 97 242 appropriate 5122
1919 516 adds 4623 amazing 2514 81516 1514 back 1621
aboveshyentitled adhere 437 amici 3825 453 4913 1922 2512
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absolutely 125 241 210 4414 Archimedes 3991222
1215 159 adjusting 3611 analysis 424 281122 3811 4025
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abstract 4267 adjustment 417 4924 argue 2518 Bank 17 35
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721 8218 administered 1716 argument 114 bars 43
141920 1522 454 announce 4525 225812 33 baseball 527
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accept 102 adversary 547 APPEARAN arrows 315 beginning 163
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account 55 618 affect 4225 appendix 1910 aside 1422 157 behalf 11719
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accounts 823 agent 52 3021 548 278 5322 214 38 2616
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actual 4020 AL 18 523 attention 3813 better 1610 albeit 923 applies 31418 Attorney 2021 216 2819
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59
3322 brightshyline 409 2313 37 71 4338 5519 beyond 115 4012 5317 checks 618 5614
1312 4623 bring 5115 case 3412 46 Chief 339 clearly 211 251 544 5610 broad 248 116 1524 261217 3024 523
Bilski 313 46 broader 225 2022 213 31812 378 client 311416 415 1722 browsing 228 2211 2313 371416 386 close 2822 2224 2329 builder 2811 2625 311424 421414 4410 CLS 17 35 262020 271 building 5218 3314 36620 441116 5110 1120 2816 2999 built 2324 426816 5118 531419 coarse 247 3935 4125 business 168 451822 461 5625 5520 427 4322 1749 203 461422 5024 chits 611 code 1213 142 447 452 2124 222122 5124 5410 chronological 1916171720 461821 4825 2311 29613 564 5712 1512 2725 4018 49481922 32132323 cases 244 2816 chronologically coffee 1211 5047 3322525 4011 423 colleagues 116
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briefs 1524 4923 1620 2619 class 59 13911 1479 1618 CARTER 117 checkbook 617 clear 1015 118 1421 15710
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1517 165 confess 1111 coterminous 4121 5324 181719 196 configured 383 2321 customer 518 describes 425 19814 206 confined 5224 cotton 914 444 5617 2918 3211 2025 211016 confirmed 2912 4711 487 cut 5414 3913 2117 2410 confusion 434 counsel 4411 description
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disclosure 328 413 302021 4220 figure 1146 discuss 164 economy 1516 ESQ 1171921 excerpted 323 311222 3917 discussion 299 effective 1223 236913 exhausted 1813 file 406 dispose 2625 5021 essence 211 exist 420 131 filed 4214 dispute 325 effectively 5214 essential 1224 existence 1119 fill 2818 disputed 3120 efficacy 1224 3425 175 filled 293
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level 920 3916 M 452 4621 4716 49710 needs 314 434 liberal 1715 machine 915 505 509 526 556 negative 3920 lifeshysciences 2120 3322 mean 69 716 558 never 1615
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1 its terms 101 applies The only argument between the
2 parties is the abstract idea exception that exists and
3 whether that bars us from otherwise satisfying
4 Section 101
5 JUSTICE GINSBURG Mr Phillips on the
6 abstract idea you know that the Bilski case held that
7 hedging qualified as an abstract idea So how is
8 intermediate settlement a less abstract than hedging
9 MR PHILLIPS If our shyshy if our patent
10 merely claimed intermediated settlements although I
11 have to say I dont really know exactly what that means
12 because I dont think thats the same kind of
13 economics shyshy basic economics concept that a hedge risk
14 treatment is But if it claimed that we wouldnt shyshy we
15 wouldnt have a distinction from Bilski
16 What we claim is a very specific way of
17 dealing with a problem that came into being in the early
18 1970s of how to try to eliminate the risk of
19 nonshysettlement in these very massive multiparty problems
20 in which you need to deal with difficulties that exist
21 at different time zones simultaneously and to do it with
22 a computer so that you not only take them on
23 chronologically deal with them sequentially based on
24 the kind software analysis that the patent specifically
25 describes by function
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1 And it goes even further than that and does
2 something that no escrow agent and shyshy and no
3 intermediated settlement that I know of shyshy settler that
4 I know of It actually blocks specific transactions
5 that in the shadow account would violate the terms of
6 the settlement that would ultimately be implemented
7 JUSTICE KENNEDY Well let me put it this
8 way If you describe that to a secondshyyear college
9 class in engineering and said heres shyshy heres my idea
10 now you go home and you program over this weekend my
11 guess is shyshy my guess is that that would be fairly easy
12 to program
13 MR PHILLIPS I dont disagree with it
14 Justice shyshy
15 JUSTICE KENNEDY So the fact that the
16 computer is involved it shyshy it seems to me is necessary
17 to make it work But the shyshy but the innovative aspect
18 is certainly not in the creation of the program to make
19 that work All youre talking about is shyshy if I can use
20 the word shyshy an idea
21 MR PHILLIPS I prefer not to use that word
22 for obvious reasons
23 (Laughter)
24 MR PHILLIPS But shyshy but if you shyshy but if
25 you look at the Solicitor shyshy
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1 JUSTICE KENNEDY Or shyshy or a method or a
2 process
3 MR PHILLIPS Right But shyshy and shyshy and
4 obviously methods and processes are precisely what
5 Section 101 permits to be subject shyshy
6 JUSTICE BREYER Why is that less abstract
7 MR PHILLIPS Im sorry
8 JUSTICE BREYER Why is that less abstract
9 I mean imagine King Tut sitting in front of the pyramid
10 where all his gold is stored and he has the habit of
11 giving chits away Good for the gold which is given at
12 the end of the day And he hires a man with an abacus
13 and when the abacus keeping track sees that hes given
14 away more gold than he is in storage he says stop
15 You see
16 Or my mother who used to look at my
17 checkbook when she saw that in fact I had written
18 more checks than I had in the account she would grab
19 it Stop You see
20 So what is it here thats less abstract that
21 the computer says stop
22 MR PHILLIPS It is shyshy
23 JUSTICE BREYER How is that less abstract
24 than King Tut if we had the same thing with a grain
25 elevator if we had the same thing with a reservoir of
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1 water if we had the same thing with my checkbook You
2 see the point
3 MR PHILLIPS I do see the point Justice
4 Breyer and it seems to me that it goes to the question
5 of the methodology youre going to employ
6 JUSTICE BREYER Methodology is just that
7 you said stop
8 MR PHILLIPS Well we could shyshy
9 JUSTICE BREYER So what we have different
10 here is the computer stops rather than the abacus man
11 stopping or my mother stopping or the guy that the grain
12 elevator has that says stop So just saying what shyshy is
13 that it In other words if you say computer stop you
14 have an invention Useful add shyshy but if you say mother
15 stop you dont
16 MR PHILLIPS No Well I mean again it
17 seems to me that in some ways what shyshy what you described
18 there is a caricature of what this invention is
19 JUSTICE BREYER Of course its a
20 caricature Its a caricature designed to suggest that
21 there is an abstract idea here Its called solvency
22 MR PHILLIPS But shyshy
23 JUSTICE BREYER And what you do is you take
24 the idea of solvency and you say apply it And you say
25 apply it through the computer
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1 Is that enough to make it not just the
2 abstract idea And now were at the heart of why I used
3 my exaggerated examples shyshy
4 MR PHILLIPS Right
5 JUSTICE BREYER shyshy because you will tell me
6 why shyshy
7 MR PHILLIPS Right
8 JUSTICE BREYER shyshy this is enough
9 MR PHILLIPS Right Because Justice
10 Breyer the shyshy the shyshy the concept here is not simply to
11 say stop Stop is obviously part of the element of it
12 But its also designed to ensure that at the
13 end of the day this transaction in the midst of
14 literally a global set of shyshy of deals that are going on
15 simultaneously will be implemented at the appropriate
16 time in the appropriate way And whatever else that may
17 be it seems to me its difficult to say thats an
18 abstract idea as implemented
19 JUSTICE SOTOMAYOR Im sorry But shyshy but
20 what it appears to be it sounds like youre trying to
21 revive the patenting of a function You used the word
22 function earlier and thats all Im seeing in this
23 patent is the function of reconciling accounts the
24 function of making sure theyre paid on time But in
25 what particular way other than saying do it through a
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1 computer is this something new and not function
2 MR PHILLIPS Well it does it through shyshy
3 it creates the shadow accounts because of the concerns
4 for security You dont shyshy youre not going to allow
5 somebody to enter into a central banks own accounts
6 You create the shadow accounts You monitor through the
7 software that allows you to do that You evaluate each
8 of the transactions to ensure that the settlement will
9 be available You do it sequentially and you act on it
10 by the end of the day or whenever the transaction is to
11 take place and you implement that transaction
12 JUSTICE SCALIA Why isnt it shyshy why isnt
13 doing it through a computer not enough I mean was the
14 cotton gin not an invention because it just means youre
15 doing through a machine what people used to do by hand
16 Its not an invention Its the same old same old
17 MR PHILLIPS Justice Scalia shyshy
18 JUSTICE SCALIA Why shyshy why is a computer
19 any different in that respect
20 MR PHILLIPS At one level I agree with you
21 completely There is no difference between them
22 This Court has however said on more than a
23 few occasions albeit in dicta that coming up with an
24 idea and then say use a computer is not sufficient
25 And what Im trying to suggest to you is we dont fall
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1 within that dicta
2 Now if you dont accept the dicta and you
3 say use a computer is fine then I think were done
4 JUSTICE SCALIA Well Im not saying use a
5 computer is shyshy is much of a novelty I mean thats shyshy
6 that goes to whether its novel or not If you just say
7 use a computer you havent invented anything But if
8 you come up with a serious program that shyshy that does it
9 then you know that may be novel But thats a novelty
10 issue isnt it
11 MR PHILLIPS To be sure Justice Scalia
12 JUSTICE BREYER And this is exactly the
13 question I really would like to you to focus on for me
14 Why is it shyshy and Im not saying this from a point of
15 view but it seems to me pretty clear that if what you
16 did was take the idea of solvency shyshy remember King Tut
17 Thats what I use the exaggeration shyshy and what you say
18 is implemented by having the abacus man keep track and
19 say stop okay shyshy
20 MR PHILLIPS Right
21 JUSTICE BREYER Then we implement it by
22 having somebody with a pencil and a piece of paper and
23 this is all that they add you see Say Have a man
24 with a pencil and a piece of paper keeping track and
25 saying stop or we say implement it in the computer
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1 which will automatically keep track and say stop are
2 they all enough Are some of them enough Whats the
3 rule
4 And you realize I couldnt figure out much
5 in Prometheus to go beyond what I thought was an obvious
6 case leaving it up to you and your colleagues to figure
7 out how to go further Am I making enough shyshy making
8 clear enough whats bothering me And Id really like
9 to get your answer to this
10 MR PHILLIPS And shyshy and look theres
11 no shyshy Ill be the first one to shyshy to confess that trying
12 to use language to describe these things is not all that
13 easy But the way I think you can meaningfully look at
14 this is to say that this is not simply something that
15 was a fundamental truth this is not something that
16 simply says use a computer Its not simply something
17 that says maintain solvency It shyshy it operates in a
18 much more specific and concrete environment where youre
19 dealing with a problem thats been in existence since
20 the 1970s a solution in the 1990s that CLS itself
21 acknowledges needed a solution and came forward with
22 their own solution that looks a lot like ours
23 JUSTICE KENNEDY But my shyshy my initial
24 question and I think I can work this into King Tut
25 is shyshy
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1 (Laughter)
2 JUSTICE KENNEDY shyshy is shyshy is whether or not
3 you could have patented that system idea process
4 method without attaching a computer program
5 MR PHILLIPS You cannot absolutely cannot
6 do that with this system because it is so complex and
7 so many interrelated parts
8 JUSTICE KENNEDY Suppose I thought shyshy and
9 again its just a thought because I dont have the
10 expertise shyshy that any computer group of people sitting
11 around a coffee shop in Silicon Valley could do this
12 over a weekend Suppose I thought that
13 MR PHILLIPS You mean wrote the code
14 JUSTICE KENNEDY Yes right
15 MR PHILLIPS Well thats absolutely shyshy
16 Im certain thats true
17 JUSTICE KENNEDY Well then shyshy then shyshy
18 MR PHILLIPS But thats true of almost all
19 software
20 JUSTICE KENNEDY Then why is the computer
21 program necessary to make the patent valid
22 MR PHILLIPS Well its shyshy its necessary
23 to make the invention effective As the Solicitor
24 General said the computer is essential to the efficacy
25 of this invention because of the complicated financial
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1 arrangements that exist and that can only be resolved on
2 a shyshy on a realtime basis Your abacus is great if you
3 happen to be waiting for the pyramids to be finished or
4 waiting for the gold to move in and out but it doesnt
5 help with you an abacus if youre dealing with literally
6 thousands of transactions simultaneously going on in
7 different countries at different points in time
8 JUSTICE KENNEDY But thats just an idea
9 hey lets use a computer
10 MR PHILLIPS But its not just shyshy I mean
11 obviously part of it is use the computer Justice
12 Kennedy But more fundamentally it goes beyond that
13 See I shyshy
14 JUSTICE SOTOMAYOR Is your software
15 copyrighted
16 MR PHILLIPS No I dont believe so
17 JUSTICE GINSBURG There is no special
18 software that comes with this shyshy thats part of this
19 patent is it shyshy is there
20 MR PHILLIPS No Justice Ginsburg what
21 we did here is what the Patent and Trademark Office
22 encourages us to do and encourages all software patent
23 writers to do which is to identify the functions that
24 you want to be provided for with the software and leave
25 it then to the software writers who I gather are you
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1 know quite capable of converting these functions into
2 very specific code
3 JUSTICE KAGAN Mr Phillips could you shyshy
4 could you disaggregate your argument for me Because
5 you just said look this Court has said its not
6 sufficient if you have an idea and then you say use a
7 computer to implement it right So are you saying that
8 your shyshy that shyshy are you saying that youre doing more
9 than saying use a computer to implement it or are you
10 saying that its shyshy that the idea itself is more than an
11 idea
12 MR PHILLIPS Yes Im saying shyshy
13 JUSTICE KAGAN Which part of what shyshy
14 MR PHILLIPS Im saying both actually I
15 mean Im making both of those arguments I shyshy I
16 believe that if you analyze the claims and you dont
17 caricature them and you dont strip them out of the
18 limitations that are embedded in there this is not some
19 kind of an abstract concept This is not some kind shyshy
20 its not an abstract idea Its a vary shyshy
21 JUSTICE KAGAN So putting the computer
22 stuff aside completely shyshy
23 MR PHILLIPS Right
24 JUSTICE KAGAN shyshy youre saying that youve
25 invented something or you shyshy
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1 MR PHILIPS Yes
2 JUSTICE KAGAN There is something that
3 youve patented that has shyshy that is not just simple use
4 a third party to do a settlement
5 MR PHILLIPS Right
6 JUSTICE KAGAN And what is that putting
7 the computer aside
8 MR PHILLIPS It is shyshy well shyshy and again
9 its difficult to do that because you absolutely need
10 the computer in order to implement this But the key to
11 the invention is the notion of being able
12 simultaneously dealing with it on a chronological basis
13 to stop transactions that will otherwise interfere with
14 the ability to settle on time and under the appropriate
15 circumstances And the only way you can do that in a
16 realtime basis when youre dealing with a global economy
17 is to use a computer It is necessary to the efficacy
18 of this
19 So in that sense I cant shyshy I cant
20 disaggregate it the way in some sense youre suggesting
21 It seems to me its bound up with in shyshy its bounds up
22 with the whole notion of is this an abstract concept
23 JUSTICE BREYER Can you in fact shyshy now
24 this is shyshy look there are 42 briefs in this case I
25 actually read them and I found them very very helpful
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1 up to the point where I have to make a decision because
2 theyre serious I mean you know shyshy now the problem
3 that I came away with is the one that youre beginning
4 to discuss that if you simply say take an idea thats
5 abstract and implement it on a computer there are shyshy
6 youre going to get it much faster youre going to be
7 able to do many many things and if thats good enough
8 there is a risk that you will take business in the
9 United States or large segments and instead of having
10 competition on price service and better production
11 methods well have competition on who has the best
12 patent lawyer You see where Im going on that one
13 MR PHILLIPS Yeah of course
14 JUSTICE BREYER And if you go the other way
15 and say never then what you do is you rule out real
16 inventions with computers
17 MR PHILLIPS Right
18 JUSTICE BREYER And so in those 42 briefs
19 there are a number of suggestions as to how to go
20 between Scylla and Charybdis Now I would like to
21 know shyshy I dont know if you can step back from your
22 representational model Thats a problem Youre all
23 we have now And shyshy and from my point of view I need
24 to know what in your opinion is the best way of sailing
25 between these two serious arms
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1 MR PHILLIPS Well Justice Breyer I guess
2 I would suggest to you that you might want to deal with
3 the problem you know as opposed to the problems you
4 dont know at this stage I mean we have had business
5 method patents and software patents in existence for
6 well over a decade and theyre obviously quite
7 significant in number And shyshy and we know what the
8 system is we have And Congress looked at that system
9 right and didnt say no to business methods patents
10 didnt say no to software patents instead said the
11 solution to this problem is to get it out of the
12 judicial process and create an administrative process
13 but leave the substantive standards intact
14 So my suggestion to you would be follow that
15 same advice a liberal interpretation of 101 and not a
16 caricature of the claims analyze the claims as written
17 and therefore say that the solution is 102 and 103 and
18 use the administrative process If you shyshy
19 JUSTICE GINSBURG Mr Phillips let me just
20 stop you there because four Justices of this Court did
21 not read that legislative history the way you do And
22 it was shyshy was in Bilski
23 MR PHILLIPS But this is postshyBilski
24 JUSTICE GINSBURG Justice Stevens went
25 carefully through that and he said Congress was
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1 reacting to a decision It had shyshy it was not addressing
2 101 So there are at least four Justices who say shyshy who
3 didnt buy that argument
4 MR PHILLIPS Well I mean it still seems
5 to me that the shyshy the natural inference is Congress did
6 not change 101 Congress created an entire
7 administrative system to deal with 101 102 and 103
8 And shyshy and I would hope shyshy
9 JUSTICE SCALIA And four is not five
10 anyway right
11 MR PHILLIPS Thats true
12 JUSTICE SCALIA Four is not five
13 MR PHILLIPS And youve exhausted my math
14 skills Your Honor
15 JUSTICE SCALIA By the way we shyshy we have
16 said that you cant take an abstract idea and then say
17 use a computer to implement it But we havent said
18 that you cant take an abstract idea and then say here
19 is how you use a computer to implement it shyshy
20 MR PHILLIPS Exactly
21 JUSTICE SCALIA shyshy which is basically what
22 youre doing
23 MR PHILLIPS And thats the argument were
24 doing and shyshy
25 JUSTICE SCALIA And thats a little
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1 different
2 MR PHILLIPS shyshy thats the line were
3 asking the Court to draw here
4 JUSTICE KAGAN Well how are you saying the
5 how Because I thought that your computers shyshy that your
6 patents really did just say do this on a computer as
7 opposed to saying anything substantive about how to do
8 it on a computer
9 MR PHILLIPS I would urge the Court to
10 look at Joint Appendix 159 285shy286 where it goes
11 through the flow charts This is shyshy and this is just a
12 specific example of the method by which you stop a
13 transaction and it goes through a varied series of
14 detailed steps and what the computer has to do in order
15 to do that It doesnt actually obviously put in the
16 code but thats what the PTO says dont do Dont put
17 in the code because nobody understands code so shyshy but
18 put in the functions and we know shyshy and we know that
19 someone skilled in the art will be able to put in the
20 code And if they arent if they cant do that then
21 its not enabled and thats a 112 problem
22 To go back Justice Breyer to your
23 question So on the one hand youve got a problem that
24 it seems to me Congress to some extent has said is okay
25 and weve got a solution and that solutions playing
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1 through On the other hand if this Court were to say
2 much more categorically either that theres no such
3 thing as business method patents or adopt the Solicitor
4 Generals interpretation which is to say that there
5 cannot be software unless the software somehow actually
6 improves the computer as opposed to software improving
7 every other device or any other mechanism that might be
8 out there
9 What we know is that this would inherently
10 declare and in one fell swoop hundreds of thousands of
11 patents invalid and the consequences of that it seems
12 to me are utterly unknowable And before the Court goes
13 down that path I would think it would think long and
14 hard about whether isnt that a judgment that Congress
15 ought to make And It seems to me in that sense youre
16 essentially where the Court was in Chakrabarty where
17 everybody was saying youve got to act in one way or the
18 other or the world comes to an end and the courts have
19 said well apply 101 directly
20 JUSTICE KENNEDY If we say that theres no
21 software patentability and agree with the Attorney
22 General do you lose in this case
23 MR PHILLIPS Well it would be very hard
24 for me to see how that shyshy how shyshy how I can get around
25 that particular problem because the computer is the
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1 essence of it so shyshy and a portion of it is clearly the
2 software So I think if you say there is no such thing
3 as software patentability I do lose in this case yes
4 Your Honor As do a whole lot of other people
5 JUSTICE KENNEDY Is there any common ground
6 between you and the government shyshy maybe a better
7 question to ask the government shyshy a common ground
8 between you and the government on something in the
9 software area thats patentable other than making the
10 computer itself work You understand the government to
11 say no software patents
12 MR PHILLIPS Thats the way I interpret
13 the governments shyshy the governments brief
14 JUSTICE BREYER It was like shyshy theres a
15 Bloomberg brief out here that was on this that said
16 no you can shyshy you can patent computer software when
17 its an improvement in the computer when its an
18 improvement in software when its an improvement in a
19 technology that is developed out of computers like
20 robotics when it is an improvement in a machine or
21 technology but you cannot improve it where it is simply
22 an improvement in an activity that is engaged in
23 primarily through mental processes But what they mean
24 by that is business finance and similar arts
25 Thats shyshy I mean thats shyshy it wasnt quite what shyshy I
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1 know Thats what I want to know what you dont agree
2 with about that because its a little more refined than
3 you suggested
4 MR PHILLIPS I read the Solicitor
5 Generals brief as broader than the Bloomberg brief
6 in shyshy in terms of the approach And IBMs argument is
7 if you knock out software patents you eliminate web
8 browsing word processing cellphones eshymail Those
9 are all activities that I dont think fall within the
10 meaning of the shyshy the meaning of the governments theory
11 of the case
12 JUSTICE BREYER But Im asking you shyshy Im
13 asking you what about this one that I just mentioned
14 You see I went through those five steps shyshy
15 MR PHILLIPS Right
16 JUSTICE BREYER shyshy and four of them you
17 could patent and the fifth one you cant
18 MR PHILLIPS Right But I shyshy and I guess
19 my answer to that is thats nowhere in the statute and
20 it doesnt seem to me to reflect an abstract idea Its
21 a shyshy its a line you draw that takes out business method
22 patents If the Court wants to eliminate business
23 method patents fine But you just said no to that in
24 Bilski two three terms ago
25 Now to be sure give the Solicitor General
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1 credit he comes here and says to you We didnt like
2 the result in Bilski we want you to say dont use
3 process in order to get there which is a statutory
4 interpretation come up with an extraordinarily
5 complicated way of looking at the exception and use that
6 to get to the exact same result
7 JUSTICE SOTOMAYOR Well youre doing a
8 very good job of proving shyshy
9 JUSTICE GINSBURG In Bilski Justice Breyer
10 did try to say that there wasnt that shyshy a whole lot of
11 distance between the four who thought business methods
12 were not patentable But he shyshy he also said something
13 else in shyshy in the other case Mayo Justice Scalia
14 asked you the question about doesnt that go to novelty
15 but didnt Justice Breyer say in Mayo that novelty can
16 be relevant to patent shyshy to patent eligibility He said
17 theres shyshy theres an overlap
18 MR PHILLIPS Well he said theres an
19 overlap Here in this context I think basically the
20 Respondents theory would mean that they are completely
21 coterminous And I dont think thats what the Court
22 meant And also we know from Diehr that theres got to
23 be at least some significant limitations on the extent
24 to which novelty has to be built into 101 That is the
25 province of 102 and 103 And as I said Congress
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1 modified the system of adjudication to create an
2 administrative mechanism that allows you to get to 102
3 and 103 And at least in context its important to
4 realize there have been 11 cases since that was created
5 9 of the 11 have been knocked down on 102 or 103 grounds
6 and not on 101 grounds And it seems to me thats the
7 answer to this problem is leave 101 as the coarse
8 filter If on its face it states these kinds of broad
9 abstract principles fundamental truths and even if it
10 says use a computer those should be struck down
11 JUSTICE SOTOMAYOR Which of the shyshy which of
12 the opinions below captures your position most
13 accurately
14 MR PHILLIPS I would guess it would be
15 Judge Moores opinion below that would capture ours most
16 correctly
17 JUSTICE SOTOMAYOR And if we were to think
18 your method claim is ineligible do you agree that your
19 systems and shyshy your medium and system claims fail as
20 well Do they rise and fall together
21 MR PHILLIPS No No I dont believe they
22 do rise and fall together I mean I think you could shyshy
23 if you wanted to interpret our medium claim shyshy I mean
24 our shyshy our method claims in a shyshy in particularly
25 abstract way I think you could still say that the
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1 system claims which clearly are shyshy are how to create a
2 computer system and how to implement it using that
3 method would be a much more concrete version of that in
4 a way that would take it out of 101 That said I
5 obviously believe that all of our claims satisfy 101
6 and should go on to the next stage
7 JUSTICE KAGAN Can I give you a
8 hypothetical Mr Phillips and you tell me how its
9 different or the same Lets say you know 30 years
10 somebody took a look around the world and said a lot of
11 people seem to order products by mail They get the
12 catalogues in the mail and then they send back their
13 return forms And lets say that one of the founders of
14 the Internet said wouldnt this be an amazing system
15 we could actually do this by computer and they had
16 patented that Is that the same
17 MR PHILLIPS I dont know if its the
18 same but I would shyshy I would argue that it could very
19 well be a patentable subject matter because shyshy but it
20 depends on how the claims play out
21 JUSTICE KAGAN No but exactly I mean
22 the claim would have said something along the lines of
23 you know theres this process by which people order
24 products and we want to do it over the Internet we want
25 to do it electronically and we will use a computer to
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1 do that to essentially take the process of mail order
2 catalogues and make it electronic
3 MR PHILLIPS I could certainly shyshy I think
4 I could write a claim shyshy a set of claims that I believe
5 would satisfy 101 And shyshy and to the extent that
6 youd shyshy that youd think those are no different than
7 the ones I have here then my argument is simply I think
8 I satisfy 101 with the claims we have before us Your
9 Honor
10 If there are no further questions then Id
11 like to reserve the rest of my time
12 CHIEF JUSTICE ROBERTS Thank you
13 Mr Phillips
14 Mr Perry
15 ORAL ARGUMENT OF MARK A PERRY
16 ON BEHALF OF THE RESPONDENTS
17 MR PERRY Mr Chief Justice and may it
18 please the Court
19 That path between Scylla and Charybdis was
20 charted in Bilski and Mayo Bilski holds that a
21 fundamental economic principle is an abstract idea and
22 Mayo holds that running such a principle on a computer
23 is quote not a patentable application of that
24 principle Those two propositions are sufficient to
25 dispose of this case
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1 If Bilski and Mayo stand Alices patents
2 fail Therefore Mr Phillips and his friends are
3 asking this Court to change the standard even though
4 this Court has had three unanimous decisions in the last
5 four terms establishing what the Court called a myriad
6 a wellshyestablished standard
7 On the abstract idea Justice Ginsburg you
8 asked Mr Phillips whats the difference between hedging
9 and this claim There is no difference This is
10 hedging It is hedging against credit default rather
11 than price fluctuation but it is simply hedging
12 And Mr Phillips stood up for 26 minutes and
13 never once referred to the patent Lets look at what
14 the inventor the soshycalled inventor said about this
15 invention This is at JA 293 to 94 in the
16 specification
17 This claim has simply two steps Its very
18 simple First debiting and crediting on a realtime
19 basis the relevant shadow records and second by
20 periodically affecting corresponding payment
21 instructions Those are direct quotes Debit credit
22 and pay Your Honor you cant get much more simple
23 than that
24 Mr Phillips suggests well we have
25 multilateral transactions global things chronological
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1 time zones and so forth None of those are claimed
2 Your Honor Those are all recited in specification
3 The claims read on a single transaction involving two
4 parties
5 JUSTICE BREYER Can I ask you at some
6 point not necessarily this second to say in my shyshy this
7 is just shyshy you know you have an opinion for a court
8 Different judges can have different interpretations
9 All youre getting is mine okay
10 But I think its pretty easy to say that
11 Archimedes cant just go to a boat builder and say
12 apply my idea All right Everybody agrees with that
13 But now we try to take that word apply and give
14 content to it
15 And what I suspect in my opinion Mayo did
16 and Bilski and the other cases is sketch an outer shell
17 of the content hoping that the experts you and the
18 other lawyers and the shyshy the circuit court could fill
19 in a little better than we had done the content of that
20 shell
21 So so far youre saying well this is
22 close enough to Archimedes saying apply it that we
23 neednt go further
24 Now will you at some point in the next few
25 minutes give me your impression of if it were necessary
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1 to go further what would the right words or example be
2 MR PERRY Your Honor as shyshy Justice
3 Breyer as to abstract ideas the PTO has filled in that
4 shell by listing economic concepts legal concepts
5 financial concepts teaching concepts dating and
6 interpersonal relationships and generally how business
7 should be conducted as examples of those things that are
8 likely abstract which of course all follow directly
9 from Bilski and the discussion this Court had in Bilski
10 And this patent shyshy these patents fall squarely within
11 that
12 Congress in the AIA confirmed that
13 reading Congress in the CBM method said business
14 methods that are subject to special scrutiny shyshy that is
15 dubious patents shyshy include methods and corresponding
16 apparatus which is what we have here that pertain to
17 data processing in the financial services industry and
18 do not offer a technological solution That describes
19 Alices patents to a letter Your Honor So that we
20 have shyshy
21 JUSTICE SOTOMAYOR What do you think is a
22 technological solution
23 MR PERRY Your Honor shyshy
24 JUSTICE SOTOMAYOR How could they if at
25 all written their patents to shyshy to make shyshy to make
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1 their software eligible What would shyshy what do they
2 need shyshy would have needed to have added
3 MR PERRY Justice Sotomayor they have no
4 software first Theyve never written software
5 Theyve never programmed a computer So thats a
6 nonexistent set
7 Second there are many technological
8 solutions to trading and settlement problems For
9 example data compression These shyshy these trading
10 platforms involve the movement of very large quantities
11 of data around the world The physical pipes that is
12 the fiber optic cables and data lines are limited
13 There are very sophisticated algorithms for both
14 security and speed to move data through the transmission
15 lines in novel and useful ways that could well be
16 patented
17 Nothing like that is claimed here To come
18 back to where I started if you look for example at
19 Claim 65 in the 510 patent as Mr Phillips reads it
20 it literally reads on a twoshyparty escrow to sell a
21 house so long as the escrow agent is typing this stuff
22 into the HUDshy1 using a computer That has nothing to do
23 with multilevel shyshy
24 CHIEF JUSTICE ROBERTS Well thats a
25 little more complicated He referred us to Joint
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1 Appendix Page 159 which is not a change in how
2 computers work But it is shyshy constitutes the
3 instructions about how to use the computer and where it
4 needs to be affected And just looking at it it looks
5 pretty complicated There are a lot of arrows and
6 they shyshy you know different things that go shyshy
7 (Laughter)
8 CHIEF JUSTICE ROBERTS Well but I mean
9 you know it shyshy in different directions And I
10 understand him to say that in each of those places
11 thats where the computer is needed
12 MR PERRY Mr Chief Justice Figure 16 has
13 nothing to do with the invention asserted against my
14 client in this case There are two inventions in this
15 patent One invention involving multilateral contract
16 formation is not asserted against my client And all of
17 these drawings pertain to that The only drawings that
18 pertain to the asserted claims are 25 and 33 to 37 And
19 that was established below and its established in this
20 Court And Mr Phillips has never disputed it
21 So the claim hes pointed the Court shyshy the
22 figure hes pointed the Court to has nothing to do with
23 the invention Its for a different invention that is
24 not at issue in this case
25 Remember there are hundreds and hundreds of
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1 pages of these patents They all pertain to the other
2 invention Thats why in the back of our red brief we
3 excerpted the very little bit that actually pertains to
4 this You sort of tack on patent shyshy the tack on claim
5 that Mr Phillips is asserting here Its 4 columns
6 Its less than five pages in the printed appendix that
7 actually pertains to this invention And it contains no
8 disclosure whatever
9 Justice Scalia to your question about how
10 the computer does it Of course a patent that
11 describes sufficiently how a computer does a new and
12 useful thing whether its data compression or any other
13 technological solution to a business problem a social
14 problem or a technological problem would be within the
15 realm of the shyshy of the patent laws That is what the
16 patent laws have always been for
17 This is not such a patent And the reason
18 for that is this is a preshyBilski set of patents These
19 were prosecuted under the old State Street test where
20 all the applicant had to claim was a result
21 JUSTICE KENNEDY Would you give me shyshy
22 again you already did it once shyshy an example of a
23 business process patent shyshy of a business process idea
24 and invention that is patentable
25 MR PERRY Your Honor there are many
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1 examples One would be a technological solution to a
2 business problem So that for example shyshy Ill give a
3 different example There are many applications today
4 The Court may be familiar with streaming video to watch
5 video on your computer
6 It is not possible to get enough data
7 through existing lines in its raw format The data has
8 to be manipulated in order to see live video So if you
9 want to watch TV on your phone for example
10 Those algorithms those inventions are
11 undoubtedly technological And if they are used in a
12 trading platform or a hedging system or something else
13 that wouldnt disable them And this is what the Diehr
14 case shyshy
15 JUSTICE KENNEDY Well I shyshy I shyshy in my
16 language Ive called that mechanical rather than
17 process Can you give me an example of process
18 MR PERRY Yes Your Honor The process in
19 that example would be a computer running the particular
20 data compression algorithm
21 JUSTICE KENNEDY But thats how to make
22 a shyshy thats how to make a machine work better
23 MR PERRY Yes Your Honor
24 JUSTICE KENNEDY Im asking you Is there
25 any business process any business activity that is
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34
1 susceptible to a patent a pure patent innovations that
2 deserve patents
3 MR PERRY Your Honor again a
4 technological solution to a business problem could well
5 be whether its a method or a process is equivalent
6 Again Congress said method in a corresponding shyshy
7 JUSTICE KENNEDY Can you give me an
8 example
9 MR PERRY I thought the data compression
10 example was a good one Ill try an encryption
11 technology Many of these trading platforms you know
12 dealing with securities and money would require some
13 sort of security devices You could have a process for
14 securely transmitting data would be another computer
15 implemented technological solution to a business
16 problem Again nothing like that claimed here
17 JUSTICE SOTOMAYOR How about eshymail and
18 just word processing programs
19 MR PERRY Your Honor a program shyshy let me
20 try it this way to both of your questions In our view
21 if what is claimed as the inventive contribution under
22 Mayo shyshy in other words if we have an abstract idea as
23 we do here and what is claimed is the inventive
24 contribution for Step 2 is the computer then the
25 computer must be essential to that operation and
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1 represent an advancement in computer science or other
2 technology And we know thats not met here Justice
3 Sotomayor because shyshy
4 JUSTICE SOTOMAYOR So youre saying no to
5 eshymail and word processing
6 MR PERRY Your Honor I think at a
7 point shyshy
8 JUSTICE SOTOMAYOR They certainly have
9 functionality and shyshy and improvement of functionality
10 for the user
11 MR PERRY At a point in time in the past
12 I think both of those would have been technological
13 advances that were patentable
14 JUSTICE SOTOMAYOR How
15 MR PERRY Today shyshy because they would have
16 provided a technological solution to a then unmet
17 problem Today reciting and do it on a word processor
18 is no different than and do it on a typewriter or shyshy and
19 do it on a calculator
20 The inventive contribution component which
21 uses specifically the language of conventional and
22 routine and well understood will evolve with
23 technology Thats why its different than the abstract
24 idea component
25 And here we know that these patents dont
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1 claim anything that was not conventional well
2 understood and routine We went through that in great
3 detail and Alice has never disputed a word of it They
4 just say youre not supposed to do that analysis even
5 though the Court 9shy0 in Mayo said we should
6 And in this case its very important to
7 look at what Alices own experts said on the subject
8 This is not our expert This is Alices expert And
9 this is at Page 1327shy28 of the Joint Appendix It is
10 possible to do the business methods of maintaining
11 accounts adjusting accounts and providing an
12 instruction without a computer or other hardware
13 And then Justice Breyer directly to your
14 abacus If someone had thought of this invention
15 soshycalled invention 100 years ago they might have
16 implemented it in a nonelectronic manner using various
17 precomputing tools such as an abacus or handwritten
18 ledgers
19 We know from Benson the Courts seminal
20 computer implementation case that if you can do it by
21 head and hand then the computer doesnt add anything
22 inventive within the meaning of the 101 exception That
23 is the holding of Benson And the Court reiterated that
24 in Mayo
25 Flook said exactly the same thing If you
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1 can do it with pencil and paper then the computer is
2 not offering anything that the patent laws are or should
3 be concerned with
4 It is only where the method will not work
5 without a computer which is not these claims and where
6 the computer itself is doing something that the patent
7 law is willing to protect
8 CHIEF JUSTICE ROBERTS What if shyshy what if
9 you can do it without a computer but its going to
10 take you know 20 people a hundred years In other
11 words theoretically you can replicate what the
12 computer does shyshy
13 MR PERRY Two answers
14 CHIEF JUSTICE ROBERTS shyshy but its
15 impractical without looking to do it on the computer
16 MR PERRY Mr Chief Justice first these
17 claims literally read as Alice reads them on a single
18 transaction between two parties so its not 20 people
19 for a hundred years Its one person sitting in a room
20 so thats not a problem
21 Second if what is being claimed is the
22 necessary speed or efficiency or data crunching
23 capabilities if you will of a computer then it would
24 have to be claimed and theres nothing claimed here
25 All that is claimed shyshy and my friend is going to stand
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1 up on rebuttal and tell you all that the expert said
2 well what is claimed is a computer but its just a
3 computer It just says a computer configured too It
4 doesnt say that the computer actually has to shyshy
5 JUSTICE BREYER Yeah but the trouble with
6 that particular test is as I think partly the Chief
7 Justice said how long et cetera and then add to that
8 though you could do it without a computer what happens
9 at the end of the line is the automobile engine goes off
10 or it begins to sputter or it turns left
11 You see its possible to take Archimedes shyshy
12 shyshy you know I use that example purposely to call
13 attention to the problem You can take those things
14 and youre not just saying apply it and youre not even
15 just saying shyshy you are saying use the computer but at
16 the end of the road something physical in the world
17 changes and everybody would say now thats shyshy that
18 will falls within I mean probably I mean my
19 hesitation shows Im looking for the right words
20 MR PERRY Justice Breyer your point is
21 the reason that it is equally fallacious to suggest on
22 the one hand as Alice and IBM does that simply
23 reciting a computer is a magic key that gets you through
24 101 and you never have to any other inquiry and what
25 some of folks the amici on the other side say which
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1 is that computers or software are never eligible Both
2 of those things have to be wrong because what the Court
3 said in Bilski was future innovation is too uncertain
4 We are not going to do that as a Court And the Court
5 laid out an approach using abstract ideas in Bilski and
6 inventive contribution in Mayo that is flexible enough
7 to take into account that innovation and to deal with
8 particular claims in context which is why at the end
9 of the day we have to come back to these patents and
10 decide which shyshy
11 JUSTICE KAGAN Mr Perry before we get
12 back to these matters you said to Justice Scalia if a
13 patent sufficiently describes how a computer will
14 implement an idea then its patentable So how
15 sufficiently does one have to describe it What do we
16 want a judge to do at this threshold level in terms of
17 trying to figure out whether the description is
18 sufficient to get you past it
19 MR PERRY If I can answer in two steps
20 Justice Kagan First in the negative What the
21 applicant or patentee must do shyshy must not do is simply
22 describe the desired result That would take us back to
23 State Street That would simply say I claim a magic
24 box that buys high and sells low or vice versa I
25 suppose I claim a magic box for investing Thats what
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1 these patents do
2 Then to put it in the affirmative and in the
3 language of Mayo the claim has to recite something
4 significantly more something significantly more than
5 the abstract idea itself That would be a contextual
6 analysis based on the claims and specifications and file
7 history and we know that some devices some methods
8 some programming will pass that
9 It is not going to be a brightshyline rule and
10 thats one of the tugshyofshywar issues that this Court and
11 the Federal Circuit have been having in these cases
12 The Federal Circuit wants brightshyline rules All
13 computers are in or all computers are out
14 This Court has been more contextual This
15 Court has been more nuanced This Court has looked at
16 things in a more robust way
17 JUSTICE KAGAN Youre not suggesting that
18 specific code is necessary
19 MR PERRY No Your Honor I think the shyshy
20 actual description of the programming is a 112 problem
21 I agree with that A 112 issue That is the realm of
22 the written description requirement What is a 101
23 problem is it is on the applicant to do more than simply
24 describe the results simply say A magic box that does
25 intermediate settlement And we can tie that back to
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1 this particular prosecution the 510 patent which is
2 the method patent
3 The examiner rejected it Under Section
4 101 the examiner said this is an abstract idea You
5 cant have this patent And the only change that this
6 applicant made was to add in the adjusting step
7 electronic adjustment It put in one word
8 electronic adjustment And under State Street which
9 is what this patent is prosecuted under that was
10 enough because the result of adjusting run through a
11 computer is enough
12 Under current law that cant be enough
13 That just cant get a patent over the line because this
14 Court said in Mayo and I got to quote this language
15 Simply implementing a fundamental principle on a
16 physical machine namely a computer is not a patentable
17 application of that principle Thats all that Alice
18 has done
19 These are preshyBilski patents They never
20 should have been issued General Verrilli will stand up
21 and address that point And certainly under current
22 law shyshy one point on the AIA Congress did not send all
23 this to the administrative process Congress created
24 two avenues the courts and the PTO to use the
25 standards Essentially it ratified Bilski and Mayo and
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1 said we agree with what you all are doing at the
2 Supreme Court and the existing standards are good enough
3 for us This is a judicial problem And that is a good
4 reason The abstract shyshy
5 JUSTICE GINSBURG The Federal Circuit in
6 this case split in many ways and it had our decisions
7 to deal with You said given Bilski and Mayo this is
8 an easy case What is the instruction that escaped a
9 good number of judges on the Federal Circuit How would
10 you state the rule
11 MR PERRY Your Honor I think theres a
12 significant element to the Federal Circuit that
13 disagrees with Mayo and has been resistant in applying
14 it Chief Judge shyshy former Chief Judge Michelle filed a
15 brief in this Court essentially saying Mayo is a
16 lifeshysciences case You should limit it to that because
17 if you apply it to everything else then these patents
18 are no good
19 Mayo we submit is a technologyshyneutral
20 industryshyneutral exceptionshyneutral framework that can
21 be used to answer all of these questions This is not
22 the death of software patents The software industry is
23 all before this Court saying this is fine with us
24 Every company in the United States practically except
25 for IBM is saying go ahead This will not affect
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1 software patents
2 Justice Ginsburg this Courts precedents
3 are clear They are unanimous They just need to be
4 applied To suggest that there is confusion that needs
5 to be addressed by retreating beating a retreat from
6 recent unanimous decisions would simply reward
7 intransigence difficulty refusal to adhere to what are
8 clear precedents because shyshy
9 JUSTICE KAGAN Should we be concerned
10 Mr Perry that there are old patents that in fact could
11 meet the test that you set forth but wont because they
12 were written in a different time and so used much more
13 general language
14 MR PERRY Your Honor the applicant or the
15 patent holder would have the opportunity to institute a
16 reexamination proceeding or some sort of administration
17 process to address that issue
18 And second it should be noted this is a
19 very small problem There are 2 million outstanding
20 patents in the United States In the last four fiscal
21 years there were 22000 infringement litigations
22 instituted but since Bilski there have only been 57
23 district court decisions on Section 101 issues There
24 have only been 12 Federal Circuit decisions total on
25 computer implementation
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1 We are talking about a group of patents
2 Justice Kagan thats way out at the tail end of
3 distribution Most patents never have a 101 challenge
4 This is not an issue with cotton gins and other things
5 This is a problem for the most marginal
6 most dubious most skeptical patents the ones that this
7 Court in Bilski shyshy and remember what Bilskis holding
8 is The majority said they are processes but it did
9 not say they are eligible
10 Thank you Mr Chief Justice
11 CHIEF JUSTICE ROBERTS Thank you counsel
12 General Verrilli
13 ORAL ARGUMENT OF DONALD B VERRILLI JR
14 ON BEHALF OF THE UNITED STATES AS AMICUS
15 CURIAE SUPPORTING RESPONDENTS
16 GENERAL VERRILLI Mr Chief Justice and
17 may it please the Court
18 An abstract idea does not become
19 patentshyeligible merely by tacking on an instruction to
20 use a computer to carry it out A computer makes a
21 difference under Section 101 when it imposes a
22 meaningful limit on the patent claim That occurs when
23 the claim is directed at improvement in computing
24 technology or an innovation that uses computing
25 technology to improve other technological functions
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1 Thats the test that we believe is most faithful to this
2 Courts precedents in Bilski and Mayo It keeps patents
3 within their traditional and appropriate domain and it
4 is capable of being administered consistently by Courts
5 and by PTO examiners
6 JUSTICE GINSBURG How do you answer the
7 argument that your view would extinguish businessshymethod
8 patents and make all software ineligible for patent
9 protection
10 GENERAL VERRILLI Yeah with shyshy let me
11 address software patents first because that I think is
12 obviously a significant question And its just not
13 correct to say that our approach would make software
14 patenting ineligible Any software patent that improves
15 the functioning of the computer technology is eligible
16 Any software patent that improves shyshy that is used to
17 improve another technology is eligible For example
18 the patent in the shyshy in the Diehr case is one in
19 which shyshy
20 JUSTICE SOTOMAYOR Why do we need to reach
21 this in that shyshy reach software patents at all in this
22 case
23 GENERAL VERRILLI Well shyshy
24 JUSTICE SOTOMAYOR Whats the necessity for
25 us to announce a general rule with respect to software
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1 There is no software being patented in this case
2 GENERAL VERRILLI Well I shyshy
3 JUSTICE SOTOMAYOR Theres a systems
4 GENERAL VERRILLI Well I shyshy I think shyshy
5 well they shyshy they shyshy theres a process being and shyshy and
6 one can think of software patents as process patents
7 And I think thats why my friends on the other side are
8 saying the sky is falling because they shyshy they are
9 interpreting what were saying about that when a
10 computer makes shyshy when a computers involvement makes
11 something eligible under 101 its calling those into
12 question and it doesnt
13 JUSTICE SOTOMAYOR Do you think we have to
14 reach the patentability of software to answer this case
15 GENERAL VERRILLI Well I think you can shyshy
16 I think the answer to that question is no not
17 necessarily You can decide it by saying that shyshy that
18 Bilski answers the question whether this is an abstract
19 idea because this form of hedging is really no
20 different than the form of hedging as a conceptual
21 matter at issue in Bilski And then Mayo answers the
22 question of whether the use of a computer in this case
23 adds enough to the abstract idea beyond conventional
24 steps because here all we have after all is just
25 conventional use of computing technology no computer
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1 innovation such that you dont qualify under 101 You
2 could take that approach
3 But it is important to the United States
4 that we shyshy and to our patent examiners that we get some
5 clarity if we can I think the clarity could come from
6 the text that I propose which I want to reiterate shyshy
7 JUSTICE SOTOMAYOR Well shyshy
8 JUSTICE BREYER Could shyshy could shyshy could you
9 go on with that because you were just getting to the
10 point where I think you say a computer improvement that
11 in fact leads to an improvement in harvesting cotton is
12 an improvement through a computer of technology so it
13 qualifies
14 But then I think you were going to say or I
15 got this also from the brief a computer improvement
16 that leads to an improvement in the methods of selling
17 bonds over the telephone is not an improvement in
18 technology reached by the computer Am I right about
19 the distinction youre making
20 GENERAL VERRILLI I dont think theres a
21 yes or no answer to that question
22 JUSTICE BREYER What is your view Yeah
23 what is shyshy how do we deal with just that problem
24 GENERAL VERRILLI If there is a genuine
25 innovation in the functioning of the computer shyshy
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1 JUSTICE BREYER Yes
2 GENERAL VERRILLI shyshy such that business
3 processes shyshy
4 JUSTICE BREYER Weve got that Yes yes
5 We got the computer But then it doesnt improve the
6 computer but rather it improves through the computer
7 the harvesting of cotton
8 Now youve got it in what you said was your
9 second category which is an improvement through the
10 computer of a technology And I thought in your brief
11 you were distinguishing an improvement through the
12 computer of a human activity that is not a technology
13 and in particular to pick an example of that
14 something in finance or something in business
15 Now am I right about the distinction youre
16 making
17 GENERAL VERRILLI Yeah that shyshy
18 JUSTICE BREYER If Im not right what is
19 the distinction
20 GENERAL VERRILLI That is generally the
21 line were drawing Frankly shyshy
22 JUSTICE BREYER And how is that justified
23 GENERAL VERRILLI I do want shyshy
24 JUSTICE BREYER That shyshy that is Judge Dyk
25 in shyshy in Bilski in the Federal circuit 4 people sort of
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1 picked it up maybe 5 didnt pick it up Would you say
2 a few words about it
3 GENERAL VERRILLI Sure About shyshy let me go
4 to Bilski there in that I do think while shyshy while
5 certainly the Court held that the term process got a
6 natural construction which could include business
7 methods it seems to me that thats not all the Court
8 said in Bilski The Court also said that it was
9 historically and traditionally quite rare that business
10 methods were patent eligible
11 It also said that shyshy that the shyshy that courts
12 and the PTO examiners should use the abstract ideas
13 exception to 101 to police the appropriate boundary
14 It also said that the
15 machineshyorshytransformation test that the United States
16 advocated remained a useful tool And of course that
17 directs to you seeing whether there is a technology
18 application
19 And of course the holding in Bilski was
20 that the shyshy the method for hedging risk was ineligible
21 because it was an abstract idea and I cant imagine
22 that if in Bilski the shyshy the claim had been exactly the
23 same but had added use a computer to carry out some of
24 these standard random analysis functions that are
25 claimed by the patent that you would have found it to
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1 be patent eligible
2 And I shyshy I would submit for the Court that
3 the key point here I think is that now given where
4 the Court shyshy what the Court has held in Bilski given
5 what its held in Mayo the abstract ideas exception is
6 really the only tool left to deal with what I shyshy what I
7 think I fairly read Bilski as saying is a significant
8 problem the proliferation of patents of business
9 methods
10 JUSTICE KENNEDY Is there an example that
11 you can give us of a shyshy what we can call a business
12 process that is patentable a process that doesnt
13 involve improving the workings of a computer
14 GENERAL VERRILLI I shyshy I think its going
15 to be difficult for me to do that I think for
16 example if you had a business method a process for
17 additional security pointshyofshysale credit card
18 transactions using particular encryption technology
19 that might well be patent eligible Its a technology
20 that it makes conduct of business more efficient or
21 effective
22 But there is a technological link here and
23 we do think thats critical to our shyshy to our point of
24 view with respect to the case And I shyshy and I do think
25 remember that when we say something is not patent
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1 eligible were not saying they cant do it Were
2 saying they cant monopolize it
3 And the concern in a situation like this one
4 is that if this is patent eligible its hard to see
5 why for example the first person who came up with a
6 frequent flier program wouldnt have been able to claim
7 a patent there because after all thats a business
8 method for improving customer loyalty implemented on a
9 computer
10 CHIEF JUSTICE ROBERTS General I shyshy you
11 mentioned a while ago the need for greater clarity and
12 certainty in this area And Im just wondering in your
13 brief youve got a nonshyexhaustive of factors to
14 consider and there are 6 different ones And Im just
15 doubtful that thats going to bring about greater
16 clarity and certainty
17 GENERAL VERRILLI I take shyshy I take the
18 point Mr Chief Justice but I think the key is that
19 they are all directed to answering the question of
20 whether the innovation that is claimed and is an
21 innovation in either A the improvement of a computers
22 functioning or B the use of computer technology to
23 improve the functioning of another technological
24 process and a case like Diehr would be in the latter
25 category
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1 And so I do think that thats the key
2 benchmark Thats the baseline Thats the test that
3 we do think can be applied clearly and consistently by
4 the courts or the PTO And it avoids the risk of things
5 like frequent flier programs or the Oakland As money
6 ball methods for evaluating the contributions in
7 individual baseball players make or any one of a host of
8 other things that our intuitions tell us just dont
9 belong in the patent system
10 Thats the shyshy drawing that line keeps them
11 out not drawing that line lets them in And with all
12 due respect I dont think that the novelty and
13 nonobviousness filters that 102 and 103 really deal with
14 that problem effectively because when you get to
15 nonobviousness in 103 for example youll be asking a
16 different question
17 If you take the frequent flier program you
18 would say well is this innovation in building consumer
19 loyalty something that would have been obvious to
20 somebody who runs an airline Its totally divorced
21 from the question of technology at that point and
22 therefore I dont think youre going to get the screen
23 that you need to get in order for the patent system to
24 be confined to its traditional and appropriate scope
25 If there are no further questions thank
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1 you
2 JUSTICE GINSBURG I have a question about
3 how do you identify an abstract concept The shyshy a
4 natural phenomenon a mathematical formula those are
5 easy to identify but there has been some confusion on
6 what qualifies as an abstract concept
7 GENERAL VERRILLI We would define
8 abstract shyshy an abstract concept as a claim that is not
9 directed to a concrete innovation in technology
10 science or the industrial arts So its the shyshy its
11 abstract in the sense that it is not a concrete
12 innovation in the traditional realm of patent law
13 Thank you
14 CHIEF JUSTICE ROBERTS Thank you General
15 Mr Phillips you have four minutes
16 remaining
17 REBUTTAL ARGUMENT OF CARTER G PHILLIPS
18 ON BEHALF OF THE PETITIONERS
19 MR PHILLIPS Thank you Mr Chief Justice
20 Id just like to make a few points
21 First of all with respect to the question
22 you asked which is looking at 159 et cetera all I can
23 tell you is that if you look at claim 33 it talks about
24 matched orders the matched orders that are described in
25 286 and 287 and then makes specific reference to 159
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1 and that flow chart thats there And its all designed
2 as a package Its only one element of the shyshy of the
3 invention but it is a central element and its an easy
4 one to understand And it goes well beyond simply the
5 notion of hedge shyshy hedge against settlement risk and do
6 it by a computer
7 JUSTICE SOTOMAYOR Your adversary says that
8 his shyshy the appendix to his brief are the only patents at
9 issue that the flow charts are not at issue in this
10 case
11 MR PHILLIPS Theres no basis for that
12 statement Your Honor There shyshy remember this went off
13 on a very truncated litigation process So theres shyshy
14 you know we shyshy we got cut off at the beginning of it
15 Theres been no construction of the shyshy of the claims
16 and shyshy and obviously these are specifications that go
17 to how you interpret the claim
18 JUSTICE SOTOMAYOR If we were to say that
19 there are no business patents shyshy
20 MR PHILLIPS Yes
21 JUSTICE SOTOMAYOR shyshy would your patent
22 survive at all
23 MR PHILLIPS No I dont shyshy I dont
24 believe so I think theres no question And you
25 know General Verrilli could not have been any plainer
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1 in his statement of how he wants to interpret the
2 abstract idea concept
3 JUSTICE SOTOMAYOR Yes he wants to say no
4 business patents
5 MR PHILLIPS No business shyshy just another
6 way of saying no business methods And you know the
7 Court rejected that And it seems to me extraordinary
8 to say Congress didnt reject no business methods in
9 101 but were going to do shyshy were going to manipulate
10 the judicial exception to accomplish precisely that same
11 thing It seems to me thats wholly inappropriate
12 Justice Ginsburg you asked my shyshy my friend
13 here you know whats his test He didnt answer that
14 question youll notice because he doesnt have an
15 answer His basic argument is whatever you do just
16 kill this patent
17 And if I were in his shoes I suppose Id
18 take that same position I think whats absolutely
19 clear is that the test ought to be one that is
20 structured as a very coarse filter not the kind of
21 filter that hes pushing for where it changes over time
22 I mean I thought his shyshy I thought his response to one
23 of the questions about eshymail and word processing that
24 Justice Sotomayor asked is over time it would change
25 Well thats exactly what 102 and 103 are for That is
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1 not the purpose of shyshy of Section 101
2 And then he uses the example of encryption
3 I guarantee you if we were arguing about encryption in
4 this case he would say to me that thats an abstract
5 principle because encryption is a concept thats been
6 around since time immemorial George Washington used
7 it Everybody has used encryption
8 And a question again thats not the
9 solution to these problems The question is how did we
10 go about doing it And we go beyond the basics of
11 simply saying use a computer and thats what we ask
12 this Court to focus on and to evaluate
13 As to the frequent flier program its
14 pretty clear to me that even though it was a novel idea
15 in some sense the concept itself would have been viewed
16 in shyshy in the KSR fashion as quite obvious as a means of
17 improving customer loyalty
18 There are solutions here Giving us 101
19 pass doesnt create a monopoly It just gets us to the
20 102 and 103 inquiries that are at the heart of what the
21 patent laws shyshy and 112 that are at the heart of what the
22 patent laws ought to be dealing with
23 If there are no further questions Your
24 Honor thank you
25 CHIEF JUSTICE ROBERTS Thank you counsel
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1 The case is submitted
2 (Whereupon at 1105 am the case in the
3 aboveshyentitled matter was submitted)
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
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25
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Official shy Subject to Final ReviewOfficial shy Subject to Final Review
58
A add 714 1023 algorithm 3320 41 automatically
As 525 3621 387 algorithms apply 72425 111
am 115 32 416 3013 3310 2019 281213 automobile 389
572 added 302 Alice 13 34 2822 3814 available 99
abacus 61213 4923 363 3717 4217 avenues 4124
710 1018 additional 5017 3822 4117 applying 4213 avoids 524
1325 3614 3617
address 4121 4317 4511
Alices 271 2919 3678
approach 226 395 4513 B
ability 1514 addressed 435 allow 94 472 B 121 29 4413
able 1511 167 addressing 181 allows 97 242 appropriate 5122
1919 516 adds 4623 amazing 2514 81516 1514 back 1621
aboveshyentitled adhere 437 amici 3825 453 4913 1922 2512
113 573 adjudication amicus 123 5224 3018 322
absolutely 125 241 210 4414 Archimedes 3991222
1215 159 adjusting 3611 analysis 424 281122 3811 4025
5518 41610 364 406 area 219 5112 ball 526
abstract 4267 adjustment 417 4924 argue 2518 Bank 17 35
48 6682023 418 analyze 1416 arguing 563 banks 95
721 8218 administered 1716 argument 114 bars 43
141920 1522 454 announce 4525 225812 33 baseball 527
165 181618 administration answer 119 37 41 144 based 423 406
2220 24925 4316 2219 247 18323 226 baseline 522
2621 277 administrative 3919 4221 26715 4413 basic 413 5515
2938 3422 171218 187 456 461416 457 5317 basically 1821
3523 395 242 4123 4721 551315 5515 2319
405 414 424 adopt 203 answering 5119 arguments basics 5610
4418 461823 adopted 31317 answers 3713 1415 basis 132 1512
491221 505 advancement 461821 arms 1625 1516 2719
53368811 351 anyway 1810 arrangements 5411
552 564 advances 3513 apparatus 2916 131 beating 435
accept 102 adversary 547 APPEARAN arrows 315 beginning 163
accomplish advice 1715 116 art 1919 5414
5510 advocated 4916 appears 820 arts 2124 5310 begins 3810
account 55 618 affect 4225 appendix 1910 aside 1422 157 behalf 11719
397 affirmative 402 311 326 369 asked 2314 122 24710
accounts 823 agent 52 3021 548 278 5322 214 38 2616
9356 3611 ago 318 2224 applicant 3220 551224 4414 5318
3611 3615 5111 3921 4023 asking 193 believe 1316
accurately 2413 agree 920 2021 416 4314 221213 273 1416 2421
acknowledges 221 2418 application 3324 5215 255 264 451
1121 4021 421 2623 4117 aspect 517 5424
act 99 2017 agrees 2812 4918 asserted 3113 belong 529
activities 229 ahead 4225 applications 311618 benchmark 522
activity 2122 AIA 2912 4122 333 asserting 325 Benson 361923
3325 4812 airline 5220 applied 434 attaching 124 best 161124
actual 4020 AL 18 523 attention 3813 better 1610 albeit 923 applies 31418 Attorney 2021 216 2819
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59
3322 brightshyline 409 2313 37 71 4338 5519 beyond 115 4012 5317 checks 618 5614
1312 4623 bring 5115 case 3412 46 Chief 339 clearly 211 251 544 5610 broad 248 116 1524 261217 3024 523
Bilski 313 46 broader 225 2022 213 31812 378 client 311416 415 1722 browsing 228 2211 2313 371416 386 close 2822 2224 2329 builder 2811 2625 311424 421414 4410 CLS 17 35 262020 271 building 5218 3314 36620 441116 5110 1120 2816 2999 built 2324 426816 5118 531419 coarse 247 3935 4125 business 168 451822 461 5625 5520 427 4322 1749 203 461422 5024 chits 611 code 1213 142 447 452 2124 222122 5124 5410 chronological 1916171720 461821 4825 2311 29613 564 5712 1512 2725 4018 49481922 32132323 cases 244 2816 chronologically coffee 1211 5047 3322525 4011 423 colleagues 116
Bilskis 447 34415 3610 catalogues 2512 circuit 2818 college 58 bit 323 48214 4969 262 401112 425 columns 325 blocks 54 508111620 categorically 42912 4324 come 108 234 Bloomberg 517 5419 202 4825 3017 399
2115 225 554568 category 489 circumstances 475 boat 2811 businessshymeth 5125 318 1515 comes 1318 bonds 4717 457 CBM 2913 claim 416 2418 2018 231 bothering 118 buy 183 cellphones 228 2423 2522 coming 923 bound 1521 buys 3924 central 95 543 264 27917 common 31120 boundary 4913 certain 1216 3019 3121 2157 bounds 1521 C certainly 518 32420 361 company 4224 box 392425 C 21 31 263 358 392325 403 competition
4024 cables 3012 4121 495 442223 4922 161011 Breyer 66823 calculator 3519 certainty 5112 516 53823 completely 921
74691923 call 3812 5011 5116 5417 1422 2320 85810 1012 called 721 275 cetera 387 claimed 41014 complex 126 1021 1523 3316 5322 281 3017 complicated 161418 171 calling 4611 Chakrabarty 34162123 1225 235 1922 2114 capabilities 2016 3721242425 3025 315 221216 239 3723 challenge 443 382 4925 component 2315 285 capable 141 change 186 5120 352024 293 3613 454 273 311 415 claims 1416 compression 38520 478 capture 2415 5524 171616 2419 309 3212 4722 4814 captures 2412 changes 3817 2424 2515 3320 349 48182224 card 5017 5521 2520 2648 computer 422
brief 211315 carefully 1725 chart 541 283 3118 516 621 710 2255 322 caricature 718 charted 2620 37517 398 71325 9113 4215 4715 72020 1417 charts 1911 406 5415 91824 1035 4810 5113 1716 549 clarity 4755 10725 1116 548 carry 4420 Charybdis 511116 124102024
briefs 1524 4923 1620 2619 class 59 13911 1479 1618 CARTER 117 checkbook 617 clear 1015 118 1421 15710
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1517 165 confess 1111 coterminous 4121 5324 181719 196 configured 383 2321 customer 518 describes 425 19814 206 confined 5224 cotton 914 444 5617 2918 3211 2025 211016 confirmed 2912 4711 487 cut 5414 3913 2117 2410 confusion 434 counsel 4411 description
D2521525 535 5625 3917 402022 D 312622 30522 Congress 178 countries 137 deserve 342 DC 1101719 31311 3210 1725 1856 course 719 designed 720
1223211 33519 1924 2014 1613 298 812 541 data 2917 309 34142425 2325 291213 3210 491619 desired 3922
30111214 351 361220 346 412223 court 1114 detail 363 3212 3367 3621 37156 558 3101317 detailed 1914 3320 34914 379121523 consequences 922 145 developed 2119 3722382334815 2011 1720 1939 device 207
dating 2953823 3913 consider 5114 2011216 devices 3413 day 612 813 411116 4325 consistently 2222 2321 407
910 399442020 4515 454 523 2618 27345 dicta 923 1012 deal 42023 46102225 constitutes 312 28718 299 Diehr 2322
172 187 397 4710121518 construction 31202122 3313 4518 427 47234725 48566 496 5415 334 36523 5124 506 5213481012 4923 consumer 5218 39244 4010 difference 921
dealing 4175013 51922 contains 327 40141515 2789 4421 1119 135546 5611 content 281417 4114 42215 different 421 151216 3412 computers 2819 4223 4323 79 919 1377 56224610 5121 context 2319 44717 4957 191 259 266
deals 814computers 243 398 498 50244 2888 3169 death 42221616 195 contextual 405 557 5612 3123 333 Debit 27212119 312 4014 Courts 3619 351823 4312 debiting 2718391 401313 contract 3115 432 452 4620 5114 decade 176computing contribution courts 2018 5216 decide 3910442324 4625 342124 3520 4124 454 difficult 817
4617concept 413 396 4911 524 159 5015 decision 161810 1419 contributions create 96 1712 difficulties 420
1811522 53368 526 241 251 difficulty 437 decisions 274552 56515 conventional 5619 direct 2721
426 43623 concepts 2944 3521 361 created 186 directed 4423 43242955 462325 244 4123 5119 539
declare 2010conceptual converting 141 creates 93 directions 319 default 27104620 copyrighted creation 518 directly 31415 define 537concern 513 1315 credit 231 322 2019 Departmentconcerned 373 Corporation 13 271021 5017 298 3613
122439 34 crediting 2718 directs 4917 depends 2520concerns 93 correct 4513 critical 5023 disable 3313 describe 58concrete 1118 correctly 2416 crunching 3722 disaggregate
1112 391522 253 53911 corresponding curiae 123 211 144 1520 4024conduct 5020 2720 2915 4415 disagree 513
described 717conducted 297 346 current 4112 disagrees 4213
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disclosure 328 413 302021 4220 figure 1146 discuss 164 economy 1516 ESQ 1171921 excerpted 323 311222 3917 discussion 299 effective 1223 236913 exhausted 1813 file 406 dispose 2625 5021 essence 211 exist 420 131 filed 4214 dispute 325 effectively 5214 essential 1224 existence 1119 fill 2818 disputed 3120 efficacy 1224 3425 175 filled 293
363 1517 essentially 2016 existing 337 filter 248 5520 distance 2311 efficiency 3722 261 4125 422 5521 distinction 415 efficient 5020 4215 exists 42 filters 5213
4719 481519 either 202 established expert 3688 finance 2124 distinguishing 5121 311919 381 4814
4811 electronic 262 establishing expertise 1210 financial 1225 distribution 4178 275 experts 2817 29517
443 electronically et 18 387 5322 367 fine 103 2223 district 4323 2525 evaluate 97 extent 1924 4223 divorced 5220 element 811 5612 2323 265 finished 133 doing 91315 4212 5423 evaluating 526 extinguish 457 first 1111 2718
148 182224 elevator 625 everybody 2017 extraordinarily 304 3716 237 376 421 712 2812 3817 234 3920 4511 5610 eligibility 2316 567 extraordinary 515 5321
domain 453 eligible 301 evolve 3522 557 fiscal 4320 DONALD 121 391 449 exact 236 five 18912
F29 4413 451517 4611 exactly 411 2214 326 face 248doubtful 5115 4910 50119 1012 1820 flexible 396 fact 515 617 draw 193 2221 5114 2521 3625 flier 516 525
1523 4310drawing 4821 eliminate 418 4922 5525 5217 5613 4711521011 22722 exaggerated 83 Flook 3625
factors 5113drawings 3117 embedded 1418 exaggeration flow 1911 541 fail 2419 272 3117 employ 75 1017 549 fairly 511 507 dubious 2915 enabled 1921 examiner 4134 fluctuation faithful 451446 encourages examiners 455 2711 fall 925 229 due 5212 132222 474 4912 focus 1013
242022 2910 Dyk 4824 encryption example 1912 5612 fallacious 38213410 5018 291 30918 folks 3825
E falling 468562357 3222 33239 follow 1714 E 21 311 falls 3818engaged 2122 331719 348 298 eshymail 228 familiar 334engine 389 3410 3812 form 461920
3417 355 far 2821engineering 59 4517 4813 format 337 5523 fashion 5616ensure 812 98 501016 515 formation 3116
earlier 822 faster 166enter 95 5215 562 former 4214 early 417 Federal 4011entire 186 examples 83 forms 2513 easy 511 1113 4012 4259 environment 297 331 formula 534
2810 428 4212 43241118 exception 317 forth 281 4311 535 543 4825equally 3821 42 235 3622 forward 1121
economic 2621 fell 2010equivalent 345 4913 505 found 1525 294 fiber 3012escaped 428 5510 4925
economics 413 fifth 2217escrow 52 exceptionshyneu founders 2513
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four 1720 182 48172023 5599 3312 461920 1016 123 18912 2216 493 5014 gold 6101114 4920 138 14610 2311 275 511017 537 134 held 46 495 141120 164 4320 5315 5314 5425 good 611 167 5045 181618 2220
framework Generals 204 238 3410 help 135 2621 277 4220 225 4223918 helpful 1525 2812 3223
Frankly 4821 generally 296 government hesitation 3819 3422 3524 frequent 516 4820 2167810 hey 139 3914 405
52517 5613 genuine 4724 governments high 3924 414 4418 friend 3725 George 566 211313 2210 hires 612 461923 4921
5512 getting 289 grab 618 historically 499 552 5614 friends 272 479 grain 624 711 history 1721 ideas 293 395
467 gin 914 great 132 362 407 4912 505 front 69 gins 444 greater 511115 holder 4315 identify 1323 function 425 Ginsburg 45 ground 31120 holding 3623 5335
821222324 131720 1719 2157 447 4919 imagine 69 91 1724 239 grounds 2456 holds 262022 4921
functionality 277 425 432 group 1210 home 510 immemorial 3599 456 532 441 Honor 1814 566
functioning 5512 guarantee 563 214 269 implement 911 4515 4725 give 2225 257 guess 51111 2722 282 102125 147 512223 281325 3221 171 2218 2921923 149 1510
functions 1323 33217 347 2414 3225 331823 165 181719 141 1918 5011 guy 711 34319 356 252 3914 4425 4924 given 61113 4019 4211 implementation
fundamental 427 5034 H 4314 5412 3620 4325 1115 249 giving 611 habit 610 5624 implemented 2621 4115 5618 hand 915 1923 hope 188 56 81518
fundamentally global 814 201 3621 hoping 2817 1018 3415 1312 1516 2725 3822 host 527 3616 518
further 51 117 go 510 1157 handwritten house 3021 implementing 2610 2823 161419 1922 3617 HUDshy1 3022 4115 291 5225 2314 256 happen 133 human 4812 important 243 5623 281123 291 happens 388 hundred 3710 366 473
future 393 316 4225 hard 201423 3719 imposes 4421 479 493 514 hundreds 2010 impractical
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1 And it goes even further than that and does
2 something that no escrow agent and shyshy and no
3 intermediated settlement that I know of shyshy settler that
4 I know of It actually blocks specific transactions
5 that in the shadow account would violate the terms of
6 the settlement that would ultimately be implemented
7 JUSTICE KENNEDY Well let me put it this
8 way If you describe that to a secondshyyear college
9 class in engineering and said heres shyshy heres my idea
10 now you go home and you program over this weekend my
11 guess is shyshy my guess is that that would be fairly easy
12 to program
13 MR PHILLIPS I dont disagree with it
14 Justice shyshy
15 JUSTICE KENNEDY So the fact that the
16 computer is involved it shyshy it seems to me is necessary
17 to make it work But the shyshy but the innovative aspect
18 is certainly not in the creation of the program to make
19 that work All youre talking about is shyshy if I can use
20 the word shyshy an idea
21 MR PHILLIPS I prefer not to use that word
22 for obvious reasons
23 (Laughter)
24 MR PHILLIPS But shyshy but if you shyshy but if
25 you look at the Solicitor shyshy
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1 JUSTICE KENNEDY Or shyshy or a method or a
2 process
3 MR PHILLIPS Right But shyshy and shyshy and
4 obviously methods and processes are precisely what
5 Section 101 permits to be subject shyshy
6 JUSTICE BREYER Why is that less abstract
7 MR PHILLIPS Im sorry
8 JUSTICE BREYER Why is that less abstract
9 I mean imagine King Tut sitting in front of the pyramid
10 where all his gold is stored and he has the habit of
11 giving chits away Good for the gold which is given at
12 the end of the day And he hires a man with an abacus
13 and when the abacus keeping track sees that hes given
14 away more gold than he is in storage he says stop
15 You see
16 Or my mother who used to look at my
17 checkbook when she saw that in fact I had written
18 more checks than I had in the account she would grab
19 it Stop You see
20 So what is it here thats less abstract that
21 the computer says stop
22 MR PHILLIPS It is shyshy
23 JUSTICE BREYER How is that less abstract
24 than King Tut if we had the same thing with a grain
25 elevator if we had the same thing with a reservoir of
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1 water if we had the same thing with my checkbook You
2 see the point
3 MR PHILLIPS I do see the point Justice
4 Breyer and it seems to me that it goes to the question
5 of the methodology youre going to employ
6 JUSTICE BREYER Methodology is just that
7 you said stop
8 MR PHILLIPS Well we could shyshy
9 JUSTICE BREYER So what we have different
10 here is the computer stops rather than the abacus man
11 stopping or my mother stopping or the guy that the grain
12 elevator has that says stop So just saying what shyshy is
13 that it In other words if you say computer stop you
14 have an invention Useful add shyshy but if you say mother
15 stop you dont
16 MR PHILLIPS No Well I mean again it
17 seems to me that in some ways what shyshy what you described
18 there is a caricature of what this invention is
19 JUSTICE BREYER Of course its a
20 caricature Its a caricature designed to suggest that
21 there is an abstract idea here Its called solvency
22 MR PHILLIPS But shyshy
23 JUSTICE BREYER And what you do is you take
24 the idea of solvency and you say apply it And you say
25 apply it through the computer
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1 Is that enough to make it not just the
2 abstract idea And now were at the heart of why I used
3 my exaggerated examples shyshy
4 MR PHILLIPS Right
5 JUSTICE BREYER shyshy because you will tell me
6 why shyshy
7 MR PHILLIPS Right
8 JUSTICE BREYER shyshy this is enough
9 MR PHILLIPS Right Because Justice
10 Breyer the shyshy the shyshy the concept here is not simply to
11 say stop Stop is obviously part of the element of it
12 But its also designed to ensure that at the
13 end of the day this transaction in the midst of
14 literally a global set of shyshy of deals that are going on
15 simultaneously will be implemented at the appropriate
16 time in the appropriate way And whatever else that may
17 be it seems to me its difficult to say thats an
18 abstract idea as implemented
19 JUSTICE SOTOMAYOR Im sorry But shyshy but
20 what it appears to be it sounds like youre trying to
21 revive the patenting of a function You used the word
22 function earlier and thats all Im seeing in this
23 patent is the function of reconciling accounts the
24 function of making sure theyre paid on time But in
25 what particular way other than saying do it through a
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1 computer is this something new and not function
2 MR PHILLIPS Well it does it through shyshy
3 it creates the shadow accounts because of the concerns
4 for security You dont shyshy youre not going to allow
5 somebody to enter into a central banks own accounts
6 You create the shadow accounts You monitor through the
7 software that allows you to do that You evaluate each
8 of the transactions to ensure that the settlement will
9 be available You do it sequentially and you act on it
10 by the end of the day or whenever the transaction is to
11 take place and you implement that transaction
12 JUSTICE SCALIA Why isnt it shyshy why isnt
13 doing it through a computer not enough I mean was the
14 cotton gin not an invention because it just means youre
15 doing through a machine what people used to do by hand
16 Its not an invention Its the same old same old
17 MR PHILLIPS Justice Scalia shyshy
18 JUSTICE SCALIA Why shyshy why is a computer
19 any different in that respect
20 MR PHILLIPS At one level I agree with you
21 completely There is no difference between them
22 This Court has however said on more than a
23 few occasions albeit in dicta that coming up with an
24 idea and then say use a computer is not sufficient
25 And what Im trying to suggest to you is we dont fall
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1 within that dicta
2 Now if you dont accept the dicta and you
3 say use a computer is fine then I think were done
4 JUSTICE SCALIA Well Im not saying use a
5 computer is shyshy is much of a novelty I mean thats shyshy
6 that goes to whether its novel or not If you just say
7 use a computer you havent invented anything But if
8 you come up with a serious program that shyshy that does it
9 then you know that may be novel But thats a novelty
10 issue isnt it
11 MR PHILLIPS To be sure Justice Scalia
12 JUSTICE BREYER And this is exactly the
13 question I really would like to you to focus on for me
14 Why is it shyshy and Im not saying this from a point of
15 view but it seems to me pretty clear that if what you
16 did was take the idea of solvency shyshy remember King Tut
17 Thats what I use the exaggeration shyshy and what you say
18 is implemented by having the abacus man keep track and
19 say stop okay shyshy
20 MR PHILLIPS Right
21 JUSTICE BREYER Then we implement it by
22 having somebody with a pencil and a piece of paper and
23 this is all that they add you see Say Have a man
24 with a pencil and a piece of paper keeping track and
25 saying stop or we say implement it in the computer
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1 which will automatically keep track and say stop are
2 they all enough Are some of them enough Whats the
3 rule
4 And you realize I couldnt figure out much
5 in Prometheus to go beyond what I thought was an obvious
6 case leaving it up to you and your colleagues to figure
7 out how to go further Am I making enough shyshy making
8 clear enough whats bothering me And Id really like
9 to get your answer to this
10 MR PHILLIPS And shyshy and look theres
11 no shyshy Ill be the first one to shyshy to confess that trying
12 to use language to describe these things is not all that
13 easy But the way I think you can meaningfully look at
14 this is to say that this is not simply something that
15 was a fundamental truth this is not something that
16 simply says use a computer Its not simply something
17 that says maintain solvency It shyshy it operates in a
18 much more specific and concrete environment where youre
19 dealing with a problem thats been in existence since
20 the 1970s a solution in the 1990s that CLS itself
21 acknowledges needed a solution and came forward with
22 their own solution that looks a lot like ours
23 JUSTICE KENNEDY But my shyshy my initial
24 question and I think I can work this into King Tut
25 is shyshy
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1 (Laughter)
2 JUSTICE KENNEDY shyshy is shyshy is whether or not
3 you could have patented that system idea process
4 method without attaching a computer program
5 MR PHILLIPS You cannot absolutely cannot
6 do that with this system because it is so complex and
7 so many interrelated parts
8 JUSTICE KENNEDY Suppose I thought shyshy and
9 again its just a thought because I dont have the
10 expertise shyshy that any computer group of people sitting
11 around a coffee shop in Silicon Valley could do this
12 over a weekend Suppose I thought that
13 MR PHILLIPS You mean wrote the code
14 JUSTICE KENNEDY Yes right
15 MR PHILLIPS Well thats absolutely shyshy
16 Im certain thats true
17 JUSTICE KENNEDY Well then shyshy then shyshy
18 MR PHILLIPS But thats true of almost all
19 software
20 JUSTICE KENNEDY Then why is the computer
21 program necessary to make the patent valid
22 MR PHILLIPS Well its shyshy its necessary
23 to make the invention effective As the Solicitor
24 General said the computer is essential to the efficacy
25 of this invention because of the complicated financial
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1 arrangements that exist and that can only be resolved on
2 a shyshy on a realtime basis Your abacus is great if you
3 happen to be waiting for the pyramids to be finished or
4 waiting for the gold to move in and out but it doesnt
5 help with you an abacus if youre dealing with literally
6 thousands of transactions simultaneously going on in
7 different countries at different points in time
8 JUSTICE KENNEDY But thats just an idea
9 hey lets use a computer
10 MR PHILLIPS But its not just shyshy I mean
11 obviously part of it is use the computer Justice
12 Kennedy But more fundamentally it goes beyond that
13 See I shyshy
14 JUSTICE SOTOMAYOR Is your software
15 copyrighted
16 MR PHILLIPS No I dont believe so
17 JUSTICE GINSBURG There is no special
18 software that comes with this shyshy thats part of this
19 patent is it shyshy is there
20 MR PHILLIPS No Justice Ginsburg what
21 we did here is what the Patent and Trademark Office
22 encourages us to do and encourages all software patent
23 writers to do which is to identify the functions that
24 you want to be provided for with the software and leave
25 it then to the software writers who I gather are you
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1 know quite capable of converting these functions into
2 very specific code
3 JUSTICE KAGAN Mr Phillips could you shyshy
4 could you disaggregate your argument for me Because
5 you just said look this Court has said its not
6 sufficient if you have an idea and then you say use a
7 computer to implement it right So are you saying that
8 your shyshy that shyshy are you saying that youre doing more
9 than saying use a computer to implement it or are you
10 saying that its shyshy that the idea itself is more than an
11 idea
12 MR PHILLIPS Yes Im saying shyshy
13 JUSTICE KAGAN Which part of what shyshy
14 MR PHILLIPS Im saying both actually I
15 mean Im making both of those arguments I shyshy I
16 believe that if you analyze the claims and you dont
17 caricature them and you dont strip them out of the
18 limitations that are embedded in there this is not some
19 kind of an abstract concept This is not some kind shyshy
20 its not an abstract idea Its a vary shyshy
21 JUSTICE KAGAN So putting the computer
22 stuff aside completely shyshy
23 MR PHILLIPS Right
24 JUSTICE KAGAN shyshy youre saying that youve
25 invented something or you shyshy
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1 MR PHILIPS Yes
2 JUSTICE KAGAN There is something that
3 youve patented that has shyshy that is not just simple use
4 a third party to do a settlement
5 MR PHILLIPS Right
6 JUSTICE KAGAN And what is that putting
7 the computer aside
8 MR PHILLIPS It is shyshy well shyshy and again
9 its difficult to do that because you absolutely need
10 the computer in order to implement this But the key to
11 the invention is the notion of being able
12 simultaneously dealing with it on a chronological basis
13 to stop transactions that will otherwise interfere with
14 the ability to settle on time and under the appropriate
15 circumstances And the only way you can do that in a
16 realtime basis when youre dealing with a global economy
17 is to use a computer It is necessary to the efficacy
18 of this
19 So in that sense I cant shyshy I cant
20 disaggregate it the way in some sense youre suggesting
21 It seems to me its bound up with in shyshy its bounds up
22 with the whole notion of is this an abstract concept
23 JUSTICE BREYER Can you in fact shyshy now
24 this is shyshy look there are 42 briefs in this case I
25 actually read them and I found them very very helpful
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1 up to the point where I have to make a decision because
2 theyre serious I mean you know shyshy now the problem
3 that I came away with is the one that youre beginning
4 to discuss that if you simply say take an idea thats
5 abstract and implement it on a computer there are shyshy
6 youre going to get it much faster youre going to be
7 able to do many many things and if thats good enough
8 there is a risk that you will take business in the
9 United States or large segments and instead of having
10 competition on price service and better production
11 methods well have competition on who has the best
12 patent lawyer You see where Im going on that one
13 MR PHILLIPS Yeah of course
14 JUSTICE BREYER And if you go the other way
15 and say never then what you do is you rule out real
16 inventions with computers
17 MR PHILLIPS Right
18 JUSTICE BREYER And so in those 42 briefs
19 there are a number of suggestions as to how to go
20 between Scylla and Charybdis Now I would like to
21 know shyshy I dont know if you can step back from your
22 representational model Thats a problem Youre all
23 we have now And shyshy and from my point of view I need
24 to know what in your opinion is the best way of sailing
25 between these two serious arms
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1 MR PHILLIPS Well Justice Breyer I guess
2 I would suggest to you that you might want to deal with
3 the problem you know as opposed to the problems you
4 dont know at this stage I mean we have had business
5 method patents and software patents in existence for
6 well over a decade and theyre obviously quite
7 significant in number And shyshy and we know what the
8 system is we have And Congress looked at that system
9 right and didnt say no to business methods patents
10 didnt say no to software patents instead said the
11 solution to this problem is to get it out of the
12 judicial process and create an administrative process
13 but leave the substantive standards intact
14 So my suggestion to you would be follow that
15 same advice a liberal interpretation of 101 and not a
16 caricature of the claims analyze the claims as written
17 and therefore say that the solution is 102 and 103 and
18 use the administrative process If you shyshy
19 JUSTICE GINSBURG Mr Phillips let me just
20 stop you there because four Justices of this Court did
21 not read that legislative history the way you do And
22 it was shyshy was in Bilski
23 MR PHILLIPS But this is postshyBilski
24 JUSTICE GINSBURG Justice Stevens went
25 carefully through that and he said Congress was
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1 reacting to a decision It had shyshy it was not addressing
2 101 So there are at least four Justices who say shyshy who
3 didnt buy that argument
4 MR PHILLIPS Well I mean it still seems
5 to me that the shyshy the natural inference is Congress did
6 not change 101 Congress created an entire
7 administrative system to deal with 101 102 and 103
8 And shyshy and I would hope shyshy
9 JUSTICE SCALIA And four is not five
10 anyway right
11 MR PHILLIPS Thats true
12 JUSTICE SCALIA Four is not five
13 MR PHILLIPS And youve exhausted my math
14 skills Your Honor
15 JUSTICE SCALIA By the way we shyshy we have
16 said that you cant take an abstract idea and then say
17 use a computer to implement it But we havent said
18 that you cant take an abstract idea and then say here
19 is how you use a computer to implement it shyshy
20 MR PHILLIPS Exactly
21 JUSTICE SCALIA shyshy which is basically what
22 youre doing
23 MR PHILLIPS And thats the argument were
24 doing and shyshy
25 JUSTICE SCALIA And thats a little
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1 different
2 MR PHILLIPS shyshy thats the line were
3 asking the Court to draw here
4 JUSTICE KAGAN Well how are you saying the
5 how Because I thought that your computers shyshy that your
6 patents really did just say do this on a computer as
7 opposed to saying anything substantive about how to do
8 it on a computer
9 MR PHILLIPS I would urge the Court to
10 look at Joint Appendix 159 285shy286 where it goes
11 through the flow charts This is shyshy and this is just a
12 specific example of the method by which you stop a
13 transaction and it goes through a varied series of
14 detailed steps and what the computer has to do in order
15 to do that It doesnt actually obviously put in the
16 code but thats what the PTO says dont do Dont put
17 in the code because nobody understands code so shyshy but
18 put in the functions and we know shyshy and we know that
19 someone skilled in the art will be able to put in the
20 code And if they arent if they cant do that then
21 its not enabled and thats a 112 problem
22 To go back Justice Breyer to your
23 question So on the one hand youve got a problem that
24 it seems to me Congress to some extent has said is okay
25 and weve got a solution and that solutions playing
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1 through On the other hand if this Court were to say
2 much more categorically either that theres no such
3 thing as business method patents or adopt the Solicitor
4 Generals interpretation which is to say that there
5 cannot be software unless the software somehow actually
6 improves the computer as opposed to software improving
7 every other device or any other mechanism that might be
8 out there
9 What we know is that this would inherently
10 declare and in one fell swoop hundreds of thousands of
11 patents invalid and the consequences of that it seems
12 to me are utterly unknowable And before the Court goes
13 down that path I would think it would think long and
14 hard about whether isnt that a judgment that Congress
15 ought to make And It seems to me in that sense youre
16 essentially where the Court was in Chakrabarty where
17 everybody was saying youve got to act in one way or the
18 other or the world comes to an end and the courts have
19 said well apply 101 directly
20 JUSTICE KENNEDY If we say that theres no
21 software patentability and agree with the Attorney
22 General do you lose in this case
23 MR PHILLIPS Well it would be very hard
24 for me to see how that shyshy how shyshy how I can get around
25 that particular problem because the computer is the
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1 essence of it so shyshy and a portion of it is clearly the
2 software So I think if you say there is no such thing
3 as software patentability I do lose in this case yes
4 Your Honor As do a whole lot of other people
5 JUSTICE KENNEDY Is there any common ground
6 between you and the government shyshy maybe a better
7 question to ask the government shyshy a common ground
8 between you and the government on something in the
9 software area thats patentable other than making the
10 computer itself work You understand the government to
11 say no software patents
12 MR PHILLIPS Thats the way I interpret
13 the governments shyshy the governments brief
14 JUSTICE BREYER It was like shyshy theres a
15 Bloomberg brief out here that was on this that said
16 no you can shyshy you can patent computer software when
17 its an improvement in the computer when its an
18 improvement in software when its an improvement in a
19 technology that is developed out of computers like
20 robotics when it is an improvement in a machine or
21 technology but you cannot improve it where it is simply
22 an improvement in an activity that is engaged in
23 primarily through mental processes But what they mean
24 by that is business finance and similar arts
25 Thats shyshy I mean thats shyshy it wasnt quite what shyshy I
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1 know Thats what I want to know what you dont agree
2 with about that because its a little more refined than
3 you suggested
4 MR PHILLIPS I read the Solicitor
5 Generals brief as broader than the Bloomberg brief
6 in shyshy in terms of the approach And IBMs argument is
7 if you knock out software patents you eliminate web
8 browsing word processing cellphones eshymail Those
9 are all activities that I dont think fall within the
10 meaning of the shyshy the meaning of the governments theory
11 of the case
12 JUSTICE BREYER But Im asking you shyshy Im
13 asking you what about this one that I just mentioned
14 You see I went through those five steps shyshy
15 MR PHILLIPS Right
16 JUSTICE BREYER shyshy and four of them you
17 could patent and the fifth one you cant
18 MR PHILLIPS Right But I shyshy and I guess
19 my answer to that is thats nowhere in the statute and
20 it doesnt seem to me to reflect an abstract idea Its
21 a shyshy its a line you draw that takes out business method
22 patents If the Court wants to eliminate business
23 method patents fine But you just said no to that in
24 Bilski two three terms ago
25 Now to be sure give the Solicitor General
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1 credit he comes here and says to you We didnt like
2 the result in Bilski we want you to say dont use
3 process in order to get there which is a statutory
4 interpretation come up with an extraordinarily
5 complicated way of looking at the exception and use that
6 to get to the exact same result
7 JUSTICE SOTOMAYOR Well youre doing a
8 very good job of proving shyshy
9 JUSTICE GINSBURG In Bilski Justice Breyer
10 did try to say that there wasnt that shyshy a whole lot of
11 distance between the four who thought business methods
12 were not patentable But he shyshy he also said something
13 else in shyshy in the other case Mayo Justice Scalia
14 asked you the question about doesnt that go to novelty
15 but didnt Justice Breyer say in Mayo that novelty can
16 be relevant to patent shyshy to patent eligibility He said
17 theres shyshy theres an overlap
18 MR PHILLIPS Well he said theres an
19 overlap Here in this context I think basically the
20 Respondents theory would mean that they are completely
21 coterminous And I dont think thats what the Court
22 meant And also we know from Diehr that theres got to
23 be at least some significant limitations on the extent
24 to which novelty has to be built into 101 That is the
25 province of 102 and 103 And as I said Congress
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1 modified the system of adjudication to create an
2 administrative mechanism that allows you to get to 102
3 and 103 And at least in context its important to
4 realize there have been 11 cases since that was created
5 9 of the 11 have been knocked down on 102 or 103 grounds
6 and not on 101 grounds And it seems to me thats the
7 answer to this problem is leave 101 as the coarse
8 filter If on its face it states these kinds of broad
9 abstract principles fundamental truths and even if it
10 says use a computer those should be struck down
11 JUSTICE SOTOMAYOR Which of the shyshy which of
12 the opinions below captures your position most
13 accurately
14 MR PHILLIPS I would guess it would be
15 Judge Moores opinion below that would capture ours most
16 correctly
17 JUSTICE SOTOMAYOR And if we were to think
18 your method claim is ineligible do you agree that your
19 systems and shyshy your medium and system claims fail as
20 well Do they rise and fall together
21 MR PHILLIPS No No I dont believe they
22 do rise and fall together I mean I think you could shyshy
23 if you wanted to interpret our medium claim shyshy I mean
24 our shyshy our method claims in a shyshy in particularly
25 abstract way I think you could still say that the
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1 system claims which clearly are shyshy are how to create a
2 computer system and how to implement it using that
3 method would be a much more concrete version of that in
4 a way that would take it out of 101 That said I
5 obviously believe that all of our claims satisfy 101
6 and should go on to the next stage
7 JUSTICE KAGAN Can I give you a
8 hypothetical Mr Phillips and you tell me how its
9 different or the same Lets say you know 30 years
10 somebody took a look around the world and said a lot of
11 people seem to order products by mail They get the
12 catalogues in the mail and then they send back their
13 return forms And lets say that one of the founders of
14 the Internet said wouldnt this be an amazing system
15 we could actually do this by computer and they had
16 patented that Is that the same
17 MR PHILLIPS I dont know if its the
18 same but I would shyshy I would argue that it could very
19 well be a patentable subject matter because shyshy but it
20 depends on how the claims play out
21 JUSTICE KAGAN No but exactly I mean
22 the claim would have said something along the lines of
23 you know theres this process by which people order
24 products and we want to do it over the Internet we want
25 to do it electronically and we will use a computer to
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1 do that to essentially take the process of mail order
2 catalogues and make it electronic
3 MR PHILLIPS I could certainly shyshy I think
4 I could write a claim shyshy a set of claims that I believe
5 would satisfy 101 And shyshy and to the extent that
6 youd shyshy that youd think those are no different than
7 the ones I have here then my argument is simply I think
8 I satisfy 101 with the claims we have before us Your
9 Honor
10 If there are no further questions then Id
11 like to reserve the rest of my time
12 CHIEF JUSTICE ROBERTS Thank you
13 Mr Phillips
14 Mr Perry
15 ORAL ARGUMENT OF MARK A PERRY
16 ON BEHALF OF THE RESPONDENTS
17 MR PERRY Mr Chief Justice and may it
18 please the Court
19 That path between Scylla and Charybdis was
20 charted in Bilski and Mayo Bilski holds that a
21 fundamental economic principle is an abstract idea and
22 Mayo holds that running such a principle on a computer
23 is quote not a patentable application of that
24 principle Those two propositions are sufficient to
25 dispose of this case
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1 If Bilski and Mayo stand Alices patents
2 fail Therefore Mr Phillips and his friends are
3 asking this Court to change the standard even though
4 this Court has had three unanimous decisions in the last
5 four terms establishing what the Court called a myriad
6 a wellshyestablished standard
7 On the abstract idea Justice Ginsburg you
8 asked Mr Phillips whats the difference between hedging
9 and this claim There is no difference This is
10 hedging It is hedging against credit default rather
11 than price fluctuation but it is simply hedging
12 And Mr Phillips stood up for 26 minutes and
13 never once referred to the patent Lets look at what
14 the inventor the soshycalled inventor said about this
15 invention This is at JA 293 to 94 in the
16 specification
17 This claim has simply two steps Its very
18 simple First debiting and crediting on a realtime
19 basis the relevant shadow records and second by
20 periodically affecting corresponding payment
21 instructions Those are direct quotes Debit credit
22 and pay Your Honor you cant get much more simple
23 than that
24 Mr Phillips suggests well we have
25 multilateral transactions global things chronological
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1 time zones and so forth None of those are claimed
2 Your Honor Those are all recited in specification
3 The claims read on a single transaction involving two
4 parties
5 JUSTICE BREYER Can I ask you at some
6 point not necessarily this second to say in my shyshy this
7 is just shyshy you know you have an opinion for a court
8 Different judges can have different interpretations
9 All youre getting is mine okay
10 But I think its pretty easy to say that
11 Archimedes cant just go to a boat builder and say
12 apply my idea All right Everybody agrees with that
13 But now we try to take that word apply and give
14 content to it
15 And what I suspect in my opinion Mayo did
16 and Bilski and the other cases is sketch an outer shell
17 of the content hoping that the experts you and the
18 other lawyers and the shyshy the circuit court could fill
19 in a little better than we had done the content of that
20 shell
21 So so far youre saying well this is
22 close enough to Archimedes saying apply it that we
23 neednt go further
24 Now will you at some point in the next few
25 minutes give me your impression of if it were necessary
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1 to go further what would the right words or example be
2 MR PERRY Your Honor as shyshy Justice
3 Breyer as to abstract ideas the PTO has filled in that
4 shell by listing economic concepts legal concepts
5 financial concepts teaching concepts dating and
6 interpersonal relationships and generally how business
7 should be conducted as examples of those things that are
8 likely abstract which of course all follow directly
9 from Bilski and the discussion this Court had in Bilski
10 And this patent shyshy these patents fall squarely within
11 that
12 Congress in the AIA confirmed that
13 reading Congress in the CBM method said business
14 methods that are subject to special scrutiny shyshy that is
15 dubious patents shyshy include methods and corresponding
16 apparatus which is what we have here that pertain to
17 data processing in the financial services industry and
18 do not offer a technological solution That describes
19 Alices patents to a letter Your Honor So that we
20 have shyshy
21 JUSTICE SOTOMAYOR What do you think is a
22 technological solution
23 MR PERRY Your Honor shyshy
24 JUSTICE SOTOMAYOR How could they if at
25 all written their patents to shyshy to make shyshy to make
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1 their software eligible What would shyshy what do they
2 need shyshy would have needed to have added
3 MR PERRY Justice Sotomayor they have no
4 software first Theyve never written software
5 Theyve never programmed a computer So thats a
6 nonexistent set
7 Second there are many technological
8 solutions to trading and settlement problems For
9 example data compression These shyshy these trading
10 platforms involve the movement of very large quantities
11 of data around the world The physical pipes that is
12 the fiber optic cables and data lines are limited
13 There are very sophisticated algorithms for both
14 security and speed to move data through the transmission
15 lines in novel and useful ways that could well be
16 patented
17 Nothing like that is claimed here To come
18 back to where I started if you look for example at
19 Claim 65 in the 510 patent as Mr Phillips reads it
20 it literally reads on a twoshyparty escrow to sell a
21 house so long as the escrow agent is typing this stuff
22 into the HUDshy1 using a computer That has nothing to do
23 with multilevel shyshy
24 CHIEF JUSTICE ROBERTS Well thats a
25 little more complicated He referred us to Joint
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1 Appendix Page 159 which is not a change in how
2 computers work But it is shyshy constitutes the
3 instructions about how to use the computer and where it
4 needs to be affected And just looking at it it looks
5 pretty complicated There are a lot of arrows and
6 they shyshy you know different things that go shyshy
7 (Laughter)
8 CHIEF JUSTICE ROBERTS Well but I mean
9 you know it shyshy in different directions And I
10 understand him to say that in each of those places
11 thats where the computer is needed
12 MR PERRY Mr Chief Justice Figure 16 has
13 nothing to do with the invention asserted against my
14 client in this case There are two inventions in this
15 patent One invention involving multilateral contract
16 formation is not asserted against my client And all of
17 these drawings pertain to that The only drawings that
18 pertain to the asserted claims are 25 and 33 to 37 And
19 that was established below and its established in this
20 Court And Mr Phillips has never disputed it
21 So the claim hes pointed the Court shyshy the
22 figure hes pointed the Court to has nothing to do with
23 the invention Its for a different invention that is
24 not at issue in this case
25 Remember there are hundreds and hundreds of
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1 pages of these patents They all pertain to the other
2 invention Thats why in the back of our red brief we
3 excerpted the very little bit that actually pertains to
4 this You sort of tack on patent shyshy the tack on claim
5 that Mr Phillips is asserting here Its 4 columns
6 Its less than five pages in the printed appendix that
7 actually pertains to this invention And it contains no
8 disclosure whatever
9 Justice Scalia to your question about how
10 the computer does it Of course a patent that
11 describes sufficiently how a computer does a new and
12 useful thing whether its data compression or any other
13 technological solution to a business problem a social
14 problem or a technological problem would be within the
15 realm of the shyshy of the patent laws That is what the
16 patent laws have always been for
17 This is not such a patent And the reason
18 for that is this is a preshyBilski set of patents These
19 were prosecuted under the old State Street test where
20 all the applicant had to claim was a result
21 JUSTICE KENNEDY Would you give me shyshy
22 again you already did it once shyshy an example of a
23 business process patent shyshy of a business process idea
24 and invention that is patentable
25 MR PERRY Your Honor there are many
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1 examples One would be a technological solution to a
2 business problem So that for example shyshy Ill give a
3 different example There are many applications today
4 The Court may be familiar with streaming video to watch
5 video on your computer
6 It is not possible to get enough data
7 through existing lines in its raw format The data has
8 to be manipulated in order to see live video So if you
9 want to watch TV on your phone for example
10 Those algorithms those inventions are
11 undoubtedly technological And if they are used in a
12 trading platform or a hedging system or something else
13 that wouldnt disable them And this is what the Diehr
14 case shyshy
15 JUSTICE KENNEDY Well I shyshy I shyshy in my
16 language Ive called that mechanical rather than
17 process Can you give me an example of process
18 MR PERRY Yes Your Honor The process in
19 that example would be a computer running the particular
20 data compression algorithm
21 JUSTICE KENNEDY But thats how to make
22 a shyshy thats how to make a machine work better
23 MR PERRY Yes Your Honor
24 JUSTICE KENNEDY Im asking you Is there
25 any business process any business activity that is
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1 susceptible to a patent a pure patent innovations that
2 deserve patents
3 MR PERRY Your Honor again a
4 technological solution to a business problem could well
5 be whether its a method or a process is equivalent
6 Again Congress said method in a corresponding shyshy
7 JUSTICE KENNEDY Can you give me an
8 example
9 MR PERRY I thought the data compression
10 example was a good one Ill try an encryption
11 technology Many of these trading platforms you know
12 dealing with securities and money would require some
13 sort of security devices You could have a process for
14 securely transmitting data would be another computer
15 implemented technological solution to a business
16 problem Again nothing like that claimed here
17 JUSTICE SOTOMAYOR How about eshymail and
18 just word processing programs
19 MR PERRY Your Honor a program shyshy let me
20 try it this way to both of your questions In our view
21 if what is claimed as the inventive contribution under
22 Mayo shyshy in other words if we have an abstract idea as
23 we do here and what is claimed is the inventive
24 contribution for Step 2 is the computer then the
25 computer must be essential to that operation and
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1 represent an advancement in computer science or other
2 technology And we know thats not met here Justice
3 Sotomayor because shyshy
4 JUSTICE SOTOMAYOR So youre saying no to
5 eshymail and word processing
6 MR PERRY Your Honor I think at a
7 point shyshy
8 JUSTICE SOTOMAYOR They certainly have
9 functionality and shyshy and improvement of functionality
10 for the user
11 MR PERRY At a point in time in the past
12 I think both of those would have been technological
13 advances that were patentable
14 JUSTICE SOTOMAYOR How
15 MR PERRY Today shyshy because they would have
16 provided a technological solution to a then unmet
17 problem Today reciting and do it on a word processor
18 is no different than and do it on a typewriter or shyshy and
19 do it on a calculator
20 The inventive contribution component which
21 uses specifically the language of conventional and
22 routine and well understood will evolve with
23 technology Thats why its different than the abstract
24 idea component
25 And here we know that these patents dont
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1 claim anything that was not conventional well
2 understood and routine We went through that in great
3 detail and Alice has never disputed a word of it They
4 just say youre not supposed to do that analysis even
5 though the Court 9shy0 in Mayo said we should
6 And in this case its very important to
7 look at what Alices own experts said on the subject
8 This is not our expert This is Alices expert And
9 this is at Page 1327shy28 of the Joint Appendix It is
10 possible to do the business methods of maintaining
11 accounts adjusting accounts and providing an
12 instruction without a computer or other hardware
13 And then Justice Breyer directly to your
14 abacus If someone had thought of this invention
15 soshycalled invention 100 years ago they might have
16 implemented it in a nonelectronic manner using various
17 precomputing tools such as an abacus or handwritten
18 ledgers
19 We know from Benson the Courts seminal
20 computer implementation case that if you can do it by
21 head and hand then the computer doesnt add anything
22 inventive within the meaning of the 101 exception That
23 is the holding of Benson And the Court reiterated that
24 in Mayo
25 Flook said exactly the same thing If you
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1 can do it with pencil and paper then the computer is
2 not offering anything that the patent laws are or should
3 be concerned with
4 It is only where the method will not work
5 without a computer which is not these claims and where
6 the computer itself is doing something that the patent
7 law is willing to protect
8 CHIEF JUSTICE ROBERTS What if shyshy what if
9 you can do it without a computer but its going to
10 take you know 20 people a hundred years In other
11 words theoretically you can replicate what the
12 computer does shyshy
13 MR PERRY Two answers
14 CHIEF JUSTICE ROBERTS shyshy but its
15 impractical without looking to do it on the computer
16 MR PERRY Mr Chief Justice first these
17 claims literally read as Alice reads them on a single
18 transaction between two parties so its not 20 people
19 for a hundred years Its one person sitting in a room
20 so thats not a problem
21 Second if what is being claimed is the
22 necessary speed or efficiency or data crunching
23 capabilities if you will of a computer then it would
24 have to be claimed and theres nothing claimed here
25 All that is claimed shyshy and my friend is going to stand
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1 up on rebuttal and tell you all that the expert said
2 well what is claimed is a computer but its just a
3 computer It just says a computer configured too It
4 doesnt say that the computer actually has to shyshy
5 JUSTICE BREYER Yeah but the trouble with
6 that particular test is as I think partly the Chief
7 Justice said how long et cetera and then add to that
8 though you could do it without a computer what happens
9 at the end of the line is the automobile engine goes off
10 or it begins to sputter or it turns left
11 You see its possible to take Archimedes shyshy
12 shyshy you know I use that example purposely to call
13 attention to the problem You can take those things
14 and youre not just saying apply it and youre not even
15 just saying shyshy you are saying use the computer but at
16 the end of the road something physical in the world
17 changes and everybody would say now thats shyshy that
18 will falls within I mean probably I mean my
19 hesitation shows Im looking for the right words
20 MR PERRY Justice Breyer your point is
21 the reason that it is equally fallacious to suggest on
22 the one hand as Alice and IBM does that simply
23 reciting a computer is a magic key that gets you through
24 101 and you never have to any other inquiry and what
25 some of folks the amici on the other side say which
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1 is that computers or software are never eligible Both
2 of those things have to be wrong because what the Court
3 said in Bilski was future innovation is too uncertain
4 We are not going to do that as a Court And the Court
5 laid out an approach using abstract ideas in Bilski and
6 inventive contribution in Mayo that is flexible enough
7 to take into account that innovation and to deal with
8 particular claims in context which is why at the end
9 of the day we have to come back to these patents and
10 decide which shyshy
11 JUSTICE KAGAN Mr Perry before we get
12 back to these matters you said to Justice Scalia if a
13 patent sufficiently describes how a computer will
14 implement an idea then its patentable So how
15 sufficiently does one have to describe it What do we
16 want a judge to do at this threshold level in terms of
17 trying to figure out whether the description is
18 sufficient to get you past it
19 MR PERRY If I can answer in two steps
20 Justice Kagan First in the negative What the
21 applicant or patentee must do shyshy must not do is simply
22 describe the desired result That would take us back to
23 State Street That would simply say I claim a magic
24 box that buys high and sells low or vice versa I
25 suppose I claim a magic box for investing Thats what
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1 these patents do
2 Then to put it in the affirmative and in the
3 language of Mayo the claim has to recite something
4 significantly more something significantly more than
5 the abstract idea itself That would be a contextual
6 analysis based on the claims and specifications and file
7 history and we know that some devices some methods
8 some programming will pass that
9 It is not going to be a brightshyline rule and
10 thats one of the tugshyofshywar issues that this Court and
11 the Federal Circuit have been having in these cases
12 The Federal Circuit wants brightshyline rules All
13 computers are in or all computers are out
14 This Court has been more contextual This
15 Court has been more nuanced This Court has looked at
16 things in a more robust way
17 JUSTICE KAGAN Youre not suggesting that
18 specific code is necessary
19 MR PERRY No Your Honor I think the shyshy
20 actual description of the programming is a 112 problem
21 I agree with that A 112 issue That is the realm of
22 the written description requirement What is a 101
23 problem is it is on the applicant to do more than simply
24 describe the results simply say A magic box that does
25 intermediate settlement And we can tie that back to
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1 this particular prosecution the 510 patent which is
2 the method patent
3 The examiner rejected it Under Section
4 101 the examiner said this is an abstract idea You
5 cant have this patent And the only change that this
6 applicant made was to add in the adjusting step
7 electronic adjustment It put in one word
8 electronic adjustment And under State Street which
9 is what this patent is prosecuted under that was
10 enough because the result of adjusting run through a
11 computer is enough
12 Under current law that cant be enough
13 That just cant get a patent over the line because this
14 Court said in Mayo and I got to quote this language
15 Simply implementing a fundamental principle on a
16 physical machine namely a computer is not a patentable
17 application of that principle Thats all that Alice
18 has done
19 These are preshyBilski patents They never
20 should have been issued General Verrilli will stand up
21 and address that point And certainly under current
22 law shyshy one point on the AIA Congress did not send all
23 this to the administrative process Congress created
24 two avenues the courts and the PTO to use the
25 standards Essentially it ratified Bilski and Mayo and
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1 said we agree with what you all are doing at the
2 Supreme Court and the existing standards are good enough
3 for us This is a judicial problem And that is a good
4 reason The abstract shyshy
5 JUSTICE GINSBURG The Federal Circuit in
6 this case split in many ways and it had our decisions
7 to deal with You said given Bilski and Mayo this is
8 an easy case What is the instruction that escaped a
9 good number of judges on the Federal Circuit How would
10 you state the rule
11 MR PERRY Your Honor I think theres a
12 significant element to the Federal Circuit that
13 disagrees with Mayo and has been resistant in applying
14 it Chief Judge shyshy former Chief Judge Michelle filed a
15 brief in this Court essentially saying Mayo is a
16 lifeshysciences case You should limit it to that because
17 if you apply it to everything else then these patents
18 are no good
19 Mayo we submit is a technologyshyneutral
20 industryshyneutral exceptionshyneutral framework that can
21 be used to answer all of these questions This is not
22 the death of software patents The software industry is
23 all before this Court saying this is fine with us
24 Every company in the United States practically except
25 for IBM is saying go ahead This will not affect
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1 software patents
2 Justice Ginsburg this Courts precedents
3 are clear They are unanimous They just need to be
4 applied To suggest that there is confusion that needs
5 to be addressed by retreating beating a retreat from
6 recent unanimous decisions would simply reward
7 intransigence difficulty refusal to adhere to what are
8 clear precedents because shyshy
9 JUSTICE KAGAN Should we be concerned
10 Mr Perry that there are old patents that in fact could
11 meet the test that you set forth but wont because they
12 were written in a different time and so used much more
13 general language
14 MR PERRY Your Honor the applicant or the
15 patent holder would have the opportunity to institute a
16 reexamination proceeding or some sort of administration
17 process to address that issue
18 And second it should be noted this is a
19 very small problem There are 2 million outstanding
20 patents in the United States In the last four fiscal
21 years there were 22000 infringement litigations
22 instituted but since Bilski there have only been 57
23 district court decisions on Section 101 issues There
24 have only been 12 Federal Circuit decisions total on
25 computer implementation
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1 We are talking about a group of patents
2 Justice Kagan thats way out at the tail end of
3 distribution Most patents never have a 101 challenge
4 This is not an issue with cotton gins and other things
5 This is a problem for the most marginal
6 most dubious most skeptical patents the ones that this
7 Court in Bilski shyshy and remember what Bilskis holding
8 is The majority said they are processes but it did
9 not say they are eligible
10 Thank you Mr Chief Justice
11 CHIEF JUSTICE ROBERTS Thank you counsel
12 General Verrilli
13 ORAL ARGUMENT OF DONALD B VERRILLI JR
14 ON BEHALF OF THE UNITED STATES AS AMICUS
15 CURIAE SUPPORTING RESPONDENTS
16 GENERAL VERRILLI Mr Chief Justice and
17 may it please the Court
18 An abstract idea does not become
19 patentshyeligible merely by tacking on an instruction to
20 use a computer to carry it out A computer makes a
21 difference under Section 101 when it imposes a
22 meaningful limit on the patent claim That occurs when
23 the claim is directed at improvement in computing
24 technology or an innovation that uses computing
25 technology to improve other technological functions
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1 Thats the test that we believe is most faithful to this
2 Courts precedents in Bilski and Mayo It keeps patents
3 within their traditional and appropriate domain and it
4 is capable of being administered consistently by Courts
5 and by PTO examiners
6 JUSTICE GINSBURG How do you answer the
7 argument that your view would extinguish businessshymethod
8 patents and make all software ineligible for patent
9 protection
10 GENERAL VERRILLI Yeah with shyshy let me
11 address software patents first because that I think is
12 obviously a significant question And its just not
13 correct to say that our approach would make software
14 patenting ineligible Any software patent that improves
15 the functioning of the computer technology is eligible
16 Any software patent that improves shyshy that is used to
17 improve another technology is eligible For example
18 the patent in the shyshy in the Diehr case is one in
19 which shyshy
20 JUSTICE SOTOMAYOR Why do we need to reach
21 this in that shyshy reach software patents at all in this
22 case
23 GENERAL VERRILLI Well shyshy
24 JUSTICE SOTOMAYOR Whats the necessity for
25 us to announce a general rule with respect to software
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1 There is no software being patented in this case
2 GENERAL VERRILLI Well I shyshy
3 JUSTICE SOTOMAYOR Theres a systems
4 GENERAL VERRILLI Well I shyshy I think shyshy
5 well they shyshy they shyshy theres a process being and shyshy and
6 one can think of software patents as process patents
7 And I think thats why my friends on the other side are
8 saying the sky is falling because they shyshy they are
9 interpreting what were saying about that when a
10 computer makes shyshy when a computers involvement makes
11 something eligible under 101 its calling those into
12 question and it doesnt
13 JUSTICE SOTOMAYOR Do you think we have to
14 reach the patentability of software to answer this case
15 GENERAL VERRILLI Well I think you can shyshy
16 I think the answer to that question is no not
17 necessarily You can decide it by saying that shyshy that
18 Bilski answers the question whether this is an abstract
19 idea because this form of hedging is really no
20 different than the form of hedging as a conceptual
21 matter at issue in Bilski And then Mayo answers the
22 question of whether the use of a computer in this case
23 adds enough to the abstract idea beyond conventional
24 steps because here all we have after all is just
25 conventional use of computing technology no computer
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1 innovation such that you dont qualify under 101 You
2 could take that approach
3 But it is important to the United States
4 that we shyshy and to our patent examiners that we get some
5 clarity if we can I think the clarity could come from
6 the text that I propose which I want to reiterate shyshy
7 JUSTICE SOTOMAYOR Well shyshy
8 JUSTICE BREYER Could shyshy could shyshy could you
9 go on with that because you were just getting to the
10 point where I think you say a computer improvement that
11 in fact leads to an improvement in harvesting cotton is
12 an improvement through a computer of technology so it
13 qualifies
14 But then I think you were going to say or I
15 got this also from the brief a computer improvement
16 that leads to an improvement in the methods of selling
17 bonds over the telephone is not an improvement in
18 technology reached by the computer Am I right about
19 the distinction youre making
20 GENERAL VERRILLI I dont think theres a
21 yes or no answer to that question
22 JUSTICE BREYER What is your view Yeah
23 what is shyshy how do we deal with just that problem
24 GENERAL VERRILLI If there is a genuine
25 innovation in the functioning of the computer shyshy
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1 JUSTICE BREYER Yes
2 GENERAL VERRILLI shyshy such that business
3 processes shyshy
4 JUSTICE BREYER Weve got that Yes yes
5 We got the computer But then it doesnt improve the
6 computer but rather it improves through the computer
7 the harvesting of cotton
8 Now youve got it in what you said was your
9 second category which is an improvement through the
10 computer of a technology And I thought in your brief
11 you were distinguishing an improvement through the
12 computer of a human activity that is not a technology
13 and in particular to pick an example of that
14 something in finance or something in business
15 Now am I right about the distinction youre
16 making
17 GENERAL VERRILLI Yeah that shyshy
18 JUSTICE BREYER If Im not right what is
19 the distinction
20 GENERAL VERRILLI That is generally the
21 line were drawing Frankly shyshy
22 JUSTICE BREYER And how is that justified
23 GENERAL VERRILLI I do want shyshy
24 JUSTICE BREYER That shyshy that is Judge Dyk
25 in shyshy in Bilski in the Federal circuit 4 people sort of
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1 picked it up maybe 5 didnt pick it up Would you say
2 a few words about it
3 GENERAL VERRILLI Sure About shyshy let me go
4 to Bilski there in that I do think while shyshy while
5 certainly the Court held that the term process got a
6 natural construction which could include business
7 methods it seems to me that thats not all the Court
8 said in Bilski The Court also said that it was
9 historically and traditionally quite rare that business
10 methods were patent eligible
11 It also said that shyshy that the shyshy that courts
12 and the PTO examiners should use the abstract ideas
13 exception to 101 to police the appropriate boundary
14 It also said that the
15 machineshyorshytransformation test that the United States
16 advocated remained a useful tool And of course that
17 directs to you seeing whether there is a technology
18 application
19 And of course the holding in Bilski was
20 that the shyshy the method for hedging risk was ineligible
21 because it was an abstract idea and I cant imagine
22 that if in Bilski the shyshy the claim had been exactly the
23 same but had added use a computer to carry out some of
24 these standard random analysis functions that are
25 claimed by the patent that you would have found it to
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1 be patent eligible
2 And I shyshy I would submit for the Court that
3 the key point here I think is that now given where
4 the Court shyshy what the Court has held in Bilski given
5 what its held in Mayo the abstract ideas exception is
6 really the only tool left to deal with what I shyshy what I
7 think I fairly read Bilski as saying is a significant
8 problem the proliferation of patents of business
9 methods
10 JUSTICE KENNEDY Is there an example that
11 you can give us of a shyshy what we can call a business
12 process that is patentable a process that doesnt
13 involve improving the workings of a computer
14 GENERAL VERRILLI I shyshy I think its going
15 to be difficult for me to do that I think for
16 example if you had a business method a process for
17 additional security pointshyofshysale credit card
18 transactions using particular encryption technology
19 that might well be patent eligible Its a technology
20 that it makes conduct of business more efficient or
21 effective
22 But there is a technological link here and
23 we do think thats critical to our shyshy to our point of
24 view with respect to the case And I shyshy and I do think
25 remember that when we say something is not patent
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1 eligible were not saying they cant do it Were
2 saying they cant monopolize it
3 And the concern in a situation like this one
4 is that if this is patent eligible its hard to see
5 why for example the first person who came up with a
6 frequent flier program wouldnt have been able to claim
7 a patent there because after all thats a business
8 method for improving customer loyalty implemented on a
9 computer
10 CHIEF JUSTICE ROBERTS General I shyshy you
11 mentioned a while ago the need for greater clarity and
12 certainty in this area And Im just wondering in your
13 brief youve got a nonshyexhaustive of factors to
14 consider and there are 6 different ones And Im just
15 doubtful that thats going to bring about greater
16 clarity and certainty
17 GENERAL VERRILLI I take shyshy I take the
18 point Mr Chief Justice but I think the key is that
19 they are all directed to answering the question of
20 whether the innovation that is claimed and is an
21 innovation in either A the improvement of a computers
22 functioning or B the use of computer technology to
23 improve the functioning of another technological
24 process and a case like Diehr would be in the latter
25 category
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1 And so I do think that thats the key
2 benchmark Thats the baseline Thats the test that
3 we do think can be applied clearly and consistently by
4 the courts or the PTO And it avoids the risk of things
5 like frequent flier programs or the Oakland As money
6 ball methods for evaluating the contributions in
7 individual baseball players make or any one of a host of
8 other things that our intuitions tell us just dont
9 belong in the patent system
10 Thats the shyshy drawing that line keeps them
11 out not drawing that line lets them in And with all
12 due respect I dont think that the novelty and
13 nonobviousness filters that 102 and 103 really deal with
14 that problem effectively because when you get to
15 nonobviousness in 103 for example youll be asking a
16 different question
17 If you take the frequent flier program you
18 would say well is this innovation in building consumer
19 loyalty something that would have been obvious to
20 somebody who runs an airline Its totally divorced
21 from the question of technology at that point and
22 therefore I dont think youre going to get the screen
23 that you need to get in order for the patent system to
24 be confined to its traditional and appropriate scope
25 If there are no further questions thank
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1 you
2 JUSTICE GINSBURG I have a question about
3 how do you identify an abstract concept The shyshy a
4 natural phenomenon a mathematical formula those are
5 easy to identify but there has been some confusion on
6 what qualifies as an abstract concept
7 GENERAL VERRILLI We would define
8 abstract shyshy an abstract concept as a claim that is not
9 directed to a concrete innovation in technology
10 science or the industrial arts So its the shyshy its
11 abstract in the sense that it is not a concrete
12 innovation in the traditional realm of patent law
13 Thank you
14 CHIEF JUSTICE ROBERTS Thank you General
15 Mr Phillips you have four minutes
16 remaining
17 REBUTTAL ARGUMENT OF CARTER G PHILLIPS
18 ON BEHALF OF THE PETITIONERS
19 MR PHILLIPS Thank you Mr Chief Justice
20 Id just like to make a few points
21 First of all with respect to the question
22 you asked which is looking at 159 et cetera all I can
23 tell you is that if you look at claim 33 it talks about
24 matched orders the matched orders that are described in
25 286 and 287 and then makes specific reference to 159
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1 and that flow chart thats there And its all designed
2 as a package Its only one element of the shyshy of the
3 invention but it is a central element and its an easy
4 one to understand And it goes well beyond simply the
5 notion of hedge shyshy hedge against settlement risk and do
6 it by a computer
7 JUSTICE SOTOMAYOR Your adversary says that
8 his shyshy the appendix to his brief are the only patents at
9 issue that the flow charts are not at issue in this
10 case
11 MR PHILLIPS Theres no basis for that
12 statement Your Honor There shyshy remember this went off
13 on a very truncated litigation process So theres shyshy
14 you know we shyshy we got cut off at the beginning of it
15 Theres been no construction of the shyshy of the claims
16 and shyshy and obviously these are specifications that go
17 to how you interpret the claim
18 JUSTICE SOTOMAYOR If we were to say that
19 there are no business patents shyshy
20 MR PHILLIPS Yes
21 JUSTICE SOTOMAYOR shyshy would your patent
22 survive at all
23 MR PHILLIPS No I dont shyshy I dont
24 believe so I think theres no question And you
25 know General Verrilli could not have been any plainer
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1 in his statement of how he wants to interpret the
2 abstract idea concept
3 JUSTICE SOTOMAYOR Yes he wants to say no
4 business patents
5 MR PHILLIPS No business shyshy just another
6 way of saying no business methods And you know the
7 Court rejected that And it seems to me extraordinary
8 to say Congress didnt reject no business methods in
9 101 but were going to do shyshy were going to manipulate
10 the judicial exception to accomplish precisely that same
11 thing It seems to me thats wholly inappropriate
12 Justice Ginsburg you asked my shyshy my friend
13 here you know whats his test He didnt answer that
14 question youll notice because he doesnt have an
15 answer His basic argument is whatever you do just
16 kill this patent
17 And if I were in his shoes I suppose Id
18 take that same position I think whats absolutely
19 clear is that the test ought to be one that is
20 structured as a very coarse filter not the kind of
21 filter that hes pushing for where it changes over time
22 I mean I thought his shyshy I thought his response to one
23 of the questions about eshymail and word processing that
24 Justice Sotomayor asked is over time it would change
25 Well thats exactly what 102 and 103 are for That is
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1 not the purpose of shyshy of Section 101
2 And then he uses the example of encryption
3 I guarantee you if we were arguing about encryption in
4 this case he would say to me that thats an abstract
5 principle because encryption is a concept thats been
6 around since time immemorial George Washington used
7 it Everybody has used encryption
8 And a question again thats not the
9 solution to these problems The question is how did we
10 go about doing it And we go beyond the basics of
11 simply saying use a computer and thats what we ask
12 this Court to focus on and to evaluate
13 As to the frequent flier program its
14 pretty clear to me that even though it was a novel idea
15 in some sense the concept itself would have been viewed
16 in shyshy in the KSR fashion as quite obvious as a means of
17 improving customer loyalty
18 There are solutions here Giving us 101
19 pass doesnt create a monopoly It just gets us to the
20 102 and 103 inquiries that are at the heart of what the
21 patent laws shyshy and 112 that are at the heart of what the
22 patent laws ought to be dealing with
23 If there are no further questions Your
24 Honor thank you
25 CHIEF JUSTICE ROBERTS Thank you counsel
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1 The case is submitted
2 (Whereupon at 1105 am the case in the
3 aboveshyentitled matter was submitted)
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
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25
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58
A add 714 1023 algorithm 3320 41 automatically
As 525 3621 387 algorithms apply 72425 111
am 115 32 416 3013 3310 2019 281213 automobile 389
572 added 302 Alice 13 34 2822 3814 available 99
abacus 61213 4923 363 3717 4217 avenues 4124
710 1018 additional 5017 3822 4117 applying 4213 avoids 524
1325 3614 3617
address 4121 4317 4511
Alices 271 2919 3678
approach 226 395 4513 B
ability 1514 addressed 435 allow 94 472 B 121 29 4413
able 1511 167 addressing 181 allows 97 242 appropriate 5122
1919 516 adds 4623 amazing 2514 81516 1514 back 1621
aboveshyentitled adhere 437 amici 3825 453 4913 1922 2512
113 573 adjudication amicus 123 5224 3018 322
absolutely 125 241 210 4414 Archimedes 3991222
1215 159 adjusting 3611 analysis 424 281122 3811 4025
5518 41610 364 406 area 219 5112 ball 526
abstract 4267 adjustment 417 4924 argue 2518 Bank 17 35
48 6682023 418 analyze 1416 arguing 563 banks 95
721 8218 administered 1716 argument 114 bars 43
141920 1522 454 announce 4525 225812 33 baseball 527
165 181618 administration answer 119 37 41 144 based 423 406
2220 24925 4316 2219 247 18323 226 baseline 522
2621 277 administrative 3919 4221 26715 4413 basic 413 5515
2938 3422 171218 187 456 461416 457 5317 basically 1821
3523 395 242 4123 4721 551315 5515 2319
405 414 424 adopt 203 answering 5119 arguments basics 5610
4418 461823 adopted 31317 answers 3713 1415 basis 132 1512
491221 505 advancement 461821 arms 1625 1516 2719
53368811 351 anyway 1810 arrangements 5411
552 564 advances 3513 apparatus 2916 131 beating 435
accept 102 adversary 547 APPEARAN arrows 315 beginning 163
accomplish advice 1715 116 art 1919 5414
5510 advocated 4916 appears 820 arts 2124 5310 begins 3810
account 55 618 affect 4225 appendix 1910 aside 1422 157 behalf 11719
397 affirmative 402 311 326 369 asked 2314 122 24710
accounts 823 agent 52 3021 548 278 5322 214 38 2616
9356 3611 ago 318 2224 applicant 3220 551224 4414 5318
3611 3615 5111 3921 4023 asking 193 believe 1316
accurately 2413 agree 920 2021 416 4314 221213 273 1416 2421
acknowledges 221 2418 application 3324 5215 255 264 451
1121 4021 421 2623 4117 aspect 517 5424
act 99 2017 agrees 2812 4918 asserted 3113 belong 529
activities 229 ahead 4225 applications 311618 benchmark 522
activity 2122 AIA 2912 4122 333 asserting 325 Benson 361923
3325 4812 airline 5220 applied 434 attaching 124 best 161124
actual 4020 AL 18 523 attention 3813 better 1610 albeit 923 applies 31418 Attorney 2021 216 2819
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59
3322 brightshyline 409 2313 37 71 4338 5519 beyond 115 4012 5317 checks 618 5614
1312 4623 bring 5115 case 3412 46 Chief 339 clearly 211 251 544 5610 broad 248 116 1524 261217 3024 523
Bilski 313 46 broader 225 2022 213 31812 378 client 311416 415 1722 browsing 228 2211 2313 371416 386 close 2822 2224 2329 builder 2811 2625 311424 421414 4410 CLS 17 35 262020 271 building 5218 3314 36620 441116 5110 1120 2816 2999 built 2324 426816 5118 531419 coarse 247 3935 4125 business 168 451822 461 5625 5520 427 4322 1749 203 461422 5024 chits 611 code 1213 142 447 452 2124 222122 5124 5410 chronological 1916171720 461821 4825 2311 29613 564 5712 1512 2725 4018 49481922 32132323 cases 244 2816 chronologically coffee 1211 5047 3322525 4011 423 colleagues 116
Bilskis 447 34415 3610 catalogues 2512 circuit 2818 college 58 bit 323 48214 4969 262 401112 425 columns 325 blocks 54 508111620 categorically 42912 4324 come 108 234 Bloomberg 517 5419 202 4825 3017 399
2115 225 554568 category 489 circumstances 475 boat 2811 businessshymeth 5125 318 1515 comes 1318 bonds 4717 457 CBM 2913 claim 416 2418 2018 231 bothering 118 buy 183 cellphones 228 2423 2522 coming 923 bound 1521 buys 3924 central 95 543 264 27917 common 31120 boundary 4913 certain 1216 3019 3121 2157 bounds 1521 C certainly 518 32420 361 company 4224 box 392425 C 21 31 263 358 392325 403 competition
4024 cables 3012 4121 495 442223 4922 161011 Breyer 66823 calculator 3519 certainty 5112 516 53823 completely 921
74691923 call 3812 5011 5116 5417 1422 2320 85810 1012 called 721 275 cetera 387 claimed 41014 complex 126 1021 1523 3316 5322 281 3017 complicated 161418 171 calling 4611 Chakrabarty 34162123 1225 235 1922 2114 capabilities 2016 3721242425 3025 315 221216 239 3723 challenge 443 382 4925 component 2315 285 capable 141 change 186 5120 352024 293 3613 454 273 311 415 claims 1416 compression 38520 478 capture 2415 5524 171616 2419 309 3212 4722 4814 captures 2412 changes 3817 2424 2515 3320 349 48182224 card 5017 5521 2520 2648 computer 422
brief 211315 carefully 1725 chart 541 283 3118 516 621 710 2255 322 caricature 718 charted 2620 37517 398 71325 9113 4215 4715 72020 1417 charts 1911 406 5415 91824 1035 4810 5113 1716 549 clarity 4755 10725 1116 548 carry 4420 Charybdis 511116 124102024
briefs 1524 4923 1620 2619 class 59 13911 1479 1618 CARTER 117 checkbook 617 clear 1015 118 1421 15710
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1517 165 confess 1111 coterminous 4121 5324 181719 196 configured 383 2321 customer 518 describes 425 19814 206 confined 5224 cotton 914 444 5617 2918 3211 2025 211016 confirmed 2912 4711 487 cut 5414 3913 2117 2410 confusion 434 counsel 4411 description
D2521525 535 5625 3917 402022 D 312622 30522 Congress 178 countries 137 deserve 342 DC 1101719 31311 3210 1725 1856 course 719 designed 720
1223211 33519 1924 2014 1613 298 812 541 data 2917 309 34142425 2325 291213 3210 491619 desired 3922
30111214 351 361220 346 412223 court 1114 detail 363 3212 3367 3621 37156 558 3101317 detailed 1914 3320 34914 379121523 consequences 922 145 developed 2119 3722382334815 2011 1720 1939 device 207
dating 2953823 3913 consider 5114 2011216 devices 3413 day 612 813 411116 4325 consistently 2222 2321 407
910 399442020 4515 454 523 2618 27345 dicta 923 1012 deal 42023 46102225 constitutes 312 28718 299 Diehr 2322
172 187 397 4710121518 construction 31202122 3313 4518 427 47234725 48566 496 5415 334 36523 5124 506 5213481012 4923 consumer 5218 39244 4010 difference 921
dealing 4175013 51922 contains 327 40141515 2789 4421 1119 135546 5611 content 281417 4114 42215 different 421 151216 3412 computers 2819 4223 4323 79 919 1377 56224610 5121 context 2319 44717 4957 191 259 266
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1 JUSTICE KENNEDY Or shyshy or a method or a
2 process
3 MR PHILLIPS Right But shyshy and shyshy and
4 obviously methods and processes are precisely what
5 Section 101 permits to be subject shyshy
6 JUSTICE BREYER Why is that less abstract
7 MR PHILLIPS Im sorry
8 JUSTICE BREYER Why is that less abstract
9 I mean imagine King Tut sitting in front of the pyramid
10 where all his gold is stored and he has the habit of
11 giving chits away Good for the gold which is given at
12 the end of the day And he hires a man with an abacus
13 and when the abacus keeping track sees that hes given
14 away more gold than he is in storage he says stop
15 You see
16 Or my mother who used to look at my
17 checkbook when she saw that in fact I had written
18 more checks than I had in the account she would grab
19 it Stop You see
20 So what is it here thats less abstract that
21 the computer says stop
22 MR PHILLIPS It is shyshy
23 JUSTICE BREYER How is that less abstract
24 than King Tut if we had the same thing with a grain
25 elevator if we had the same thing with a reservoir of
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1 water if we had the same thing with my checkbook You
2 see the point
3 MR PHILLIPS I do see the point Justice
4 Breyer and it seems to me that it goes to the question
5 of the methodology youre going to employ
6 JUSTICE BREYER Methodology is just that
7 you said stop
8 MR PHILLIPS Well we could shyshy
9 JUSTICE BREYER So what we have different
10 here is the computer stops rather than the abacus man
11 stopping or my mother stopping or the guy that the grain
12 elevator has that says stop So just saying what shyshy is
13 that it In other words if you say computer stop you
14 have an invention Useful add shyshy but if you say mother
15 stop you dont
16 MR PHILLIPS No Well I mean again it
17 seems to me that in some ways what shyshy what you described
18 there is a caricature of what this invention is
19 JUSTICE BREYER Of course its a
20 caricature Its a caricature designed to suggest that
21 there is an abstract idea here Its called solvency
22 MR PHILLIPS But shyshy
23 JUSTICE BREYER And what you do is you take
24 the idea of solvency and you say apply it And you say
25 apply it through the computer
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1 Is that enough to make it not just the
2 abstract idea And now were at the heart of why I used
3 my exaggerated examples shyshy
4 MR PHILLIPS Right
5 JUSTICE BREYER shyshy because you will tell me
6 why shyshy
7 MR PHILLIPS Right
8 JUSTICE BREYER shyshy this is enough
9 MR PHILLIPS Right Because Justice
10 Breyer the shyshy the shyshy the concept here is not simply to
11 say stop Stop is obviously part of the element of it
12 But its also designed to ensure that at the
13 end of the day this transaction in the midst of
14 literally a global set of shyshy of deals that are going on
15 simultaneously will be implemented at the appropriate
16 time in the appropriate way And whatever else that may
17 be it seems to me its difficult to say thats an
18 abstract idea as implemented
19 JUSTICE SOTOMAYOR Im sorry But shyshy but
20 what it appears to be it sounds like youre trying to
21 revive the patenting of a function You used the word
22 function earlier and thats all Im seeing in this
23 patent is the function of reconciling accounts the
24 function of making sure theyre paid on time But in
25 what particular way other than saying do it through a
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1 computer is this something new and not function
2 MR PHILLIPS Well it does it through shyshy
3 it creates the shadow accounts because of the concerns
4 for security You dont shyshy youre not going to allow
5 somebody to enter into a central banks own accounts
6 You create the shadow accounts You monitor through the
7 software that allows you to do that You evaluate each
8 of the transactions to ensure that the settlement will
9 be available You do it sequentially and you act on it
10 by the end of the day or whenever the transaction is to
11 take place and you implement that transaction
12 JUSTICE SCALIA Why isnt it shyshy why isnt
13 doing it through a computer not enough I mean was the
14 cotton gin not an invention because it just means youre
15 doing through a machine what people used to do by hand
16 Its not an invention Its the same old same old
17 MR PHILLIPS Justice Scalia shyshy
18 JUSTICE SCALIA Why shyshy why is a computer
19 any different in that respect
20 MR PHILLIPS At one level I agree with you
21 completely There is no difference between them
22 This Court has however said on more than a
23 few occasions albeit in dicta that coming up with an
24 idea and then say use a computer is not sufficient
25 And what Im trying to suggest to you is we dont fall
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1 within that dicta
2 Now if you dont accept the dicta and you
3 say use a computer is fine then I think were done
4 JUSTICE SCALIA Well Im not saying use a
5 computer is shyshy is much of a novelty I mean thats shyshy
6 that goes to whether its novel or not If you just say
7 use a computer you havent invented anything But if
8 you come up with a serious program that shyshy that does it
9 then you know that may be novel But thats a novelty
10 issue isnt it
11 MR PHILLIPS To be sure Justice Scalia
12 JUSTICE BREYER And this is exactly the
13 question I really would like to you to focus on for me
14 Why is it shyshy and Im not saying this from a point of
15 view but it seems to me pretty clear that if what you
16 did was take the idea of solvency shyshy remember King Tut
17 Thats what I use the exaggeration shyshy and what you say
18 is implemented by having the abacus man keep track and
19 say stop okay shyshy
20 MR PHILLIPS Right
21 JUSTICE BREYER Then we implement it by
22 having somebody with a pencil and a piece of paper and
23 this is all that they add you see Say Have a man
24 with a pencil and a piece of paper keeping track and
25 saying stop or we say implement it in the computer
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1 which will automatically keep track and say stop are
2 they all enough Are some of them enough Whats the
3 rule
4 And you realize I couldnt figure out much
5 in Prometheus to go beyond what I thought was an obvious
6 case leaving it up to you and your colleagues to figure
7 out how to go further Am I making enough shyshy making
8 clear enough whats bothering me And Id really like
9 to get your answer to this
10 MR PHILLIPS And shyshy and look theres
11 no shyshy Ill be the first one to shyshy to confess that trying
12 to use language to describe these things is not all that
13 easy But the way I think you can meaningfully look at
14 this is to say that this is not simply something that
15 was a fundamental truth this is not something that
16 simply says use a computer Its not simply something
17 that says maintain solvency It shyshy it operates in a
18 much more specific and concrete environment where youre
19 dealing with a problem thats been in existence since
20 the 1970s a solution in the 1990s that CLS itself
21 acknowledges needed a solution and came forward with
22 their own solution that looks a lot like ours
23 JUSTICE KENNEDY But my shyshy my initial
24 question and I think I can work this into King Tut
25 is shyshy
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1 (Laughter)
2 JUSTICE KENNEDY shyshy is shyshy is whether or not
3 you could have patented that system idea process
4 method without attaching a computer program
5 MR PHILLIPS You cannot absolutely cannot
6 do that with this system because it is so complex and
7 so many interrelated parts
8 JUSTICE KENNEDY Suppose I thought shyshy and
9 again its just a thought because I dont have the
10 expertise shyshy that any computer group of people sitting
11 around a coffee shop in Silicon Valley could do this
12 over a weekend Suppose I thought that
13 MR PHILLIPS You mean wrote the code
14 JUSTICE KENNEDY Yes right
15 MR PHILLIPS Well thats absolutely shyshy
16 Im certain thats true
17 JUSTICE KENNEDY Well then shyshy then shyshy
18 MR PHILLIPS But thats true of almost all
19 software
20 JUSTICE KENNEDY Then why is the computer
21 program necessary to make the patent valid
22 MR PHILLIPS Well its shyshy its necessary
23 to make the invention effective As the Solicitor
24 General said the computer is essential to the efficacy
25 of this invention because of the complicated financial
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1 arrangements that exist and that can only be resolved on
2 a shyshy on a realtime basis Your abacus is great if you
3 happen to be waiting for the pyramids to be finished or
4 waiting for the gold to move in and out but it doesnt
5 help with you an abacus if youre dealing with literally
6 thousands of transactions simultaneously going on in
7 different countries at different points in time
8 JUSTICE KENNEDY But thats just an idea
9 hey lets use a computer
10 MR PHILLIPS But its not just shyshy I mean
11 obviously part of it is use the computer Justice
12 Kennedy But more fundamentally it goes beyond that
13 See I shyshy
14 JUSTICE SOTOMAYOR Is your software
15 copyrighted
16 MR PHILLIPS No I dont believe so
17 JUSTICE GINSBURG There is no special
18 software that comes with this shyshy thats part of this
19 patent is it shyshy is there
20 MR PHILLIPS No Justice Ginsburg what
21 we did here is what the Patent and Trademark Office
22 encourages us to do and encourages all software patent
23 writers to do which is to identify the functions that
24 you want to be provided for with the software and leave
25 it then to the software writers who I gather are you
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1 know quite capable of converting these functions into
2 very specific code
3 JUSTICE KAGAN Mr Phillips could you shyshy
4 could you disaggregate your argument for me Because
5 you just said look this Court has said its not
6 sufficient if you have an idea and then you say use a
7 computer to implement it right So are you saying that
8 your shyshy that shyshy are you saying that youre doing more
9 than saying use a computer to implement it or are you
10 saying that its shyshy that the idea itself is more than an
11 idea
12 MR PHILLIPS Yes Im saying shyshy
13 JUSTICE KAGAN Which part of what shyshy
14 MR PHILLIPS Im saying both actually I
15 mean Im making both of those arguments I shyshy I
16 believe that if you analyze the claims and you dont
17 caricature them and you dont strip them out of the
18 limitations that are embedded in there this is not some
19 kind of an abstract concept This is not some kind shyshy
20 its not an abstract idea Its a vary shyshy
21 JUSTICE KAGAN So putting the computer
22 stuff aside completely shyshy
23 MR PHILLIPS Right
24 JUSTICE KAGAN shyshy youre saying that youve
25 invented something or you shyshy
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1 MR PHILIPS Yes
2 JUSTICE KAGAN There is something that
3 youve patented that has shyshy that is not just simple use
4 a third party to do a settlement
5 MR PHILLIPS Right
6 JUSTICE KAGAN And what is that putting
7 the computer aside
8 MR PHILLIPS It is shyshy well shyshy and again
9 its difficult to do that because you absolutely need
10 the computer in order to implement this But the key to
11 the invention is the notion of being able
12 simultaneously dealing with it on a chronological basis
13 to stop transactions that will otherwise interfere with
14 the ability to settle on time and under the appropriate
15 circumstances And the only way you can do that in a
16 realtime basis when youre dealing with a global economy
17 is to use a computer It is necessary to the efficacy
18 of this
19 So in that sense I cant shyshy I cant
20 disaggregate it the way in some sense youre suggesting
21 It seems to me its bound up with in shyshy its bounds up
22 with the whole notion of is this an abstract concept
23 JUSTICE BREYER Can you in fact shyshy now
24 this is shyshy look there are 42 briefs in this case I
25 actually read them and I found them very very helpful
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1 up to the point where I have to make a decision because
2 theyre serious I mean you know shyshy now the problem
3 that I came away with is the one that youre beginning
4 to discuss that if you simply say take an idea thats
5 abstract and implement it on a computer there are shyshy
6 youre going to get it much faster youre going to be
7 able to do many many things and if thats good enough
8 there is a risk that you will take business in the
9 United States or large segments and instead of having
10 competition on price service and better production
11 methods well have competition on who has the best
12 patent lawyer You see where Im going on that one
13 MR PHILLIPS Yeah of course
14 JUSTICE BREYER And if you go the other way
15 and say never then what you do is you rule out real
16 inventions with computers
17 MR PHILLIPS Right
18 JUSTICE BREYER And so in those 42 briefs
19 there are a number of suggestions as to how to go
20 between Scylla and Charybdis Now I would like to
21 know shyshy I dont know if you can step back from your
22 representational model Thats a problem Youre all
23 we have now And shyshy and from my point of view I need
24 to know what in your opinion is the best way of sailing
25 between these two serious arms
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1 MR PHILLIPS Well Justice Breyer I guess
2 I would suggest to you that you might want to deal with
3 the problem you know as opposed to the problems you
4 dont know at this stage I mean we have had business
5 method patents and software patents in existence for
6 well over a decade and theyre obviously quite
7 significant in number And shyshy and we know what the
8 system is we have And Congress looked at that system
9 right and didnt say no to business methods patents
10 didnt say no to software patents instead said the
11 solution to this problem is to get it out of the
12 judicial process and create an administrative process
13 but leave the substantive standards intact
14 So my suggestion to you would be follow that
15 same advice a liberal interpretation of 101 and not a
16 caricature of the claims analyze the claims as written
17 and therefore say that the solution is 102 and 103 and
18 use the administrative process If you shyshy
19 JUSTICE GINSBURG Mr Phillips let me just
20 stop you there because four Justices of this Court did
21 not read that legislative history the way you do And
22 it was shyshy was in Bilski
23 MR PHILLIPS But this is postshyBilski
24 JUSTICE GINSBURG Justice Stevens went
25 carefully through that and he said Congress was
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1 reacting to a decision It had shyshy it was not addressing
2 101 So there are at least four Justices who say shyshy who
3 didnt buy that argument
4 MR PHILLIPS Well I mean it still seems
5 to me that the shyshy the natural inference is Congress did
6 not change 101 Congress created an entire
7 administrative system to deal with 101 102 and 103
8 And shyshy and I would hope shyshy
9 JUSTICE SCALIA And four is not five
10 anyway right
11 MR PHILLIPS Thats true
12 JUSTICE SCALIA Four is not five
13 MR PHILLIPS And youve exhausted my math
14 skills Your Honor
15 JUSTICE SCALIA By the way we shyshy we have
16 said that you cant take an abstract idea and then say
17 use a computer to implement it But we havent said
18 that you cant take an abstract idea and then say here
19 is how you use a computer to implement it shyshy
20 MR PHILLIPS Exactly
21 JUSTICE SCALIA shyshy which is basically what
22 youre doing
23 MR PHILLIPS And thats the argument were
24 doing and shyshy
25 JUSTICE SCALIA And thats a little
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1 different
2 MR PHILLIPS shyshy thats the line were
3 asking the Court to draw here
4 JUSTICE KAGAN Well how are you saying the
5 how Because I thought that your computers shyshy that your
6 patents really did just say do this on a computer as
7 opposed to saying anything substantive about how to do
8 it on a computer
9 MR PHILLIPS I would urge the Court to
10 look at Joint Appendix 159 285shy286 where it goes
11 through the flow charts This is shyshy and this is just a
12 specific example of the method by which you stop a
13 transaction and it goes through a varied series of
14 detailed steps and what the computer has to do in order
15 to do that It doesnt actually obviously put in the
16 code but thats what the PTO says dont do Dont put
17 in the code because nobody understands code so shyshy but
18 put in the functions and we know shyshy and we know that
19 someone skilled in the art will be able to put in the
20 code And if they arent if they cant do that then
21 its not enabled and thats a 112 problem
22 To go back Justice Breyer to your
23 question So on the one hand youve got a problem that
24 it seems to me Congress to some extent has said is okay
25 and weve got a solution and that solutions playing
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1 through On the other hand if this Court were to say
2 much more categorically either that theres no such
3 thing as business method patents or adopt the Solicitor
4 Generals interpretation which is to say that there
5 cannot be software unless the software somehow actually
6 improves the computer as opposed to software improving
7 every other device or any other mechanism that might be
8 out there
9 What we know is that this would inherently
10 declare and in one fell swoop hundreds of thousands of
11 patents invalid and the consequences of that it seems
12 to me are utterly unknowable And before the Court goes
13 down that path I would think it would think long and
14 hard about whether isnt that a judgment that Congress
15 ought to make And It seems to me in that sense youre
16 essentially where the Court was in Chakrabarty where
17 everybody was saying youve got to act in one way or the
18 other or the world comes to an end and the courts have
19 said well apply 101 directly
20 JUSTICE KENNEDY If we say that theres no
21 software patentability and agree with the Attorney
22 General do you lose in this case
23 MR PHILLIPS Well it would be very hard
24 for me to see how that shyshy how shyshy how I can get around
25 that particular problem because the computer is the
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1 essence of it so shyshy and a portion of it is clearly the
2 software So I think if you say there is no such thing
3 as software patentability I do lose in this case yes
4 Your Honor As do a whole lot of other people
5 JUSTICE KENNEDY Is there any common ground
6 between you and the government shyshy maybe a better
7 question to ask the government shyshy a common ground
8 between you and the government on something in the
9 software area thats patentable other than making the
10 computer itself work You understand the government to
11 say no software patents
12 MR PHILLIPS Thats the way I interpret
13 the governments shyshy the governments brief
14 JUSTICE BREYER It was like shyshy theres a
15 Bloomberg brief out here that was on this that said
16 no you can shyshy you can patent computer software when
17 its an improvement in the computer when its an
18 improvement in software when its an improvement in a
19 technology that is developed out of computers like
20 robotics when it is an improvement in a machine or
21 technology but you cannot improve it where it is simply
22 an improvement in an activity that is engaged in
23 primarily through mental processes But what they mean
24 by that is business finance and similar arts
25 Thats shyshy I mean thats shyshy it wasnt quite what shyshy I
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1 know Thats what I want to know what you dont agree
2 with about that because its a little more refined than
3 you suggested
4 MR PHILLIPS I read the Solicitor
5 Generals brief as broader than the Bloomberg brief
6 in shyshy in terms of the approach And IBMs argument is
7 if you knock out software patents you eliminate web
8 browsing word processing cellphones eshymail Those
9 are all activities that I dont think fall within the
10 meaning of the shyshy the meaning of the governments theory
11 of the case
12 JUSTICE BREYER But Im asking you shyshy Im
13 asking you what about this one that I just mentioned
14 You see I went through those five steps shyshy
15 MR PHILLIPS Right
16 JUSTICE BREYER shyshy and four of them you
17 could patent and the fifth one you cant
18 MR PHILLIPS Right But I shyshy and I guess
19 my answer to that is thats nowhere in the statute and
20 it doesnt seem to me to reflect an abstract idea Its
21 a shyshy its a line you draw that takes out business method
22 patents If the Court wants to eliminate business
23 method patents fine But you just said no to that in
24 Bilski two three terms ago
25 Now to be sure give the Solicitor General
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1 credit he comes here and says to you We didnt like
2 the result in Bilski we want you to say dont use
3 process in order to get there which is a statutory
4 interpretation come up with an extraordinarily
5 complicated way of looking at the exception and use that
6 to get to the exact same result
7 JUSTICE SOTOMAYOR Well youre doing a
8 very good job of proving shyshy
9 JUSTICE GINSBURG In Bilski Justice Breyer
10 did try to say that there wasnt that shyshy a whole lot of
11 distance between the four who thought business methods
12 were not patentable But he shyshy he also said something
13 else in shyshy in the other case Mayo Justice Scalia
14 asked you the question about doesnt that go to novelty
15 but didnt Justice Breyer say in Mayo that novelty can
16 be relevant to patent shyshy to patent eligibility He said
17 theres shyshy theres an overlap
18 MR PHILLIPS Well he said theres an
19 overlap Here in this context I think basically the
20 Respondents theory would mean that they are completely
21 coterminous And I dont think thats what the Court
22 meant And also we know from Diehr that theres got to
23 be at least some significant limitations on the extent
24 to which novelty has to be built into 101 That is the
25 province of 102 and 103 And as I said Congress
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1 modified the system of adjudication to create an
2 administrative mechanism that allows you to get to 102
3 and 103 And at least in context its important to
4 realize there have been 11 cases since that was created
5 9 of the 11 have been knocked down on 102 or 103 grounds
6 and not on 101 grounds And it seems to me thats the
7 answer to this problem is leave 101 as the coarse
8 filter If on its face it states these kinds of broad
9 abstract principles fundamental truths and even if it
10 says use a computer those should be struck down
11 JUSTICE SOTOMAYOR Which of the shyshy which of
12 the opinions below captures your position most
13 accurately
14 MR PHILLIPS I would guess it would be
15 Judge Moores opinion below that would capture ours most
16 correctly
17 JUSTICE SOTOMAYOR And if we were to think
18 your method claim is ineligible do you agree that your
19 systems and shyshy your medium and system claims fail as
20 well Do they rise and fall together
21 MR PHILLIPS No No I dont believe they
22 do rise and fall together I mean I think you could shyshy
23 if you wanted to interpret our medium claim shyshy I mean
24 our shyshy our method claims in a shyshy in particularly
25 abstract way I think you could still say that the
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1 system claims which clearly are shyshy are how to create a
2 computer system and how to implement it using that
3 method would be a much more concrete version of that in
4 a way that would take it out of 101 That said I
5 obviously believe that all of our claims satisfy 101
6 and should go on to the next stage
7 JUSTICE KAGAN Can I give you a
8 hypothetical Mr Phillips and you tell me how its
9 different or the same Lets say you know 30 years
10 somebody took a look around the world and said a lot of
11 people seem to order products by mail They get the
12 catalogues in the mail and then they send back their
13 return forms And lets say that one of the founders of
14 the Internet said wouldnt this be an amazing system
15 we could actually do this by computer and they had
16 patented that Is that the same
17 MR PHILLIPS I dont know if its the
18 same but I would shyshy I would argue that it could very
19 well be a patentable subject matter because shyshy but it
20 depends on how the claims play out
21 JUSTICE KAGAN No but exactly I mean
22 the claim would have said something along the lines of
23 you know theres this process by which people order
24 products and we want to do it over the Internet we want
25 to do it electronically and we will use a computer to
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1 do that to essentially take the process of mail order
2 catalogues and make it electronic
3 MR PHILLIPS I could certainly shyshy I think
4 I could write a claim shyshy a set of claims that I believe
5 would satisfy 101 And shyshy and to the extent that
6 youd shyshy that youd think those are no different than
7 the ones I have here then my argument is simply I think
8 I satisfy 101 with the claims we have before us Your
9 Honor
10 If there are no further questions then Id
11 like to reserve the rest of my time
12 CHIEF JUSTICE ROBERTS Thank you
13 Mr Phillips
14 Mr Perry
15 ORAL ARGUMENT OF MARK A PERRY
16 ON BEHALF OF THE RESPONDENTS
17 MR PERRY Mr Chief Justice and may it
18 please the Court
19 That path between Scylla and Charybdis was
20 charted in Bilski and Mayo Bilski holds that a
21 fundamental economic principle is an abstract idea and
22 Mayo holds that running such a principle on a computer
23 is quote not a patentable application of that
24 principle Those two propositions are sufficient to
25 dispose of this case
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1 If Bilski and Mayo stand Alices patents
2 fail Therefore Mr Phillips and his friends are
3 asking this Court to change the standard even though
4 this Court has had three unanimous decisions in the last
5 four terms establishing what the Court called a myriad
6 a wellshyestablished standard
7 On the abstract idea Justice Ginsburg you
8 asked Mr Phillips whats the difference between hedging
9 and this claim There is no difference This is
10 hedging It is hedging against credit default rather
11 than price fluctuation but it is simply hedging
12 And Mr Phillips stood up for 26 minutes and
13 never once referred to the patent Lets look at what
14 the inventor the soshycalled inventor said about this
15 invention This is at JA 293 to 94 in the
16 specification
17 This claim has simply two steps Its very
18 simple First debiting and crediting on a realtime
19 basis the relevant shadow records and second by
20 periodically affecting corresponding payment
21 instructions Those are direct quotes Debit credit
22 and pay Your Honor you cant get much more simple
23 than that
24 Mr Phillips suggests well we have
25 multilateral transactions global things chronological
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1 time zones and so forth None of those are claimed
2 Your Honor Those are all recited in specification
3 The claims read on a single transaction involving two
4 parties
5 JUSTICE BREYER Can I ask you at some
6 point not necessarily this second to say in my shyshy this
7 is just shyshy you know you have an opinion for a court
8 Different judges can have different interpretations
9 All youre getting is mine okay
10 But I think its pretty easy to say that
11 Archimedes cant just go to a boat builder and say
12 apply my idea All right Everybody agrees with that
13 But now we try to take that word apply and give
14 content to it
15 And what I suspect in my opinion Mayo did
16 and Bilski and the other cases is sketch an outer shell
17 of the content hoping that the experts you and the
18 other lawyers and the shyshy the circuit court could fill
19 in a little better than we had done the content of that
20 shell
21 So so far youre saying well this is
22 close enough to Archimedes saying apply it that we
23 neednt go further
24 Now will you at some point in the next few
25 minutes give me your impression of if it were necessary
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1 to go further what would the right words or example be
2 MR PERRY Your Honor as shyshy Justice
3 Breyer as to abstract ideas the PTO has filled in that
4 shell by listing economic concepts legal concepts
5 financial concepts teaching concepts dating and
6 interpersonal relationships and generally how business
7 should be conducted as examples of those things that are
8 likely abstract which of course all follow directly
9 from Bilski and the discussion this Court had in Bilski
10 And this patent shyshy these patents fall squarely within
11 that
12 Congress in the AIA confirmed that
13 reading Congress in the CBM method said business
14 methods that are subject to special scrutiny shyshy that is
15 dubious patents shyshy include methods and corresponding
16 apparatus which is what we have here that pertain to
17 data processing in the financial services industry and
18 do not offer a technological solution That describes
19 Alices patents to a letter Your Honor So that we
20 have shyshy
21 JUSTICE SOTOMAYOR What do you think is a
22 technological solution
23 MR PERRY Your Honor shyshy
24 JUSTICE SOTOMAYOR How could they if at
25 all written their patents to shyshy to make shyshy to make
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1 their software eligible What would shyshy what do they
2 need shyshy would have needed to have added
3 MR PERRY Justice Sotomayor they have no
4 software first Theyve never written software
5 Theyve never programmed a computer So thats a
6 nonexistent set
7 Second there are many technological
8 solutions to trading and settlement problems For
9 example data compression These shyshy these trading
10 platforms involve the movement of very large quantities
11 of data around the world The physical pipes that is
12 the fiber optic cables and data lines are limited
13 There are very sophisticated algorithms for both
14 security and speed to move data through the transmission
15 lines in novel and useful ways that could well be
16 patented
17 Nothing like that is claimed here To come
18 back to where I started if you look for example at
19 Claim 65 in the 510 patent as Mr Phillips reads it
20 it literally reads on a twoshyparty escrow to sell a
21 house so long as the escrow agent is typing this stuff
22 into the HUDshy1 using a computer That has nothing to do
23 with multilevel shyshy
24 CHIEF JUSTICE ROBERTS Well thats a
25 little more complicated He referred us to Joint
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1 Appendix Page 159 which is not a change in how
2 computers work But it is shyshy constitutes the
3 instructions about how to use the computer and where it
4 needs to be affected And just looking at it it looks
5 pretty complicated There are a lot of arrows and
6 they shyshy you know different things that go shyshy
7 (Laughter)
8 CHIEF JUSTICE ROBERTS Well but I mean
9 you know it shyshy in different directions And I
10 understand him to say that in each of those places
11 thats where the computer is needed
12 MR PERRY Mr Chief Justice Figure 16 has
13 nothing to do with the invention asserted against my
14 client in this case There are two inventions in this
15 patent One invention involving multilateral contract
16 formation is not asserted against my client And all of
17 these drawings pertain to that The only drawings that
18 pertain to the asserted claims are 25 and 33 to 37 And
19 that was established below and its established in this
20 Court And Mr Phillips has never disputed it
21 So the claim hes pointed the Court shyshy the
22 figure hes pointed the Court to has nothing to do with
23 the invention Its for a different invention that is
24 not at issue in this case
25 Remember there are hundreds and hundreds of
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1 pages of these patents They all pertain to the other
2 invention Thats why in the back of our red brief we
3 excerpted the very little bit that actually pertains to
4 this You sort of tack on patent shyshy the tack on claim
5 that Mr Phillips is asserting here Its 4 columns
6 Its less than five pages in the printed appendix that
7 actually pertains to this invention And it contains no
8 disclosure whatever
9 Justice Scalia to your question about how
10 the computer does it Of course a patent that
11 describes sufficiently how a computer does a new and
12 useful thing whether its data compression or any other
13 technological solution to a business problem a social
14 problem or a technological problem would be within the
15 realm of the shyshy of the patent laws That is what the
16 patent laws have always been for
17 This is not such a patent And the reason
18 for that is this is a preshyBilski set of patents These
19 were prosecuted under the old State Street test where
20 all the applicant had to claim was a result
21 JUSTICE KENNEDY Would you give me shyshy
22 again you already did it once shyshy an example of a
23 business process patent shyshy of a business process idea
24 and invention that is patentable
25 MR PERRY Your Honor there are many
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1 examples One would be a technological solution to a
2 business problem So that for example shyshy Ill give a
3 different example There are many applications today
4 The Court may be familiar with streaming video to watch
5 video on your computer
6 It is not possible to get enough data
7 through existing lines in its raw format The data has
8 to be manipulated in order to see live video So if you
9 want to watch TV on your phone for example
10 Those algorithms those inventions are
11 undoubtedly technological And if they are used in a
12 trading platform or a hedging system or something else
13 that wouldnt disable them And this is what the Diehr
14 case shyshy
15 JUSTICE KENNEDY Well I shyshy I shyshy in my
16 language Ive called that mechanical rather than
17 process Can you give me an example of process
18 MR PERRY Yes Your Honor The process in
19 that example would be a computer running the particular
20 data compression algorithm
21 JUSTICE KENNEDY But thats how to make
22 a shyshy thats how to make a machine work better
23 MR PERRY Yes Your Honor
24 JUSTICE KENNEDY Im asking you Is there
25 any business process any business activity that is
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1 susceptible to a patent a pure patent innovations that
2 deserve patents
3 MR PERRY Your Honor again a
4 technological solution to a business problem could well
5 be whether its a method or a process is equivalent
6 Again Congress said method in a corresponding shyshy
7 JUSTICE KENNEDY Can you give me an
8 example
9 MR PERRY I thought the data compression
10 example was a good one Ill try an encryption
11 technology Many of these trading platforms you know
12 dealing with securities and money would require some
13 sort of security devices You could have a process for
14 securely transmitting data would be another computer
15 implemented technological solution to a business
16 problem Again nothing like that claimed here
17 JUSTICE SOTOMAYOR How about eshymail and
18 just word processing programs
19 MR PERRY Your Honor a program shyshy let me
20 try it this way to both of your questions In our view
21 if what is claimed as the inventive contribution under
22 Mayo shyshy in other words if we have an abstract idea as
23 we do here and what is claimed is the inventive
24 contribution for Step 2 is the computer then the
25 computer must be essential to that operation and
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1 represent an advancement in computer science or other
2 technology And we know thats not met here Justice
3 Sotomayor because shyshy
4 JUSTICE SOTOMAYOR So youre saying no to
5 eshymail and word processing
6 MR PERRY Your Honor I think at a
7 point shyshy
8 JUSTICE SOTOMAYOR They certainly have
9 functionality and shyshy and improvement of functionality
10 for the user
11 MR PERRY At a point in time in the past
12 I think both of those would have been technological
13 advances that were patentable
14 JUSTICE SOTOMAYOR How
15 MR PERRY Today shyshy because they would have
16 provided a technological solution to a then unmet
17 problem Today reciting and do it on a word processor
18 is no different than and do it on a typewriter or shyshy and
19 do it on a calculator
20 The inventive contribution component which
21 uses specifically the language of conventional and
22 routine and well understood will evolve with
23 technology Thats why its different than the abstract
24 idea component
25 And here we know that these patents dont
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1 claim anything that was not conventional well
2 understood and routine We went through that in great
3 detail and Alice has never disputed a word of it They
4 just say youre not supposed to do that analysis even
5 though the Court 9shy0 in Mayo said we should
6 And in this case its very important to
7 look at what Alices own experts said on the subject
8 This is not our expert This is Alices expert And
9 this is at Page 1327shy28 of the Joint Appendix It is
10 possible to do the business methods of maintaining
11 accounts adjusting accounts and providing an
12 instruction without a computer or other hardware
13 And then Justice Breyer directly to your
14 abacus If someone had thought of this invention
15 soshycalled invention 100 years ago they might have
16 implemented it in a nonelectronic manner using various
17 precomputing tools such as an abacus or handwritten
18 ledgers
19 We know from Benson the Courts seminal
20 computer implementation case that if you can do it by
21 head and hand then the computer doesnt add anything
22 inventive within the meaning of the 101 exception That
23 is the holding of Benson And the Court reiterated that
24 in Mayo
25 Flook said exactly the same thing If you
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1 can do it with pencil and paper then the computer is
2 not offering anything that the patent laws are or should
3 be concerned with
4 It is only where the method will not work
5 without a computer which is not these claims and where
6 the computer itself is doing something that the patent
7 law is willing to protect
8 CHIEF JUSTICE ROBERTS What if shyshy what if
9 you can do it without a computer but its going to
10 take you know 20 people a hundred years In other
11 words theoretically you can replicate what the
12 computer does shyshy
13 MR PERRY Two answers
14 CHIEF JUSTICE ROBERTS shyshy but its
15 impractical without looking to do it on the computer
16 MR PERRY Mr Chief Justice first these
17 claims literally read as Alice reads them on a single
18 transaction between two parties so its not 20 people
19 for a hundred years Its one person sitting in a room
20 so thats not a problem
21 Second if what is being claimed is the
22 necessary speed or efficiency or data crunching
23 capabilities if you will of a computer then it would
24 have to be claimed and theres nothing claimed here
25 All that is claimed shyshy and my friend is going to stand
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1 up on rebuttal and tell you all that the expert said
2 well what is claimed is a computer but its just a
3 computer It just says a computer configured too It
4 doesnt say that the computer actually has to shyshy
5 JUSTICE BREYER Yeah but the trouble with
6 that particular test is as I think partly the Chief
7 Justice said how long et cetera and then add to that
8 though you could do it without a computer what happens
9 at the end of the line is the automobile engine goes off
10 or it begins to sputter or it turns left
11 You see its possible to take Archimedes shyshy
12 shyshy you know I use that example purposely to call
13 attention to the problem You can take those things
14 and youre not just saying apply it and youre not even
15 just saying shyshy you are saying use the computer but at
16 the end of the road something physical in the world
17 changes and everybody would say now thats shyshy that
18 will falls within I mean probably I mean my
19 hesitation shows Im looking for the right words
20 MR PERRY Justice Breyer your point is
21 the reason that it is equally fallacious to suggest on
22 the one hand as Alice and IBM does that simply
23 reciting a computer is a magic key that gets you through
24 101 and you never have to any other inquiry and what
25 some of folks the amici on the other side say which
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1 is that computers or software are never eligible Both
2 of those things have to be wrong because what the Court
3 said in Bilski was future innovation is too uncertain
4 We are not going to do that as a Court And the Court
5 laid out an approach using abstract ideas in Bilski and
6 inventive contribution in Mayo that is flexible enough
7 to take into account that innovation and to deal with
8 particular claims in context which is why at the end
9 of the day we have to come back to these patents and
10 decide which shyshy
11 JUSTICE KAGAN Mr Perry before we get
12 back to these matters you said to Justice Scalia if a
13 patent sufficiently describes how a computer will
14 implement an idea then its patentable So how
15 sufficiently does one have to describe it What do we
16 want a judge to do at this threshold level in terms of
17 trying to figure out whether the description is
18 sufficient to get you past it
19 MR PERRY If I can answer in two steps
20 Justice Kagan First in the negative What the
21 applicant or patentee must do shyshy must not do is simply
22 describe the desired result That would take us back to
23 State Street That would simply say I claim a magic
24 box that buys high and sells low or vice versa I
25 suppose I claim a magic box for investing Thats what
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1 these patents do
2 Then to put it in the affirmative and in the
3 language of Mayo the claim has to recite something
4 significantly more something significantly more than
5 the abstract idea itself That would be a contextual
6 analysis based on the claims and specifications and file
7 history and we know that some devices some methods
8 some programming will pass that
9 It is not going to be a brightshyline rule and
10 thats one of the tugshyofshywar issues that this Court and
11 the Federal Circuit have been having in these cases
12 The Federal Circuit wants brightshyline rules All
13 computers are in or all computers are out
14 This Court has been more contextual This
15 Court has been more nuanced This Court has looked at
16 things in a more robust way
17 JUSTICE KAGAN Youre not suggesting that
18 specific code is necessary
19 MR PERRY No Your Honor I think the shyshy
20 actual description of the programming is a 112 problem
21 I agree with that A 112 issue That is the realm of
22 the written description requirement What is a 101
23 problem is it is on the applicant to do more than simply
24 describe the results simply say A magic box that does
25 intermediate settlement And we can tie that back to
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1 this particular prosecution the 510 patent which is
2 the method patent
3 The examiner rejected it Under Section
4 101 the examiner said this is an abstract idea You
5 cant have this patent And the only change that this
6 applicant made was to add in the adjusting step
7 electronic adjustment It put in one word
8 electronic adjustment And under State Street which
9 is what this patent is prosecuted under that was
10 enough because the result of adjusting run through a
11 computer is enough
12 Under current law that cant be enough
13 That just cant get a patent over the line because this
14 Court said in Mayo and I got to quote this language
15 Simply implementing a fundamental principle on a
16 physical machine namely a computer is not a patentable
17 application of that principle Thats all that Alice
18 has done
19 These are preshyBilski patents They never
20 should have been issued General Verrilli will stand up
21 and address that point And certainly under current
22 law shyshy one point on the AIA Congress did not send all
23 this to the administrative process Congress created
24 two avenues the courts and the PTO to use the
25 standards Essentially it ratified Bilski and Mayo and
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1 said we agree with what you all are doing at the
2 Supreme Court and the existing standards are good enough
3 for us This is a judicial problem And that is a good
4 reason The abstract shyshy
5 JUSTICE GINSBURG The Federal Circuit in
6 this case split in many ways and it had our decisions
7 to deal with You said given Bilski and Mayo this is
8 an easy case What is the instruction that escaped a
9 good number of judges on the Federal Circuit How would
10 you state the rule
11 MR PERRY Your Honor I think theres a
12 significant element to the Federal Circuit that
13 disagrees with Mayo and has been resistant in applying
14 it Chief Judge shyshy former Chief Judge Michelle filed a
15 brief in this Court essentially saying Mayo is a
16 lifeshysciences case You should limit it to that because
17 if you apply it to everything else then these patents
18 are no good
19 Mayo we submit is a technologyshyneutral
20 industryshyneutral exceptionshyneutral framework that can
21 be used to answer all of these questions This is not
22 the death of software patents The software industry is
23 all before this Court saying this is fine with us
24 Every company in the United States practically except
25 for IBM is saying go ahead This will not affect
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1 software patents
2 Justice Ginsburg this Courts precedents
3 are clear They are unanimous They just need to be
4 applied To suggest that there is confusion that needs
5 to be addressed by retreating beating a retreat from
6 recent unanimous decisions would simply reward
7 intransigence difficulty refusal to adhere to what are
8 clear precedents because shyshy
9 JUSTICE KAGAN Should we be concerned
10 Mr Perry that there are old patents that in fact could
11 meet the test that you set forth but wont because they
12 were written in a different time and so used much more
13 general language
14 MR PERRY Your Honor the applicant or the
15 patent holder would have the opportunity to institute a
16 reexamination proceeding or some sort of administration
17 process to address that issue
18 And second it should be noted this is a
19 very small problem There are 2 million outstanding
20 patents in the United States In the last four fiscal
21 years there were 22000 infringement litigations
22 instituted but since Bilski there have only been 57
23 district court decisions on Section 101 issues There
24 have only been 12 Federal Circuit decisions total on
25 computer implementation
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1 We are talking about a group of patents
2 Justice Kagan thats way out at the tail end of
3 distribution Most patents never have a 101 challenge
4 This is not an issue with cotton gins and other things
5 This is a problem for the most marginal
6 most dubious most skeptical patents the ones that this
7 Court in Bilski shyshy and remember what Bilskis holding
8 is The majority said they are processes but it did
9 not say they are eligible
10 Thank you Mr Chief Justice
11 CHIEF JUSTICE ROBERTS Thank you counsel
12 General Verrilli
13 ORAL ARGUMENT OF DONALD B VERRILLI JR
14 ON BEHALF OF THE UNITED STATES AS AMICUS
15 CURIAE SUPPORTING RESPONDENTS
16 GENERAL VERRILLI Mr Chief Justice and
17 may it please the Court
18 An abstract idea does not become
19 patentshyeligible merely by tacking on an instruction to
20 use a computer to carry it out A computer makes a
21 difference under Section 101 when it imposes a
22 meaningful limit on the patent claim That occurs when
23 the claim is directed at improvement in computing
24 technology or an innovation that uses computing
25 technology to improve other technological functions
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1 Thats the test that we believe is most faithful to this
2 Courts precedents in Bilski and Mayo It keeps patents
3 within their traditional and appropriate domain and it
4 is capable of being administered consistently by Courts
5 and by PTO examiners
6 JUSTICE GINSBURG How do you answer the
7 argument that your view would extinguish businessshymethod
8 patents and make all software ineligible for patent
9 protection
10 GENERAL VERRILLI Yeah with shyshy let me
11 address software patents first because that I think is
12 obviously a significant question And its just not
13 correct to say that our approach would make software
14 patenting ineligible Any software patent that improves
15 the functioning of the computer technology is eligible
16 Any software patent that improves shyshy that is used to
17 improve another technology is eligible For example
18 the patent in the shyshy in the Diehr case is one in
19 which shyshy
20 JUSTICE SOTOMAYOR Why do we need to reach
21 this in that shyshy reach software patents at all in this
22 case
23 GENERAL VERRILLI Well shyshy
24 JUSTICE SOTOMAYOR Whats the necessity for
25 us to announce a general rule with respect to software
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1 There is no software being patented in this case
2 GENERAL VERRILLI Well I shyshy
3 JUSTICE SOTOMAYOR Theres a systems
4 GENERAL VERRILLI Well I shyshy I think shyshy
5 well they shyshy they shyshy theres a process being and shyshy and
6 one can think of software patents as process patents
7 And I think thats why my friends on the other side are
8 saying the sky is falling because they shyshy they are
9 interpreting what were saying about that when a
10 computer makes shyshy when a computers involvement makes
11 something eligible under 101 its calling those into
12 question and it doesnt
13 JUSTICE SOTOMAYOR Do you think we have to
14 reach the patentability of software to answer this case
15 GENERAL VERRILLI Well I think you can shyshy
16 I think the answer to that question is no not
17 necessarily You can decide it by saying that shyshy that
18 Bilski answers the question whether this is an abstract
19 idea because this form of hedging is really no
20 different than the form of hedging as a conceptual
21 matter at issue in Bilski And then Mayo answers the
22 question of whether the use of a computer in this case
23 adds enough to the abstract idea beyond conventional
24 steps because here all we have after all is just
25 conventional use of computing technology no computer
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1 innovation such that you dont qualify under 101 You
2 could take that approach
3 But it is important to the United States
4 that we shyshy and to our patent examiners that we get some
5 clarity if we can I think the clarity could come from
6 the text that I propose which I want to reiterate shyshy
7 JUSTICE SOTOMAYOR Well shyshy
8 JUSTICE BREYER Could shyshy could shyshy could you
9 go on with that because you were just getting to the
10 point where I think you say a computer improvement that
11 in fact leads to an improvement in harvesting cotton is
12 an improvement through a computer of technology so it
13 qualifies
14 But then I think you were going to say or I
15 got this also from the brief a computer improvement
16 that leads to an improvement in the methods of selling
17 bonds over the telephone is not an improvement in
18 technology reached by the computer Am I right about
19 the distinction youre making
20 GENERAL VERRILLI I dont think theres a
21 yes or no answer to that question
22 JUSTICE BREYER What is your view Yeah
23 what is shyshy how do we deal with just that problem
24 GENERAL VERRILLI If there is a genuine
25 innovation in the functioning of the computer shyshy
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1 JUSTICE BREYER Yes
2 GENERAL VERRILLI shyshy such that business
3 processes shyshy
4 JUSTICE BREYER Weve got that Yes yes
5 We got the computer But then it doesnt improve the
6 computer but rather it improves through the computer
7 the harvesting of cotton
8 Now youve got it in what you said was your
9 second category which is an improvement through the
10 computer of a technology And I thought in your brief
11 you were distinguishing an improvement through the
12 computer of a human activity that is not a technology
13 and in particular to pick an example of that
14 something in finance or something in business
15 Now am I right about the distinction youre
16 making
17 GENERAL VERRILLI Yeah that shyshy
18 JUSTICE BREYER If Im not right what is
19 the distinction
20 GENERAL VERRILLI That is generally the
21 line were drawing Frankly shyshy
22 JUSTICE BREYER And how is that justified
23 GENERAL VERRILLI I do want shyshy
24 JUSTICE BREYER That shyshy that is Judge Dyk
25 in shyshy in Bilski in the Federal circuit 4 people sort of
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1 picked it up maybe 5 didnt pick it up Would you say
2 a few words about it
3 GENERAL VERRILLI Sure About shyshy let me go
4 to Bilski there in that I do think while shyshy while
5 certainly the Court held that the term process got a
6 natural construction which could include business
7 methods it seems to me that thats not all the Court
8 said in Bilski The Court also said that it was
9 historically and traditionally quite rare that business
10 methods were patent eligible
11 It also said that shyshy that the shyshy that courts
12 and the PTO examiners should use the abstract ideas
13 exception to 101 to police the appropriate boundary
14 It also said that the
15 machineshyorshytransformation test that the United States
16 advocated remained a useful tool And of course that
17 directs to you seeing whether there is a technology
18 application
19 And of course the holding in Bilski was
20 that the shyshy the method for hedging risk was ineligible
21 because it was an abstract idea and I cant imagine
22 that if in Bilski the shyshy the claim had been exactly the
23 same but had added use a computer to carry out some of
24 these standard random analysis functions that are
25 claimed by the patent that you would have found it to
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1 be patent eligible
2 And I shyshy I would submit for the Court that
3 the key point here I think is that now given where
4 the Court shyshy what the Court has held in Bilski given
5 what its held in Mayo the abstract ideas exception is
6 really the only tool left to deal with what I shyshy what I
7 think I fairly read Bilski as saying is a significant
8 problem the proliferation of patents of business
9 methods
10 JUSTICE KENNEDY Is there an example that
11 you can give us of a shyshy what we can call a business
12 process that is patentable a process that doesnt
13 involve improving the workings of a computer
14 GENERAL VERRILLI I shyshy I think its going
15 to be difficult for me to do that I think for
16 example if you had a business method a process for
17 additional security pointshyofshysale credit card
18 transactions using particular encryption technology
19 that might well be patent eligible Its a technology
20 that it makes conduct of business more efficient or
21 effective
22 But there is a technological link here and
23 we do think thats critical to our shyshy to our point of
24 view with respect to the case And I shyshy and I do think
25 remember that when we say something is not patent
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1 eligible were not saying they cant do it Were
2 saying they cant monopolize it
3 And the concern in a situation like this one
4 is that if this is patent eligible its hard to see
5 why for example the first person who came up with a
6 frequent flier program wouldnt have been able to claim
7 a patent there because after all thats a business
8 method for improving customer loyalty implemented on a
9 computer
10 CHIEF JUSTICE ROBERTS General I shyshy you
11 mentioned a while ago the need for greater clarity and
12 certainty in this area And Im just wondering in your
13 brief youve got a nonshyexhaustive of factors to
14 consider and there are 6 different ones And Im just
15 doubtful that thats going to bring about greater
16 clarity and certainty
17 GENERAL VERRILLI I take shyshy I take the
18 point Mr Chief Justice but I think the key is that
19 they are all directed to answering the question of
20 whether the innovation that is claimed and is an
21 innovation in either A the improvement of a computers
22 functioning or B the use of computer technology to
23 improve the functioning of another technological
24 process and a case like Diehr would be in the latter
25 category
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1 And so I do think that thats the key
2 benchmark Thats the baseline Thats the test that
3 we do think can be applied clearly and consistently by
4 the courts or the PTO And it avoids the risk of things
5 like frequent flier programs or the Oakland As money
6 ball methods for evaluating the contributions in
7 individual baseball players make or any one of a host of
8 other things that our intuitions tell us just dont
9 belong in the patent system
10 Thats the shyshy drawing that line keeps them
11 out not drawing that line lets them in And with all
12 due respect I dont think that the novelty and
13 nonobviousness filters that 102 and 103 really deal with
14 that problem effectively because when you get to
15 nonobviousness in 103 for example youll be asking a
16 different question
17 If you take the frequent flier program you
18 would say well is this innovation in building consumer
19 loyalty something that would have been obvious to
20 somebody who runs an airline Its totally divorced
21 from the question of technology at that point and
22 therefore I dont think youre going to get the screen
23 that you need to get in order for the patent system to
24 be confined to its traditional and appropriate scope
25 If there are no further questions thank
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1 you
2 JUSTICE GINSBURG I have a question about
3 how do you identify an abstract concept The shyshy a
4 natural phenomenon a mathematical formula those are
5 easy to identify but there has been some confusion on
6 what qualifies as an abstract concept
7 GENERAL VERRILLI We would define
8 abstract shyshy an abstract concept as a claim that is not
9 directed to a concrete innovation in technology
10 science or the industrial arts So its the shyshy its
11 abstract in the sense that it is not a concrete
12 innovation in the traditional realm of patent law
13 Thank you
14 CHIEF JUSTICE ROBERTS Thank you General
15 Mr Phillips you have four minutes
16 remaining
17 REBUTTAL ARGUMENT OF CARTER G PHILLIPS
18 ON BEHALF OF THE PETITIONERS
19 MR PHILLIPS Thank you Mr Chief Justice
20 Id just like to make a few points
21 First of all with respect to the question
22 you asked which is looking at 159 et cetera all I can
23 tell you is that if you look at claim 33 it talks about
24 matched orders the matched orders that are described in
25 286 and 287 and then makes specific reference to 159
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1 and that flow chart thats there And its all designed
2 as a package Its only one element of the shyshy of the
3 invention but it is a central element and its an easy
4 one to understand And it goes well beyond simply the
5 notion of hedge shyshy hedge against settlement risk and do
6 it by a computer
7 JUSTICE SOTOMAYOR Your adversary says that
8 his shyshy the appendix to his brief are the only patents at
9 issue that the flow charts are not at issue in this
10 case
11 MR PHILLIPS Theres no basis for that
12 statement Your Honor There shyshy remember this went off
13 on a very truncated litigation process So theres shyshy
14 you know we shyshy we got cut off at the beginning of it
15 Theres been no construction of the shyshy of the claims
16 and shyshy and obviously these are specifications that go
17 to how you interpret the claim
18 JUSTICE SOTOMAYOR If we were to say that
19 there are no business patents shyshy
20 MR PHILLIPS Yes
21 JUSTICE SOTOMAYOR shyshy would your patent
22 survive at all
23 MR PHILLIPS No I dont shyshy I dont
24 believe so I think theres no question And you
25 know General Verrilli could not have been any plainer
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1 in his statement of how he wants to interpret the
2 abstract idea concept
3 JUSTICE SOTOMAYOR Yes he wants to say no
4 business patents
5 MR PHILLIPS No business shyshy just another
6 way of saying no business methods And you know the
7 Court rejected that And it seems to me extraordinary
8 to say Congress didnt reject no business methods in
9 101 but were going to do shyshy were going to manipulate
10 the judicial exception to accomplish precisely that same
11 thing It seems to me thats wholly inappropriate
12 Justice Ginsburg you asked my shyshy my friend
13 here you know whats his test He didnt answer that
14 question youll notice because he doesnt have an
15 answer His basic argument is whatever you do just
16 kill this patent
17 And if I were in his shoes I suppose Id
18 take that same position I think whats absolutely
19 clear is that the test ought to be one that is
20 structured as a very coarse filter not the kind of
21 filter that hes pushing for where it changes over time
22 I mean I thought his shyshy I thought his response to one
23 of the questions about eshymail and word processing that
24 Justice Sotomayor asked is over time it would change
25 Well thats exactly what 102 and 103 are for That is
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1 not the purpose of shyshy of Section 101
2 And then he uses the example of encryption
3 I guarantee you if we were arguing about encryption in
4 this case he would say to me that thats an abstract
5 principle because encryption is a concept thats been
6 around since time immemorial George Washington used
7 it Everybody has used encryption
8 And a question again thats not the
9 solution to these problems The question is how did we
10 go about doing it And we go beyond the basics of
11 simply saying use a computer and thats what we ask
12 this Court to focus on and to evaluate
13 As to the frequent flier program its
14 pretty clear to me that even though it was a novel idea
15 in some sense the concept itself would have been viewed
16 in shyshy in the KSR fashion as quite obvious as a means of
17 improving customer loyalty
18 There are solutions here Giving us 101
19 pass doesnt create a monopoly It just gets us to the
20 102 and 103 inquiries that are at the heart of what the
21 patent laws shyshy and 112 that are at the heart of what the
22 patent laws ought to be dealing with
23 If there are no further questions Your
24 Honor thank you
25 CHIEF JUSTICE ROBERTS Thank you counsel
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1 The case is submitted
2 (Whereupon at 1105 am the case in the
3 aboveshyentitled matter was submitted)
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
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58
A add 714 1023 algorithm 3320 41 automatically
As 525 3621 387 algorithms apply 72425 111
am 115 32 416 3013 3310 2019 281213 automobile 389
572 added 302 Alice 13 34 2822 3814 available 99
abacus 61213 4923 363 3717 4217 avenues 4124
710 1018 additional 5017 3822 4117 applying 4213 avoids 524
1325 3614 3617
address 4121 4317 4511
Alices 271 2919 3678
approach 226 395 4513 B
ability 1514 addressed 435 allow 94 472 B 121 29 4413
able 1511 167 addressing 181 allows 97 242 appropriate 5122
1919 516 adds 4623 amazing 2514 81516 1514 back 1621
aboveshyentitled adhere 437 amici 3825 453 4913 1922 2512
113 573 adjudication amicus 123 5224 3018 322
absolutely 125 241 210 4414 Archimedes 3991222
1215 159 adjusting 3611 analysis 424 281122 3811 4025
5518 41610 364 406 area 219 5112 ball 526
abstract 4267 adjustment 417 4924 argue 2518 Bank 17 35
48 6682023 418 analyze 1416 arguing 563 banks 95
721 8218 administered 1716 argument 114 bars 43
141920 1522 454 announce 4525 225812 33 baseball 527
165 181618 administration answer 119 37 41 144 based 423 406
2220 24925 4316 2219 247 18323 226 baseline 522
2621 277 administrative 3919 4221 26715 4413 basic 413 5515
2938 3422 171218 187 456 461416 457 5317 basically 1821
3523 395 242 4123 4721 551315 5515 2319
405 414 424 adopt 203 answering 5119 arguments basics 5610
4418 461823 adopted 31317 answers 3713 1415 basis 132 1512
491221 505 advancement 461821 arms 1625 1516 2719
53368811 351 anyway 1810 arrangements 5411
552 564 advances 3513 apparatus 2916 131 beating 435
accept 102 adversary 547 APPEARAN arrows 315 beginning 163
accomplish advice 1715 116 art 1919 5414
5510 advocated 4916 appears 820 arts 2124 5310 begins 3810
account 55 618 affect 4225 appendix 1910 aside 1422 157 behalf 11719
397 affirmative 402 311 326 369 asked 2314 122 24710
accounts 823 agent 52 3021 548 278 5322 214 38 2616
9356 3611 ago 318 2224 applicant 3220 551224 4414 5318
3611 3615 5111 3921 4023 asking 193 believe 1316
accurately 2413 agree 920 2021 416 4314 221213 273 1416 2421
acknowledges 221 2418 application 3324 5215 255 264 451
1121 4021 421 2623 4117 aspect 517 5424
act 99 2017 agrees 2812 4918 asserted 3113 belong 529
activities 229 ahead 4225 applications 311618 benchmark 522
activity 2122 AIA 2912 4122 333 asserting 325 Benson 361923
3325 4812 airline 5220 applied 434 attaching 124 best 161124
actual 4020 AL 18 523 attention 3813 better 1610 albeit 923 applies 31418 Attorney 2021 216 2819
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3322 brightshyline 409 2313 37 71 4338 5519 beyond 115 4012 5317 checks 618 5614
1312 4623 bring 5115 case 3412 46 Chief 339 clearly 211 251 544 5610 broad 248 116 1524 261217 3024 523
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1 water if we had the same thing with my checkbook You
2 see the point
3 MR PHILLIPS I do see the point Justice
4 Breyer and it seems to me that it goes to the question
5 of the methodology youre going to employ
6 JUSTICE BREYER Methodology is just that
7 you said stop
8 MR PHILLIPS Well we could shyshy
9 JUSTICE BREYER So what we have different
10 here is the computer stops rather than the abacus man
11 stopping or my mother stopping or the guy that the grain
12 elevator has that says stop So just saying what shyshy is
13 that it In other words if you say computer stop you
14 have an invention Useful add shyshy but if you say mother
15 stop you dont
16 MR PHILLIPS No Well I mean again it
17 seems to me that in some ways what shyshy what you described
18 there is a caricature of what this invention is
19 JUSTICE BREYER Of course its a
20 caricature Its a caricature designed to suggest that
21 there is an abstract idea here Its called solvency
22 MR PHILLIPS But shyshy
23 JUSTICE BREYER And what you do is you take
24 the idea of solvency and you say apply it And you say
25 apply it through the computer
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1 Is that enough to make it not just the
2 abstract idea And now were at the heart of why I used
3 my exaggerated examples shyshy
4 MR PHILLIPS Right
5 JUSTICE BREYER shyshy because you will tell me
6 why shyshy
7 MR PHILLIPS Right
8 JUSTICE BREYER shyshy this is enough
9 MR PHILLIPS Right Because Justice
10 Breyer the shyshy the shyshy the concept here is not simply to
11 say stop Stop is obviously part of the element of it
12 But its also designed to ensure that at the
13 end of the day this transaction in the midst of
14 literally a global set of shyshy of deals that are going on
15 simultaneously will be implemented at the appropriate
16 time in the appropriate way And whatever else that may
17 be it seems to me its difficult to say thats an
18 abstract idea as implemented
19 JUSTICE SOTOMAYOR Im sorry But shyshy but
20 what it appears to be it sounds like youre trying to
21 revive the patenting of a function You used the word
22 function earlier and thats all Im seeing in this
23 patent is the function of reconciling accounts the
24 function of making sure theyre paid on time But in
25 what particular way other than saying do it through a
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1 computer is this something new and not function
2 MR PHILLIPS Well it does it through shyshy
3 it creates the shadow accounts because of the concerns
4 for security You dont shyshy youre not going to allow
5 somebody to enter into a central banks own accounts
6 You create the shadow accounts You monitor through the
7 software that allows you to do that You evaluate each
8 of the transactions to ensure that the settlement will
9 be available You do it sequentially and you act on it
10 by the end of the day or whenever the transaction is to
11 take place and you implement that transaction
12 JUSTICE SCALIA Why isnt it shyshy why isnt
13 doing it through a computer not enough I mean was the
14 cotton gin not an invention because it just means youre
15 doing through a machine what people used to do by hand
16 Its not an invention Its the same old same old
17 MR PHILLIPS Justice Scalia shyshy
18 JUSTICE SCALIA Why shyshy why is a computer
19 any different in that respect
20 MR PHILLIPS At one level I agree with you
21 completely There is no difference between them
22 This Court has however said on more than a
23 few occasions albeit in dicta that coming up with an
24 idea and then say use a computer is not sufficient
25 And what Im trying to suggest to you is we dont fall
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1 within that dicta
2 Now if you dont accept the dicta and you
3 say use a computer is fine then I think were done
4 JUSTICE SCALIA Well Im not saying use a
5 computer is shyshy is much of a novelty I mean thats shyshy
6 that goes to whether its novel or not If you just say
7 use a computer you havent invented anything But if
8 you come up with a serious program that shyshy that does it
9 then you know that may be novel But thats a novelty
10 issue isnt it
11 MR PHILLIPS To be sure Justice Scalia
12 JUSTICE BREYER And this is exactly the
13 question I really would like to you to focus on for me
14 Why is it shyshy and Im not saying this from a point of
15 view but it seems to me pretty clear that if what you
16 did was take the idea of solvency shyshy remember King Tut
17 Thats what I use the exaggeration shyshy and what you say
18 is implemented by having the abacus man keep track and
19 say stop okay shyshy
20 MR PHILLIPS Right
21 JUSTICE BREYER Then we implement it by
22 having somebody with a pencil and a piece of paper and
23 this is all that they add you see Say Have a man
24 with a pencil and a piece of paper keeping track and
25 saying stop or we say implement it in the computer
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1 which will automatically keep track and say stop are
2 they all enough Are some of them enough Whats the
3 rule
4 And you realize I couldnt figure out much
5 in Prometheus to go beyond what I thought was an obvious
6 case leaving it up to you and your colleagues to figure
7 out how to go further Am I making enough shyshy making
8 clear enough whats bothering me And Id really like
9 to get your answer to this
10 MR PHILLIPS And shyshy and look theres
11 no shyshy Ill be the first one to shyshy to confess that trying
12 to use language to describe these things is not all that
13 easy But the way I think you can meaningfully look at
14 this is to say that this is not simply something that
15 was a fundamental truth this is not something that
16 simply says use a computer Its not simply something
17 that says maintain solvency It shyshy it operates in a
18 much more specific and concrete environment where youre
19 dealing with a problem thats been in existence since
20 the 1970s a solution in the 1990s that CLS itself
21 acknowledges needed a solution and came forward with
22 their own solution that looks a lot like ours
23 JUSTICE KENNEDY But my shyshy my initial
24 question and I think I can work this into King Tut
25 is shyshy
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1 (Laughter)
2 JUSTICE KENNEDY shyshy is shyshy is whether or not
3 you could have patented that system idea process
4 method without attaching a computer program
5 MR PHILLIPS You cannot absolutely cannot
6 do that with this system because it is so complex and
7 so many interrelated parts
8 JUSTICE KENNEDY Suppose I thought shyshy and
9 again its just a thought because I dont have the
10 expertise shyshy that any computer group of people sitting
11 around a coffee shop in Silicon Valley could do this
12 over a weekend Suppose I thought that
13 MR PHILLIPS You mean wrote the code
14 JUSTICE KENNEDY Yes right
15 MR PHILLIPS Well thats absolutely shyshy
16 Im certain thats true
17 JUSTICE KENNEDY Well then shyshy then shyshy
18 MR PHILLIPS But thats true of almost all
19 software
20 JUSTICE KENNEDY Then why is the computer
21 program necessary to make the patent valid
22 MR PHILLIPS Well its shyshy its necessary
23 to make the invention effective As the Solicitor
24 General said the computer is essential to the efficacy
25 of this invention because of the complicated financial
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1 arrangements that exist and that can only be resolved on
2 a shyshy on a realtime basis Your abacus is great if you
3 happen to be waiting for the pyramids to be finished or
4 waiting for the gold to move in and out but it doesnt
5 help with you an abacus if youre dealing with literally
6 thousands of transactions simultaneously going on in
7 different countries at different points in time
8 JUSTICE KENNEDY But thats just an idea
9 hey lets use a computer
10 MR PHILLIPS But its not just shyshy I mean
11 obviously part of it is use the computer Justice
12 Kennedy But more fundamentally it goes beyond that
13 See I shyshy
14 JUSTICE SOTOMAYOR Is your software
15 copyrighted
16 MR PHILLIPS No I dont believe so
17 JUSTICE GINSBURG There is no special
18 software that comes with this shyshy thats part of this
19 patent is it shyshy is there
20 MR PHILLIPS No Justice Ginsburg what
21 we did here is what the Patent and Trademark Office
22 encourages us to do and encourages all software patent
23 writers to do which is to identify the functions that
24 you want to be provided for with the software and leave
25 it then to the software writers who I gather are you
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1 know quite capable of converting these functions into
2 very specific code
3 JUSTICE KAGAN Mr Phillips could you shyshy
4 could you disaggregate your argument for me Because
5 you just said look this Court has said its not
6 sufficient if you have an idea and then you say use a
7 computer to implement it right So are you saying that
8 your shyshy that shyshy are you saying that youre doing more
9 than saying use a computer to implement it or are you
10 saying that its shyshy that the idea itself is more than an
11 idea
12 MR PHILLIPS Yes Im saying shyshy
13 JUSTICE KAGAN Which part of what shyshy
14 MR PHILLIPS Im saying both actually I
15 mean Im making both of those arguments I shyshy I
16 believe that if you analyze the claims and you dont
17 caricature them and you dont strip them out of the
18 limitations that are embedded in there this is not some
19 kind of an abstract concept This is not some kind shyshy
20 its not an abstract idea Its a vary shyshy
21 JUSTICE KAGAN So putting the computer
22 stuff aside completely shyshy
23 MR PHILLIPS Right
24 JUSTICE KAGAN shyshy youre saying that youve
25 invented something or you shyshy
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1 MR PHILIPS Yes
2 JUSTICE KAGAN There is something that
3 youve patented that has shyshy that is not just simple use
4 a third party to do a settlement
5 MR PHILLIPS Right
6 JUSTICE KAGAN And what is that putting
7 the computer aside
8 MR PHILLIPS It is shyshy well shyshy and again
9 its difficult to do that because you absolutely need
10 the computer in order to implement this But the key to
11 the invention is the notion of being able
12 simultaneously dealing with it on a chronological basis
13 to stop transactions that will otherwise interfere with
14 the ability to settle on time and under the appropriate
15 circumstances And the only way you can do that in a
16 realtime basis when youre dealing with a global economy
17 is to use a computer It is necessary to the efficacy
18 of this
19 So in that sense I cant shyshy I cant
20 disaggregate it the way in some sense youre suggesting
21 It seems to me its bound up with in shyshy its bounds up
22 with the whole notion of is this an abstract concept
23 JUSTICE BREYER Can you in fact shyshy now
24 this is shyshy look there are 42 briefs in this case I
25 actually read them and I found them very very helpful
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1 up to the point where I have to make a decision because
2 theyre serious I mean you know shyshy now the problem
3 that I came away with is the one that youre beginning
4 to discuss that if you simply say take an idea thats
5 abstract and implement it on a computer there are shyshy
6 youre going to get it much faster youre going to be
7 able to do many many things and if thats good enough
8 there is a risk that you will take business in the
9 United States or large segments and instead of having
10 competition on price service and better production
11 methods well have competition on who has the best
12 patent lawyer You see where Im going on that one
13 MR PHILLIPS Yeah of course
14 JUSTICE BREYER And if you go the other way
15 and say never then what you do is you rule out real
16 inventions with computers
17 MR PHILLIPS Right
18 JUSTICE BREYER And so in those 42 briefs
19 there are a number of suggestions as to how to go
20 between Scylla and Charybdis Now I would like to
21 know shyshy I dont know if you can step back from your
22 representational model Thats a problem Youre all
23 we have now And shyshy and from my point of view I need
24 to know what in your opinion is the best way of sailing
25 between these two serious arms
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1 MR PHILLIPS Well Justice Breyer I guess
2 I would suggest to you that you might want to deal with
3 the problem you know as opposed to the problems you
4 dont know at this stage I mean we have had business
5 method patents and software patents in existence for
6 well over a decade and theyre obviously quite
7 significant in number And shyshy and we know what the
8 system is we have And Congress looked at that system
9 right and didnt say no to business methods patents
10 didnt say no to software patents instead said the
11 solution to this problem is to get it out of the
12 judicial process and create an administrative process
13 but leave the substantive standards intact
14 So my suggestion to you would be follow that
15 same advice a liberal interpretation of 101 and not a
16 caricature of the claims analyze the claims as written
17 and therefore say that the solution is 102 and 103 and
18 use the administrative process If you shyshy
19 JUSTICE GINSBURG Mr Phillips let me just
20 stop you there because four Justices of this Court did
21 not read that legislative history the way you do And
22 it was shyshy was in Bilski
23 MR PHILLIPS But this is postshyBilski
24 JUSTICE GINSBURG Justice Stevens went
25 carefully through that and he said Congress was
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1 reacting to a decision It had shyshy it was not addressing
2 101 So there are at least four Justices who say shyshy who
3 didnt buy that argument
4 MR PHILLIPS Well I mean it still seems
5 to me that the shyshy the natural inference is Congress did
6 not change 101 Congress created an entire
7 administrative system to deal with 101 102 and 103
8 And shyshy and I would hope shyshy
9 JUSTICE SCALIA And four is not five
10 anyway right
11 MR PHILLIPS Thats true
12 JUSTICE SCALIA Four is not five
13 MR PHILLIPS And youve exhausted my math
14 skills Your Honor
15 JUSTICE SCALIA By the way we shyshy we have
16 said that you cant take an abstract idea and then say
17 use a computer to implement it But we havent said
18 that you cant take an abstract idea and then say here
19 is how you use a computer to implement it shyshy
20 MR PHILLIPS Exactly
21 JUSTICE SCALIA shyshy which is basically what
22 youre doing
23 MR PHILLIPS And thats the argument were
24 doing and shyshy
25 JUSTICE SCALIA And thats a little
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1 different
2 MR PHILLIPS shyshy thats the line were
3 asking the Court to draw here
4 JUSTICE KAGAN Well how are you saying the
5 how Because I thought that your computers shyshy that your
6 patents really did just say do this on a computer as
7 opposed to saying anything substantive about how to do
8 it on a computer
9 MR PHILLIPS I would urge the Court to
10 look at Joint Appendix 159 285shy286 where it goes
11 through the flow charts This is shyshy and this is just a
12 specific example of the method by which you stop a
13 transaction and it goes through a varied series of
14 detailed steps and what the computer has to do in order
15 to do that It doesnt actually obviously put in the
16 code but thats what the PTO says dont do Dont put
17 in the code because nobody understands code so shyshy but
18 put in the functions and we know shyshy and we know that
19 someone skilled in the art will be able to put in the
20 code And if they arent if they cant do that then
21 its not enabled and thats a 112 problem
22 To go back Justice Breyer to your
23 question So on the one hand youve got a problem that
24 it seems to me Congress to some extent has said is okay
25 and weve got a solution and that solutions playing
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1 through On the other hand if this Court were to say
2 much more categorically either that theres no such
3 thing as business method patents or adopt the Solicitor
4 Generals interpretation which is to say that there
5 cannot be software unless the software somehow actually
6 improves the computer as opposed to software improving
7 every other device or any other mechanism that might be
8 out there
9 What we know is that this would inherently
10 declare and in one fell swoop hundreds of thousands of
11 patents invalid and the consequences of that it seems
12 to me are utterly unknowable And before the Court goes
13 down that path I would think it would think long and
14 hard about whether isnt that a judgment that Congress
15 ought to make And It seems to me in that sense youre
16 essentially where the Court was in Chakrabarty where
17 everybody was saying youve got to act in one way or the
18 other or the world comes to an end and the courts have
19 said well apply 101 directly
20 JUSTICE KENNEDY If we say that theres no
21 software patentability and agree with the Attorney
22 General do you lose in this case
23 MR PHILLIPS Well it would be very hard
24 for me to see how that shyshy how shyshy how I can get around
25 that particular problem because the computer is the
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1 essence of it so shyshy and a portion of it is clearly the
2 software So I think if you say there is no such thing
3 as software patentability I do lose in this case yes
4 Your Honor As do a whole lot of other people
5 JUSTICE KENNEDY Is there any common ground
6 between you and the government shyshy maybe a better
7 question to ask the government shyshy a common ground
8 between you and the government on something in the
9 software area thats patentable other than making the
10 computer itself work You understand the government to
11 say no software patents
12 MR PHILLIPS Thats the way I interpret
13 the governments shyshy the governments brief
14 JUSTICE BREYER It was like shyshy theres a
15 Bloomberg brief out here that was on this that said
16 no you can shyshy you can patent computer software when
17 its an improvement in the computer when its an
18 improvement in software when its an improvement in a
19 technology that is developed out of computers like
20 robotics when it is an improvement in a machine or
21 technology but you cannot improve it where it is simply
22 an improvement in an activity that is engaged in
23 primarily through mental processes But what they mean
24 by that is business finance and similar arts
25 Thats shyshy I mean thats shyshy it wasnt quite what shyshy I
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1 know Thats what I want to know what you dont agree
2 with about that because its a little more refined than
3 you suggested
4 MR PHILLIPS I read the Solicitor
5 Generals brief as broader than the Bloomberg brief
6 in shyshy in terms of the approach And IBMs argument is
7 if you knock out software patents you eliminate web
8 browsing word processing cellphones eshymail Those
9 are all activities that I dont think fall within the
10 meaning of the shyshy the meaning of the governments theory
11 of the case
12 JUSTICE BREYER But Im asking you shyshy Im
13 asking you what about this one that I just mentioned
14 You see I went through those five steps shyshy
15 MR PHILLIPS Right
16 JUSTICE BREYER shyshy and four of them you
17 could patent and the fifth one you cant
18 MR PHILLIPS Right But I shyshy and I guess
19 my answer to that is thats nowhere in the statute and
20 it doesnt seem to me to reflect an abstract idea Its
21 a shyshy its a line you draw that takes out business method
22 patents If the Court wants to eliminate business
23 method patents fine But you just said no to that in
24 Bilski two three terms ago
25 Now to be sure give the Solicitor General
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1 credit he comes here and says to you We didnt like
2 the result in Bilski we want you to say dont use
3 process in order to get there which is a statutory
4 interpretation come up with an extraordinarily
5 complicated way of looking at the exception and use that
6 to get to the exact same result
7 JUSTICE SOTOMAYOR Well youre doing a
8 very good job of proving shyshy
9 JUSTICE GINSBURG In Bilski Justice Breyer
10 did try to say that there wasnt that shyshy a whole lot of
11 distance between the four who thought business methods
12 were not patentable But he shyshy he also said something
13 else in shyshy in the other case Mayo Justice Scalia
14 asked you the question about doesnt that go to novelty
15 but didnt Justice Breyer say in Mayo that novelty can
16 be relevant to patent shyshy to patent eligibility He said
17 theres shyshy theres an overlap
18 MR PHILLIPS Well he said theres an
19 overlap Here in this context I think basically the
20 Respondents theory would mean that they are completely
21 coterminous And I dont think thats what the Court
22 meant And also we know from Diehr that theres got to
23 be at least some significant limitations on the extent
24 to which novelty has to be built into 101 That is the
25 province of 102 and 103 And as I said Congress
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1 modified the system of adjudication to create an
2 administrative mechanism that allows you to get to 102
3 and 103 And at least in context its important to
4 realize there have been 11 cases since that was created
5 9 of the 11 have been knocked down on 102 or 103 grounds
6 and not on 101 grounds And it seems to me thats the
7 answer to this problem is leave 101 as the coarse
8 filter If on its face it states these kinds of broad
9 abstract principles fundamental truths and even if it
10 says use a computer those should be struck down
11 JUSTICE SOTOMAYOR Which of the shyshy which of
12 the opinions below captures your position most
13 accurately
14 MR PHILLIPS I would guess it would be
15 Judge Moores opinion below that would capture ours most
16 correctly
17 JUSTICE SOTOMAYOR And if we were to think
18 your method claim is ineligible do you agree that your
19 systems and shyshy your medium and system claims fail as
20 well Do they rise and fall together
21 MR PHILLIPS No No I dont believe they
22 do rise and fall together I mean I think you could shyshy
23 if you wanted to interpret our medium claim shyshy I mean
24 our shyshy our method claims in a shyshy in particularly
25 abstract way I think you could still say that the
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1 system claims which clearly are shyshy are how to create a
2 computer system and how to implement it using that
3 method would be a much more concrete version of that in
4 a way that would take it out of 101 That said I
5 obviously believe that all of our claims satisfy 101
6 and should go on to the next stage
7 JUSTICE KAGAN Can I give you a
8 hypothetical Mr Phillips and you tell me how its
9 different or the same Lets say you know 30 years
10 somebody took a look around the world and said a lot of
11 people seem to order products by mail They get the
12 catalogues in the mail and then they send back their
13 return forms And lets say that one of the founders of
14 the Internet said wouldnt this be an amazing system
15 we could actually do this by computer and they had
16 patented that Is that the same
17 MR PHILLIPS I dont know if its the
18 same but I would shyshy I would argue that it could very
19 well be a patentable subject matter because shyshy but it
20 depends on how the claims play out
21 JUSTICE KAGAN No but exactly I mean
22 the claim would have said something along the lines of
23 you know theres this process by which people order
24 products and we want to do it over the Internet we want
25 to do it electronically and we will use a computer to
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1 do that to essentially take the process of mail order
2 catalogues and make it electronic
3 MR PHILLIPS I could certainly shyshy I think
4 I could write a claim shyshy a set of claims that I believe
5 would satisfy 101 And shyshy and to the extent that
6 youd shyshy that youd think those are no different than
7 the ones I have here then my argument is simply I think
8 I satisfy 101 with the claims we have before us Your
9 Honor
10 If there are no further questions then Id
11 like to reserve the rest of my time
12 CHIEF JUSTICE ROBERTS Thank you
13 Mr Phillips
14 Mr Perry
15 ORAL ARGUMENT OF MARK A PERRY
16 ON BEHALF OF THE RESPONDENTS
17 MR PERRY Mr Chief Justice and may it
18 please the Court
19 That path between Scylla and Charybdis was
20 charted in Bilski and Mayo Bilski holds that a
21 fundamental economic principle is an abstract idea and
22 Mayo holds that running such a principle on a computer
23 is quote not a patentable application of that
24 principle Those two propositions are sufficient to
25 dispose of this case
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1 If Bilski and Mayo stand Alices patents
2 fail Therefore Mr Phillips and his friends are
3 asking this Court to change the standard even though
4 this Court has had three unanimous decisions in the last
5 four terms establishing what the Court called a myriad
6 a wellshyestablished standard
7 On the abstract idea Justice Ginsburg you
8 asked Mr Phillips whats the difference between hedging
9 and this claim There is no difference This is
10 hedging It is hedging against credit default rather
11 than price fluctuation but it is simply hedging
12 And Mr Phillips stood up for 26 minutes and
13 never once referred to the patent Lets look at what
14 the inventor the soshycalled inventor said about this
15 invention This is at JA 293 to 94 in the
16 specification
17 This claim has simply two steps Its very
18 simple First debiting and crediting on a realtime
19 basis the relevant shadow records and second by
20 periodically affecting corresponding payment
21 instructions Those are direct quotes Debit credit
22 and pay Your Honor you cant get much more simple
23 than that
24 Mr Phillips suggests well we have
25 multilateral transactions global things chronological
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1 time zones and so forth None of those are claimed
2 Your Honor Those are all recited in specification
3 The claims read on a single transaction involving two
4 parties
5 JUSTICE BREYER Can I ask you at some
6 point not necessarily this second to say in my shyshy this
7 is just shyshy you know you have an opinion for a court
8 Different judges can have different interpretations
9 All youre getting is mine okay
10 But I think its pretty easy to say that
11 Archimedes cant just go to a boat builder and say
12 apply my idea All right Everybody agrees with that
13 But now we try to take that word apply and give
14 content to it
15 And what I suspect in my opinion Mayo did
16 and Bilski and the other cases is sketch an outer shell
17 of the content hoping that the experts you and the
18 other lawyers and the shyshy the circuit court could fill
19 in a little better than we had done the content of that
20 shell
21 So so far youre saying well this is
22 close enough to Archimedes saying apply it that we
23 neednt go further
24 Now will you at some point in the next few
25 minutes give me your impression of if it were necessary
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1 to go further what would the right words or example be
2 MR PERRY Your Honor as shyshy Justice
3 Breyer as to abstract ideas the PTO has filled in that
4 shell by listing economic concepts legal concepts
5 financial concepts teaching concepts dating and
6 interpersonal relationships and generally how business
7 should be conducted as examples of those things that are
8 likely abstract which of course all follow directly
9 from Bilski and the discussion this Court had in Bilski
10 And this patent shyshy these patents fall squarely within
11 that
12 Congress in the AIA confirmed that
13 reading Congress in the CBM method said business
14 methods that are subject to special scrutiny shyshy that is
15 dubious patents shyshy include methods and corresponding
16 apparatus which is what we have here that pertain to
17 data processing in the financial services industry and
18 do not offer a technological solution That describes
19 Alices patents to a letter Your Honor So that we
20 have shyshy
21 JUSTICE SOTOMAYOR What do you think is a
22 technological solution
23 MR PERRY Your Honor shyshy
24 JUSTICE SOTOMAYOR How could they if at
25 all written their patents to shyshy to make shyshy to make
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1 their software eligible What would shyshy what do they
2 need shyshy would have needed to have added
3 MR PERRY Justice Sotomayor they have no
4 software first Theyve never written software
5 Theyve never programmed a computer So thats a
6 nonexistent set
7 Second there are many technological
8 solutions to trading and settlement problems For
9 example data compression These shyshy these trading
10 platforms involve the movement of very large quantities
11 of data around the world The physical pipes that is
12 the fiber optic cables and data lines are limited
13 There are very sophisticated algorithms for both
14 security and speed to move data through the transmission
15 lines in novel and useful ways that could well be
16 patented
17 Nothing like that is claimed here To come
18 back to where I started if you look for example at
19 Claim 65 in the 510 patent as Mr Phillips reads it
20 it literally reads on a twoshyparty escrow to sell a
21 house so long as the escrow agent is typing this stuff
22 into the HUDshy1 using a computer That has nothing to do
23 with multilevel shyshy
24 CHIEF JUSTICE ROBERTS Well thats a
25 little more complicated He referred us to Joint
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1 Appendix Page 159 which is not a change in how
2 computers work But it is shyshy constitutes the
3 instructions about how to use the computer and where it
4 needs to be affected And just looking at it it looks
5 pretty complicated There are a lot of arrows and
6 they shyshy you know different things that go shyshy
7 (Laughter)
8 CHIEF JUSTICE ROBERTS Well but I mean
9 you know it shyshy in different directions And I
10 understand him to say that in each of those places
11 thats where the computer is needed
12 MR PERRY Mr Chief Justice Figure 16 has
13 nothing to do with the invention asserted against my
14 client in this case There are two inventions in this
15 patent One invention involving multilateral contract
16 formation is not asserted against my client And all of
17 these drawings pertain to that The only drawings that
18 pertain to the asserted claims are 25 and 33 to 37 And
19 that was established below and its established in this
20 Court And Mr Phillips has never disputed it
21 So the claim hes pointed the Court shyshy the
22 figure hes pointed the Court to has nothing to do with
23 the invention Its for a different invention that is
24 not at issue in this case
25 Remember there are hundreds and hundreds of
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1 pages of these patents They all pertain to the other
2 invention Thats why in the back of our red brief we
3 excerpted the very little bit that actually pertains to
4 this You sort of tack on patent shyshy the tack on claim
5 that Mr Phillips is asserting here Its 4 columns
6 Its less than five pages in the printed appendix that
7 actually pertains to this invention And it contains no
8 disclosure whatever
9 Justice Scalia to your question about how
10 the computer does it Of course a patent that
11 describes sufficiently how a computer does a new and
12 useful thing whether its data compression or any other
13 technological solution to a business problem a social
14 problem or a technological problem would be within the
15 realm of the shyshy of the patent laws That is what the
16 patent laws have always been for
17 This is not such a patent And the reason
18 for that is this is a preshyBilski set of patents These
19 were prosecuted under the old State Street test where
20 all the applicant had to claim was a result
21 JUSTICE KENNEDY Would you give me shyshy
22 again you already did it once shyshy an example of a
23 business process patent shyshy of a business process idea
24 and invention that is patentable
25 MR PERRY Your Honor there are many
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1 examples One would be a technological solution to a
2 business problem So that for example shyshy Ill give a
3 different example There are many applications today
4 The Court may be familiar with streaming video to watch
5 video on your computer
6 It is not possible to get enough data
7 through existing lines in its raw format The data has
8 to be manipulated in order to see live video So if you
9 want to watch TV on your phone for example
10 Those algorithms those inventions are
11 undoubtedly technological And if they are used in a
12 trading platform or a hedging system or something else
13 that wouldnt disable them And this is what the Diehr
14 case shyshy
15 JUSTICE KENNEDY Well I shyshy I shyshy in my
16 language Ive called that mechanical rather than
17 process Can you give me an example of process
18 MR PERRY Yes Your Honor The process in
19 that example would be a computer running the particular
20 data compression algorithm
21 JUSTICE KENNEDY But thats how to make
22 a shyshy thats how to make a machine work better
23 MR PERRY Yes Your Honor
24 JUSTICE KENNEDY Im asking you Is there
25 any business process any business activity that is
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1 susceptible to a patent a pure patent innovations that
2 deserve patents
3 MR PERRY Your Honor again a
4 technological solution to a business problem could well
5 be whether its a method or a process is equivalent
6 Again Congress said method in a corresponding shyshy
7 JUSTICE KENNEDY Can you give me an
8 example
9 MR PERRY I thought the data compression
10 example was a good one Ill try an encryption
11 technology Many of these trading platforms you know
12 dealing with securities and money would require some
13 sort of security devices You could have a process for
14 securely transmitting data would be another computer
15 implemented technological solution to a business
16 problem Again nothing like that claimed here
17 JUSTICE SOTOMAYOR How about eshymail and
18 just word processing programs
19 MR PERRY Your Honor a program shyshy let me
20 try it this way to both of your questions In our view
21 if what is claimed as the inventive contribution under
22 Mayo shyshy in other words if we have an abstract idea as
23 we do here and what is claimed is the inventive
24 contribution for Step 2 is the computer then the
25 computer must be essential to that operation and
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1 represent an advancement in computer science or other
2 technology And we know thats not met here Justice
3 Sotomayor because shyshy
4 JUSTICE SOTOMAYOR So youre saying no to
5 eshymail and word processing
6 MR PERRY Your Honor I think at a
7 point shyshy
8 JUSTICE SOTOMAYOR They certainly have
9 functionality and shyshy and improvement of functionality
10 for the user
11 MR PERRY At a point in time in the past
12 I think both of those would have been technological
13 advances that were patentable
14 JUSTICE SOTOMAYOR How
15 MR PERRY Today shyshy because they would have
16 provided a technological solution to a then unmet
17 problem Today reciting and do it on a word processor
18 is no different than and do it on a typewriter or shyshy and
19 do it on a calculator
20 The inventive contribution component which
21 uses specifically the language of conventional and
22 routine and well understood will evolve with
23 technology Thats why its different than the abstract
24 idea component
25 And here we know that these patents dont
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1 claim anything that was not conventional well
2 understood and routine We went through that in great
3 detail and Alice has never disputed a word of it They
4 just say youre not supposed to do that analysis even
5 though the Court 9shy0 in Mayo said we should
6 And in this case its very important to
7 look at what Alices own experts said on the subject
8 This is not our expert This is Alices expert And
9 this is at Page 1327shy28 of the Joint Appendix It is
10 possible to do the business methods of maintaining
11 accounts adjusting accounts and providing an
12 instruction without a computer or other hardware
13 And then Justice Breyer directly to your
14 abacus If someone had thought of this invention
15 soshycalled invention 100 years ago they might have
16 implemented it in a nonelectronic manner using various
17 precomputing tools such as an abacus or handwritten
18 ledgers
19 We know from Benson the Courts seminal
20 computer implementation case that if you can do it by
21 head and hand then the computer doesnt add anything
22 inventive within the meaning of the 101 exception That
23 is the holding of Benson And the Court reiterated that
24 in Mayo
25 Flook said exactly the same thing If you
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1 can do it with pencil and paper then the computer is
2 not offering anything that the patent laws are or should
3 be concerned with
4 It is only where the method will not work
5 without a computer which is not these claims and where
6 the computer itself is doing something that the patent
7 law is willing to protect
8 CHIEF JUSTICE ROBERTS What if shyshy what if
9 you can do it without a computer but its going to
10 take you know 20 people a hundred years In other
11 words theoretically you can replicate what the
12 computer does shyshy
13 MR PERRY Two answers
14 CHIEF JUSTICE ROBERTS shyshy but its
15 impractical without looking to do it on the computer
16 MR PERRY Mr Chief Justice first these
17 claims literally read as Alice reads them on a single
18 transaction between two parties so its not 20 people
19 for a hundred years Its one person sitting in a room
20 so thats not a problem
21 Second if what is being claimed is the
22 necessary speed or efficiency or data crunching
23 capabilities if you will of a computer then it would
24 have to be claimed and theres nothing claimed here
25 All that is claimed shyshy and my friend is going to stand
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1 up on rebuttal and tell you all that the expert said
2 well what is claimed is a computer but its just a
3 computer It just says a computer configured too It
4 doesnt say that the computer actually has to shyshy
5 JUSTICE BREYER Yeah but the trouble with
6 that particular test is as I think partly the Chief
7 Justice said how long et cetera and then add to that
8 though you could do it without a computer what happens
9 at the end of the line is the automobile engine goes off
10 or it begins to sputter or it turns left
11 You see its possible to take Archimedes shyshy
12 shyshy you know I use that example purposely to call
13 attention to the problem You can take those things
14 and youre not just saying apply it and youre not even
15 just saying shyshy you are saying use the computer but at
16 the end of the road something physical in the world
17 changes and everybody would say now thats shyshy that
18 will falls within I mean probably I mean my
19 hesitation shows Im looking for the right words
20 MR PERRY Justice Breyer your point is
21 the reason that it is equally fallacious to suggest on
22 the one hand as Alice and IBM does that simply
23 reciting a computer is a magic key that gets you through
24 101 and you never have to any other inquiry and what
25 some of folks the amici on the other side say which
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1 is that computers or software are never eligible Both
2 of those things have to be wrong because what the Court
3 said in Bilski was future innovation is too uncertain
4 We are not going to do that as a Court And the Court
5 laid out an approach using abstract ideas in Bilski and
6 inventive contribution in Mayo that is flexible enough
7 to take into account that innovation and to deal with
8 particular claims in context which is why at the end
9 of the day we have to come back to these patents and
10 decide which shyshy
11 JUSTICE KAGAN Mr Perry before we get
12 back to these matters you said to Justice Scalia if a
13 patent sufficiently describes how a computer will
14 implement an idea then its patentable So how
15 sufficiently does one have to describe it What do we
16 want a judge to do at this threshold level in terms of
17 trying to figure out whether the description is
18 sufficient to get you past it
19 MR PERRY If I can answer in two steps
20 Justice Kagan First in the negative What the
21 applicant or patentee must do shyshy must not do is simply
22 describe the desired result That would take us back to
23 State Street That would simply say I claim a magic
24 box that buys high and sells low or vice versa I
25 suppose I claim a magic box for investing Thats what
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1 these patents do
2 Then to put it in the affirmative and in the
3 language of Mayo the claim has to recite something
4 significantly more something significantly more than
5 the abstract idea itself That would be a contextual
6 analysis based on the claims and specifications and file
7 history and we know that some devices some methods
8 some programming will pass that
9 It is not going to be a brightshyline rule and
10 thats one of the tugshyofshywar issues that this Court and
11 the Federal Circuit have been having in these cases
12 The Federal Circuit wants brightshyline rules All
13 computers are in or all computers are out
14 This Court has been more contextual This
15 Court has been more nuanced This Court has looked at
16 things in a more robust way
17 JUSTICE KAGAN Youre not suggesting that
18 specific code is necessary
19 MR PERRY No Your Honor I think the shyshy
20 actual description of the programming is a 112 problem
21 I agree with that A 112 issue That is the realm of
22 the written description requirement What is a 101
23 problem is it is on the applicant to do more than simply
24 describe the results simply say A magic box that does
25 intermediate settlement And we can tie that back to
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1 this particular prosecution the 510 patent which is
2 the method patent
3 The examiner rejected it Under Section
4 101 the examiner said this is an abstract idea You
5 cant have this patent And the only change that this
6 applicant made was to add in the adjusting step
7 electronic adjustment It put in one word
8 electronic adjustment And under State Street which
9 is what this patent is prosecuted under that was
10 enough because the result of adjusting run through a
11 computer is enough
12 Under current law that cant be enough
13 That just cant get a patent over the line because this
14 Court said in Mayo and I got to quote this language
15 Simply implementing a fundamental principle on a
16 physical machine namely a computer is not a patentable
17 application of that principle Thats all that Alice
18 has done
19 These are preshyBilski patents They never
20 should have been issued General Verrilli will stand up
21 and address that point And certainly under current
22 law shyshy one point on the AIA Congress did not send all
23 this to the administrative process Congress created
24 two avenues the courts and the PTO to use the
25 standards Essentially it ratified Bilski and Mayo and
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1 said we agree with what you all are doing at the
2 Supreme Court and the existing standards are good enough
3 for us This is a judicial problem And that is a good
4 reason The abstract shyshy
5 JUSTICE GINSBURG The Federal Circuit in
6 this case split in many ways and it had our decisions
7 to deal with You said given Bilski and Mayo this is
8 an easy case What is the instruction that escaped a
9 good number of judges on the Federal Circuit How would
10 you state the rule
11 MR PERRY Your Honor I think theres a
12 significant element to the Federal Circuit that
13 disagrees with Mayo and has been resistant in applying
14 it Chief Judge shyshy former Chief Judge Michelle filed a
15 brief in this Court essentially saying Mayo is a
16 lifeshysciences case You should limit it to that because
17 if you apply it to everything else then these patents
18 are no good
19 Mayo we submit is a technologyshyneutral
20 industryshyneutral exceptionshyneutral framework that can
21 be used to answer all of these questions This is not
22 the death of software patents The software industry is
23 all before this Court saying this is fine with us
24 Every company in the United States practically except
25 for IBM is saying go ahead This will not affect
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1 software patents
2 Justice Ginsburg this Courts precedents
3 are clear They are unanimous They just need to be
4 applied To suggest that there is confusion that needs
5 to be addressed by retreating beating a retreat from
6 recent unanimous decisions would simply reward
7 intransigence difficulty refusal to adhere to what are
8 clear precedents because shyshy
9 JUSTICE KAGAN Should we be concerned
10 Mr Perry that there are old patents that in fact could
11 meet the test that you set forth but wont because they
12 were written in a different time and so used much more
13 general language
14 MR PERRY Your Honor the applicant or the
15 patent holder would have the opportunity to institute a
16 reexamination proceeding or some sort of administration
17 process to address that issue
18 And second it should be noted this is a
19 very small problem There are 2 million outstanding
20 patents in the United States In the last four fiscal
21 years there were 22000 infringement litigations
22 instituted but since Bilski there have only been 57
23 district court decisions on Section 101 issues There
24 have only been 12 Federal Circuit decisions total on
25 computer implementation
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1 We are talking about a group of patents
2 Justice Kagan thats way out at the tail end of
3 distribution Most patents never have a 101 challenge
4 This is not an issue with cotton gins and other things
5 This is a problem for the most marginal
6 most dubious most skeptical patents the ones that this
7 Court in Bilski shyshy and remember what Bilskis holding
8 is The majority said they are processes but it did
9 not say they are eligible
10 Thank you Mr Chief Justice
11 CHIEF JUSTICE ROBERTS Thank you counsel
12 General Verrilli
13 ORAL ARGUMENT OF DONALD B VERRILLI JR
14 ON BEHALF OF THE UNITED STATES AS AMICUS
15 CURIAE SUPPORTING RESPONDENTS
16 GENERAL VERRILLI Mr Chief Justice and
17 may it please the Court
18 An abstract idea does not become
19 patentshyeligible merely by tacking on an instruction to
20 use a computer to carry it out A computer makes a
21 difference under Section 101 when it imposes a
22 meaningful limit on the patent claim That occurs when
23 the claim is directed at improvement in computing
24 technology or an innovation that uses computing
25 technology to improve other technological functions
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1 Thats the test that we believe is most faithful to this
2 Courts precedents in Bilski and Mayo It keeps patents
3 within their traditional and appropriate domain and it
4 is capable of being administered consistently by Courts
5 and by PTO examiners
6 JUSTICE GINSBURG How do you answer the
7 argument that your view would extinguish businessshymethod
8 patents and make all software ineligible for patent
9 protection
10 GENERAL VERRILLI Yeah with shyshy let me
11 address software patents first because that I think is
12 obviously a significant question And its just not
13 correct to say that our approach would make software
14 patenting ineligible Any software patent that improves
15 the functioning of the computer technology is eligible
16 Any software patent that improves shyshy that is used to
17 improve another technology is eligible For example
18 the patent in the shyshy in the Diehr case is one in
19 which shyshy
20 JUSTICE SOTOMAYOR Why do we need to reach
21 this in that shyshy reach software patents at all in this
22 case
23 GENERAL VERRILLI Well shyshy
24 JUSTICE SOTOMAYOR Whats the necessity for
25 us to announce a general rule with respect to software
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1 There is no software being patented in this case
2 GENERAL VERRILLI Well I shyshy
3 JUSTICE SOTOMAYOR Theres a systems
4 GENERAL VERRILLI Well I shyshy I think shyshy
5 well they shyshy they shyshy theres a process being and shyshy and
6 one can think of software patents as process patents
7 And I think thats why my friends on the other side are
8 saying the sky is falling because they shyshy they are
9 interpreting what were saying about that when a
10 computer makes shyshy when a computers involvement makes
11 something eligible under 101 its calling those into
12 question and it doesnt
13 JUSTICE SOTOMAYOR Do you think we have to
14 reach the patentability of software to answer this case
15 GENERAL VERRILLI Well I think you can shyshy
16 I think the answer to that question is no not
17 necessarily You can decide it by saying that shyshy that
18 Bilski answers the question whether this is an abstract
19 idea because this form of hedging is really no
20 different than the form of hedging as a conceptual
21 matter at issue in Bilski And then Mayo answers the
22 question of whether the use of a computer in this case
23 adds enough to the abstract idea beyond conventional
24 steps because here all we have after all is just
25 conventional use of computing technology no computer
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1 innovation such that you dont qualify under 101 You
2 could take that approach
3 But it is important to the United States
4 that we shyshy and to our patent examiners that we get some
5 clarity if we can I think the clarity could come from
6 the text that I propose which I want to reiterate shyshy
7 JUSTICE SOTOMAYOR Well shyshy
8 JUSTICE BREYER Could shyshy could shyshy could you
9 go on with that because you were just getting to the
10 point where I think you say a computer improvement that
11 in fact leads to an improvement in harvesting cotton is
12 an improvement through a computer of technology so it
13 qualifies
14 But then I think you were going to say or I
15 got this also from the brief a computer improvement
16 that leads to an improvement in the methods of selling
17 bonds over the telephone is not an improvement in
18 technology reached by the computer Am I right about
19 the distinction youre making
20 GENERAL VERRILLI I dont think theres a
21 yes or no answer to that question
22 JUSTICE BREYER What is your view Yeah
23 what is shyshy how do we deal with just that problem
24 GENERAL VERRILLI If there is a genuine
25 innovation in the functioning of the computer shyshy
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1 JUSTICE BREYER Yes
2 GENERAL VERRILLI shyshy such that business
3 processes shyshy
4 JUSTICE BREYER Weve got that Yes yes
5 We got the computer But then it doesnt improve the
6 computer but rather it improves through the computer
7 the harvesting of cotton
8 Now youve got it in what you said was your
9 second category which is an improvement through the
10 computer of a technology And I thought in your brief
11 you were distinguishing an improvement through the
12 computer of a human activity that is not a technology
13 and in particular to pick an example of that
14 something in finance or something in business
15 Now am I right about the distinction youre
16 making
17 GENERAL VERRILLI Yeah that shyshy
18 JUSTICE BREYER If Im not right what is
19 the distinction
20 GENERAL VERRILLI That is generally the
21 line were drawing Frankly shyshy
22 JUSTICE BREYER And how is that justified
23 GENERAL VERRILLI I do want shyshy
24 JUSTICE BREYER That shyshy that is Judge Dyk
25 in shyshy in Bilski in the Federal circuit 4 people sort of
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1 picked it up maybe 5 didnt pick it up Would you say
2 a few words about it
3 GENERAL VERRILLI Sure About shyshy let me go
4 to Bilski there in that I do think while shyshy while
5 certainly the Court held that the term process got a
6 natural construction which could include business
7 methods it seems to me that thats not all the Court
8 said in Bilski The Court also said that it was
9 historically and traditionally quite rare that business
10 methods were patent eligible
11 It also said that shyshy that the shyshy that courts
12 and the PTO examiners should use the abstract ideas
13 exception to 101 to police the appropriate boundary
14 It also said that the
15 machineshyorshytransformation test that the United States
16 advocated remained a useful tool And of course that
17 directs to you seeing whether there is a technology
18 application
19 And of course the holding in Bilski was
20 that the shyshy the method for hedging risk was ineligible
21 because it was an abstract idea and I cant imagine
22 that if in Bilski the shyshy the claim had been exactly the
23 same but had added use a computer to carry out some of
24 these standard random analysis functions that are
25 claimed by the patent that you would have found it to
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1 be patent eligible
2 And I shyshy I would submit for the Court that
3 the key point here I think is that now given where
4 the Court shyshy what the Court has held in Bilski given
5 what its held in Mayo the abstract ideas exception is
6 really the only tool left to deal with what I shyshy what I
7 think I fairly read Bilski as saying is a significant
8 problem the proliferation of patents of business
9 methods
10 JUSTICE KENNEDY Is there an example that
11 you can give us of a shyshy what we can call a business
12 process that is patentable a process that doesnt
13 involve improving the workings of a computer
14 GENERAL VERRILLI I shyshy I think its going
15 to be difficult for me to do that I think for
16 example if you had a business method a process for
17 additional security pointshyofshysale credit card
18 transactions using particular encryption technology
19 that might well be patent eligible Its a technology
20 that it makes conduct of business more efficient or
21 effective
22 But there is a technological link here and
23 we do think thats critical to our shyshy to our point of
24 view with respect to the case And I shyshy and I do think
25 remember that when we say something is not patent
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1 eligible were not saying they cant do it Were
2 saying they cant monopolize it
3 And the concern in a situation like this one
4 is that if this is patent eligible its hard to see
5 why for example the first person who came up with a
6 frequent flier program wouldnt have been able to claim
7 a patent there because after all thats a business
8 method for improving customer loyalty implemented on a
9 computer
10 CHIEF JUSTICE ROBERTS General I shyshy you
11 mentioned a while ago the need for greater clarity and
12 certainty in this area And Im just wondering in your
13 brief youve got a nonshyexhaustive of factors to
14 consider and there are 6 different ones And Im just
15 doubtful that thats going to bring about greater
16 clarity and certainty
17 GENERAL VERRILLI I take shyshy I take the
18 point Mr Chief Justice but I think the key is that
19 they are all directed to answering the question of
20 whether the innovation that is claimed and is an
21 innovation in either A the improvement of a computers
22 functioning or B the use of computer technology to
23 improve the functioning of another technological
24 process and a case like Diehr would be in the latter
25 category
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1 And so I do think that thats the key
2 benchmark Thats the baseline Thats the test that
3 we do think can be applied clearly and consistently by
4 the courts or the PTO And it avoids the risk of things
5 like frequent flier programs or the Oakland As money
6 ball methods for evaluating the contributions in
7 individual baseball players make or any one of a host of
8 other things that our intuitions tell us just dont
9 belong in the patent system
10 Thats the shyshy drawing that line keeps them
11 out not drawing that line lets them in And with all
12 due respect I dont think that the novelty and
13 nonobviousness filters that 102 and 103 really deal with
14 that problem effectively because when you get to
15 nonobviousness in 103 for example youll be asking a
16 different question
17 If you take the frequent flier program you
18 would say well is this innovation in building consumer
19 loyalty something that would have been obvious to
20 somebody who runs an airline Its totally divorced
21 from the question of technology at that point and
22 therefore I dont think youre going to get the screen
23 that you need to get in order for the patent system to
24 be confined to its traditional and appropriate scope
25 If there are no further questions thank
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1 you
2 JUSTICE GINSBURG I have a question about
3 how do you identify an abstract concept The shyshy a
4 natural phenomenon a mathematical formula those are
5 easy to identify but there has been some confusion on
6 what qualifies as an abstract concept
7 GENERAL VERRILLI We would define
8 abstract shyshy an abstract concept as a claim that is not
9 directed to a concrete innovation in technology
10 science or the industrial arts So its the shyshy its
11 abstract in the sense that it is not a concrete
12 innovation in the traditional realm of patent law
13 Thank you
14 CHIEF JUSTICE ROBERTS Thank you General
15 Mr Phillips you have four minutes
16 remaining
17 REBUTTAL ARGUMENT OF CARTER G PHILLIPS
18 ON BEHALF OF THE PETITIONERS
19 MR PHILLIPS Thank you Mr Chief Justice
20 Id just like to make a few points
21 First of all with respect to the question
22 you asked which is looking at 159 et cetera all I can
23 tell you is that if you look at claim 33 it talks about
24 matched orders the matched orders that are described in
25 286 and 287 and then makes specific reference to 159
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1 and that flow chart thats there And its all designed
2 as a package Its only one element of the shyshy of the
3 invention but it is a central element and its an easy
4 one to understand And it goes well beyond simply the
5 notion of hedge shyshy hedge against settlement risk and do
6 it by a computer
7 JUSTICE SOTOMAYOR Your adversary says that
8 his shyshy the appendix to his brief are the only patents at
9 issue that the flow charts are not at issue in this
10 case
11 MR PHILLIPS Theres no basis for that
12 statement Your Honor There shyshy remember this went off
13 on a very truncated litigation process So theres shyshy
14 you know we shyshy we got cut off at the beginning of it
15 Theres been no construction of the shyshy of the claims
16 and shyshy and obviously these are specifications that go
17 to how you interpret the claim
18 JUSTICE SOTOMAYOR If we were to say that
19 there are no business patents shyshy
20 MR PHILLIPS Yes
21 JUSTICE SOTOMAYOR shyshy would your patent
22 survive at all
23 MR PHILLIPS No I dont shyshy I dont
24 believe so I think theres no question And you
25 know General Verrilli could not have been any plainer
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1 in his statement of how he wants to interpret the
2 abstract idea concept
3 JUSTICE SOTOMAYOR Yes he wants to say no
4 business patents
5 MR PHILLIPS No business shyshy just another
6 way of saying no business methods And you know the
7 Court rejected that And it seems to me extraordinary
8 to say Congress didnt reject no business methods in
9 101 but were going to do shyshy were going to manipulate
10 the judicial exception to accomplish precisely that same
11 thing It seems to me thats wholly inappropriate
12 Justice Ginsburg you asked my shyshy my friend
13 here you know whats his test He didnt answer that
14 question youll notice because he doesnt have an
15 answer His basic argument is whatever you do just
16 kill this patent
17 And if I were in his shoes I suppose Id
18 take that same position I think whats absolutely
19 clear is that the test ought to be one that is
20 structured as a very coarse filter not the kind of
21 filter that hes pushing for where it changes over time
22 I mean I thought his shyshy I thought his response to one
23 of the questions about eshymail and word processing that
24 Justice Sotomayor asked is over time it would change
25 Well thats exactly what 102 and 103 are for That is
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1 not the purpose of shyshy of Section 101
2 And then he uses the example of encryption
3 I guarantee you if we were arguing about encryption in
4 this case he would say to me that thats an abstract
5 principle because encryption is a concept thats been
6 around since time immemorial George Washington used
7 it Everybody has used encryption
8 And a question again thats not the
9 solution to these problems The question is how did we
10 go about doing it And we go beyond the basics of
11 simply saying use a computer and thats what we ask
12 this Court to focus on and to evaluate
13 As to the frequent flier program its
14 pretty clear to me that even though it was a novel idea
15 in some sense the concept itself would have been viewed
16 in shyshy in the KSR fashion as quite obvious as a means of
17 improving customer loyalty
18 There are solutions here Giving us 101
19 pass doesnt create a monopoly It just gets us to the
20 102 and 103 inquiries that are at the heart of what the
21 patent laws shyshy and 112 that are at the heart of what the
22 patent laws ought to be dealing with
23 If there are no further questions Your
24 Honor thank you
25 CHIEF JUSTICE ROBERTS Thank you counsel
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1 The case is submitted
2 (Whereupon at 1105 am the case in the
3 aboveshyentitled matter was submitted)
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A add 714 1023 algorithm 3320 41 automatically
As 525 3621 387 algorithms apply 72425 111
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1623 3420 2214 362 0 293 2715 457 4722 5024
viewed 5615 violate 55
W waiting 1334 want 1324 172
221 232 252424 339 3916 476 4823
wanted 2423 wants 2222
4012 5513 Washington
110171922 566
wasnt 2125 2310
watch 3349 water 71 way 416 58
81625 1113 151520 1614 1624 1721 1815 2017 2112 235 2425 254
5412 wholly 5511 willing 377 wondering
5112 word 52021
821 228 2813 3418 35517 363 417 5523
words 713 291 3422 3711 3819 492
work 51719 1124 2110 312 3322 374
workings 5013 world 2018
2510 3011 3816
wouldnt 414 415 2514 3313 516
write 264 writers 132325 written 617
1716 2925 304 4022
1 1004 115 32 100 3615 101 3121522
414 65 1715 18267 2019 2324 2467 2545 2658 3622 3824 4022 414 4323 44321 4611 471 4913 559 56118
102 1717 187 2325 2425 5213 5525 5620
103 1717 187 2325 2435 521315 5525 5620
11 2445 1105 572 112 1921 4020
4021 5621 12 4324 13shy298 15 34
3 3 24 30 259 31 111 33 3118 5323 37 3118
4 4 325 4825 42 1524 1618 44 211
5 5 491 510 3019 411 53 214 57 4322
6 6 5114 65 3019
7
8
9 9 245 9shy0 365
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1 Is that enough to make it not just the
2 abstract idea And now were at the heart of why I used
3 my exaggerated examples shyshy
4 MR PHILLIPS Right
5 JUSTICE BREYER shyshy because you will tell me
6 why shyshy
7 MR PHILLIPS Right
8 JUSTICE BREYER shyshy this is enough
9 MR PHILLIPS Right Because Justice
10 Breyer the shyshy the shyshy the concept here is not simply to
11 say stop Stop is obviously part of the element of it
12 But its also designed to ensure that at the
13 end of the day this transaction in the midst of
14 literally a global set of shyshy of deals that are going on
15 simultaneously will be implemented at the appropriate
16 time in the appropriate way And whatever else that may
17 be it seems to me its difficult to say thats an
18 abstract idea as implemented
19 JUSTICE SOTOMAYOR Im sorry But shyshy but
20 what it appears to be it sounds like youre trying to
21 revive the patenting of a function You used the word
22 function earlier and thats all Im seeing in this
23 patent is the function of reconciling accounts the
24 function of making sure theyre paid on time But in
25 what particular way other than saying do it through a
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1 computer is this something new and not function
2 MR PHILLIPS Well it does it through shyshy
3 it creates the shadow accounts because of the concerns
4 for security You dont shyshy youre not going to allow
5 somebody to enter into a central banks own accounts
6 You create the shadow accounts You monitor through the
7 software that allows you to do that You evaluate each
8 of the transactions to ensure that the settlement will
9 be available You do it sequentially and you act on it
10 by the end of the day or whenever the transaction is to
11 take place and you implement that transaction
12 JUSTICE SCALIA Why isnt it shyshy why isnt
13 doing it through a computer not enough I mean was the
14 cotton gin not an invention because it just means youre
15 doing through a machine what people used to do by hand
16 Its not an invention Its the same old same old
17 MR PHILLIPS Justice Scalia shyshy
18 JUSTICE SCALIA Why shyshy why is a computer
19 any different in that respect
20 MR PHILLIPS At one level I agree with you
21 completely There is no difference between them
22 This Court has however said on more than a
23 few occasions albeit in dicta that coming up with an
24 idea and then say use a computer is not sufficient
25 And what Im trying to suggest to you is we dont fall
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1 within that dicta
2 Now if you dont accept the dicta and you
3 say use a computer is fine then I think were done
4 JUSTICE SCALIA Well Im not saying use a
5 computer is shyshy is much of a novelty I mean thats shyshy
6 that goes to whether its novel or not If you just say
7 use a computer you havent invented anything But if
8 you come up with a serious program that shyshy that does it
9 then you know that may be novel But thats a novelty
10 issue isnt it
11 MR PHILLIPS To be sure Justice Scalia
12 JUSTICE BREYER And this is exactly the
13 question I really would like to you to focus on for me
14 Why is it shyshy and Im not saying this from a point of
15 view but it seems to me pretty clear that if what you
16 did was take the idea of solvency shyshy remember King Tut
17 Thats what I use the exaggeration shyshy and what you say
18 is implemented by having the abacus man keep track and
19 say stop okay shyshy
20 MR PHILLIPS Right
21 JUSTICE BREYER Then we implement it by
22 having somebody with a pencil and a piece of paper and
23 this is all that they add you see Say Have a man
24 with a pencil and a piece of paper keeping track and
25 saying stop or we say implement it in the computer
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1 which will automatically keep track and say stop are
2 they all enough Are some of them enough Whats the
3 rule
4 And you realize I couldnt figure out much
5 in Prometheus to go beyond what I thought was an obvious
6 case leaving it up to you and your colleagues to figure
7 out how to go further Am I making enough shyshy making
8 clear enough whats bothering me And Id really like
9 to get your answer to this
10 MR PHILLIPS And shyshy and look theres
11 no shyshy Ill be the first one to shyshy to confess that trying
12 to use language to describe these things is not all that
13 easy But the way I think you can meaningfully look at
14 this is to say that this is not simply something that
15 was a fundamental truth this is not something that
16 simply says use a computer Its not simply something
17 that says maintain solvency It shyshy it operates in a
18 much more specific and concrete environment where youre
19 dealing with a problem thats been in existence since
20 the 1970s a solution in the 1990s that CLS itself
21 acknowledges needed a solution and came forward with
22 their own solution that looks a lot like ours
23 JUSTICE KENNEDY But my shyshy my initial
24 question and I think I can work this into King Tut
25 is shyshy
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1 (Laughter)
2 JUSTICE KENNEDY shyshy is shyshy is whether or not
3 you could have patented that system idea process
4 method without attaching a computer program
5 MR PHILLIPS You cannot absolutely cannot
6 do that with this system because it is so complex and
7 so many interrelated parts
8 JUSTICE KENNEDY Suppose I thought shyshy and
9 again its just a thought because I dont have the
10 expertise shyshy that any computer group of people sitting
11 around a coffee shop in Silicon Valley could do this
12 over a weekend Suppose I thought that
13 MR PHILLIPS You mean wrote the code
14 JUSTICE KENNEDY Yes right
15 MR PHILLIPS Well thats absolutely shyshy
16 Im certain thats true
17 JUSTICE KENNEDY Well then shyshy then shyshy
18 MR PHILLIPS But thats true of almost all
19 software
20 JUSTICE KENNEDY Then why is the computer
21 program necessary to make the patent valid
22 MR PHILLIPS Well its shyshy its necessary
23 to make the invention effective As the Solicitor
24 General said the computer is essential to the efficacy
25 of this invention because of the complicated financial
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1 arrangements that exist and that can only be resolved on
2 a shyshy on a realtime basis Your abacus is great if you
3 happen to be waiting for the pyramids to be finished or
4 waiting for the gold to move in and out but it doesnt
5 help with you an abacus if youre dealing with literally
6 thousands of transactions simultaneously going on in
7 different countries at different points in time
8 JUSTICE KENNEDY But thats just an idea
9 hey lets use a computer
10 MR PHILLIPS But its not just shyshy I mean
11 obviously part of it is use the computer Justice
12 Kennedy But more fundamentally it goes beyond that
13 See I shyshy
14 JUSTICE SOTOMAYOR Is your software
15 copyrighted
16 MR PHILLIPS No I dont believe so
17 JUSTICE GINSBURG There is no special
18 software that comes with this shyshy thats part of this
19 patent is it shyshy is there
20 MR PHILLIPS No Justice Ginsburg what
21 we did here is what the Patent and Trademark Office
22 encourages us to do and encourages all software patent
23 writers to do which is to identify the functions that
24 you want to be provided for with the software and leave
25 it then to the software writers who I gather are you
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1 know quite capable of converting these functions into
2 very specific code
3 JUSTICE KAGAN Mr Phillips could you shyshy
4 could you disaggregate your argument for me Because
5 you just said look this Court has said its not
6 sufficient if you have an idea and then you say use a
7 computer to implement it right So are you saying that
8 your shyshy that shyshy are you saying that youre doing more
9 than saying use a computer to implement it or are you
10 saying that its shyshy that the idea itself is more than an
11 idea
12 MR PHILLIPS Yes Im saying shyshy
13 JUSTICE KAGAN Which part of what shyshy
14 MR PHILLIPS Im saying both actually I
15 mean Im making both of those arguments I shyshy I
16 believe that if you analyze the claims and you dont
17 caricature them and you dont strip them out of the
18 limitations that are embedded in there this is not some
19 kind of an abstract concept This is not some kind shyshy
20 its not an abstract idea Its a vary shyshy
21 JUSTICE KAGAN So putting the computer
22 stuff aside completely shyshy
23 MR PHILLIPS Right
24 JUSTICE KAGAN shyshy youre saying that youve
25 invented something or you shyshy
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1 MR PHILIPS Yes
2 JUSTICE KAGAN There is something that
3 youve patented that has shyshy that is not just simple use
4 a third party to do a settlement
5 MR PHILLIPS Right
6 JUSTICE KAGAN And what is that putting
7 the computer aside
8 MR PHILLIPS It is shyshy well shyshy and again
9 its difficult to do that because you absolutely need
10 the computer in order to implement this But the key to
11 the invention is the notion of being able
12 simultaneously dealing with it on a chronological basis
13 to stop transactions that will otherwise interfere with
14 the ability to settle on time and under the appropriate
15 circumstances And the only way you can do that in a
16 realtime basis when youre dealing with a global economy
17 is to use a computer It is necessary to the efficacy
18 of this
19 So in that sense I cant shyshy I cant
20 disaggregate it the way in some sense youre suggesting
21 It seems to me its bound up with in shyshy its bounds up
22 with the whole notion of is this an abstract concept
23 JUSTICE BREYER Can you in fact shyshy now
24 this is shyshy look there are 42 briefs in this case I
25 actually read them and I found them very very helpful
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1 up to the point where I have to make a decision because
2 theyre serious I mean you know shyshy now the problem
3 that I came away with is the one that youre beginning
4 to discuss that if you simply say take an idea thats
5 abstract and implement it on a computer there are shyshy
6 youre going to get it much faster youre going to be
7 able to do many many things and if thats good enough
8 there is a risk that you will take business in the
9 United States or large segments and instead of having
10 competition on price service and better production
11 methods well have competition on who has the best
12 patent lawyer You see where Im going on that one
13 MR PHILLIPS Yeah of course
14 JUSTICE BREYER And if you go the other way
15 and say never then what you do is you rule out real
16 inventions with computers
17 MR PHILLIPS Right
18 JUSTICE BREYER And so in those 42 briefs
19 there are a number of suggestions as to how to go
20 between Scylla and Charybdis Now I would like to
21 know shyshy I dont know if you can step back from your
22 representational model Thats a problem Youre all
23 we have now And shyshy and from my point of view I need
24 to know what in your opinion is the best way of sailing
25 between these two serious arms
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1 MR PHILLIPS Well Justice Breyer I guess
2 I would suggest to you that you might want to deal with
3 the problem you know as opposed to the problems you
4 dont know at this stage I mean we have had business
5 method patents and software patents in existence for
6 well over a decade and theyre obviously quite
7 significant in number And shyshy and we know what the
8 system is we have And Congress looked at that system
9 right and didnt say no to business methods patents
10 didnt say no to software patents instead said the
11 solution to this problem is to get it out of the
12 judicial process and create an administrative process
13 but leave the substantive standards intact
14 So my suggestion to you would be follow that
15 same advice a liberal interpretation of 101 and not a
16 caricature of the claims analyze the claims as written
17 and therefore say that the solution is 102 and 103 and
18 use the administrative process If you shyshy
19 JUSTICE GINSBURG Mr Phillips let me just
20 stop you there because four Justices of this Court did
21 not read that legislative history the way you do And
22 it was shyshy was in Bilski
23 MR PHILLIPS But this is postshyBilski
24 JUSTICE GINSBURG Justice Stevens went
25 carefully through that and he said Congress was
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1 reacting to a decision It had shyshy it was not addressing
2 101 So there are at least four Justices who say shyshy who
3 didnt buy that argument
4 MR PHILLIPS Well I mean it still seems
5 to me that the shyshy the natural inference is Congress did
6 not change 101 Congress created an entire
7 administrative system to deal with 101 102 and 103
8 And shyshy and I would hope shyshy
9 JUSTICE SCALIA And four is not five
10 anyway right
11 MR PHILLIPS Thats true
12 JUSTICE SCALIA Four is not five
13 MR PHILLIPS And youve exhausted my math
14 skills Your Honor
15 JUSTICE SCALIA By the way we shyshy we have
16 said that you cant take an abstract idea and then say
17 use a computer to implement it But we havent said
18 that you cant take an abstract idea and then say here
19 is how you use a computer to implement it shyshy
20 MR PHILLIPS Exactly
21 JUSTICE SCALIA shyshy which is basically what
22 youre doing
23 MR PHILLIPS And thats the argument were
24 doing and shyshy
25 JUSTICE SCALIA And thats a little
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1 different
2 MR PHILLIPS shyshy thats the line were
3 asking the Court to draw here
4 JUSTICE KAGAN Well how are you saying the
5 how Because I thought that your computers shyshy that your
6 patents really did just say do this on a computer as
7 opposed to saying anything substantive about how to do
8 it on a computer
9 MR PHILLIPS I would urge the Court to
10 look at Joint Appendix 159 285shy286 where it goes
11 through the flow charts This is shyshy and this is just a
12 specific example of the method by which you stop a
13 transaction and it goes through a varied series of
14 detailed steps and what the computer has to do in order
15 to do that It doesnt actually obviously put in the
16 code but thats what the PTO says dont do Dont put
17 in the code because nobody understands code so shyshy but
18 put in the functions and we know shyshy and we know that
19 someone skilled in the art will be able to put in the
20 code And if they arent if they cant do that then
21 its not enabled and thats a 112 problem
22 To go back Justice Breyer to your
23 question So on the one hand youve got a problem that
24 it seems to me Congress to some extent has said is okay
25 and weve got a solution and that solutions playing
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1 through On the other hand if this Court were to say
2 much more categorically either that theres no such
3 thing as business method patents or adopt the Solicitor
4 Generals interpretation which is to say that there
5 cannot be software unless the software somehow actually
6 improves the computer as opposed to software improving
7 every other device or any other mechanism that might be
8 out there
9 What we know is that this would inherently
10 declare and in one fell swoop hundreds of thousands of
11 patents invalid and the consequences of that it seems
12 to me are utterly unknowable And before the Court goes
13 down that path I would think it would think long and
14 hard about whether isnt that a judgment that Congress
15 ought to make And It seems to me in that sense youre
16 essentially where the Court was in Chakrabarty where
17 everybody was saying youve got to act in one way or the
18 other or the world comes to an end and the courts have
19 said well apply 101 directly
20 JUSTICE KENNEDY If we say that theres no
21 software patentability and agree with the Attorney
22 General do you lose in this case
23 MR PHILLIPS Well it would be very hard
24 for me to see how that shyshy how shyshy how I can get around
25 that particular problem because the computer is the
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1 essence of it so shyshy and a portion of it is clearly the
2 software So I think if you say there is no such thing
3 as software patentability I do lose in this case yes
4 Your Honor As do a whole lot of other people
5 JUSTICE KENNEDY Is there any common ground
6 between you and the government shyshy maybe a better
7 question to ask the government shyshy a common ground
8 between you and the government on something in the
9 software area thats patentable other than making the
10 computer itself work You understand the government to
11 say no software patents
12 MR PHILLIPS Thats the way I interpret
13 the governments shyshy the governments brief
14 JUSTICE BREYER It was like shyshy theres a
15 Bloomberg brief out here that was on this that said
16 no you can shyshy you can patent computer software when
17 its an improvement in the computer when its an
18 improvement in software when its an improvement in a
19 technology that is developed out of computers like
20 robotics when it is an improvement in a machine or
21 technology but you cannot improve it where it is simply
22 an improvement in an activity that is engaged in
23 primarily through mental processes But what they mean
24 by that is business finance and similar arts
25 Thats shyshy I mean thats shyshy it wasnt quite what shyshy I
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1 know Thats what I want to know what you dont agree
2 with about that because its a little more refined than
3 you suggested
4 MR PHILLIPS I read the Solicitor
5 Generals brief as broader than the Bloomberg brief
6 in shyshy in terms of the approach And IBMs argument is
7 if you knock out software patents you eliminate web
8 browsing word processing cellphones eshymail Those
9 are all activities that I dont think fall within the
10 meaning of the shyshy the meaning of the governments theory
11 of the case
12 JUSTICE BREYER But Im asking you shyshy Im
13 asking you what about this one that I just mentioned
14 You see I went through those five steps shyshy
15 MR PHILLIPS Right
16 JUSTICE BREYER shyshy and four of them you
17 could patent and the fifth one you cant
18 MR PHILLIPS Right But I shyshy and I guess
19 my answer to that is thats nowhere in the statute and
20 it doesnt seem to me to reflect an abstract idea Its
21 a shyshy its a line you draw that takes out business method
22 patents If the Court wants to eliminate business
23 method patents fine But you just said no to that in
24 Bilski two three terms ago
25 Now to be sure give the Solicitor General
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1 credit he comes here and says to you We didnt like
2 the result in Bilski we want you to say dont use
3 process in order to get there which is a statutory
4 interpretation come up with an extraordinarily
5 complicated way of looking at the exception and use that
6 to get to the exact same result
7 JUSTICE SOTOMAYOR Well youre doing a
8 very good job of proving shyshy
9 JUSTICE GINSBURG In Bilski Justice Breyer
10 did try to say that there wasnt that shyshy a whole lot of
11 distance between the four who thought business methods
12 were not patentable But he shyshy he also said something
13 else in shyshy in the other case Mayo Justice Scalia
14 asked you the question about doesnt that go to novelty
15 but didnt Justice Breyer say in Mayo that novelty can
16 be relevant to patent shyshy to patent eligibility He said
17 theres shyshy theres an overlap
18 MR PHILLIPS Well he said theres an
19 overlap Here in this context I think basically the
20 Respondents theory would mean that they are completely
21 coterminous And I dont think thats what the Court
22 meant And also we know from Diehr that theres got to
23 be at least some significant limitations on the extent
24 to which novelty has to be built into 101 That is the
25 province of 102 and 103 And as I said Congress
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1 modified the system of adjudication to create an
2 administrative mechanism that allows you to get to 102
3 and 103 And at least in context its important to
4 realize there have been 11 cases since that was created
5 9 of the 11 have been knocked down on 102 or 103 grounds
6 and not on 101 grounds And it seems to me thats the
7 answer to this problem is leave 101 as the coarse
8 filter If on its face it states these kinds of broad
9 abstract principles fundamental truths and even if it
10 says use a computer those should be struck down
11 JUSTICE SOTOMAYOR Which of the shyshy which of
12 the opinions below captures your position most
13 accurately
14 MR PHILLIPS I would guess it would be
15 Judge Moores opinion below that would capture ours most
16 correctly
17 JUSTICE SOTOMAYOR And if we were to think
18 your method claim is ineligible do you agree that your
19 systems and shyshy your medium and system claims fail as
20 well Do they rise and fall together
21 MR PHILLIPS No No I dont believe they
22 do rise and fall together I mean I think you could shyshy
23 if you wanted to interpret our medium claim shyshy I mean
24 our shyshy our method claims in a shyshy in particularly
25 abstract way I think you could still say that the
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1 system claims which clearly are shyshy are how to create a
2 computer system and how to implement it using that
3 method would be a much more concrete version of that in
4 a way that would take it out of 101 That said I
5 obviously believe that all of our claims satisfy 101
6 and should go on to the next stage
7 JUSTICE KAGAN Can I give you a
8 hypothetical Mr Phillips and you tell me how its
9 different or the same Lets say you know 30 years
10 somebody took a look around the world and said a lot of
11 people seem to order products by mail They get the
12 catalogues in the mail and then they send back their
13 return forms And lets say that one of the founders of
14 the Internet said wouldnt this be an amazing system
15 we could actually do this by computer and they had
16 patented that Is that the same
17 MR PHILLIPS I dont know if its the
18 same but I would shyshy I would argue that it could very
19 well be a patentable subject matter because shyshy but it
20 depends on how the claims play out
21 JUSTICE KAGAN No but exactly I mean
22 the claim would have said something along the lines of
23 you know theres this process by which people order
24 products and we want to do it over the Internet we want
25 to do it electronically and we will use a computer to
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1 do that to essentially take the process of mail order
2 catalogues and make it electronic
3 MR PHILLIPS I could certainly shyshy I think
4 I could write a claim shyshy a set of claims that I believe
5 would satisfy 101 And shyshy and to the extent that
6 youd shyshy that youd think those are no different than
7 the ones I have here then my argument is simply I think
8 I satisfy 101 with the claims we have before us Your
9 Honor
10 If there are no further questions then Id
11 like to reserve the rest of my time
12 CHIEF JUSTICE ROBERTS Thank you
13 Mr Phillips
14 Mr Perry
15 ORAL ARGUMENT OF MARK A PERRY
16 ON BEHALF OF THE RESPONDENTS
17 MR PERRY Mr Chief Justice and may it
18 please the Court
19 That path between Scylla and Charybdis was
20 charted in Bilski and Mayo Bilski holds that a
21 fundamental economic principle is an abstract idea and
22 Mayo holds that running such a principle on a computer
23 is quote not a patentable application of that
24 principle Those two propositions are sufficient to
25 dispose of this case
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1 If Bilski and Mayo stand Alices patents
2 fail Therefore Mr Phillips and his friends are
3 asking this Court to change the standard even though
4 this Court has had three unanimous decisions in the last
5 four terms establishing what the Court called a myriad
6 a wellshyestablished standard
7 On the abstract idea Justice Ginsburg you
8 asked Mr Phillips whats the difference between hedging
9 and this claim There is no difference This is
10 hedging It is hedging against credit default rather
11 than price fluctuation but it is simply hedging
12 And Mr Phillips stood up for 26 minutes and
13 never once referred to the patent Lets look at what
14 the inventor the soshycalled inventor said about this
15 invention This is at JA 293 to 94 in the
16 specification
17 This claim has simply two steps Its very
18 simple First debiting and crediting on a realtime
19 basis the relevant shadow records and second by
20 periodically affecting corresponding payment
21 instructions Those are direct quotes Debit credit
22 and pay Your Honor you cant get much more simple
23 than that
24 Mr Phillips suggests well we have
25 multilateral transactions global things chronological
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1 time zones and so forth None of those are claimed
2 Your Honor Those are all recited in specification
3 The claims read on a single transaction involving two
4 parties
5 JUSTICE BREYER Can I ask you at some
6 point not necessarily this second to say in my shyshy this
7 is just shyshy you know you have an opinion for a court
8 Different judges can have different interpretations
9 All youre getting is mine okay
10 But I think its pretty easy to say that
11 Archimedes cant just go to a boat builder and say
12 apply my idea All right Everybody agrees with that
13 But now we try to take that word apply and give
14 content to it
15 And what I suspect in my opinion Mayo did
16 and Bilski and the other cases is sketch an outer shell
17 of the content hoping that the experts you and the
18 other lawyers and the shyshy the circuit court could fill
19 in a little better than we had done the content of that
20 shell
21 So so far youre saying well this is
22 close enough to Archimedes saying apply it that we
23 neednt go further
24 Now will you at some point in the next few
25 minutes give me your impression of if it were necessary
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1 to go further what would the right words or example be
2 MR PERRY Your Honor as shyshy Justice
3 Breyer as to abstract ideas the PTO has filled in that
4 shell by listing economic concepts legal concepts
5 financial concepts teaching concepts dating and
6 interpersonal relationships and generally how business
7 should be conducted as examples of those things that are
8 likely abstract which of course all follow directly
9 from Bilski and the discussion this Court had in Bilski
10 And this patent shyshy these patents fall squarely within
11 that
12 Congress in the AIA confirmed that
13 reading Congress in the CBM method said business
14 methods that are subject to special scrutiny shyshy that is
15 dubious patents shyshy include methods and corresponding
16 apparatus which is what we have here that pertain to
17 data processing in the financial services industry and
18 do not offer a technological solution That describes
19 Alices patents to a letter Your Honor So that we
20 have shyshy
21 JUSTICE SOTOMAYOR What do you think is a
22 technological solution
23 MR PERRY Your Honor shyshy
24 JUSTICE SOTOMAYOR How could they if at
25 all written their patents to shyshy to make shyshy to make
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1 their software eligible What would shyshy what do they
2 need shyshy would have needed to have added
3 MR PERRY Justice Sotomayor they have no
4 software first Theyve never written software
5 Theyve never programmed a computer So thats a
6 nonexistent set
7 Second there are many technological
8 solutions to trading and settlement problems For
9 example data compression These shyshy these trading
10 platforms involve the movement of very large quantities
11 of data around the world The physical pipes that is
12 the fiber optic cables and data lines are limited
13 There are very sophisticated algorithms for both
14 security and speed to move data through the transmission
15 lines in novel and useful ways that could well be
16 patented
17 Nothing like that is claimed here To come
18 back to where I started if you look for example at
19 Claim 65 in the 510 patent as Mr Phillips reads it
20 it literally reads on a twoshyparty escrow to sell a
21 house so long as the escrow agent is typing this stuff
22 into the HUDshy1 using a computer That has nothing to do
23 with multilevel shyshy
24 CHIEF JUSTICE ROBERTS Well thats a
25 little more complicated He referred us to Joint
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1 Appendix Page 159 which is not a change in how
2 computers work But it is shyshy constitutes the
3 instructions about how to use the computer and where it
4 needs to be affected And just looking at it it looks
5 pretty complicated There are a lot of arrows and
6 they shyshy you know different things that go shyshy
7 (Laughter)
8 CHIEF JUSTICE ROBERTS Well but I mean
9 you know it shyshy in different directions And I
10 understand him to say that in each of those places
11 thats where the computer is needed
12 MR PERRY Mr Chief Justice Figure 16 has
13 nothing to do with the invention asserted against my
14 client in this case There are two inventions in this
15 patent One invention involving multilateral contract
16 formation is not asserted against my client And all of
17 these drawings pertain to that The only drawings that
18 pertain to the asserted claims are 25 and 33 to 37 And
19 that was established below and its established in this
20 Court And Mr Phillips has never disputed it
21 So the claim hes pointed the Court shyshy the
22 figure hes pointed the Court to has nothing to do with
23 the invention Its for a different invention that is
24 not at issue in this case
25 Remember there are hundreds and hundreds of
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1 pages of these patents They all pertain to the other
2 invention Thats why in the back of our red brief we
3 excerpted the very little bit that actually pertains to
4 this You sort of tack on patent shyshy the tack on claim
5 that Mr Phillips is asserting here Its 4 columns
6 Its less than five pages in the printed appendix that
7 actually pertains to this invention And it contains no
8 disclosure whatever
9 Justice Scalia to your question about how
10 the computer does it Of course a patent that
11 describes sufficiently how a computer does a new and
12 useful thing whether its data compression or any other
13 technological solution to a business problem a social
14 problem or a technological problem would be within the
15 realm of the shyshy of the patent laws That is what the
16 patent laws have always been for
17 This is not such a patent And the reason
18 for that is this is a preshyBilski set of patents These
19 were prosecuted under the old State Street test where
20 all the applicant had to claim was a result
21 JUSTICE KENNEDY Would you give me shyshy
22 again you already did it once shyshy an example of a
23 business process patent shyshy of a business process idea
24 and invention that is patentable
25 MR PERRY Your Honor there are many
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1 examples One would be a technological solution to a
2 business problem So that for example shyshy Ill give a
3 different example There are many applications today
4 The Court may be familiar with streaming video to watch
5 video on your computer
6 It is not possible to get enough data
7 through existing lines in its raw format The data has
8 to be manipulated in order to see live video So if you
9 want to watch TV on your phone for example
10 Those algorithms those inventions are
11 undoubtedly technological And if they are used in a
12 trading platform or a hedging system or something else
13 that wouldnt disable them And this is what the Diehr
14 case shyshy
15 JUSTICE KENNEDY Well I shyshy I shyshy in my
16 language Ive called that mechanical rather than
17 process Can you give me an example of process
18 MR PERRY Yes Your Honor The process in
19 that example would be a computer running the particular
20 data compression algorithm
21 JUSTICE KENNEDY But thats how to make
22 a shyshy thats how to make a machine work better
23 MR PERRY Yes Your Honor
24 JUSTICE KENNEDY Im asking you Is there
25 any business process any business activity that is
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1 susceptible to a patent a pure patent innovations that
2 deserve patents
3 MR PERRY Your Honor again a
4 technological solution to a business problem could well
5 be whether its a method or a process is equivalent
6 Again Congress said method in a corresponding shyshy
7 JUSTICE KENNEDY Can you give me an
8 example
9 MR PERRY I thought the data compression
10 example was a good one Ill try an encryption
11 technology Many of these trading platforms you know
12 dealing with securities and money would require some
13 sort of security devices You could have a process for
14 securely transmitting data would be another computer
15 implemented technological solution to a business
16 problem Again nothing like that claimed here
17 JUSTICE SOTOMAYOR How about eshymail and
18 just word processing programs
19 MR PERRY Your Honor a program shyshy let me
20 try it this way to both of your questions In our view
21 if what is claimed as the inventive contribution under
22 Mayo shyshy in other words if we have an abstract idea as
23 we do here and what is claimed is the inventive
24 contribution for Step 2 is the computer then the
25 computer must be essential to that operation and
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1 represent an advancement in computer science or other
2 technology And we know thats not met here Justice
3 Sotomayor because shyshy
4 JUSTICE SOTOMAYOR So youre saying no to
5 eshymail and word processing
6 MR PERRY Your Honor I think at a
7 point shyshy
8 JUSTICE SOTOMAYOR They certainly have
9 functionality and shyshy and improvement of functionality
10 for the user
11 MR PERRY At a point in time in the past
12 I think both of those would have been technological
13 advances that were patentable
14 JUSTICE SOTOMAYOR How
15 MR PERRY Today shyshy because they would have
16 provided a technological solution to a then unmet
17 problem Today reciting and do it on a word processor
18 is no different than and do it on a typewriter or shyshy and
19 do it on a calculator
20 The inventive contribution component which
21 uses specifically the language of conventional and
22 routine and well understood will evolve with
23 technology Thats why its different than the abstract
24 idea component
25 And here we know that these patents dont
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1 claim anything that was not conventional well
2 understood and routine We went through that in great
3 detail and Alice has never disputed a word of it They
4 just say youre not supposed to do that analysis even
5 though the Court 9shy0 in Mayo said we should
6 And in this case its very important to
7 look at what Alices own experts said on the subject
8 This is not our expert This is Alices expert And
9 this is at Page 1327shy28 of the Joint Appendix It is
10 possible to do the business methods of maintaining
11 accounts adjusting accounts and providing an
12 instruction without a computer or other hardware
13 And then Justice Breyer directly to your
14 abacus If someone had thought of this invention
15 soshycalled invention 100 years ago they might have
16 implemented it in a nonelectronic manner using various
17 precomputing tools such as an abacus or handwritten
18 ledgers
19 We know from Benson the Courts seminal
20 computer implementation case that if you can do it by
21 head and hand then the computer doesnt add anything
22 inventive within the meaning of the 101 exception That
23 is the holding of Benson And the Court reiterated that
24 in Mayo
25 Flook said exactly the same thing If you
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1 can do it with pencil and paper then the computer is
2 not offering anything that the patent laws are or should
3 be concerned with
4 It is only where the method will not work
5 without a computer which is not these claims and where
6 the computer itself is doing something that the patent
7 law is willing to protect
8 CHIEF JUSTICE ROBERTS What if shyshy what if
9 you can do it without a computer but its going to
10 take you know 20 people a hundred years In other
11 words theoretically you can replicate what the
12 computer does shyshy
13 MR PERRY Two answers
14 CHIEF JUSTICE ROBERTS shyshy but its
15 impractical without looking to do it on the computer
16 MR PERRY Mr Chief Justice first these
17 claims literally read as Alice reads them on a single
18 transaction between two parties so its not 20 people
19 for a hundred years Its one person sitting in a room
20 so thats not a problem
21 Second if what is being claimed is the
22 necessary speed or efficiency or data crunching
23 capabilities if you will of a computer then it would
24 have to be claimed and theres nothing claimed here
25 All that is claimed shyshy and my friend is going to stand
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1 up on rebuttal and tell you all that the expert said
2 well what is claimed is a computer but its just a
3 computer It just says a computer configured too It
4 doesnt say that the computer actually has to shyshy
5 JUSTICE BREYER Yeah but the trouble with
6 that particular test is as I think partly the Chief
7 Justice said how long et cetera and then add to that
8 though you could do it without a computer what happens
9 at the end of the line is the automobile engine goes off
10 or it begins to sputter or it turns left
11 You see its possible to take Archimedes shyshy
12 shyshy you know I use that example purposely to call
13 attention to the problem You can take those things
14 and youre not just saying apply it and youre not even
15 just saying shyshy you are saying use the computer but at
16 the end of the road something physical in the world
17 changes and everybody would say now thats shyshy that
18 will falls within I mean probably I mean my
19 hesitation shows Im looking for the right words
20 MR PERRY Justice Breyer your point is
21 the reason that it is equally fallacious to suggest on
22 the one hand as Alice and IBM does that simply
23 reciting a computer is a magic key that gets you through
24 101 and you never have to any other inquiry and what
25 some of folks the amici on the other side say which
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1 is that computers or software are never eligible Both
2 of those things have to be wrong because what the Court
3 said in Bilski was future innovation is too uncertain
4 We are not going to do that as a Court And the Court
5 laid out an approach using abstract ideas in Bilski and
6 inventive contribution in Mayo that is flexible enough
7 to take into account that innovation and to deal with
8 particular claims in context which is why at the end
9 of the day we have to come back to these patents and
10 decide which shyshy
11 JUSTICE KAGAN Mr Perry before we get
12 back to these matters you said to Justice Scalia if a
13 patent sufficiently describes how a computer will
14 implement an idea then its patentable So how
15 sufficiently does one have to describe it What do we
16 want a judge to do at this threshold level in terms of
17 trying to figure out whether the description is
18 sufficient to get you past it
19 MR PERRY If I can answer in two steps
20 Justice Kagan First in the negative What the
21 applicant or patentee must do shyshy must not do is simply
22 describe the desired result That would take us back to
23 State Street That would simply say I claim a magic
24 box that buys high and sells low or vice versa I
25 suppose I claim a magic box for investing Thats what
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1 these patents do
2 Then to put it in the affirmative and in the
3 language of Mayo the claim has to recite something
4 significantly more something significantly more than
5 the abstract idea itself That would be a contextual
6 analysis based on the claims and specifications and file
7 history and we know that some devices some methods
8 some programming will pass that
9 It is not going to be a brightshyline rule and
10 thats one of the tugshyofshywar issues that this Court and
11 the Federal Circuit have been having in these cases
12 The Federal Circuit wants brightshyline rules All
13 computers are in or all computers are out
14 This Court has been more contextual This
15 Court has been more nuanced This Court has looked at
16 things in a more robust way
17 JUSTICE KAGAN Youre not suggesting that
18 specific code is necessary
19 MR PERRY No Your Honor I think the shyshy
20 actual description of the programming is a 112 problem
21 I agree with that A 112 issue That is the realm of
22 the written description requirement What is a 101
23 problem is it is on the applicant to do more than simply
24 describe the results simply say A magic box that does
25 intermediate settlement And we can tie that back to
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1 this particular prosecution the 510 patent which is
2 the method patent
3 The examiner rejected it Under Section
4 101 the examiner said this is an abstract idea You
5 cant have this patent And the only change that this
6 applicant made was to add in the adjusting step
7 electronic adjustment It put in one word
8 electronic adjustment And under State Street which
9 is what this patent is prosecuted under that was
10 enough because the result of adjusting run through a
11 computer is enough
12 Under current law that cant be enough
13 That just cant get a patent over the line because this
14 Court said in Mayo and I got to quote this language
15 Simply implementing a fundamental principle on a
16 physical machine namely a computer is not a patentable
17 application of that principle Thats all that Alice
18 has done
19 These are preshyBilski patents They never
20 should have been issued General Verrilli will stand up
21 and address that point And certainly under current
22 law shyshy one point on the AIA Congress did not send all
23 this to the administrative process Congress created
24 two avenues the courts and the PTO to use the
25 standards Essentially it ratified Bilski and Mayo and
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1 said we agree with what you all are doing at the
2 Supreme Court and the existing standards are good enough
3 for us This is a judicial problem And that is a good
4 reason The abstract shyshy
5 JUSTICE GINSBURG The Federal Circuit in
6 this case split in many ways and it had our decisions
7 to deal with You said given Bilski and Mayo this is
8 an easy case What is the instruction that escaped a
9 good number of judges on the Federal Circuit How would
10 you state the rule
11 MR PERRY Your Honor I think theres a
12 significant element to the Federal Circuit that
13 disagrees with Mayo and has been resistant in applying
14 it Chief Judge shyshy former Chief Judge Michelle filed a
15 brief in this Court essentially saying Mayo is a
16 lifeshysciences case You should limit it to that because
17 if you apply it to everything else then these patents
18 are no good
19 Mayo we submit is a technologyshyneutral
20 industryshyneutral exceptionshyneutral framework that can
21 be used to answer all of these questions This is not
22 the death of software patents The software industry is
23 all before this Court saying this is fine with us
24 Every company in the United States practically except
25 for IBM is saying go ahead This will not affect
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1 software patents
2 Justice Ginsburg this Courts precedents
3 are clear They are unanimous They just need to be
4 applied To suggest that there is confusion that needs
5 to be addressed by retreating beating a retreat from
6 recent unanimous decisions would simply reward
7 intransigence difficulty refusal to adhere to what are
8 clear precedents because shyshy
9 JUSTICE KAGAN Should we be concerned
10 Mr Perry that there are old patents that in fact could
11 meet the test that you set forth but wont because they
12 were written in a different time and so used much more
13 general language
14 MR PERRY Your Honor the applicant or the
15 patent holder would have the opportunity to institute a
16 reexamination proceeding or some sort of administration
17 process to address that issue
18 And second it should be noted this is a
19 very small problem There are 2 million outstanding
20 patents in the United States In the last four fiscal
21 years there were 22000 infringement litigations
22 instituted but since Bilski there have only been 57
23 district court decisions on Section 101 issues There
24 have only been 12 Federal Circuit decisions total on
25 computer implementation
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1 We are talking about a group of patents
2 Justice Kagan thats way out at the tail end of
3 distribution Most patents never have a 101 challenge
4 This is not an issue with cotton gins and other things
5 This is a problem for the most marginal
6 most dubious most skeptical patents the ones that this
7 Court in Bilski shyshy and remember what Bilskis holding
8 is The majority said they are processes but it did
9 not say they are eligible
10 Thank you Mr Chief Justice
11 CHIEF JUSTICE ROBERTS Thank you counsel
12 General Verrilli
13 ORAL ARGUMENT OF DONALD B VERRILLI JR
14 ON BEHALF OF THE UNITED STATES AS AMICUS
15 CURIAE SUPPORTING RESPONDENTS
16 GENERAL VERRILLI Mr Chief Justice and
17 may it please the Court
18 An abstract idea does not become
19 patentshyeligible merely by tacking on an instruction to
20 use a computer to carry it out A computer makes a
21 difference under Section 101 when it imposes a
22 meaningful limit on the patent claim That occurs when
23 the claim is directed at improvement in computing
24 technology or an innovation that uses computing
25 technology to improve other technological functions
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1 Thats the test that we believe is most faithful to this
2 Courts precedents in Bilski and Mayo It keeps patents
3 within their traditional and appropriate domain and it
4 is capable of being administered consistently by Courts
5 and by PTO examiners
6 JUSTICE GINSBURG How do you answer the
7 argument that your view would extinguish businessshymethod
8 patents and make all software ineligible for patent
9 protection
10 GENERAL VERRILLI Yeah with shyshy let me
11 address software patents first because that I think is
12 obviously a significant question And its just not
13 correct to say that our approach would make software
14 patenting ineligible Any software patent that improves
15 the functioning of the computer technology is eligible
16 Any software patent that improves shyshy that is used to
17 improve another technology is eligible For example
18 the patent in the shyshy in the Diehr case is one in
19 which shyshy
20 JUSTICE SOTOMAYOR Why do we need to reach
21 this in that shyshy reach software patents at all in this
22 case
23 GENERAL VERRILLI Well shyshy
24 JUSTICE SOTOMAYOR Whats the necessity for
25 us to announce a general rule with respect to software
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1 There is no software being patented in this case
2 GENERAL VERRILLI Well I shyshy
3 JUSTICE SOTOMAYOR Theres a systems
4 GENERAL VERRILLI Well I shyshy I think shyshy
5 well they shyshy they shyshy theres a process being and shyshy and
6 one can think of software patents as process patents
7 And I think thats why my friends on the other side are
8 saying the sky is falling because they shyshy they are
9 interpreting what were saying about that when a
10 computer makes shyshy when a computers involvement makes
11 something eligible under 101 its calling those into
12 question and it doesnt
13 JUSTICE SOTOMAYOR Do you think we have to
14 reach the patentability of software to answer this case
15 GENERAL VERRILLI Well I think you can shyshy
16 I think the answer to that question is no not
17 necessarily You can decide it by saying that shyshy that
18 Bilski answers the question whether this is an abstract
19 idea because this form of hedging is really no
20 different than the form of hedging as a conceptual
21 matter at issue in Bilski And then Mayo answers the
22 question of whether the use of a computer in this case
23 adds enough to the abstract idea beyond conventional
24 steps because here all we have after all is just
25 conventional use of computing technology no computer
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1 innovation such that you dont qualify under 101 You
2 could take that approach
3 But it is important to the United States
4 that we shyshy and to our patent examiners that we get some
5 clarity if we can I think the clarity could come from
6 the text that I propose which I want to reiterate shyshy
7 JUSTICE SOTOMAYOR Well shyshy
8 JUSTICE BREYER Could shyshy could shyshy could you
9 go on with that because you were just getting to the
10 point where I think you say a computer improvement that
11 in fact leads to an improvement in harvesting cotton is
12 an improvement through a computer of technology so it
13 qualifies
14 But then I think you were going to say or I
15 got this also from the brief a computer improvement
16 that leads to an improvement in the methods of selling
17 bonds over the telephone is not an improvement in
18 technology reached by the computer Am I right about
19 the distinction youre making
20 GENERAL VERRILLI I dont think theres a
21 yes or no answer to that question
22 JUSTICE BREYER What is your view Yeah
23 what is shyshy how do we deal with just that problem
24 GENERAL VERRILLI If there is a genuine
25 innovation in the functioning of the computer shyshy
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1 JUSTICE BREYER Yes
2 GENERAL VERRILLI shyshy such that business
3 processes shyshy
4 JUSTICE BREYER Weve got that Yes yes
5 We got the computer But then it doesnt improve the
6 computer but rather it improves through the computer
7 the harvesting of cotton
8 Now youve got it in what you said was your
9 second category which is an improvement through the
10 computer of a technology And I thought in your brief
11 you were distinguishing an improvement through the
12 computer of a human activity that is not a technology
13 and in particular to pick an example of that
14 something in finance or something in business
15 Now am I right about the distinction youre
16 making
17 GENERAL VERRILLI Yeah that shyshy
18 JUSTICE BREYER If Im not right what is
19 the distinction
20 GENERAL VERRILLI That is generally the
21 line were drawing Frankly shyshy
22 JUSTICE BREYER And how is that justified
23 GENERAL VERRILLI I do want shyshy
24 JUSTICE BREYER That shyshy that is Judge Dyk
25 in shyshy in Bilski in the Federal circuit 4 people sort of
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1 picked it up maybe 5 didnt pick it up Would you say
2 a few words about it
3 GENERAL VERRILLI Sure About shyshy let me go
4 to Bilski there in that I do think while shyshy while
5 certainly the Court held that the term process got a
6 natural construction which could include business
7 methods it seems to me that thats not all the Court
8 said in Bilski The Court also said that it was
9 historically and traditionally quite rare that business
10 methods were patent eligible
11 It also said that shyshy that the shyshy that courts
12 and the PTO examiners should use the abstract ideas
13 exception to 101 to police the appropriate boundary
14 It also said that the
15 machineshyorshytransformation test that the United States
16 advocated remained a useful tool And of course that
17 directs to you seeing whether there is a technology
18 application
19 And of course the holding in Bilski was
20 that the shyshy the method for hedging risk was ineligible
21 because it was an abstract idea and I cant imagine
22 that if in Bilski the shyshy the claim had been exactly the
23 same but had added use a computer to carry out some of
24 these standard random analysis functions that are
25 claimed by the patent that you would have found it to
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1 be patent eligible
2 And I shyshy I would submit for the Court that
3 the key point here I think is that now given where
4 the Court shyshy what the Court has held in Bilski given
5 what its held in Mayo the abstract ideas exception is
6 really the only tool left to deal with what I shyshy what I
7 think I fairly read Bilski as saying is a significant
8 problem the proliferation of patents of business
9 methods
10 JUSTICE KENNEDY Is there an example that
11 you can give us of a shyshy what we can call a business
12 process that is patentable a process that doesnt
13 involve improving the workings of a computer
14 GENERAL VERRILLI I shyshy I think its going
15 to be difficult for me to do that I think for
16 example if you had a business method a process for
17 additional security pointshyofshysale credit card
18 transactions using particular encryption technology
19 that might well be patent eligible Its a technology
20 that it makes conduct of business more efficient or
21 effective
22 But there is a technological link here and
23 we do think thats critical to our shyshy to our point of
24 view with respect to the case And I shyshy and I do think
25 remember that when we say something is not patent
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1 eligible were not saying they cant do it Were
2 saying they cant monopolize it
3 And the concern in a situation like this one
4 is that if this is patent eligible its hard to see
5 why for example the first person who came up with a
6 frequent flier program wouldnt have been able to claim
7 a patent there because after all thats a business
8 method for improving customer loyalty implemented on a
9 computer
10 CHIEF JUSTICE ROBERTS General I shyshy you
11 mentioned a while ago the need for greater clarity and
12 certainty in this area And Im just wondering in your
13 brief youve got a nonshyexhaustive of factors to
14 consider and there are 6 different ones And Im just
15 doubtful that thats going to bring about greater
16 clarity and certainty
17 GENERAL VERRILLI I take shyshy I take the
18 point Mr Chief Justice but I think the key is that
19 they are all directed to answering the question of
20 whether the innovation that is claimed and is an
21 innovation in either A the improvement of a computers
22 functioning or B the use of computer technology to
23 improve the functioning of another technological
24 process and a case like Diehr would be in the latter
25 category
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1 And so I do think that thats the key
2 benchmark Thats the baseline Thats the test that
3 we do think can be applied clearly and consistently by
4 the courts or the PTO And it avoids the risk of things
5 like frequent flier programs or the Oakland As money
6 ball methods for evaluating the contributions in
7 individual baseball players make or any one of a host of
8 other things that our intuitions tell us just dont
9 belong in the patent system
10 Thats the shyshy drawing that line keeps them
11 out not drawing that line lets them in And with all
12 due respect I dont think that the novelty and
13 nonobviousness filters that 102 and 103 really deal with
14 that problem effectively because when you get to
15 nonobviousness in 103 for example youll be asking a
16 different question
17 If you take the frequent flier program you
18 would say well is this innovation in building consumer
19 loyalty something that would have been obvious to
20 somebody who runs an airline Its totally divorced
21 from the question of technology at that point and
22 therefore I dont think youre going to get the screen
23 that you need to get in order for the patent system to
24 be confined to its traditional and appropriate scope
25 If there are no further questions thank
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1 you
2 JUSTICE GINSBURG I have a question about
3 how do you identify an abstract concept The shyshy a
4 natural phenomenon a mathematical formula those are
5 easy to identify but there has been some confusion on
6 what qualifies as an abstract concept
7 GENERAL VERRILLI We would define
8 abstract shyshy an abstract concept as a claim that is not
9 directed to a concrete innovation in technology
10 science or the industrial arts So its the shyshy its
11 abstract in the sense that it is not a concrete
12 innovation in the traditional realm of patent law
13 Thank you
14 CHIEF JUSTICE ROBERTS Thank you General
15 Mr Phillips you have four minutes
16 remaining
17 REBUTTAL ARGUMENT OF CARTER G PHILLIPS
18 ON BEHALF OF THE PETITIONERS
19 MR PHILLIPS Thank you Mr Chief Justice
20 Id just like to make a few points
21 First of all with respect to the question
22 you asked which is looking at 159 et cetera all I can
23 tell you is that if you look at claim 33 it talks about
24 matched orders the matched orders that are described in
25 286 and 287 and then makes specific reference to 159
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1 and that flow chart thats there And its all designed
2 as a package Its only one element of the shyshy of the
3 invention but it is a central element and its an easy
4 one to understand And it goes well beyond simply the
5 notion of hedge shyshy hedge against settlement risk and do
6 it by a computer
7 JUSTICE SOTOMAYOR Your adversary says that
8 his shyshy the appendix to his brief are the only patents at
9 issue that the flow charts are not at issue in this
10 case
11 MR PHILLIPS Theres no basis for that
12 statement Your Honor There shyshy remember this went off
13 on a very truncated litigation process So theres shyshy
14 you know we shyshy we got cut off at the beginning of it
15 Theres been no construction of the shyshy of the claims
16 and shyshy and obviously these are specifications that go
17 to how you interpret the claim
18 JUSTICE SOTOMAYOR If we were to say that
19 there are no business patents shyshy
20 MR PHILLIPS Yes
21 JUSTICE SOTOMAYOR shyshy would your patent
22 survive at all
23 MR PHILLIPS No I dont shyshy I dont
24 believe so I think theres no question And you
25 know General Verrilli could not have been any plainer
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1 in his statement of how he wants to interpret the
2 abstract idea concept
3 JUSTICE SOTOMAYOR Yes he wants to say no
4 business patents
5 MR PHILLIPS No business shyshy just another
6 way of saying no business methods And you know the
7 Court rejected that And it seems to me extraordinary
8 to say Congress didnt reject no business methods in
9 101 but were going to do shyshy were going to manipulate
10 the judicial exception to accomplish precisely that same
11 thing It seems to me thats wholly inappropriate
12 Justice Ginsburg you asked my shyshy my friend
13 here you know whats his test He didnt answer that
14 question youll notice because he doesnt have an
15 answer His basic argument is whatever you do just
16 kill this patent
17 And if I were in his shoes I suppose Id
18 take that same position I think whats absolutely
19 clear is that the test ought to be one that is
20 structured as a very coarse filter not the kind of
21 filter that hes pushing for where it changes over time
22 I mean I thought his shyshy I thought his response to one
23 of the questions about eshymail and word processing that
24 Justice Sotomayor asked is over time it would change
25 Well thats exactly what 102 and 103 are for That is
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1 not the purpose of shyshy of Section 101
2 And then he uses the example of encryption
3 I guarantee you if we were arguing about encryption in
4 this case he would say to me that thats an abstract
5 principle because encryption is a concept thats been
6 around since time immemorial George Washington used
7 it Everybody has used encryption
8 And a question again thats not the
9 solution to these problems The question is how did we
10 go about doing it And we go beyond the basics of
11 simply saying use a computer and thats what we ask
12 this Court to focus on and to evaluate
13 As to the frequent flier program its
14 pretty clear to me that even though it was a novel idea
15 in some sense the concept itself would have been viewed
16 in shyshy in the KSR fashion as quite obvious as a means of
17 improving customer loyalty
18 There are solutions here Giving us 101
19 pass doesnt create a monopoly It just gets us to the
20 102 and 103 inquiries that are at the heart of what the
21 patent laws shyshy and 112 that are at the heart of what the
22 patent laws ought to be dealing with
23 If there are no further questions Your
24 Honor thank you
25 CHIEF JUSTICE ROBERTS Thank you counsel
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2 (Whereupon at 1105 am the case in the
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various 3616 3420 4016 4312 1327shy28 369 94 2715 vary 1420 442 556 wrong 392 159 1910 311 Verrilli 121 29 ways 717 3015 wrote 1213 532225
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were 82 103 1823 192 469 4821 5111 5599
weve 1925 484 web 227 weekend 510
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years 318 259 3615 371019 4321
2 2 3424 4319 20 371018 2014 111 22000 4321 25 3118 26 27 2712
vice 3924 video 33458 view 1015
wellshyestablished 276
went 1724
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285shy286 1910 286 5325 287 5325
1623 3420 2214 362 0 293 2715 457 4722 5024
viewed 5615 violate 55
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221 232 252424 339 3916 476 4823
wanted 2423 wants 2222
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watch 3349 water 71 way 416 58
81625 1113 151520 1614 1624 1721 1815 2017 2112 235 2425 254
5412 wholly 5511 willing 377 wondering
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821 228 2813 3418 35517 363 417 5523
words 713 291 3422 3711 3819 492
work 51719 1124 2110 312 3322 374
workings 5013 world 2018
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write 264 writers 132325 written 617
1716 2925 304 4022
1 1004 115 32 100 3615 101 3121522
414 65 1715 18267 2019 2324 2467 2545 2658 3622 3824 4022 414 4323 44321 4611 471 4913 559 56118
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3 3 24 30 259 31 111 33 3118 5323 37 3118
4 4 325 4825 42 1524 1618 44 211
5 5 491 510 3019 411 53 214 57 4322
6 6 5114 65 3019
7
8
9 9 245 9shy0 365
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1 computer is this something new and not function
2 MR PHILLIPS Well it does it through shyshy
3 it creates the shadow accounts because of the concerns
4 for security You dont shyshy youre not going to allow
5 somebody to enter into a central banks own accounts
6 You create the shadow accounts You monitor through the
7 software that allows you to do that You evaluate each
8 of the transactions to ensure that the settlement will
9 be available You do it sequentially and you act on it
10 by the end of the day or whenever the transaction is to
11 take place and you implement that transaction
12 JUSTICE SCALIA Why isnt it shyshy why isnt
13 doing it through a computer not enough I mean was the
14 cotton gin not an invention because it just means youre
15 doing through a machine what people used to do by hand
16 Its not an invention Its the same old same old
17 MR PHILLIPS Justice Scalia shyshy
18 JUSTICE SCALIA Why shyshy why is a computer
19 any different in that respect
20 MR PHILLIPS At one level I agree with you
21 completely There is no difference between them
22 This Court has however said on more than a
23 few occasions albeit in dicta that coming up with an
24 idea and then say use a computer is not sufficient
25 And what Im trying to suggest to you is we dont fall
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1 within that dicta
2 Now if you dont accept the dicta and you
3 say use a computer is fine then I think were done
4 JUSTICE SCALIA Well Im not saying use a
5 computer is shyshy is much of a novelty I mean thats shyshy
6 that goes to whether its novel or not If you just say
7 use a computer you havent invented anything But if
8 you come up with a serious program that shyshy that does it
9 then you know that may be novel But thats a novelty
10 issue isnt it
11 MR PHILLIPS To be sure Justice Scalia
12 JUSTICE BREYER And this is exactly the
13 question I really would like to you to focus on for me
14 Why is it shyshy and Im not saying this from a point of
15 view but it seems to me pretty clear that if what you
16 did was take the idea of solvency shyshy remember King Tut
17 Thats what I use the exaggeration shyshy and what you say
18 is implemented by having the abacus man keep track and
19 say stop okay shyshy
20 MR PHILLIPS Right
21 JUSTICE BREYER Then we implement it by
22 having somebody with a pencil and a piece of paper and
23 this is all that they add you see Say Have a man
24 with a pencil and a piece of paper keeping track and
25 saying stop or we say implement it in the computer
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1 which will automatically keep track and say stop are
2 they all enough Are some of them enough Whats the
3 rule
4 And you realize I couldnt figure out much
5 in Prometheus to go beyond what I thought was an obvious
6 case leaving it up to you and your colleagues to figure
7 out how to go further Am I making enough shyshy making
8 clear enough whats bothering me And Id really like
9 to get your answer to this
10 MR PHILLIPS And shyshy and look theres
11 no shyshy Ill be the first one to shyshy to confess that trying
12 to use language to describe these things is not all that
13 easy But the way I think you can meaningfully look at
14 this is to say that this is not simply something that
15 was a fundamental truth this is not something that
16 simply says use a computer Its not simply something
17 that says maintain solvency It shyshy it operates in a
18 much more specific and concrete environment where youre
19 dealing with a problem thats been in existence since
20 the 1970s a solution in the 1990s that CLS itself
21 acknowledges needed a solution and came forward with
22 their own solution that looks a lot like ours
23 JUSTICE KENNEDY But my shyshy my initial
24 question and I think I can work this into King Tut
25 is shyshy
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1 (Laughter)
2 JUSTICE KENNEDY shyshy is shyshy is whether or not
3 you could have patented that system idea process
4 method without attaching a computer program
5 MR PHILLIPS You cannot absolutely cannot
6 do that with this system because it is so complex and
7 so many interrelated parts
8 JUSTICE KENNEDY Suppose I thought shyshy and
9 again its just a thought because I dont have the
10 expertise shyshy that any computer group of people sitting
11 around a coffee shop in Silicon Valley could do this
12 over a weekend Suppose I thought that
13 MR PHILLIPS You mean wrote the code
14 JUSTICE KENNEDY Yes right
15 MR PHILLIPS Well thats absolutely shyshy
16 Im certain thats true
17 JUSTICE KENNEDY Well then shyshy then shyshy
18 MR PHILLIPS But thats true of almost all
19 software
20 JUSTICE KENNEDY Then why is the computer
21 program necessary to make the patent valid
22 MR PHILLIPS Well its shyshy its necessary
23 to make the invention effective As the Solicitor
24 General said the computer is essential to the efficacy
25 of this invention because of the complicated financial
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1 arrangements that exist and that can only be resolved on
2 a shyshy on a realtime basis Your abacus is great if you
3 happen to be waiting for the pyramids to be finished or
4 waiting for the gold to move in and out but it doesnt
5 help with you an abacus if youre dealing with literally
6 thousands of transactions simultaneously going on in
7 different countries at different points in time
8 JUSTICE KENNEDY But thats just an idea
9 hey lets use a computer
10 MR PHILLIPS But its not just shyshy I mean
11 obviously part of it is use the computer Justice
12 Kennedy But more fundamentally it goes beyond that
13 See I shyshy
14 JUSTICE SOTOMAYOR Is your software
15 copyrighted
16 MR PHILLIPS No I dont believe so
17 JUSTICE GINSBURG There is no special
18 software that comes with this shyshy thats part of this
19 patent is it shyshy is there
20 MR PHILLIPS No Justice Ginsburg what
21 we did here is what the Patent and Trademark Office
22 encourages us to do and encourages all software patent
23 writers to do which is to identify the functions that
24 you want to be provided for with the software and leave
25 it then to the software writers who I gather are you
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1 know quite capable of converting these functions into
2 very specific code
3 JUSTICE KAGAN Mr Phillips could you shyshy
4 could you disaggregate your argument for me Because
5 you just said look this Court has said its not
6 sufficient if you have an idea and then you say use a
7 computer to implement it right So are you saying that
8 your shyshy that shyshy are you saying that youre doing more
9 than saying use a computer to implement it or are you
10 saying that its shyshy that the idea itself is more than an
11 idea
12 MR PHILLIPS Yes Im saying shyshy
13 JUSTICE KAGAN Which part of what shyshy
14 MR PHILLIPS Im saying both actually I
15 mean Im making both of those arguments I shyshy I
16 believe that if you analyze the claims and you dont
17 caricature them and you dont strip them out of the
18 limitations that are embedded in there this is not some
19 kind of an abstract concept This is not some kind shyshy
20 its not an abstract idea Its a vary shyshy
21 JUSTICE KAGAN So putting the computer
22 stuff aside completely shyshy
23 MR PHILLIPS Right
24 JUSTICE KAGAN shyshy youre saying that youve
25 invented something or you shyshy
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1 MR PHILIPS Yes
2 JUSTICE KAGAN There is something that
3 youve patented that has shyshy that is not just simple use
4 a third party to do a settlement
5 MR PHILLIPS Right
6 JUSTICE KAGAN And what is that putting
7 the computer aside
8 MR PHILLIPS It is shyshy well shyshy and again
9 its difficult to do that because you absolutely need
10 the computer in order to implement this But the key to
11 the invention is the notion of being able
12 simultaneously dealing with it on a chronological basis
13 to stop transactions that will otherwise interfere with
14 the ability to settle on time and under the appropriate
15 circumstances And the only way you can do that in a
16 realtime basis when youre dealing with a global economy
17 is to use a computer It is necessary to the efficacy
18 of this
19 So in that sense I cant shyshy I cant
20 disaggregate it the way in some sense youre suggesting
21 It seems to me its bound up with in shyshy its bounds up
22 with the whole notion of is this an abstract concept
23 JUSTICE BREYER Can you in fact shyshy now
24 this is shyshy look there are 42 briefs in this case I
25 actually read them and I found them very very helpful
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1 up to the point where I have to make a decision because
2 theyre serious I mean you know shyshy now the problem
3 that I came away with is the one that youre beginning
4 to discuss that if you simply say take an idea thats
5 abstract and implement it on a computer there are shyshy
6 youre going to get it much faster youre going to be
7 able to do many many things and if thats good enough
8 there is a risk that you will take business in the
9 United States or large segments and instead of having
10 competition on price service and better production
11 methods well have competition on who has the best
12 patent lawyer You see where Im going on that one
13 MR PHILLIPS Yeah of course
14 JUSTICE BREYER And if you go the other way
15 and say never then what you do is you rule out real
16 inventions with computers
17 MR PHILLIPS Right
18 JUSTICE BREYER And so in those 42 briefs
19 there are a number of suggestions as to how to go
20 between Scylla and Charybdis Now I would like to
21 know shyshy I dont know if you can step back from your
22 representational model Thats a problem Youre all
23 we have now And shyshy and from my point of view I need
24 to know what in your opinion is the best way of sailing
25 between these two serious arms
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1 MR PHILLIPS Well Justice Breyer I guess
2 I would suggest to you that you might want to deal with
3 the problem you know as opposed to the problems you
4 dont know at this stage I mean we have had business
5 method patents and software patents in existence for
6 well over a decade and theyre obviously quite
7 significant in number And shyshy and we know what the
8 system is we have And Congress looked at that system
9 right and didnt say no to business methods patents
10 didnt say no to software patents instead said the
11 solution to this problem is to get it out of the
12 judicial process and create an administrative process
13 but leave the substantive standards intact
14 So my suggestion to you would be follow that
15 same advice a liberal interpretation of 101 and not a
16 caricature of the claims analyze the claims as written
17 and therefore say that the solution is 102 and 103 and
18 use the administrative process If you shyshy
19 JUSTICE GINSBURG Mr Phillips let me just
20 stop you there because four Justices of this Court did
21 not read that legislative history the way you do And
22 it was shyshy was in Bilski
23 MR PHILLIPS But this is postshyBilski
24 JUSTICE GINSBURG Justice Stevens went
25 carefully through that and he said Congress was
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1 reacting to a decision It had shyshy it was not addressing
2 101 So there are at least four Justices who say shyshy who
3 didnt buy that argument
4 MR PHILLIPS Well I mean it still seems
5 to me that the shyshy the natural inference is Congress did
6 not change 101 Congress created an entire
7 administrative system to deal with 101 102 and 103
8 And shyshy and I would hope shyshy
9 JUSTICE SCALIA And four is not five
10 anyway right
11 MR PHILLIPS Thats true
12 JUSTICE SCALIA Four is not five
13 MR PHILLIPS And youve exhausted my math
14 skills Your Honor
15 JUSTICE SCALIA By the way we shyshy we have
16 said that you cant take an abstract idea and then say
17 use a computer to implement it But we havent said
18 that you cant take an abstract idea and then say here
19 is how you use a computer to implement it shyshy
20 MR PHILLIPS Exactly
21 JUSTICE SCALIA shyshy which is basically what
22 youre doing
23 MR PHILLIPS And thats the argument were
24 doing and shyshy
25 JUSTICE SCALIA And thats a little
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1 different
2 MR PHILLIPS shyshy thats the line were
3 asking the Court to draw here
4 JUSTICE KAGAN Well how are you saying the
5 how Because I thought that your computers shyshy that your
6 patents really did just say do this on a computer as
7 opposed to saying anything substantive about how to do
8 it on a computer
9 MR PHILLIPS I would urge the Court to
10 look at Joint Appendix 159 285shy286 where it goes
11 through the flow charts This is shyshy and this is just a
12 specific example of the method by which you stop a
13 transaction and it goes through a varied series of
14 detailed steps and what the computer has to do in order
15 to do that It doesnt actually obviously put in the
16 code but thats what the PTO says dont do Dont put
17 in the code because nobody understands code so shyshy but
18 put in the functions and we know shyshy and we know that
19 someone skilled in the art will be able to put in the
20 code And if they arent if they cant do that then
21 its not enabled and thats a 112 problem
22 To go back Justice Breyer to your
23 question So on the one hand youve got a problem that
24 it seems to me Congress to some extent has said is okay
25 and weve got a solution and that solutions playing
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1 through On the other hand if this Court were to say
2 much more categorically either that theres no such
3 thing as business method patents or adopt the Solicitor
4 Generals interpretation which is to say that there
5 cannot be software unless the software somehow actually
6 improves the computer as opposed to software improving
7 every other device or any other mechanism that might be
8 out there
9 What we know is that this would inherently
10 declare and in one fell swoop hundreds of thousands of
11 patents invalid and the consequences of that it seems
12 to me are utterly unknowable And before the Court goes
13 down that path I would think it would think long and
14 hard about whether isnt that a judgment that Congress
15 ought to make And It seems to me in that sense youre
16 essentially where the Court was in Chakrabarty where
17 everybody was saying youve got to act in one way or the
18 other or the world comes to an end and the courts have
19 said well apply 101 directly
20 JUSTICE KENNEDY If we say that theres no
21 software patentability and agree with the Attorney
22 General do you lose in this case
23 MR PHILLIPS Well it would be very hard
24 for me to see how that shyshy how shyshy how I can get around
25 that particular problem because the computer is the
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1 essence of it so shyshy and a portion of it is clearly the
2 software So I think if you say there is no such thing
3 as software patentability I do lose in this case yes
4 Your Honor As do a whole lot of other people
5 JUSTICE KENNEDY Is there any common ground
6 between you and the government shyshy maybe a better
7 question to ask the government shyshy a common ground
8 between you and the government on something in the
9 software area thats patentable other than making the
10 computer itself work You understand the government to
11 say no software patents
12 MR PHILLIPS Thats the way I interpret
13 the governments shyshy the governments brief
14 JUSTICE BREYER It was like shyshy theres a
15 Bloomberg brief out here that was on this that said
16 no you can shyshy you can patent computer software when
17 its an improvement in the computer when its an
18 improvement in software when its an improvement in a
19 technology that is developed out of computers like
20 robotics when it is an improvement in a machine or
21 technology but you cannot improve it where it is simply
22 an improvement in an activity that is engaged in
23 primarily through mental processes But what they mean
24 by that is business finance and similar arts
25 Thats shyshy I mean thats shyshy it wasnt quite what shyshy I
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1 know Thats what I want to know what you dont agree
2 with about that because its a little more refined than
3 you suggested
4 MR PHILLIPS I read the Solicitor
5 Generals brief as broader than the Bloomberg brief
6 in shyshy in terms of the approach And IBMs argument is
7 if you knock out software patents you eliminate web
8 browsing word processing cellphones eshymail Those
9 are all activities that I dont think fall within the
10 meaning of the shyshy the meaning of the governments theory
11 of the case
12 JUSTICE BREYER But Im asking you shyshy Im
13 asking you what about this one that I just mentioned
14 You see I went through those five steps shyshy
15 MR PHILLIPS Right
16 JUSTICE BREYER shyshy and four of them you
17 could patent and the fifth one you cant
18 MR PHILLIPS Right But I shyshy and I guess
19 my answer to that is thats nowhere in the statute and
20 it doesnt seem to me to reflect an abstract idea Its
21 a shyshy its a line you draw that takes out business method
22 patents If the Court wants to eliminate business
23 method patents fine But you just said no to that in
24 Bilski two three terms ago
25 Now to be sure give the Solicitor General
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1 credit he comes here and says to you We didnt like
2 the result in Bilski we want you to say dont use
3 process in order to get there which is a statutory
4 interpretation come up with an extraordinarily
5 complicated way of looking at the exception and use that
6 to get to the exact same result
7 JUSTICE SOTOMAYOR Well youre doing a
8 very good job of proving shyshy
9 JUSTICE GINSBURG In Bilski Justice Breyer
10 did try to say that there wasnt that shyshy a whole lot of
11 distance between the four who thought business methods
12 were not patentable But he shyshy he also said something
13 else in shyshy in the other case Mayo Justice Scalia
14 asked you the question about doesnt that go to novelty
15 but didnt Justice Breyer say in Mayo that novelty can
16 be relevant to patent shyshy to patent eligibility He said
17 theres shyshy theres an overlap
18 MR PHILLIPS Well he said theres an
19 overlap Here in this context I think basically the
20 Respondents theory would mean that they are completely
21 coterminous And I dont think thats what the Court
22 meant And also we know from Diehr that theres got to
23 be at least some significant limitations on the extent
24 to which novelty has to be built into 101 That is the
25 province of 102 and 103 And as I said Congress
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1 modified the system of adjudication to create an
2 administrative mechanism that allows you to get to 102
3 and 103 And at least in context its important to
4 realize there have been 11 cases since that was created
5 9 of the 11 have been knocked down on 102 or 103 grounds
6 and not on 101 grounds And it seems to me thats the
7 answer to this problem is leave 101 as the coarse
8 filter If on its face it states these kinds of broad
9 abstract principles fundamental truths and even if it
10 says use a computer those should be struck down
11 JUSTICE SOTOMAYOR Which of the shyshy which of
12 the opinions below captures your position most
13 accurately
14 MR PHILLIPS I would guess it would be
15 Judge Moores opinion below that would capture ours most
16 correctly
17 JUSTICE SOTOMAYOR And if we were to think
18 your method claim is ineligible do you agree that your
19 systems and shyshy your medium and system claims fail as
20 well Do they rise and fall together
21 MR PHILLIPS No No I dont believe they
22 do rise and fall together I mean I think you could shyshy
23 if you wanted to interpret our medium claim shyshy I mean
24 our shyshy our method claims in a shyshy in particularly
25 abstract way I think you could still say that the
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1 system claims which clearly are shyshy are how to create a
2 computer system and how to implement it using that
3 method would be a much more concrete version of that in
4 a way that would take it out of 101 That said I
5 obviously believe that all of our claims satisfy 101
6 and should go on to the next stage
7 JUSTICE KAGAN Can I give you a
8 hypothetical Mr Phillips and you tell me how its
9 different or the same Lets say you know 30 years
10 somebody took a look around the world and said a lot of
11 people seem to order products by mail They get the
12 catalogues in the mail and then they send back their
13 return forms And lets say that one of the founders of
14 the Internet said wouldnt this be an amazing system
15 we could actually do this by computer and they had
16 patented that Is that the same
17 MR PHILLIPS I dont know if its the
18 same but I would shyshy I would argue that it could very
19 well be a patentable subject matter because shyshy but it
20 depends on how the claims play out
21 JUSTICE KAGAN No but exactly I mean
22 the claim would have said something along the lines of
23 you know theres this process by which people order
24 products and we want to do it over the Internet we want
25 to do it electronically and we will use a computer to
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1 do that to essentially take the process of mail order
2 catalogues and make it electronic
3 MR PHILLIPS I could certainly shyshy I think
4 I could write a claim shyshy a set of claims that I believe
5 would satisfy 101 And shyshy and to the extent that
6 youd shyshy that youd think those are no different than
7 the ones I have here then my argument is simply I think
8 I satisfy 101 with the claims we have before us Your
9 Honor
10 If there are no further questions then Id
11 like to reserve the rest of my time
12 CHIEF JUSTICE ROBERTS Thank you
13 Mr Phillips
14 Mr Perry
15 ORAL ARGUMENT OF MARK A PERRY
16 ON BEHALF OF THE RESPONDENTS
17 MR PERRY Mr Chief Justice and may it
18 please the Court
19 That path between Scylla and Charybdis was
20 charted in Bilski and Mayo Bilski holds that a
21 fundamental economic principle is an abstract idea and
22 Mayo holds that running such a principle on a computer
23 is quote not a patentable application of that
24 principle Those two propositions are sufficient to
25 dispose of this case
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1 If Bilski and Mayo stand Alices patents
2 fail Therefore Mr Phillips and his friends are
3 asking this Court to change the standard even though
4 this Court has had three unanimous decisions in the last
5 four terms establishing what the Court called a myriad
6 a wellshyestablished standard
7 On the abstract idea Justice Ginsburg you
8 asked Mr Phillips whats the difference between hedging
9 and this claim There is no difference This is
10 hedging It is hedging against credit default rather
11 than price fluctuation but it is simply hedging
12 And Mr Phillips stood up for 26 minutes and
13 never once referred to the patent Lets look at what
14 the inventor the soshycalled inventor said about this
15 invention This is at JA 293 to 94 in the
16 specification
17 This claim has simply two steps Its very
18 simple First debiting and crediting on a realtime
19 basis the relevant shadow records and second by
20 periodically affecting corresponding payment
21 instructions Those are direct quotes Debit credit
22 and pay Your Honor you cant get much more simple
23 than that
24 Mr Phillips suggests well we have
25 multilateral transactions global things chronological
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1 time zones and so forth None of those are claimed
2 Your Honor Those are all recited in specification
3 The claims read on a single transaction involving two
4 parties
5 JUSTICE BREYER Can I ask you at some
6 point not necessarily this second to say in my shyshy this
7 is just shyshy you know you have an opinion for a court
8 Different judges can have different interpretations
9 All youre getting is mine okay
10 But I think its pretty easy to say that
11 Archimedes cant just go to a boat builder and say
12 apply my idea All right Everybody agrees with that
13 But now we try to take that word apply and give
14 content to it
15 And what I suspect in my opinion Mayo did
16 and Bilski and the other cases is sketch an outer shell
17 of the content hoping that the experts you and the
18 other lawyers and the shyshy the circuit court could fill
19 in a little better than we had done the content of that
20 shell
21 So so far youre saying well this is
22 close enough to Archimedes saying apply it that we
23 neednt go further
24 Now will you at some point in the next few
25 minutes give me your impression of if it were necessary
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1 to go further what would the right words or example be
2 MR PERRY Your Honor as shyshy Justice
3 Breyer as to abstract ideas the PTO has filled in that
4 shell by listing economic concepts legal concepts
5 financial concepts teaching concepts dating and
6 interpersonal relationships and generally how business
7 should be conducted as examples of those things that are
8 likely abstract which of course all follow directly
9 from Bilski and the discussion this Court had in Bilski
10 And this patent shyshy these patents fall squarely within
11 that
12 Congress in the AIA confirmed that
13 reading Congress in the CBM method said business
14 methods that are subject to special scrutiny shyshy that is
15 dubious patents shyshy include methods and corresponding
16 apparatus which is what we have here that pertain to
17 data processing in the financial services industry and
18 do not offer a technological solution That describes
19 Alices patents to a letter Your Honor So that we
20 have shyshy
21 JUSTICE SOTOMAYOR What do you think is a
22 technological solution
23 MR PERRY Your Honor shyshy
24 JUSTICE SOTOMAYOR How could they if at
25 all written their patents to shyshy to make shyshy to make
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1 their software eligible What would shyshy what do they
2 need shyshy would have needed to have added
3 MR PERRY Justice Sotomayor they have no
4 software first Theyve never written software
5 Theyve never programmed a computer So thats a
6 nonexistent set
7 Second there are many technological
8 solutions to trading and settlement problems For
9 example data compression These shyshy these trading
10 platforms involve the movement of very large quantities
11 of data around the world The physical pipes that is
12 the fiber optic cables and data lines are limited
13 There are very sophisticated algorithms for both
14 security and speed to move data through the transmission
15 lines in novel and useful ways that could well be
16 patented
17 Nothing like that is claimed here To come
18 back to where I started if you look for example at
19 Claim 65 in the 510 patent as Mr Phillips reads it
20 it literally reads on a twoshyparty escrow to sell a
21 house so long as the escrow agent is typing this stuff
22 into the HUDshy1 using a computer That has nothing to do
23 with multilevel shyshy
24 CHIEF JUSTICE ROBERTS Well thats a
25 little more complicated He referred us to Joint
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1 Appendix Page 159 which is not a change in how
2 computers work But it is shyshy constitutes the
3 instructions about how to use the computer and where it
4 needs to be affected And just looking at it it looks
5 pretty complicated There are a lot of arrows and
6 they shyshy you know different things that go shyshy
7 (Laughter)
8 CHIEF JUSTICE ROBERTS Well but I mean
9 you know it shyshy in different directions And I
10 understand him to say that in each of those places
11 thats where the computer is needed
12 MR PERRY Mr Chief Justice Figure 16 has
13 nothing to do with the invention asserted against my
14 client in this case There are two inventions in this
15 patent One invention involving multilateral contract
16 formation is not asserted against my client And all of
17 these drawings pertain to that The only drawings that
18 pertain to the asserted claims are 25 and 33 to 37 And
19 that was established below and its established in this
20 Court And Mr Phillips has never disputed it
21 So the claim hes pointed the Court shyshy the
22 figure hes pointed the Court to has nothing to do with
23 the invention Its for a different invention that is
24 not at issue in this case
25 Remember there are hundreds and hundreds of
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1 pages of these patents They all pertain to the other
2 invention Thats why in the back of our red brief we
3 excerpted the very little bit that actually pertains to
4 this You sort of tack on patent shyshy the tack on claim
5 that Mr Phillips is asserting here Its 4 columns
6 Its less than five pages in the printed appendix that
7 actually pertains to this invention And it contains no
8 disclosure whatever
9 Justice Scalia to your question about how
10 the computer does it Of course a patent that
11 describes sufficiently how a computer does a new and
12 useful thing whether its data compression or any other
13 technological solution to a business problem a social
14 problem or a technological problem would be within the
15 realm of the shyshy of the patent laws That is what the
16 patent laws have always been for
17 This is not such a patent And the reason
18 for that is this is a preshyBilski set of patents These
19 were prosecuted under the old State Street test where
20 all the applicant had to claim was a result
21 JUSTICE KENNEDY Would you give me shyshy
22 again you already did it once shyshy an example of a
23 business process patent shyshy of a business process idea
24 and invention that is patentable
25 MR PERRY Your Honor there are many
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1 examples One would be a technological solution to a
2 business problem So that for example shyshy Ill give a
3 different example There are many applications today
4 The Court may be familiar with streaming video to watch
5 video on your computer
6 It is not possible to get enough data
7 through existing lines in its raw format The data has
8 to be manipulated in order to see live video So if you
9 want to watch TV on your phone for example
10 Those algorithms those inventions are
11 undoubtedly technological And if they are used in a
12 trading platform or a hedging system or something else
13 that wouldnt disable them And this is what the Diehr
14 case shyshy
15 JUSTICE KENNEDY Well I shyshy I shyshy in my
16 language Ive called that mechanical rather than
17 process Can you give me an example of process
18 MR PERRY Yes Your Honor The process in
19 that example would be a computer running the particular
20 data compression algorithm
21 JUSTICE KENNEDY But thats how to make
22 a shyshy thats how to make a machine work better
23 MR PERRY Yes Your Honor
24 JUSTICE KENNEDY Im asking you Is there
25 any business process any business activity that is
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1 susceptible to a patent a pure patent innovations that
2 deserve patents
3 MR PERRY Your Honor again a
4 technological solution to a business problem could well
5 be whether its a method or a process is equivalent
6 Again Congress said method in a corresponding shyshy
7 JUSTICE KENNEDY Can you give me an
8 example
9 MR PERRY I thought the data compression
10 example was a good one Ill try an encryption
11 technology Many of these trading platforms you know
12 dealing with securities and money would require some
13 sort of security devices You could have a process for
14 securely transmitting data would be another computer
15 implemented technological solution to a business
16 problem Again nothing like that claimed here
17 JUSTICE SOTOMAYOR How about eshymail and
18 just word processing programs
19 MR PERRY Your Honor a program shyshy let me
20 try it this way to both of your questions In our view
21 if what is claimed as the inventive contribution under
22 Mayo shyshy in other words if we have an abstract idea as
23 we do here and what is claimed is the inventive
24 contribution for Step 2 is the computer then the
25 computer must be essential to that operation and
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1 represent an advancement in computer science or other
2 technology And we know thats not met here Justice
3 Sotomayor because shyshy
4 JUSTICE SOTOMAYOR So youre saying no to
5 eshymail and word processing
6 MR PERRY Your Honor I think at a
7 point shyshy
8 JUSTICE SOTOMAYOR They certainly have
9 functionality and shyshy and improvement of functionality
10 for the user
11 MR PERRY At a point in time in the past
12 I think both of those would have been technological
13 advances that were patentable
14 JUSTICE SOTOMAYOR How
15 MR PERRY Today shyshy because they would have
16 provided a technological solution to a then unmet
17 problem Today reciting and do it on a word processor
18 is no different than and do it on a typewriter or shyshy and
19 do it on a calculator
20 The inventive contribution component which
21 uses specifically the language of conventional and
22 routine and well understood will evolve with
23 technology Thats why its different than the abstract
24 idea component
25 And here we know that these patents dont
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1 claim anything that was not conventional well
2 understood and routine We went through that in great
3 detail and Alice has never disputed a word of it They
4 just say youre not supposed to do that analysis even
5 though the Court 9shy0 in Mayo said we should
6 And in this case its very important to
7 look at what Alices own experts said on the subject
8 This is not our expert This is Alices expert And
9 this is at Page 1327shy28 of the Joint Appendix It is
10 possible to do the business methods of maintaining
11 accounts adjusting accounts and providing an
12 instruction without a computer or other hardware
13 And then Justice Breyer directly to your
14 abacus If someone had thought of this invention
15 soshycalled invention 100 years ago they might have
16 implemented it in a nonelectronic manner using various
17 precomputing tools such as an abacus or handwritten
18 ledgers
19 We know from Benson the Courts seminal
20 computer implementation case that if you can do it by
21 head and hand then the computer doesnt add anything
22 inventive within the meaning of the 101 exception That
23 is the holding of Benson And the Court reiterated that
24 in Mayo
25 Flook said exactly the same thing If you
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1 can do it with pencil and paper then the computer is
2 not offering anything that the patent laws are or should
3 be concerned with
4 It is only where the method will not work
5 without a computer which is not these claims and where
6 the computer itself is doing something that the patent
7 law is willing to protect
8 CHIEF JUSTICE ROBERTS What if shyshy what if
9 you can do it without a computer but its going to
10 take you know 20 people a hundred years In other
11 words theoretically you can replicate what the
12 computer does shyshy
13 MR PERRY Two answers
14 CHIEF JUSTICE ROBERTS shyshy but its
15 impractical without looking to do it on the computer
16 MR PERRY Mr Chief Justice first these
17 claims literally read as Alice reads them on a single
18 transaction between two parties so its not 20 people
19 for a hundred years Its one person sitting in a room
20 so thats not a problem
21 Second if what is being claimed is the
22 necessary speed or efficiency or data crunching
23 capabilities if you will of a computer then it would
24 have to be claimed and theres nothing claimed here
25 All that is claimed shyshy and my friend is going to stand
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1 up on rebuttal and tell you all that the expert said
2 well what is claimed is a computer but its just a
3 computer It just says a computer configured too It
4 doesnt say that the computer actually has to shyshy
5 JUSTICE BREYER Yeah but the trouble with
6 that particular test is as I think partly the Chief
7 Justice said how long et cetera and then add to that
8 though you could do it without a computer what happens
9 at the end of the line is the automobile engine goes off
10 or it begins to sputter or it turns left
11 You see its possible to take Archimedes shyshy
12 shyshy you know I use that example purposely to call
13 attention to the problem You can take those things
14 and youre not just saying apply it and youre not even
15 just saying shyshy you are saying use the computer but at
16 the end of the road something physical in the world
17 changes and everybody would say now thats shyshy that
18 will falls within I mean probably I mean my
19 hesitation shows Im looking for the right words
20 MR PERRY Justice Breyer your point is
21 the reason that it is equally fallacious to suggest on
22 the one hand as Alice and IBM does that simply
23 reciting a computer is a magic key that gets you through
24 101 and you never have to any other inquiry and what
25 some of folks the amici on the other side say which
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1 is that computers or software are never eligible Both
2 of those things have to be wrong because what the Court
3 said in Bilski was future innovation is too uncertain
4 We are not going to do that as a Court And the Court
5 laid out an approach using abstract ideas in Bilski and
6 inventive contribution in Mayo that is flexible enough
7 to take into account that innovation and to deal with
8 particular claims in context which is why at the end
9 of the day we have to come back to these patents and
10 decide which shyshy
11 JUSTICE KAGAN Mr Perry before we get
12 back to these matters you said to Justice Scalia if a
13 patent sufficiently describes how a computer will
14 implement an idea then its patentable So how
15 sufficiently does one have to describe it What do we
16 want a judge to do at this threshold level in terms of
17 trying to figure out whether the description is
18 sufficient to get you past it
19 MR PERRY If I can answer in two steps
20 Justice Kagan First in the negative What the
21 applicant or patentee must do shyshy must not do is simply
22 describe the desired result That would take us back to
23 State Street That would simply say I claim a magic
24 box that buys high and sells low or vice versa I
25 suppose I claim a magic box for investing Thats what
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1 these patents do
2 Then to put it in the affirmative and in the
3 language of Mayo the claim has to recite something
4 significantly more something significantly more than
5 the abstract idea itself That would be a contextual
6 analysis based on the claims and specifications and file
7 history and we know that some devices some methods
8 some programming will pass that
9 It is not going to be a brightshyline rule and
10 thats one of the tugshyofshywar issues that this Court and
11 the Federal Circuit have been having in these cases
12 The Federal Circuit wants brightshyline rules All
13 computers are in or all computers are out
14 This Court has been more contextual This
15 Court has been more nuanced This Court has looked at
16 things in a more robust way
17 JUSTICE KAGAN Youre not suggesting that
18 specific code is necessary
19 MR PERRY No Your Honor I think the shyshy
20 actual description of the programming is a 112 problem
21 I agree with that A 112 issue That is the realm of
22 the written description requirement What is a 101
23 problem is it is on the applicant to do more than simply
24 describe the results simply say A magic box that does
25 intermediate settlement And we can tie that back to
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1 this particular prosecution the 510 patent which is
2 the method patent
3 The examiner rejected it Under Section
4 101 the examiner said this is an abstract idea You
5 cant have this patent And the only change that this
6 applicant made was to add in the adjusting step
7 electronic adjustment It put in one word
8 electronic adjustment And under State Street which
9 is what this patent is prosecuted under that was
10 enough because the result of adjusting run through a
11 computer is enough
12 Under current law that cant be enough
13 That just cant get a patent over the line because this
14 Court said in Mayo and I got to quote this language
15 Simply implementing a fundamental principle on a
16 physical machine namely a computer is not a patentable
17 application of that principle Thats all that Alice
18 has done
19 These are preshyBilski patents They never
20 should have been issued General Verrilli will stand up
21 and address that point And certainly under current
22 law shyshy one point on the AIA Congress did not send all
23 this to the administrative process Congress created
24 two avenues the courts and the PTO to use the
25 standards Essentially it ratified Bilski and Mayo and
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1 said we agree with what you all are doing at the
2 Supreme Court and the existing standards are good enough
3 for us This is a judicial problem And that is a good
4 reason The abstract shyshy
5 JUSTICE GINSBURG The Federal Circuit in
6 this case split in many ways and it had our decisions
7 to deal with You said given Bilski and Mayo this is
8 an easy case What is the instruction that escaped a
9 good number of judges on the Federal Circuit How would
10 you state the rule
11 MR PERRY Your Honor I think theres a
12 significant element to the Federal Circuit that
13 disagrees with Mayo and has been resistant in applying
14 it Chief Judge shyshy former Chief Judge Michelle filed a
15 brief in this Court essentially saying Mayo is a
16 lifeshysciences case You should limit it to that because
17 if you apply it to everything else then these patents
18 are no good
19 Mayo we submit is a technologyshyneutral
20 industryshyneutral exceptionshyneutral framework that can
21 be used to answer all of these questions This is not
22 the death of software patents The software industry is
23 all before this Court saying this is fine with us
24 Every company in the United States practically except
25 for IBM is saying go ahead This will not affect
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1 software patents
2 Justice Ginsburg this Courts precedents
3 are clear They are unanimous They just need to be
4 applied To suggest that there is confusion that needs
5 to be addressed by retreating beating a retreat from
6 recent unanimous decisions would simply reward
7 intransigence difficulty refusal to adhere to what are
8 clear precedents because shyshy
9 JUSTICE KAGAN Should we be concerned
10 Mr Perry that there are old patents that in fact could
11 meet the test that you set forth but wont because they
12 were written in a different time and so used much more
13 general language
14 MR PERRY Your Honor the applicant or the
15 patent holder would have the opportunity to institute a
16 reexamination proceeding or some sort of administration
17 process to address that issue
18 And second it should be noted this is a
19 very small problem There are 2 million outstanding
20 patents in the United States In the last four fiscal
21 years there were 22000 infringement litigations
22 instituted but since Bilski there have only been 57
23 district court decisions on Section 101 issues There
24 have only been 12 Federal Circuit decisions total on
25 computer implementation
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1 We are talking about a group of patents
2 Justice Kagan thats way out at the tail end of
3 distribution Most patents never have a 101 challenge
4 This is not an issue with cotton gins and other things
5 This is a problem for the most marginal
6 most dubious most skeptical patents the ones that this
7 Court in Bilski shyshy and remember what Bilskis holding
8 is The majority said they are processes but it did
9 not say they are eligible
10 Thank you Mr Chief Justice
11 CHIEF JUSTICE ROBERTS Thank you counsel
12 General Verrilli
13 ORAL ARGUMENT OF DONALD B VERRILLI JR
14 ON BEHALF OF THE UNITED STATES AS AMICUS
15 CURIAE SUPPORTING RESPONDENTS
16 GENERAL VERRILLI Mr Chief Justice and
17 may it please the Court
18 An abstract idea does not become
19 patentshyeligible merely by tacking on an instruction to
20 use a computer to carry it out A computer makes a
21 difference under Section 101 when it imposes a
22 meaningful limit on the patent claim That occurs when
23 the claim is directed at improvement in computing
24 technology or an innovation that uses computing
25 technology to improve other technological functions
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1 Thats the test that we believe is most faithful to this
2 Courts precedents in Bilski and Mayo It keeps patents
3 within their traditional and appropriate domain and it
4 is capable of being administered consistently by Courts
5 and by PTO examiners
6 JUSTICE GINSBURG How do you answer the
7 argument that your view would extinguish businessshymethod
8 patents and make all software ineligible for patent
9 protection
10 GENERAL VERRILLI Yeah with shyshy let me
11 address software patents first because that I think is
12 obviously a significant question And its just not
13 correct to say that our approach would make software
14 patenting ineligible Any software patent that improves
15 the functioning of the computer technology is eligible
16 Any software patent that improves shyshy that is used to
17 improve another technology is eligible For example
18 the patent in the shyshy in the Diehr case is one in
19 which shyshy
20 JUSTICE SOTOMAYOR Why do we need to reach
21 this in that shyshy reach software patents at all in this
22 case
23 GENERAL VERRILLI Well shyshy
24 JUSTICE SOTOMAYOR Whats the necessity for
25 us to announce a general rule with respect to software
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1 There is no software being patented in this case
2 GENERAL VERRILLI Well I shyshy
3 JUSTICE SOTOMAYOR Theres a systems
4 GENERAL VERRILLI Well I shyshy I think shyshy
5 well they shyshy they shyshy theres a process being and shyshy and
6 one can think of software patents as process patents
7 And I think thats why my friends on the other side are
8 saying the sky is falling because they shyshy they are
9 interpreting what were saying about that when a
10 computer makes shyshy when a computers involvement makes
11 something eligible under 101 its calling those into
12 question and it doesnt
13 JUSTICE SOTOMAYOR Do you think we have to
14 reach the patentability of software to answer this case
15 GENERAL VERRILLI Well I think you can shyshy
16 I think the answer to that question is no not
17 necessarily You can decide it by saying that shyshy that
18 Bilski answers the question whether this is an abstract
19 idea because this form of hedging is really no
20 different than the form of hedging as a conceptual
21 matter at issue in Bilski And then Mayo answers the
22 question of whether the use of a computer in this case
23 adds enough to the abstract idea beyond conventional
24 steps because here all we have after all is just
25 conventional use of computing technology no computer
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1 innovation such that you dont qualify under 101 You
2 could take that approach
3 But it is important to the United States
4 that we shyshy and to our patent examiners that we get some
5 clarity if we can I think the clarity could come from
6 the text that I propose which I want to reiterate shyshy
7 JUSTICE SOTOMAYOR Well shyshy
8 JUSTICE BREYER Could shyshy could shyshy could you
9 go on with that because you were just getting to the
10 point where I think you say a computer improvement that
11 in fact leads to an improvement in harvesting cotton is
12 an improvement through a computer of technology so it
13 qualifies
14 But then I think you were going to say or I
15 got this also from the brief a computer improvement
16 that leads to an improvement in the methods of selling
17 bonds over the telephone is not an improvement in
18 technology reached by the computer Am I right about
19 the distinction youre making
20 GENERAL VERRILLI I dont think theres a
21 yes or no answer to that question
22 JUSTICE BREYER What is your view Yeah
23 what is shyshy how do we deal with just that problem
24 GENERAL VERRILLI If there is a genuine
25 innovation in the functioning of the computer shyshy
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1 JUSTICE BREYER Yes
2 GENERAL VERRILLI shyshy such that business
3 processes shyshy
4 JUSTICE BREYER Weve got that Yes yes
5 We got the computer But then it doesnt improve the
6 computer but rather it improves through the computer
7 the harvesting of cotton
8 Now youve got it in what you said was your
9 second category which is an improvement through the
10 computer of a technology And I thought in your brief
11 you were distinguishing an improvement through the
12 computer of a human activity that is not a technology
13 and in particular to pick an example of that
14 something in finance or something in business
15 Now am I right about the distinction youre
16 making
17 GENERAL VERRILLI Yeah that shyshy
18 JUSTICE BREYER If Im not right what is
19 the distinction
20 GENERAL VERRILLI That is generally the
21 line were drawing Frankly shyshy
22 JUSTICE BREYER And how is that justified
23 GENERAL VERRILLI I do want shyshy
24 JUSTICE BREYER That shyshy that is Judge Dyk
25 in shyshy in Bilski in the Federal circuit 4 people sort of
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1 picked it up maybe 5 didnt pick it up Would you say
2 a few words about it
3 GENERAL VERRILLI Sure About shyshy let me go
4 to Bilski there in that I do think while shyshy while
5 certainly the Court held that the term process got a
6 natural construction which could include business
7 methods it seems to me that thats not all the Court
8 said in Bilski The Court also said that it was
9 historically and traditionally quite rare that business
10 methods were patent eligible
11 It also said that shyshy that the shyshy that courts
12 and the PTO examiners should use the abstract ideas
13 exception to 101 to police the appropriate boundary
14 It also said that the
15 machineshyorshytransformation test that the United States
16 advocated remained a useful tool And of course that
17 directs to you seeing whether there is a technology
18 application
19 And of course the holding in Bilski was
20 that the shyshy the method for hedging risk was ineligible
21 because it was an abstract idea and I cant imagine
22 that if in Bilski the shyshy the claim had been exactly the
23 same but had added use a computer to carry out some of
24 these standard random analysis functions that are
25 claimed by the patent that you would have found it to
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1 be patent eligible
2 And I shyshy I would submit for the Court that
3 the key point here I think is that now given where
4 the Court shyshy what the Court has held in Bilski given
5 what its held in Mayo the abstract ideas exception is
6 really the only tool left to deal with what I shyshy what I
7 think I fairly read Bilski as saying is a significant
8 problem the proliferation of patents of business
9 methods
10 JUSTICE KENNEDY Is there an example that
11 you can give us of a shyshy what we can call a business
12 process that is patentable a process that doesnt
13 involve improving the workings of a computer
14 GENERAL VERRILLI I shyshy I think its going
15 to be difficult for me to do that I think for
16 example if you had a business method a process for
17 additional security pointshyofshysale credit card
18 transactions using particular encryption technology
19 that might well be patent eligible Its a technology
20 that it makes conduct of business more efficient or
21 effective
22 But there is a technological link here and
23 we do think thats critical to our shyshy to our point of
24 view with respect to the case And I shyshy and I do think
25 remember that when we say something is not patent
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1 eligible were not saying they cant do it Were
2 saying they cant monopolize it
3 And the concern in a situation like this one
4 is that if this is patent eligible its hard to see
5 why for example the first person who came up with a
6 frequent flier program wouldnt have been able to claim
7 a patent there because after all thats a business
8 method for improving customer loyalty implemented on a
9 computer
10 CHIEF JUSTICE ROBERTS General I shyshy you
11 mentioned a while ago the need for greater clarity and
12 certainty in this area And Im just wondering in your
13 brief youve got a nonshyexhaustive of factors to
14 consider and there are 6 different ones And Im just
15 doubtful that thats going to bring about greater
16 clarity and certainty
17 GENERAL VERRILLI I take shyshy I take the
18 point Mr Chief Justice but I think the key is that
19 they are all directed to answering the question of
20 whether the innovation that is claimed and is an
21 innovation in either A the improvement of a computers
22 functioning or B the use of computer technology to
23 improve the functioning of another technological
24 process and a case like Diehr would be in the latter
25 category
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1 And so I do think that thats the key
2 benchmark Thats the baseline Thats the test that
3 we do think can be applied clearly and consistently by
4 the courts or the PTO And it avoids the risk of things
5 like frequent flier programs or the Oakland As money
6 ball methods for evaluating the contributions in
7 individual baseball players make or any one of a host of
8 other things that our intuitions tell us just dont
9 belong in the patent system
10 Thats the shyshy drawing that line keeps them
11 out not drawing that line lets them in And with all
12 due respect I dont think that the novelty and
13 nonobviousness filters that 102 and 103 really deal with
14 that problem effectively because when you get to
15 nonobviousness in 103 for example youll be asking a
16 different question
17 If you take the frequent flier program you
18 would say well is this innovation in building consumer
19 loyalty something that would have been obvious to
20 somebody who runs an airline Its totally divorced
21 from the question of technology at that point and
22 therefore I dont think youre going to get the screen
23 that you need to get in order for the patent system to
24 be confined to its traditional and appropriate scope
25 If there are no further questions thank
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1 you
2 JUSTICE GINSBURG I have a question about
3 how do you identify an abstract concept The shyshy a
4 natural phenomenon a mathematical formula those are
5 easy to identify but there has been some confusion on
6 what qualifies as an abstract concept
7 GENERAL VERRILLI We would define
8 abstract shyshy an abstract concept as a claim that is not
9 directed to a concrete innovation in technology
10 science or the industrial arts So its the shyshy its
11 abstract in the sense that it is not a concrete
12 innovation in the traditional realm of patent law
13 Thank you
14 CHIEF JUSTICE ROBERTS Thank you General
15 Mr Phillips you have four minutes
16 remaining
17 REBUTTAL ARGUMENT OF CARTER G PHILLIPS
18 ON BEHALF OF THE PETITIONERS
19 MR PHILLIPS Thank you Mr Chief Justice
20 Id just like to make a few points
21 First of all with respect to the question
22 you asked which is looking at 159 et cetera all I can
23 tell you is that if you look at claim 33 it talks about
24 matched orders the matched orders that are described in
25 286 and 287 and then makes specific reference to 159
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1 and that flow chart thats there And its all designed
2 as a package Its only one element of the shyshy of the
3 invention but it is a central element and its an easy
4 one to understand And it goes well beyond simply the
5 notion of hedge shyshy hedge against settlement risk and do
6 it by a computer
7 JUSTICE SOTOMAYOR Your adversary says that
8 his shyshy the appendix to his brief are the only patents at
9 issue that the flow charts are not at issue in this
10 case
11 MR PHILLIPS Theres no basis for that
12 statement Your Honor There shyshy remember this went off
13 on a very truncated litigation process So theres shyshy
14 you know we shyshy we got cut off at the beginning of it
15 Theres been no construction of the shyshy of the claims
16 and shyshy and obviously these are specifications that go
17 to how you interpret the claim
18 JUSTICE SOTOMAYOR If we were to say that
19 there are no business patents shyshy
20 MR PHILLIPS Yes
21 JUSTICE SOTOMAYOR shyshy would your patent
22 survive at all
23 MR PHILLIPS No I dont shyshy I dont
24 believe so I think theres no question And you
25 know General Verrilli could not have been any plainer
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1 in his statement of how he wants to interpret the
2 abstract idea concept
3 JUSTICE SOTOMAYOR Yes he wants to say no
4 business patents
5 MR PHILLIPS No business shyshy just another
6 way of saying no business methods And you know the
7 Court rejected that And it seems to me extraordinary
8 to say Congress didnt reject no business methods in
9 101 but were going to do shyshy were going to manipulate
10 the judicial exception to accomplish precisely that same
11 thing It seems to me thats wholly inappropriate
12 Justice Ginsburg you asked my shyshy my friend
13 here you know whats his test He didnt answer that
14 question youll notice because he doesnt have an
15 answer His basic argument is whatever you do just
16 kill this patent
17 And if I were in his shoes I suppose Id
18 take that same position I think whats absolutely
19 clear is that the test ought to be one that is
20 structured as a very coarse filter not the kind of
21 filter that hes pushing for where it changes over time
22 I mean I thought his shyshy I thought his response to one
23 of the questions about eshymail and word processing that
24 Justice Sotomayor asked is over time it would change
25 Well thats exactly what 102 and 103 are for That is
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1 not the purpose of shyshy of Section 101
2 And then he uses the example of encryption
3 I guarantee you if we were arguing about encryption in
4 this case he would say to me that thats an abstract
5 principle because encryption is a concept thats been
6 around since time immemorial George Washington used
7 it Everybody has used encryption
8 And a question again thats not the
9 solution to these problems The question is how did we
10 go about doing it And we go beyond the basics of
11 simply saying use a computer and thats what we ask
12 this Court to focus on and to evaluate
13 As to the frequent flier program its
14 pretty clear to me that even though it was a novel idea
15 in some sense the concept itself would have been viewed
16 in shyshy in the KSR fashion as quite obvious as a means of
17 improving customer loyalty
18 There are solutions here Giving us 101
19 pass doesnt create a monopoly It just gets us to the
20 102 and 103 inquiries that are at the heart of what the
21 patent laws shyshy and 112 that are at the heart of what the
22 patent laws ought to be dealing with
23 If there are no further questions Your
24 Honor thank you
25 CHIEF JUSTICE ROBERTS Thank you counsel
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1 The case is submitted
2 (Whereupon at 1105 am the case in the
3 aboveshyentitled matter was submitted)
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text 476 824 137 TV 339 3015 3212 T thank 39 2612 1514 2611 two 1625 2224 4916
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various 3616 3420 4016 4312 1327shy28 369 94 2715 vary 1420 442 556 wrong 392 159 1910 311 Verrilli 121 29 ways 717 3015 wrote 1213 532225
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weve 1925 484 web 227 weekend 510
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years 318 259 3615 371019 4321
2 2 3424 4319 20 371018 2014 111 22000 4321 25 3118 26 27 2712
vice 3924 video 33458 view 1015
wellshyestablished 276
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1623 3420 2214 362 0 293 2715 457 4722 5024
viewed 5615 violate 55
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81625 1113 151520 1614 1624 1721 1815 2017 2112 235 2425 254
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3 3 24 30 259 31 111 33 3118 5323 37 3118
4 4 325 4825 42 1524 1618 44 211
5 5 491 510 3019 411 53 214 57 4322
6 6 5114 65 3019
7
8
9 9 245 9shy0 365
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1 within that dicta
2 Now if you dont accept the dicta and you
3 say use a computer is fine then I think were done
4 JUSTICE SCALIA Well Im not saying use a
5 computer is shyshy is much of a novelty I mean thats shyshy
6 that goes to whether its novel or not If you just say
7 use a computer you havent invented anything But if
8 you come up with a serious program that shyshy that does it
9 then you know that may be novel But thats a novelty
10 issue isnt it
11 MR PHILLIPS To be sure Justice Scalia
12 JUSTICE BREYER And this is exactly the
13 question I really would like to you to focus on for me
14 Why is it shyshy and Im not saying this from a point of
15 view but it seems to me pretty clear that if what you
16 did was take the idea of solvency shyshy remember King Tut
17 Thats what I use the exaggeration shyshy and what you say
18 is implemented by having the abacus man keep track and
19 say stop okay shyshy
20 MR PHILLIPS Right
21 JUSTICE BREYER Then we implement it by
22 having somebody with a pencil and a piece of paper and
23 this is all that they add you see Say Have a man
24 with a pencil and a piece of paper keeping track and
25 saying stop or we say implement it in the computer
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1 which will automatically keep track and say stop are
2 they all enough Are some of them enough Whats the
3 rule
4 And you realize I couldnt figure out much
5 in Prometheus to go beyond what I thought was an obvious
6 case leaving it up to you and your colleagues to figure
7 out how to go further Am I making enough shyshy making
8 clear enough whats bothering me And Id really like
9 to get your answer to this
10 MR PHILLIPS And shyshy and look theres
11 no shyshy Ill be the first one to shyshy to confess that trying
12 to use language to describe these things is not all that
13 easy But the way I think you can meaningfully look at
14 this is to say that this is not simply something that
15 was a fundamental truth this is not something that
16 simply says use a computer Its not simply something
17 that says maintain solvency It shyshy it operates in a
18 much more specific and concrete environment where youre
19 dealing with a problem thats been in existence since
20 the 1970s a solution in the 1990s that CLS itself
21 acknowledges needed a solution and came forward with
22 their own solution that looks a lot like ours
23 JUSTICE KENNEDY But my shyshy my initial
24 question and I think I can work this into King Tut
25 is shyshy
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1 (Laughter)
2 JUSTICE KENNEDY shyshy is shyshy is whether or not
3 you could have patented that system idea process
4 method without attaching a computer program
5 MR PHILLIPS You cannot absolutely cannot
6 do that with this system because it is so complex and
7 so many interrelated parts
8 JUSTICE KENNEDY Suppose I thought shyshy and
9 again its just a thought because I dont have the
10 expertise shyshy that any computer group of people sitting
11 around a coffee shop in Silicon Valley could do this
12 over a weekend Suppose I thought that
13 MR PHILLIPS You mean wrote the code
14 JUSTICE KENNEDY Yes right
15 MR PHILLIPS Well thats absolutely shyshy
16 Im certain thats true
17 JUSTICE KENNEDY Well then shyshy then shyshy
18 MR PHILLIPS But thats true of almost all
19 software
20 JUSTICE KENNEDY Then why is the computer
21 program necessary to make the patent valid
22 MR PHILLIPS Well its shyshy its necessary
23 to make the invention effective As the Solicitor
24 General said the computer is essential to the efficacy
25 of this invention because of the complicated financial
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1 arrangements that exist and that can only be resolved on
2 a shyshy on a realtime basis Your abacus is great if you
3 happen to be waiting for the pyramids to be finished or
4 waiting for the gold to move in and out but it doesnt
5 help with you an abacus if youre dealing with literally
6 thousands of transactions simultaneously going on in
7 different countries at different points in time
8 JUSTICE KENNEDY But thats just an idea
9 hey lets use a computer
10 MR PHILLIPS But its not just shyshy I mean
11 obviously part of it is use the computer Justice
12 Kennedy But more fundamentally it goes beyond that
13 See I shyshy
14 JUSTICE SOTOMAYOR Is your software
15 copyrighted
16 MR PHILLIPS No I dont believe so
17 JUSTICE GINSBURG There is no special
18 software that comes with this shyshy thats part of this
19 patent is it shyshy is there
20 MR PHILLIPS No Justice Ginsburg what
21 we did here is what the Patent and Trademark Office
22 encourages us to do and encourages all software patent
23 writers to do which is to identify the functions that
24 you want to be provided for with the software and leave
25 it then to the software writers who I gather are you
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1 know quite capable of converting these functions into
2 very specific code
3 JUSTICE KAGAN Mr Phillips could you shyshy
4 could you disaggregate your argument for me Because
5 you just said look this Court has said its not
6 sufficient if you have an idea and then you say use a
7 computer to implement it right So are you saying that
8 your shyshy that shyshy are you saying that youre doing more
9 than saying use a computer to implement it or are you
10 saying that its shyshy that the idea itself is more than an
11 idea
12 MR PHILLIPS Yes Im saying shyshy
13 JUSTICE KAGAN Which part of what shyshy
14 MR PHILLIPS Im saying both actually I
15 mean Im making both of those arguments I shyshy I
16 believe that if you analyze the claims and you dont
17 caricature them and you dont strip them out of the
18 limitations that are embedded in there this is not some
19 kind of an abstract concept This is not some kind shyshy
20 its not an abstract idea Its a vary shyshy
21 JUSTICE KAGAN So putting the computer
22 stuff aside completely shyshy
23 MR PHILLIPS Right
24 JUSTICE KAGAN shyshy youre saying that youve
25 invented something or you shyshy
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1 MR PHILIPS Yes
2 JUSTICE KAGAN There is something that
3 youve patented that has shyshy that is not just simple use
4 a third party to do a settlement
5 MR PHILLIPS Right
6 JUSTICE KAGAN And what is that putting
7 the computer aside
8 MR PHILLIPS It is shyshy well shyshy and again
9 its difficult to do that because you absolutely need
10 the computer in order to implement this But the key to
11 the invention is the notion of being able
12 simultaneously dealing with it on a chronological basis
13 to stop transactions that will otherwise interfere with
14 the ability to settle on time and under the appropriate
15 circumstances And the only way you can do that in a
16 realtime basis when youre dealing with a global economy
17 is to use a computer It is necessary to the efficacy
18 of this
19 So in that sense I cant shyshy I cant
20 disaggregate it the way in some sense youre suggesting
21 It seems to me its bound up with in shyshy its bounds up
22 with the whole notion of is this an abstract concept
23 JUSTICE BREYER Can you in fact shyshy now
24 this is shyshy look there are 42 briefs in this case I
25 actually read them and I found them very very helpful
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1 up to the point where I have to make a decision because
2 theyre serious I mean you know shyshy now the problem
3 that I came away with is the one that youre beginning
4 to discuss that if you simply say take an idea thats
5 abstract and implement it on a computer there are shyshy
6 youre going to get it much faster youre going to be
7 able to do many many things and if thats good enough
8 there is a risk that you will take business in the
9 United States or large segments and instead of having
10 competition on price service and better production
11 methods well have competition on who has the best
12 patent lawyer You see where Im going on that one
13 MR PHILLIPS Yeah of course
14 JUSTICE BREYER And if you go the other way
15 and say never then what you do is you rule out real
16 inventions with computers
17 MR PHILLIPS Right
18 JUSTICE BREYER And so in those 42 briefs
19 there are a number of suggestions as to how to go
20 between Scylla and Charybdis Now I would like to
21 know shyshy I dont know if you can step back from your
22 representational model Thats a problem Youre all
23 we have now And shyshy and from my point of view I need
24 to know what in your opinion is the best way of sailing
25 between these two serious arms
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1 MR PHILLIPS Well Justice Breyer I guess
2 I would suggest to you that you might want to deal with
3 the problem you know as opposed to the problems you
4 dont know at this stage I mean we have had business
5 method patents and software patents in existence for
6 well over a decade and theyre obviously quite
7 significant in number And shyshy and we know what the
8 system is we have And Congress looked at that system
9 right and didnt say no to business methods patents
10 didnt say no to software patents instead said the
11 solution to this problem is to get it out of the
12 judicial process and create an administrative process
13 but leave the substantive standards intact
14 So my suggestion to you would be follow that
15 same advice a liberal interpretation of 101 and not a
16 caricature of the claims analyze the claims as written
17 and therefore say that the solution is 102 and 103 and
18 use the administrative process If you shyshy
19 JUSTICE GINSBURG Mr Phillips let me just
20 stop you there because four Justices of this Court did
21 not read that legislative history the way you do And
22 it was shyshy was in Bilski
23 MR PHILLIPS But this is postshyBilski
24 JUSTICE GINSBURG Justice Stevens went
25 carefully through that and he said Congress was
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1 reacting to a decision It had shyshy it was not addressing
2 101 So there are at least four Justices who say shyshy who
3 didnt buy that argument
4 MR PHILLIPS Well I mean it still seems
5 to me that the shyshy the natural inference is Congress did
6 not change 101 Congress created an entire
7 administrative system to deal with 101 102 and 103
8 And shyshy and I would hope shyshy
9 JUSTICE SCALIA And four is not five
10 anyway right
11 MR PHILLIPS Thats true
12 JUSTICE SCALIA Four is not five
13 MR PHILLIPS And youve exhausted my math
14 skills Your Honor
15 JUSTICE SCALIA By the way we shyshy we have
16 said that you cant take an abstract idea and then say
17 use a computer to implement it But we havent said
18 that you cant take an abstract idea and then say here
19 is how you use a computer to implement it shyshy
20 MR PHILLIPS Exactly
21 JUSTICE SCALIA shyshy which is basically what
22 youre doing
23 MR PHILLIPS And thats the argument were
24 doing and shyshy
25 JUSTICE SCALIA And thats a little
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1 different
2 MR PHILLIPS shyshy thats the line were
3 asking the Court to draw here
4 JUSTICE KAGAN Well how are you saying the
5 how Because I thought that your computers shyshy that your
6 patents really did just say do this on a computer as
7 opposed to saying anything substantive about how to do
8 it on a computer
9 MR PHILLIPS I would urge the Court to
10 look at Joint Appendix 159 285shy286 where it goes
11 through the flow charts This is shyshy and this is just a
12 specific example of the method by which you stop a
13 transaction and it goes through a varied series of
14 detailed steps and what the computer has to do in order
15 to do that It doesnt actually obviously put in the
16 code but thats what the PTO says dont do Dont put
17 in the code because nobody understands code so shyshy but
18 put in the functions and we know shyshy and we know that
19 someone skilled in the art will be able to put in the
20 code And if they arent if they cant do that then
21 its not enabled and thats a 112 problem
22 To go back Justice Breyer to your
23 question So on the one hand youve got a problem that
24 it seems to me Congress to some extent has said is okay
25 and weve got a solution and that solutions playing
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1 through On the other hand if this Court were to say
2 much more categorically either that theres no such
3 thing as business method patents or adopt the Solicitor
4 Generals interpretation which is to say that there
5 cannot be software unless the software somehow actually
6 improves the computer as opposed to software improving
7 every other device or any other mechanism that might be
8 out there
9 What we know is that this would inherently
10 declare and in one fell swoop hundreds of thousands of
11 patents invalid and the consequences of that it seems
12 to me are utterly unknowable And before the Court goes
13 down that path I would think it would think long and
14 hard about whether isnt that a judgment that Congress
15 ought to make And It seems to me in that sense youre
16 essentially where the Court was in Chakrabarty where
17 everybody was saying youve got to act in one way or the
18 other or the world comes to an end and the courts have
19 said well apply 101 directly
20 JUSTICE KENNEDY If we say that theres no
21 software patentability and agree with the Attorney
22 General do you lose in this case
23 MR PHILLIPS Well it would be very hard
24 for me to see how that shyshy how shyshy how I can get around
25 that particular problem because the computer is the
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1 essence of it so shyshy and a portion of it is clearly the
2 software So I think if you say there is no such thing
3 as software patentability I do lose in this case yes
4 Your Honor As do a whole lot of other people
5 JUSTICE KENNEDY Is there any common ground
6 between you and the government shyshy maybe a better
7 question to ask the government shyshy a common ground
8 between you and the government on something in the
9 software area thats patentable other than making the
10 computer itself work You understand the government to
11 say no software patents
12 MR PHILLIPS Thats the way I interpret
13 the governments shyshy the governments brief
14 JUSTICE BREYER It was like shyshy theres a
15 Bloomberg brief out here that was on this that said
16 no you can shyshy you can patent computer software when
17 its an improvement in the computer when its an
18 improvement in software when its an improvement in a
19 technology that is developed out of computers like
20 robotics when it is an improvement in a machine or
21 technology but you cannot improve it where it is simply
22 an improvement in an activity that is engaged in
23 primarily through mental processes But what they mean
24 by that is business finance and similar arts
25 Thats shyshy I mean thats shyshy it wasnt quite what shyshy I
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1 know Thats what I want to know what you dont agree
2 with about that because its a little more refined than
3 you suggested
4 MR PHILLIPS I read the Solicitor
5 Generals brief as broader than the Bloomberg brief
6 in shyshy in terms of the approach And IBMs argument is
7 if you knock out software patents you eliminate web
8 browsing word processing cellphones eshymail Those
9 are all activities that I dont think fall within the
10 meaning of the shyshy the meaning of the governments theory
11 of the case
12 JUSTICE BREYER But Im asking you shyshy Im
13 asking you what about this one that I just mentioned
14 You see I went through those five steps shyshy
15 MR PHILLIPS Right
16 JUSTICE BREYER shyshy and four of them you
17 could patent and the fifth one you cant
18 MR PHILLIPS Right But I shyshy and I guess
19 my answer to that is thats nowhere in the statute and
20 it doesnt seem to me to reflect an abstract idea Its
21 a shyshy its a line you draw that takes out business method
22 patents If the Court wants to eliminate business
23 method patents fine But you just said no to that in
24 Bilski two three terms ago
25 Now to be sure give the Solicitor General
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1 credit he comes here and says to you We didnt like
2 the result in Bilski we want you to say dont use
3 process in order to get there which is a statutory
4 interpretation come up with an extraordinarily
5 complicated way of looking at the exception and use that
6 to get to the exact same result
7 JUSTICE SOTOMAYOR Well youre doing a
8 very good job of proving shyshy
9 JUSTICE GINSBURG In Bilski Justice Breyer
10 did try to say that there wasnt that shyshy a whole lot of
11 distance between the four who thought business methods
12 were not patentable But he shyshy he also said something
13 else in shyshy in the other case Mayo Justice Scalia
14 asked you the question about doesnt that go to novelty
15 but didnt Justice Breyer say in Mayo that novelty can
16 be relevant to patent shyshy to patent eligibility He said
17 theres shyshy theres an overlap
18 MR PHILLIPS Well he said theres an
19 overlap Here in this context I think basically the
20 Respondents theory would mean that they are completely
21 coterminous And I dont think thats what the Court
22 meant And also we know from Diehr that theres got to
23 be at least some significant limitations on the extent
24 to which novelty has to be built into 101 That is the
25 province of 102 and 103 And as I said Congress
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1 modified the system of adjudication to create an
2 administrative mechanism that allows you to get to 102
3 and 103 And at least in context its important to
4 realize there have been 11 cases since that was created
5 9 of the 11 have been knocked down on 102 or 103 grounds
6 and not on 101 grounds And it seems to me thats the
7 answer to this problem is leave 101 as the coarse
8 filter If on its face it states these kinds of broad
9 abstract principles fundamental truths and even if it
10 says use a computer those should be struck down
11 JUSTICE SOTOMAYOR Which of the shyshy which of
12 the opinions below captures your position most
13 accurately
14 MR PHILLIPS I would guess it would be
15 Judge Moores opinion below that would capture ours most
16 correctly
17 JUSTICE SOTOMAYOR And if we were to think
18 your method claim is ineligible do you agree that your
19 systems and shyshy your medium and system claims fail as
20 well Do they rise and fall together
21 MR PHILLIPS No No I dont believe they
22 do rise and fall together I mean I think you could shyshy
23 if you wanted to interpret our medium claim shyshy I mean
24 our shyshy our method claims in a shyshy in particularly
25 abstract way I think you could still say that the
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1 system claims which clearly are shyshy are how to create a
2 computer system and how to implement it using that
3 method would be a much more concrete version of that in
4 a way that would take it out of 101 That said I
5 obviously believe that all of our claims satisfy 101
6 and should go on to the next stage
7 JUSTICE KAGAN Can I give you a
8 hypothetical Mr Phillips and you tell me how its
9 different or the same Lets say you know 30 years
10 somebody took a look around the world and said a lot of
11 people seem to order products by mail They get the
12 catalogues in the mail and then they send back their
13 return forms And lets say that one of the founders of
14 the Internet said wouldnt this be an amazing system
15 we could actually do this by computer and they had
16 patented that Is that the same
17 MR PHILLIPS I dont know if its the
18 same but I would shyshy I would argue that it could very
19 well be a patentable subject matter because shyshy but it
20 depends on how the claims play out
21 JUSTICE KAGAN No but exactly I mean
22 the claim would have said something along the lines of
23 you know theres this process by which people order
24 products and we want to do it over the Internet we want
25 to do it electronically and we will use a computer to
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1 do that to essentially take the process of mail order
2 catalogues and make it electronic
3 MR PHILLIPS I could certainly shyshy I think
4 I could write a claim shyshy a set of claims that I believe
5 would satisfy 101 And shyshy and to the extent that
6 youd shyshy that youd think those are no different than
7 the ones I have here then my argument is simply I think
8 I satisfy 101 with the claims we have before us Your
9 Honor
10 If there are no further questions then Id
11 like to reserve the rest of my time
12 CHIEF JUSTICE ROBERTS Thank you
13 Mr Phillips
14 Mr Perry
15 ORAL ARGUMENT OF MARK A PERRY
16 ON BEHALF OF THE RESPONDENTS
17 MR PERRY Mr Chief Justice and may it
18 please the Court
19 That path between Scylla and Charybdis was
20 charted in Bilski and Mayo Bilski holds that a
21 fundamental economic principle is an abstract idea and
22 Mayo holds that running such a principle on a computer
23 is quote not a patentable application of that
24 principle Those two propositions are sufficient to
25 dispose of this case
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1 If Bilski and Mayo stand Alices patents
2 fail Therefore Mr Phillips and his friends are
3 asking this Court to change the standard even though
4 this Court has had three unanimous decisions in the last
5 four terms establishing what the Court called a myriad
6 a wellshyestablished standard
7 On the abstract idea Justice Ginsburg you
8 asked Mr Phillips whats the difference between hedging
9 and this claim There is no difference This is
10 hedging It is hedging against credit default rather
11 than price fluctuation but it is simply hedging
12 And Mr Phillips stood up for 26 minutes and
13 never once referred to the patent Lets look at what
14 the inventor the soshycalled inventor said about this
15 invention This is at JA 293 to 94 in the
16 specification
17 This claim has simply two steps Its very
18 simple First debiting and crediting on a realtime
19 basis the relevant shadow records and second by
20 periodically affecting corresponding payment
21 instructions Those are direct quotes Debit credit
22 and pay Your Honor you cant get much more simple
23 than that
24 Mr Phillips suggests well we have
25 multilateral transactions global things chronological
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1 time zones and so forth None of those are claimed
2 Your Honor Those are all recited in specification
3 The claims read on a single transaction involving two
4 parties
5 JUSTICE BREYER Can I ask you at some
6 point not necessarily this second to say in my shyshy this
7 is just shyshy you know you have an opinion for a court
8 Different judges can have different interpretations
9 All youre getting is mine okay
10 But I think its pretty easy to say that
11 Archimedes cant just go to a boat builder and say
12 apply my idea All right Everybody agrees with that
13 But now we try to take that word apply and give
14 content to it
15 And what I suspect in my opinion Mayo did
16 and Bilski and the other cases is sketch an outer shell
17 of the content hoping that the experts you and the
18 other lawyers and the shyshy the circuit court could fill
19 in a little better than we had done the content of that
20 shell
21 So so far youre saying well this is
22 close enough to Archimedes saying apply it that we
23 neednt go further
24 Now will you at some point in the next few
25 minutes give me your impression of if it were necessary
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1 to go further what would the right words or example be
2 MR PERRY Your Honor as shyshy Justice
3 Breyer as to abstract ideas the PTO has filled in that
4 shell by listing economic concepts legal concepts
5 financial concepts teaching concepts dating and
6 interpersonal relationships and generally how business
7 should be conducted as examples of those things that are
8 likely abstract which of course all follow directly
9 from Bilski and the discussion this Court had in Bilski
10 And this patent shyshy these patents fall squarely within
11 that
12 Congress in the AIA confirmed that
13 reading Congress in the CBM method said business
14 methods that are subject to special scrutiny shyshy that is
15 dubious patents shyshy include methods and corresponding
16 apparatus which is what we have here that pertain to
17 data processing in the financial services industry and
18 do not offer a technological solution That describes
19 Alices patents to a letter Your Honor So that we
20 have shyshy
21 JUSTICE SOTOMAYOR What do you think is a
22 technological solution
23 MR PERRY Your Honor shyshy
24 JUSTICE SOTOMAYOR How could they if at
25 all written their patents to shyshy to make shyshy to make
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1 their software eligible What would shyshy what do they
2 need shyshy would have needed to have added
3 MR PERRY Justice Sotomayor they have no
4 software first Theyve never written software
5 Theyve never programmed a computer So thats a
6 nonexistent set
7 Second there are many technological
8 solutions to trading and settlement problems For
9 example data compression These shyshy these trading
10 platforms involve the movement of very large quantities
11 of data around the world The physical pipes that is
12 the fiber optic cables and data lines are limited
13 There are very sophisticated algorithms for both
14 security and speed to move data through the transmission
15 lines in novel and useful ways that could well be
16 patented
17 Nothing like that is claimed here To come
18 back to where I started if you look for example at
19 Claim 65 in the 510 patent as Mr Phillips reads it
20 it literally reads on a twoshyparty escrow to sell a
21 house so long as the escrow agent is typing this stuff
22 into the HUDshy1 using a computer That has nothing to do
23 with multilevel shyshy
24 CHIEF JUSTICE ROBERTS Well thats a
25 little more complicated He referred us to Joint
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1 Appendix Page 159 which is not a change in how
2 computers work But it is shyshy constitutes the
3 instructions about how to use the computer and where it
4 needs to be affected And just looking at it it looks
5 pretty complicated There are a lot of arrows and
6 they shyshy you know different things that go shyshy
7 (Laughter)
8 CHIEF JUSTICE ROBERTS Well but I mean
9 you know it shyshy in different directions And I
10 understand him to say that in each of those places
11 thats where the computer is needed
12 MR PERRY Mr Chief Justice Figure 16 has
13 nothing to do with the invention asserted against my
14 client in this case There are two inventions in this
15 patent One invention involving multilateral contract
16 formation is not asserted against my client And all of
17 these drawings pertain to that The only drawings that
18 pertain to the asserted claims are 25 and 33 to 37 And
19 that was established below and its established in this
20 Court And Mr Phillips has never disputed it
21 So the claim hes pointed the Court shyshy the
22 figure hes pointed the Court to has nothing to do with
23 the invention Its for a different invention that is
24 not at issue in this case
25 Remember there are hundreds and hundreds of
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1 pages of these patents They all pertain to the other
2 invention Thats why in the back of our red brief we
3 excerpted the very little bit that actually pertains to
4 this You sort of tack on patent shyshy the tack on claim
5 that Mr Phillips is asserting here Its 4 columns
6 Its less than five pages in the printed appendix that
7 actually pertains to this invention And it contains no
8 disclosure whatever
9 Justice Scalia to your question about how
10 the computer does it Of course a patent that
11 describes sufficiently how a computer does a new and
12 useful thing whether its data compression or any other
13 technological solution to a business problem a social
14 problem or a technological problem would be within the
15 realm of the shyshy of the patent laws That is what the
16 patent laws have always been for
17 This is not such a patent And the reason
18 for that is this is a preshyBilski set of patents These
19 were prosecuted under the old State Street test where
20 all the applicant had to claim was a result
21 JUSTICE KENNEDY Would you give me shyshy
22 again you already did it once shyshy an example of a
23 business process patent shyshy of a business process idea
24 and invention that is patentable
25 MR PERRY Your Honor there are many
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1 examples One would be a technological solution to a
2 business problem So that for example shyshy Ill give a
3 different example There are many applications today
4 The Court may be familiar with streaming video to watch
5 video on your computer
6 It is not possible to get enough data
7 through existing lines in its raw format The data has
8 to be manipulated in order to see live video So if you
9 want to watch TV on your phone for example
10 Those algorithms those inventions are
11 undoubtedly technological And if they are used in a
12 trading platform or a hedging system or something else
13 that wouldnt disable them And this is what the Diehr
14 case shyshy
15 JUSTICE KENNEDY Well I shyshy I shyshy in my
16 language Ive called that mechanical rather than
17 process Can you give me an example of process
18 MR PERRY Yes Your Honor The process in
19 that example would be a computer running the particular
20 data compression algorithm
21 JUSTICE KENNEDY But thats how to make
22 a shyshy thats how to make a machine work better
23 MR PERRY Yes Your Honor
24 JUSTICE KENNEDY Im asking you Is there
25 any business process any business activity that is
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1 susceptible to a patent a pure patent innovations that
2 deserve patents
3 MR PERRY Your Honor again a
4 technological solution to a business problem could well
5 be whether its a method or a process is equivalent
6 Again Congress said method in a corresponding shyshy
7 JUSTICE KENNEDY Can you give me an
8 example
9 MR PERRY I thought the data compression
10 example was a good one Ill try an encryption
11 technology Many of these trading platforms you know
12 dealing with securities and money would require some
13 sort of security devices You could have a process for
14 securely transmitting data would be another computer
15 implemented technological solution to a business
16 problem Again nothing like that claimed here
17 JUSTICE SOTOMAYOR How about eshymail and
18 just word processing programs
19 MR PERRY Your Honor a program shyshy let me
20 try it this way to both of your questions In our view
21 if what is claimed as the inventive contribution under
22 Mayo shyshy in other words if we have an abstract idea as
23 we do here and what is claimed is the inventive
24 contribution for Step 2 is the computer then the
25 computer must be essential to that operation and
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1 represent an advancement in computer science or other
2 technology And we know thats not met here Justice
3 Sotomayor because shyshy
4 JUSTICE SOTOMAYOR So youre saying no to
5 eshymail and word processing
6 MR PERRY Your Honor I think at a
7 point shyshy
8 JUSTICE SOTOMAYOR They certainly have
9 functionality and shyshy and improvement of functionality
10 for the user
11 MR PERRY At a point in time in the past
12 I think both of those would have been technological
13 advances that were patentable
14 JUSTICE SOTOMAYOR How
15 MR PERRY Today shyshy because they would have
16 provided a technological solution to a then unmet
17 problem Today reciting and do it on a word processor
18 is no different than and do it on a typewriter or shyshy and
19 do it on a calculator
20 The inventive contribution component which
21 uses specifically the language of conventional and
22 routine and well understood will evolve with
23 technology Thats why its different than the abstract
24 idea component
25 And here we know that these patents dont
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1 claim anything that was not conventional well
2 understood and routine We went through that in great
3 detail and Alice has never disputed a word of it They
4 just say youre not supposed to do that analysis even
5 though the Court 9shy0 in Mayo said we should
6 And in this case its very important to
7 look at what Alices own experts said on the subject
8 This is not our expert This is Alices expert And
9 this is at Page 1327shy28 of the Joint Appendix It is
10 possible to do the business methods of maintaining
11 accounts adjusting accounts and providing an
12 instruction without a computer or other hardware
13 And then Justice Breyer directly to your
14 abacus If someone had thought of this invention
15 soshycalled invention 100 years ago they might have
16 implemented it in a nonelectronic manner using various
17 precomputing tools such as an abacus or handwritten
18 ledgers
19 We know from Benson the Courts seminal
20 computer implementation case that if you can do it by
21 head and hand then the computer doesnt add anything
22 inventive within the meaning of the 101 exception That
23 is the holding of Benson And the Court reiterated that
24 in Mayo
25 Flook said exactly the same thing If you
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1 can do it with pencil and paper then the computer is
2 not offering anything that the patent laws are or should
3 be concerned with
4 It is only where the method will not work
5 without a computer which is not these claims and where
6 the computer itself is doing something that the patent
7 law is willing to protect
8 CHIEF JUSTICE ROBERTS What if shyshy what if
9 you can do it without a computer but its going to
10 take you know 20 people a hundred years In other
11 words theoretically you can replicate what the
12 computer does shyshy
13 MR PERRY Two answers
14 CHIEF JUSTICE ROBERTS shyshy but its
15 impractical without looking to do it on the computer
16 MR PERRY Mr Chief Justice first these
17 claims literally read as Alice reads them on a single
18 transaction between two parties so its not 20 people
19 for a hundred years Its one person sitting in a room
20 so thats not a problem
21 Second if what is being claimed is the
22 necessary speed or efficiency or data crunching
23 capabilities if you will of a computer then it would
24 have to be claimed and theres nothing claimed here
25 All that is claimed shyshy and my friend is going to stand
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1 up on rebuttal and tell you all that the expert said
2 well what is claimed is a computer but its just a
3 computer It just says a computer configured too It
4 doesnt say that the computer actually has to shyshy
5 JUSTICE BREYER Yeah but the trouble with
6 that particular test is as I think partly the Chief
7 Justice said how long et cetera and then add to that
8 though you could do it without a computer what happens
9 at the end of the line is the automobile engine goes off
10 or it begins to sputter or it turns left
11 You see its possible to take Archimedes shyshy
12 shyshy you know I use that example purposely to call
13 attention to the problem You can take those things
14 and youre not just saying apply it and youre not even
15 just saying shyshy you are saying use the computer but at
16 the end of the road something physical in the world
17 changes and everybody would say now thats shyshy that
18 will falls within I mean probably I mean my
19 hesitation shows Im looking for the right words
20 MR PERRY Justice Breyer your point is
21 the reason that it is equally fallacious to suggest on
22 the one hand as Alice and IBM does that simply
23 reciting a computer is a magic key that gets you through
24 101 and you never have to any other inquiry and what
25 some of folks the amici on the other side say which
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1 is that computers or software are never eligible Both
2 of those things have to be wrong because what the Court
3 said in Bilski was future innovation is too uncertain
4 We are not going to do that as a Court And the Court
5 laid out an approach using abstract ideas in Bilski and
6 inventive contribution in Mayo that is flexible enough
7 to take into account that innovation and to deal with
8 particular claims in context which is why at the end
9 of the day we have to come back to these patents and
10 decide which shyshy
11 JUSTICE KAGAN Mr Perry before we get
12 back to these matters you said to Justice Scalia if a
13 patent sufficiently describes how a computer will
14 implement an idea then its patentable So how
15 sufficiently does one have to describe it What do we
16 want a judge to do at this threshold level in terms of
17 trying to figure out whether the description is
18 sufficient to get you past it
19 MR PERRY If I can answer in two steps
20 Justice Kagan First in the negative What the
21 applicant or patentee must do shyshy must not do is simply
22 describe the desired result That would take us back to
23 State Street That would simply say I claim a magic
24 box that buys high and sells low or vice versa I
25 suppose I claim a magic box for investing Thats what
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1 these patents do
2 Then to put it in the affirmative and in the
3 language of Mayo the claim has to recite something
4 significantly more something significantly more than
5 the abstract idea itself That would be a contextual
6 analysis based on the claims and specifications and file
7 history and we know that some devices some methods
8 some programming will pass that
9 It is not going to be a brightshyline rule and
10 thats one of the tugshyofshywar issues that this Court and
11 the Federal Circuit have been having in these cases
12 The Federal Circuit wants brightshyline rules All
13 computers are in or all computers are out
14 This Court has been more contextual This
15 Court has been more nuanced This Court has looked at
16 things in a more robust way
17 JUSTICE KAGAN Youre not suggesting that
18 specific code is necessary
19 MR PERRY No Your Honor I think the shyshy
20 actual description of the programming is a 112 problem
21 I agree with that A 112 issue That is the realm of
22 the written description requirement What is a 101
23 problem is it is on the applicant to do more than simply
24 describe the results simply say A magic box that does
25 intermediate settlement And we can tie that back to
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1 this particular prosecution the 510 patent which is
2 the method patent
3 The examiner rejected it Under Section
4 101 the examiner said this is an abstract idea You
5 cant have this patent And the only change that this
6 applicant made was to add in the adjusting step
7 electronic adjustment It put in one word
8 electronic adjustment And under State Street which
9 is what this patent is prosecuted under that was
10 enough because the result of adjusting run through a
11 computer is enough
12 Under current law that cant be enough
13 That just cant get a patent over the line because this
14 Court said in Mayo and I got to quote this language
15 Simply implementing a fundamental principle on a
16 physical machine namely a computer is not a patentable
17 application of that principle Thats all that Alice
18 has done
19 These are preshyBilski patents They never
20 should have been issued General Verrilli will stand up
21 and address that point And certainly under current
22 law shyshy one point on the AIA Congress did not send all
23 this to the administrative process Congress created
24 two avenues the courts and the PTO to use the
25 standards Essentially it ratified Bilski and Mayo and
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1 said we agree with what you all are doing at the
2 Supreme Court and the existing standards are good enough
3 for us This is a judicial problem And that is a good
4 reason The abstract shyshy
5 JUSTICE GINSBURG The Federal Circuit in
6 this case split in many ways and it had our decisions
7 to deal with You said given Bilski and Mayo this is
8 an easy case What is the instruction that escaped a
9 good number of judges on the Federal Circuit How would
10 you state the rule
11 MR PERRY Your Honor I think theres a
12 significant element to the Federal Circuit that
13 disagrees with Mayo and has been resistant in applying
14 it Chief Judge shyshy former Chief Judge Michelle filed a
15 brief in this Court essentially saying Mayo is a
16 lifeshysciences case You should limit it to that because
17 if you apply it to everything else then these patents
18 are no good
19 Mayo we submit is a technologyshyneutral
20 industryshyneutral exceptionshyneutral framework that can
21 be used to answer all of these questions This is not
22 the death of software patents The software industry is
23 all before this Court saying this is fine with us
24 Every company in the United States practically except
25 for IBM is saying go ahead This will not affect
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1 software patents
2 Justice Ginsburg this Courts precedents
3 are clear They are unanimous They just need to be
4 applied To suggest that there is confusion that needs
5 to be addressed by retreating beating a retreat from
6 recent unanimous decisions would simply reward
7 intransigence difficulty refusal to adhere to what are
8 clear precedents because shyshy
9 JUSTICE KAGAN Should we be concerned
10 Mr Perry that there are old patents that in fact could
11 meet the test that you set forth but wont because they
12 were written in a different time and so used much more
13 general language
14 MR PERRY Your Honor the applicant or the
15 patent holder would have the opportunity to institute a
16 reexamination proceeding or some sort of administration
17 process to address that issue
18 And second it should be noted this is a
19 very small problem There are 2 million outstanding
20 patents in the United States In the last four fiscal
21 years there were 22000 infringement litigations
22 instituted but since Bilski there have only been 57
23 district court decisions on Section 101 issues There
24 have only been 12 Federal Circuit decisions total on
25 computer implementation
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1 We are talking about a group of patents
2 Justice Kagan thats way out at the tail end of
3 distribution Most patents never have a 101 challenge
4 This is not an issue with cotton gins and other things
5 This is a problem for the most marginal
6 most dubious most skeptical patents the ones that this
7 Court in Bilski shyshy and remember what Bilskis holding
8 is The majority said they are processes but it did
9 not say they are eligible
10 Thank you Mr Chief Justice
11 CHIEF JUSTICE ROBERTS Thank you counsel
12 General Verrilli
13 ORAL ARGUMENT OF DONALD B VERRILLI JR
14 ON BEHALF OF THE UNITED STATES AS AMICUS
15 CURIAE SUPPORTING RESPONDENTS
16 GENERAL VERRILLI Mr Chief Justice and
17 may it please the Court
18 An abstract idea does not become
19 patentshyeligible merely by tacking on an instruction to
20 use a computer to carry it out A computer makes a
21 difference under Section 101 when it imposes a
22 meaningful limit on the patent claim That occurs when
23 the claim is directed at improvement in computing
24 technology or an innovation that uses computing
25 technology to improve other technological functions
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1 Thats the test that we believe is most faithful to this
2 Courts precedents in Bilski and Mayo It keeps patents
3 within their traditional and appropriate domain and it
4 is capable of being administered consistently by Courts
5 and by PTO examiners
6 JUSTICE GINSBURG How do you answer the
7 argument that your view would extinguish businessshymethod
8 patents and make all software ineligible for patent
9 protection
10 GENERAL VERRILLI Yeah with shyshy let me
11 address software patents first because that I think is
12 obviously a significant question And its just not
13 correct to say that our approach would make software
14 patenting ineligible Any software patent that improves
15 the functioning of the computer technology is eligible
16 Any software patent that improves shyshy that is used to
17 improve another technology is eligible For example
18 the patent in the shyshy in the Diehr case is one in
19 which shyshy
20 JUSTICE SOTOMAYOR Why do we need to reach
21 this in that shyshy reach software patents at all in this
22 case
23 GENERAL VERRILLI Well shyshy
24 JUSTICE SOTOMAYOR Whats the necessity for
25 us to announce a general rule with respect to software
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1 There is no software being patented in this case
2 GENERAL VERRILLI Well I shyshy
3 JUSTICE SOTOMAYOR Theres a systems
4 GENERAL VERRILLI Well I shyshy I think shyshy
5 well they shyshy they shyshy theres a process being and shyshy and
6 one can think of software patents as process patents
7 And I think thats why my friends on the other side are
8 saying the sky is falling because they shyshy they are
9 interpreting what were saying about that when a
10 computer makes shyshy when a computers involvement makes
11 something eligible under 101 its calling those into
12 question and it doesnt
13 JUSTICE SOTOMAYOR Do you think we have to
14 reach the patentability of software to answer this case
15 GENERAL VERRILLI Well I think you can shyshy
16 I think the answer to that question is no not
17 necessarily You can decide it by saying that shyshy that
18 Bilski answers the question whether this is an abstract
19 idea because this form of hedging is really no
20 different than the form of hedging as a conceptual
21 matter at issue in Bilski And then Mayo answers the
22 question of whether the use of a computer in this case
23 adds enough to the abstract idea beyond conventional
24 steps because here all we have after all is just
25 conventional use of computing technology no computer
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1 innovation such that you dont qualify under 101 You
2 could take that approach
3 But it is important to the United States
4 that we shyshy and to our patent examiners that we get some
5 clarity if we can I think the clarity could come from
6 the text that I propose which I want to reiterate shyshy
7 JUSTICE SOTOMAYOR Well shyshy
8 JUSTICE BREYER Could shyshy could shyshy could you
9 go on with that because you were just getting to the
10 point where I think you say a computer improvement that
11 in fact leads to an improvement in harvesting cotton is
12 an improvement through a computer of technology so it
13 qualifies
14 But then I think you were going to say or I
15 got this also from the brief a computer improvement
16 that leads to an improvement in the methods of selling
17 bonds over the telephone is not an improvement in
18 technology reached by the computer Am I right about
19 the distinction youre making
20 GENERAL VERRILLI I dont think theres a
21 yes or no answer to that question
22 JUSTICE BREYER What is your view Yeah
23 what is shyshy how do we deal with just that problem
24 GENERAL VERRILLI If there is a genuine
25 innovation in the functioning of the computer shyshy
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1 JUSTICE BREYER Yes
2 GENERAL VERRILLI shyshy such that business
3 processes shyshy
4 JUSTICE BREYER Weve got that Yes yes
5 We got the computer But then it doesnt improve the
6 computer but rather it improves through the computer
7 the harvesting of cotton
8 Now youve got it in what you said was your
9 second category which is an improvement through the
10 computer of a technology And I thought in your brief
11 you were distinguishing an improvement through the
12 computer of a human activity that is not a technology
13 and in particular to pick an example of that
14 something in finance or something in business
15 Now am I right about the distinction youre
16 making
17 GENERAL VERRILLI Yeah that shyshy
18 JUSTICE BREYER If Im not right what is
19 the distinction
20 GENERAL VERRILLI That is generally the
21 line were drawing Frankly shyshy
22 JUSTICE BREYER And how is that justified
23 GENERAL VERRILLI I do want shyshy
24 JUSTICE BREYER That shyshy that is Judge Dyk
25 in shyshy in Bilski in the Federal circuit 4 people sort of
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1 picked it up maybe 5 didnt pick it up Would you say
2 a few words about it
3 GENERAL VERRILLI Sure About shyshy let me go
4 to Bilski there in that I do think while shyshy while
5 certainly the Court held that the term process got a
6 natural construction which could include business
7 methods it seems to me that thats not all the Court
8 said in Bilski The Court also said that it was
9 historically and traditionally quite rare that business
10 methods were patent eligible
11 It also said that shyshy that the shyshy that courts
12 and the PTO examiners should use the abstract ideas
13 exception to 101 to police the appropriate boundary
14 It also said that the
15 machineshyorshytransformation test that the United States
16 advocated remained a useful tool And of course that
17 directs to you seeing whether there is a technology
18 application
19 And of course the holding in Bilski was
20 that the shyshy the method for hedging risk was ineligible
21 because it was an abstract idea and I cant imagine
22 that if in Bilski the shyshy the claim had been exactly the
23 same but had added use a computer to carry out some of
24 these standard random analysis functions that are
25 claimed by the patent that you would have found it to
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1 be patent eligible
2 And I shyshy I would submit for the Court that
3 the key point here I think is that now given where
4 the Court shyshy what the Court has held in Bilski given
5 what its held in Mayo the abstract ideas exception is
6 really the only tool left to deal with what I shyshy what I
7 think I fairly read Bilski as saying is a significant
8 problem the proliferation of patents of business
9 methods
10 JUSTICE KENNEDY Is there an example that
11 you can give us of a shyshy what we can call a business
12 process that is patentable a process that doesnt
13 involve improving the workings of a computer
14 GENERAL VERRILLI I shyshy I think its going
15 to be difficult for me to do that I think for
16 example if you had a business method a process for
17 additional security pointshyofshysale credit card
18 transactions using particular encryption technology
19 that might well be patent eligible Its a technology
20 that it makes conduct of business more efficient or
21 effective
22 But there is a technological link here and
23 we do think thats critical to our shyshy to our point of
24 view with respect to the case And I shyshy and I do think
25 remember that when we say something is not patent
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1 eligible were not saying they cant do it Were
2 saying they cant monopolize it
3 And the concern in a situation like this one
4 is that if this is patent eligible its hard to see
5 why for example the first person who came up with a
6 frequent flier program wouldnt have been able to claim
7 a patent there because after all thats a business
8 method for improving customer loyalty implemented on a
9 computer
10 CHIEF JUSTICE ROBERTS General I shyshy you
11 mentioned a while ago the need for greater clarity and
12 certainty in this area And Im just wondering in your
13 brief youve got a nonshyexhaustive of factors to
14 consider and there are 6 different ones And Im just
15 doubtful that thats going to bring about greater
16 clarity and certainty
17 GENERAL VERRILLI I take shyshy I take the
18 point Mr Chief Justice but I think the key is that
19 they are all directed to answering the question of
20 whether the innovation that is claimed and is an
21 innovation in either A the improvement of a computers
22 functioning or B the use of computer technology to
23 improve the functioning of another technological
24 process and a case like Diehr would be in the latter
25 category
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1 And so I do think that thats the key
2 benchmark Thats the baseline Thats the test that
3 we do think can be applied clearly and consistently by
4 the courts or the PTO And it avoids the risk of things
5 like frequent flier programs or the Oakland As money
6 ball methods for evaluating the contributions in
7 individual baseball players make or any one of a host of
8 other things that our intuitions tell us just dont
9 belong in the patent system
10 Thats the shyshy drawing that line keeps them
11 out not drawing that line lets them in And with all
12 due respect I dont think that the novelty and
13 nonobviousness filters that 102 and 103 really deal with
14 that problem effectively because when you get to
15 nonobviousness in 103 for example youll be asking a
16 different question
17 If you take the frequent flier program you
18 would say well is this innovation in building consumer
19 loyalty something that would have been obvious to
20 somebody who runs an airline Its totally divorced
21 from the question of technology at that point and
22 therefore I dont think youre going to get the screen
23 that you need to get in order for the patent system to
24 be confined to its traditional and appropriate scope
25 If there are no further questions thank
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1 you
2 JUSTICE GINSBURG I have a question about
3 how do you identify an abstract concept The shyshy a
4 natural phenomenon a mathematical formula those are
5 easy to identify but there has been some confusion on
6 what qualifies as an abstract concept
7 GENERAL VERRILLI We would define
8 abstract shyshy an abstract concept as a claim that is not
9 directed to a concrete innovation in technology
10 science or the industrial arts So its the shyshy its
11 abstract in the sense that it is not a concrete
12 innovation in the traditional realm of patent law
13 Thank you
14 CHIEF JUSTICE ROBERTS Thank you General
15 Mr Phillips you have four minutes
16 remaining
17 REBUTTAL ARGUMENT OF CARTER G PHILLIPS
18 ON BEHALF OF THE PETITIONERS
19 MR PHILLIPS Thank you Mr Chief Justice
20 Id just like to make a few points
21 First of all with respect to the question
22 you asked which is looking at 159 et cetera all I can
23 tell you is that if you look at claim 33 it talks about
24 matched orders the matched orders that are described in
25 286 and 287 and then makes specific reference to 159
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1 and that flow chart thats there And its all designed
2 as a package Its only one element of the shyshy of the
3 invention but it is a central element and its an easy
4 one to understand And it goes well beyond simply the
5 notion of hedge shyshy hedge against settlement risk and do
6 it by a computer
7 JUSTICE SOTOMAYOR Your adversary says that
8 his shyshy the appendix to his brief are the only patents at
9 issue that the flow charts are not at issue in this
10 case
11 MR PHILLIPS Theres no basis for that
12 statement Your Honor There shyshy remember this went off
13 on a very truncated litigation process So theres shyshy
14 you know we shyshy we got cut off at the beginning of it
15 Theres been no construction of the shyshy of the claims
16 and shyshy and obviously these are specifications that go
17 to how you interpret the claim
18 JUSTICE SOTOMAYOR If we were to say that
19 there are no business patents shyshy
20 MR PHILLIPS Yes
21 JUSTICE SOTOMAYOR shyshy would your patent
22 survive at all
23 MR PHILLIPS No I dont shyshy I dont
24 believe so I think theres no question And you
25 know General Verrilli could not have been any plainer
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1 in his statement of how he wants to interpret the
2 abstract idea concept
3 JUSTICE SOTOMAYOR Yes he wants to say no
4 business patents
5 MR PHILLIPS No business shyshy just another
6 way of saying no business methods And you know the
7 Court rejected that And it seems to me extraordinary
8 to say Congress didnt reject no business methods in
9 101 but were going to do shyshy were going to manipulate
10 the judicial exception to accomplish precisely that same
11 thing It seems to me thats wholly inappropriate
12 Justice Ginsburg you asked my shyshy my friend
13 here you know whats his test He didnt answer that
14 question youll notice because he doesnt have an
15 answer His basic argument is whatever you do just
16 kill this patent
17 And if I were in his shoes I suppose Id
18 take that same position I think whats absolutely
19 clear is that the test ought to be one that is
20 structured as a very coarse filter not the kind of
21 filter that hes pushing for where it changes over time
22 I mean I thought his shyshy I thought his response to one
23 of the questions about eshymail and word processing that
24 Justice Sotomayor asked is over time it would change
25 Well thats exactly what 102 and 103 are for That is
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1 not the purpose of shyshy of Section 101
2 And then he uses the example of encryption
3 I guarantee you if we were arguing about encryption in
4 this case he would say to me that thats an abstract
5 principle because encryption is a concept thats been
6 around since time immemorial George Washington used
7 it Everybody has used encryption
8 And a question again thats not the
9 solution to these problems The question is how did we
10 go about doing it And we go beyond the basics of
11 simply saying use a computer and thats what we ask
12 this Court to focus on and to evaluate
13 As to the frequent flier program its
14 pretty clear to me that even though it was a novel idea
15 in some sense the concept itself would have been viewed
16 in shyshy in the KSR fashion as quite obvious as a means of
17 improving customer loyalty
18 There are solutions here Giving us 101
19 pass doesnt create a monopoly It just gets us to the
20 102 and 103 inquiries that are at the heart of what the
21 patent laws shyshy and 112 that are at the heart of what the
22 patent laws ought to be dealing with
23 If there are no further questions Your
24 Honor thank you
25 CHIEF JUSTICE ROBERTS Thank you counsel
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2 (Whereupon at 1105 am the case in the
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various 3616 3420 4016 4312 1327shy28 369 94 2715 vary 1420 442 556 wrong 392 159 1910 311 Verrilli 121 29 ways 717 3015 wrote 1213 532225
4120 441213 4416 451023
426 well 33 1611 X
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462415 2019 x 129 1990s 1120 472024 482 48172023 493 5014 5117 537 5425
versa 3924 version 253 versus 34
were 82 103 1823 192 469 4821 5111 5599
weve 1925 484 web 227 weekend 510
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4510 4722 4817
years 318 259 3615 371019 4321
2 2 3424 4319 20 371018 2014 111 22000 4321 25 3118 26 27 2712
vice 3924 video 33458 view 1015
wellshyestablished 276
went 1724
Z zones 421 281
285shy286 1910 286 5325 287 5325
1623 3420 2214 362 0 293 2715 457 4722 5024
viewed 5615 violate 55
W waiting 1334 want 1324 172
221 232 252424 339 3916 476 4823
wanted 2423 wants 2222
4012 5513 Washington
110171922 566
wasnt 2125 2310
watch 3349 water 71 way 416 58
81625 1113 151520 1614 1624 1721 1815 2017 2112 235 2425 254
5412 wholly 5511 willing 377 wondering
5112 word 52021
821 228 2813 3418 35517 363 417 5523
words 713 291 3422 3711 3819 492
work 51719 1124 2110 312 3322 374
workings 5013 world 2018
2510 3011 3816
wouldnt 414 415 2514 3313 516
write 264 writers 132325 written 617
1716 2925 304 4022
1 1004 115 32 100 3615 101 3121522
414 65 1715 18267 2019 2324 2467 2545 2658 3622 3824 4022 414 4323 44321 4611 471 4913 559 56118
102 1717 187 2325 2425 5213 5525 5620
103 1717 187 2325 2435 521315 5525 5620
11 2445 1105 572 112 1921 4020
4021 5621 12 4324 13shy298 15 34
3 3 24 30 259 31 111 33 3118 5323 37 3118
4 4 325 4825 42 1524 1618 44 211
5 5 491 510 3019 411 53 214 57 4322
6 6 5114 65 3019
7
8
9 9 245 9shy0 365
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1 which will automatically keep track and say stop are
2 they all enough Are some of them enough Whats the
3 rule
4 And you realize I couldnt figure out much
5 in Prometheus to go beyond what I thought was an obvious
6 case leaving it up to you and your colleagues to figure
7 out how to go further Am I making enough shyshy making
8 clear enough whats bothering me And Id really like
9 to get your answer to this
10 MR PHILLIPS And shyshy and look theres
11 no shyshy Ill be the first one to shyshy to confess that trying
12 to use language to describe these things is not all that
13 easy But the way I think you can meaningfully look at
14 this is to say that this is not simply something that
15 was a fundamental truth this is not something that
16 simply says use a computer Its not simply something
17 that says maintain solvency It shyshy it operates in a
18 much more specific and concrete environment where youre
19 dealing with a problem thats been in existence since
20 the 1970s a solution in the 1990s that CLS itself
21 acknowledges needed a solution and came forward with
22 their own solution that looks a lot like ours
23 JUSTICE KENNEDY But my shyshy my initial
24 question and I think I can work this into King Tut
25 is shyshy
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1 (Laughter)
2 JUSTICE KENNEDY shyshy is shyshy is whether or not
3 you could have patented that system idea process
4 method without attaching a computer program
5 MR PHILLIPS You cannot absolutely cannot
6 do that with this system because it is so complex and
7 so many interrelated parts
8 JUSTICE KENNEDY Suppose I thought shyshy and
9 again its just a thought because I dont have the
10 expertise shyshy that any computer group of people sitting
11 around a coffee shop in Silicon Valley could do this
12 over a weekend Suppose I thought that
13 MR PHILLIPS You mean wrote the code
14 JUSTICE KENNEDY Yes right
15 MR PHILLIPS Well thats absolutely shyshy
16 Im certain thats true
17 JUSTICE KENNEDY Well then shyshy then shyshy
18 MR PHILLIPS But thats true of almost all
19 software
20 JUSTICE KENNEDY Then why is the computer
21 program necessary to make the patent valid
22 MR PHILLIPS Well its shyshy its necessary
23 to make the invention effective As the Solicitor
24 General said the computer is essential to the efficacy
25 of this invention because of the complicated financial
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1 arrangements that exist and that can only be resolved on
2 a shyshy on a realtime basis Your abacus is great if you
3 happen to be waiting for the pyramids to be finished or
4 waiting for the gold to move in and out but it doesnt
5 help with you an abacus if youre dealing with literally
6 thousands of transactions simultaneously going on in
7 different countries at different points in time
8 JUSTICE KENNEDY But thats just an idea
9 hey lets use a computer
10 MR PHILLIPS But its not just shyshy I mean
11 obviously part of it is use the computer Justice
12 Kennedy But more fundamentally it goes beyond that
13 See I shyshy
14 JUSTICE SOTOMAYOR Is your software
15 copyrighted
16 MR PHILLIPS No I dont believe so
17 JUSTICE GINSBURG There is no special
18 software that comes with this shyshy thats part of this
19 patent is it shyshy is there
20 MR PHILLIPS No Justice Ginsburg what
21 we did here is what the Patent and Trademark Office
22 encourages us to do and encourages all software patent
23 writers to do which is to identify the functions that
24 you want to be provided for with the software and leave
25 it then to the software writers who I gather are you
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1 know quite capable of converting these functions into
2 very specific code
3 JUSTICE KAGAN Mr Phillips could you shyshy
4 could you disaggregate your argument for me Because
5 you just said look this Court has said its not
6 sufficient if you have an idea and then you say use a
7 computer to implement it right So are you saying that
8 your shyshy that shyshy are you saying that youre doing more
9 than saying use a computer to implement it or are you
10 saying that its shyshy that the idea itself is more than an
11 idea
12 MR PHILLIPS Yes Im saying shyshy
13 JUSTICE KAGAN Which part of what shyshy
14 MR PHILLIPS Im saying both actually I
15 mean Im making both of those arguments I shyshy I
16 believe that if you analyze the claims and you dont
17 caricature them and you dont strip them out of the
18 limitations that are embedded in there this is not some
19 kind of an abstract concept This is not some kind shyshy
20 its not an abstract idea Its a vary shyshy
21 JUSTICE KAGAN So putting the computer
22 stuff aside completely shyshy
23 MR PHILLIPS Right
24 JUSTICE KAGAN shyshy youre saying that youve
25 invented something or you shyshy
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1 MR PHILIPS Yes
2 JUSTICE KAGAN There is something that
3 youve patented that has shyshy that is not just simple use
4 a third party to do a settlement
5 MR PHILLIPS Right
6 JUSTICE KAGAN And what is that putting
7 the computer aside
8 MR PHILLIPS It is shyshy well shyshy and again
9 its difficult to do that because you absolutely need
10 the computer in order to implement this But the key to
11 the invention is the notion of being able
12 simultaneously dealing with it on a chronological basis
13 to stop transactions that will otherwise interfere with
14 the ability to settle on time and under the appropriate
15 circumstances And the only way you can do that in a
16 realtime basis when youre dealing with a global economy
17 is to use a computer It is necessary to the efficacy
18 of this
19 So in that sense I cant shyshy I cant
20 disaggregate it the way in some sense youre suggesting
21 It seems to me its bound up with in shyshy its bounds up
22 with the whole notion of is this an abstract concept
23 JUSTICE BREYER Can you in fact shyshy now
24 this is shyshy look there are 42 briefs in this case I
25 actually read them and I found them very very helpful
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1 up to the point where I have to make a decision because
2 theyre serious I mean you know shyshy now the problem
3 that I came away with is the one that youre beginning
4 to discuss that if you simply say take an idea thats
5 abstract and implement it on a computer there are shyshy
6 youre going to get it much faster youre going to be
7 able to do many many things and if thats good enough
8 there is a risk that you will take business in the
9 United States or large segments and instead of having
10 competition on price service and better production
11 methods well have competition on who has the best
12 patent lawyer You see where Im going on that one
13 MR PHILLIPS Yeah of course
14 JUSTICE BREYER And if you go the other way
15 and say never then what you do is you rule out real
16 inventions with computers
17 MR PHILLIPS Right
18 JUSTICE BREYER And so in those 42 briefs
19 there are a number of suggestions as to how to go
20 between Scylla and Charybdis Now I would like to
21 know shyshy I dont know if you can step back from your
22 representational model Thats a problem Youre all
23 we have now And shyshy and from my point of view I need
24 to know what in your opinion is the best way of sailing
25 between these two serious arms
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1 MR PHILLIPS Well Justice Breyer I guess
2 I would suggest to you that you might want to deal with
3 the problem you know as opposed to the problems you
4 dont know at this stage I mean we have had business
5 method patents and software patents in existence for
6 well over a decade and theyre obviously quite
7 significant in number And shyshy and we know what the
8 system is we have And Congress looked at that system
9 right and didnt say no to business methods patents
10 didnt say no to software patents instead said the
11 solution to this problem is to get it out of the
12 judicial process and create an administrative process
13 but leave the substantive standards intact
14 So my suggestion to you would be follow that
15 same advice a liberal interpretation of 101 and not a
16 caricature of the claims analyze the claims as written
17 and therefore say that the solution is 102 and 103 and
18 use the administrative process If you shyshy
19 JUSTICE GINSBURG Mr Phillips let me just
20 stop you there because four Justices of this Court did
21 not read that legislative history the way you do And
22 it was shyshy was in Bilski
23 MR PHILLIPS But this is postshyBilski
24 JUSTICE GINSBURG Justice Stevens went
25 carefully through that and he said Congress was
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1 reacting to a decision It had shyshy it was not addressing
2 101 So there are at least four Justices who say shyshy who
3 didnt buy that argument
4 MR PHILLIPS Well I mean it still seems
5 to me that the shyshy the natural inference is Congress did
6 not change 101 Congress created an entire
7 administrative system to deal with 101 102 and 103
8 And shyshy and I would hope shyshy
9 JUSTICE SCALIA And four is not five
10 anyway right
11 MR PHILLIPS Thats true
12 JUSTICE SCALIA Four is not five
13 MR PHILLIPS And youve exhausted my math
14 skills Your Honor
15 JUSTICE SCALIA By the way we shyshy we have
16 said that you cant take an abstract idea and then say
17 use a computer to implement it But we havent said
18 that you cant take an abstract idea and then say here
19 is how you use a computer to implement it shyshy
20 MR PHILLIPS Exactly
21 JUSTICE SCALIA shyshy which is basically what
22 youre doing
23 MR PHILLIPS And thats the argument were
24 doing and shyshy
25 JUSTICE SCALIA And thats a little
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1 different
2 MR PHILLIPS shyshy thats the line were
3 asking the Court to draw here
4 JUSTICE KAGAN Well how are you saying the
5 how Because I thought that your computers shyshy that your
6 patents really did just say do this on a computer as
7 opposed to saying anything substantive about how to do
8 it on a computer
9 MR PHILLIPS I would urge the Court to
10 look at Joint Appendix 159 285shy286 where it goes
11 through the flow charts This is shyshy and this is just a
12 specific example of the method by which you stop a
13 transaction and it goes through a varied series of
14 detailed steps and what the computer has to do in order
15 to do that It doesnt actually obviously put in the
16 code but thats what the PTO says dont do Dont put
17 in the code because nobody understands code so shyshy but
18 put in the functions and we know shyshy and we know that
19 someone skilled in the art will be able to put in the
20 code And if they arent if they cant do that then
21 its not enabled and thats a 112 problem
22 To go back Justice Breyer to your
23 question So on the one hand youve got a problem that
24 it seems to me Congress to some extent has said is okay
25 and weve got a solution and that solutions playing
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1 through On the other hand if this Court were to say
2 much more categorically either that theres no such
3 thing as business method patents or adopt the Solicitor
4 Generals interpretation which is to say that there
5 cannot be software unless the software somehow actually
6 improves the computer as opposed to software improving
7 every other device or any other mechanism that might be
8 out there
9 What we know is that this would inherently
10 declare and in one fell swoop hundreds of thousands of
11 patents invalid and the consequences of that it seems
12 to me are utterly unknowable And before the Court goes
13 down that path I would think it would think long and
14 hard about whether isnt that a judgment that Congress
15 ought to make And It seems to me in that sense youre
16 essentially where the Court was in Chakrabarty where
17 everybody was saying youve got to act in one way or the
18 other or the world comes to an end and the courts have
19 said well apply 101 directly
20 JUSTICE KENNEDY If we say that theres no
21 software patentability and agree with the Attorney
22 General do you lose in this case
23 MR PHILLIPS Well it would be very hard
24 for me to see how that shyshy how shyshy how I can get around
25 that particular problem because the computer is the
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1 essence of it so shyshy and a portion of it is clearly the
2 software So I think if you say there is no such thing
3 as software patentability I do lose in this case yes
4 Your Honor As do a whole lot of other people
5 JUSTICE KENNEDY Is there any common ground
6 between you and the government shyshy maybe a better
7 question to ask the government shyshy a common ground
8 between you and the government on something in the
9 software area thats patentable other than making the
10 computer itself work You understand the government to
11 say no software patents
12 MR PHILLIPS Thats the way I interpret
13 the governments shyshy the governments brief
14 JUSTICE BREYER It was like shyshy theres a
15 Bloomberg brief out here that was on this that said
16 no you can shyshy you can patent computer software when
17 its an improvement in the computer when its an
18 improvement in software when its an improvement in a
19 technology that is developed out of computers like
20 robotics when it is an improvement in a machine or
21 technology but you cannot improve it where it is simply
22 an improvement in an activity that is engaged in
23 primarily through mental processes But what they mean
24 by that is business finance and similar arts
25 Thats shyshy I mean thats shyshy it wasnt quite what shyshy I
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1 know Thats what I want to know what you dont agree
2 with about that because its a little more refined than
3 you suggested
4 MR PHILLIPS I read the Solicitor
5 Generals brief as broader than the Bloomberg brief
6 in shyshy in terms of the approach And IBMs argument is
7 if you knock out software patents you eliminate web
8 browsing word processing cellphones eshymail Those
9 are all activities that I dont think fall within the
10 meaning of the shyshy the meaning of the governments theory
11 of the case
12 JUSTICE BREYER But Im asking you shyshy Im
13 asking you what about this one that I just mentioned
14 You see I went through those five steps shyshy
15 MR PHILLIPS Right
16 JUSTICE BREYER shyshy and four of them you
17 could patent and the fifth one you cant
18 MR PHILLIPS Right But I shyshy and I guess
19 my answer to that is thats nowhere in the statute and
20 it doesnt seem to me to reflect an abstract idea Its
21 a shyshy its a line you draw that takes out business method
22 patents If the Court wants to eliminate business
23 method patents fine But you just said no to that in
24 Bilski two three terms ago
25 Now to be sure give the Solicitor General
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1 credit he comes here and says to you We didnt like
2 the result in Bilski we want you to say dont use
3 process in order to get there which is a statutory
4 interpretation come up with an extraordinarily
5 complicated way of looking at the exception and use that
6 to get to the exact same result
7 JUSTICE SOTOMAYOR Well youre doing a
8 very good job of proving shyshy
9 JUSTICE GINSBURG In Bilski Justice Breyer
10 did try to say that there wasnt that shyshy a whole lot of
11 distance between the four who thought business methods
12 were not patentable But he shyshy he also said something
13 else in shyshy in the other case Mayo Justice Scalia
14 asked you the question about doesnt that go to novelty
15 but didnt Justice Breyer say in Mayo that novelty can
16 be relevant to patent shyshy to patent eligibility He said
17 theres shyshy theres an overlap
18 MR PHILLIPS Well he said theres an
19 overlap Here in this context I think basically the
20 Respondents theory would mean that they are completely
21 coterminous And I dont think thats what the Court
22 meant And also we know from Diehr that theres got to
23 be at least some significant limitations on the extent
24 to which novelty has to be built into 101 That is the
25 province of 102 and 103 And as I said Congress
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1 modified the system of adjudication to create an
2 administrative mechanism that allows you to get to 102
3 and 103 And at least in context its important to
4 realize there have been 11 cases since that was created
5 9 of the 11 have been knocked down on 102 or 103 grounds
6 and not on 101 grounds And it seems to me thats the
7 answer to this problem is leave 101 as the coarse
8 filter If on its face it states these kinds of broad
9 abstract principles fundamental truths and even if it
10 says use a computer those should be struck down
11 JUSTICE SOTOMAYOR Which of the shyshy which of
12 the opinions below captures your position most
13 accurately
14 MR PHILLIPS I would guess it would be
15 Judge Moores opinion below that would capture ours most
16 correctly
17 JUSTICE SOTOMAYOR And if we were to think
18 your method claim is ineligible do you agree that your
19 systems and shyshy your medium and system claims fail as
20 well Do they rise and fall together
21 MR PHILLIPS No No I dont believe they
22 do rise and fall together I mean I think you could shyshy
23 if you wanted to interpret our medium claim shyshy I mean
24 our shyshy our method claims in a shyshy in particularly
25 abstract way I think you could still say that the
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1 system claims which clearly are shyshy are how to create a
2 computer system and how to implement it using that
3 method would be a much more concrete version of that in
4 a way that would take it out of 101 That said I
5 obviously believe that all of our claims satisfy 101
6 and should go on to the next stage
7 JUSTICE KAGAN Can I give you a
8 hypothetical Mr Phillips and you tell me how its
9 different or the same Lets say you know 30 years
10 somebody took a look around the world and said a lot of
11 people seem to order products by mail They get the
12 catalogues in the mail and then they send back their
13 return forms And lets say that one of the founders of
14 the Internet said wouldnt this be an amazing system
15 we could actually do this by computer and they had
16 patented that Is that the same
17 MR PHILLIPS I dont know if its the
18 same but I would shyshy I would argue that it could very
19 well be a patentable subject matter because shyshy but it
20 depends on how the claims play out
21 JUSTICE KAGAN No but exactly I mean
22 the claim would have said something along the lines of
23 you know theres this process by which people order
24 products and we want to do it over the Internet we want
25 to do it electronically and we will use a computer to
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1 do that to essentially take the process of mail order
2 catalogues and make it electronic
3 MR PHILLIPS I could certainly shyshy I think
4 I could write a claim shyshy a set of claims that I believe
5 would satisfy 101 And shyshy and to the extent that
6 youd shyshy that youd think those are no different than
7 the ones I have here then my argument is simply I think
8 I satisfy 101 with the claims we have before us Your
9 Honor
10 If there are no further questions then Id
11 like to reserve the rest of my time
12 CHIEF JUSTICE ROBERTS Thank you
13 Mr Phillips
14 Mr Perry
15 ORAL ARGUMENT OF MARK A PERRY
16 ON BEHALF OF THE RESPONDENTS
17 MR PERRY Mr Chief Justice and may it
18 please the Court
19 That path between Scylla and Charybdis was
20 charted in Bilski and Mayo Bilski holds that a
21 fundamental economic principle is an abstract idea and
22 Mayo holds that running such a principle on a computer
23 is quote not a patentable application of that
24 principle Those two propositions are sufficient to
25 dispose of this case
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1 If Bilski and Mayo stand Alices patents
2 fail Therefore Mr Phillips and his friends are
3 asking this Court to change the standard even though
4 this Court has had three unanimous decisions in the last
5 four terms establishing what the Court called a myriad
6 a wellshyestablished standard
7 On the abstract idea Justice Ginsburg you
8 asked Mr Phillips whats the difference between hedging
9 and this claim There is no difference This is
10 hedging It is hedging against credit default rather
11 than price fluctuation but it is simply hedging
12 And Mr Phillips stood up for 26 minutes and
13 never once referred to the patent Lets look at what
14 the inventor the soshycalled inventor said about this
15 invention This is at JA 293 to 94 in the
16 specification
17 This claim has simply two steps Its very
18 simple First debiting and crediting on a realtime
19 basis the relevant shadow records and second by
20 periodically affecting corresponding payment
21 instructions Those are direct quotes Debit credit
22 and pay Your Honor you cant get much more simple
23 than that
24 Mr Phillips suggests well we have
25 multilateral transactions global things chronological
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1 time zones and so forth None of those are claimed
2 Your Honor Those are all recited in specification
3 The claims read on a single transaction involving two
4 parties
5 JUSTICE BREYER Can I ask you at some
6 point not necessarily this second to say in my shyshy this
7 is just shyshy you know you have an opinion for a court
8 Different judges can have different interpretations
9 All youre getting is mine okay
10 But I think its pretty easy to say that
11 Archimedes cant just go to a boat builder and say
12 apply my idea All right Everybody agrees with that
13 But now we try to take that word apply and give
14 content to it
15 And what I suspect in my opinion Mayo did
16 and Bilski and the other cases is sketch an outer shell
17 of the content hoping that the experts you and the
18 other lawyers and the shyshy the circuit court could fill
19 in a little better than we had done the content of that
20 shell
21 So so far youre saying well this is
22 close enough to Archimedes saying apply it that we
23 neednt go further
24 Now will you at some point in the next few
25 minutes give me your impression of if it were necessary
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1 to go further what would the right words or example be
2 MR PERRY Your Honor as shyshy Justice
3 Breyer as to abstract ideas the PTO has filled in that
4 shell by listing economic concepts legal concepts
5 financial concepts teaching concepts dating and
6 interpersonal relationships and generally how business
7 should be conducted as examples of those things that are
8 likely abstract which of course all follow directly
9 from Bilski and the discussion this Court had in Bilski
10 And this patent shyshy these patents fall squarely within
11 that
12 Congress in the AIA confirmed that
13 reading Congress in the CBM method said business
14 methods that are subject to special scrutiny shyshy that is
15 dubious patents shyshy include methods and corresponding
16 apparatus which is what we have here that pertain to
17 data processing in the financial services industry and
18 do not offer a technological solution That describes
19 Alices patents to a letter Your Honor So that we
20 have shyshy
21 JUSTICE SOTOMAYOR What do you think is a
22 technological solution
23 MR PERRY Your Honor shyshy
24 JUSTICE SOTOMAYOR How could they if at
25 all written their patents to shyshy to make shyshy to make
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1 their software eligible What would shyshy what do they
2 need shyshy would have needed to have added
3 MR PERRY Justice Sotomayor they have no
4 software first Theyve never written software
5 Theyve never programmed a computer So thats a
6 nonexistent set
7 Second there are many technological
8 solutions to trading and settlement problems For
9 example data compression These shyshy these trading
10 platforms involve the movement of very large quantities
11 of data around the world The physical pipes that is
12 the fiber optic cables and data lines are limited
13 There are very sophisticated algorithms for both
14 security and speed to move data through the transmission
15 lines in novel and useful ways that could well be
16 patented
17 Nothing like that is claimed here To come
18 back to where I started if you look for example at
19 Claim 65 in the 510 patent as Mr Phillips reads it
20 it literally reads on a twoshyparty escrow to sell a
21 house so long as the escrow agent is typing this stuff
22 into the HUDshy1 using a computer That has nothing to do
23 with multilevel shyshy
24 CHIEF JUSTICE ROBERTS Well thats a
25 little more complicated He referred us to Joint
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1 Appendix Page 159 which is not a change in how
2 computers work But it is shyshy constitutes the
3 instructions about how to use the computer and where it
4 needs to be affected And just looking at it it looks
5 pretty complicated There are a lot of arrows and
6 they shyshy you know different things that go shyshy
7 (Laughter)
8 CHIEF JUSTICE ROBERTS Well but I mean
9 you know it shyshy in different directions And I
10 understand him to say that in each of those places
11 thats where the computer is needed
12 MR PERRY Mr Chief Justice Figure 16 has
13 nothing to do with the invention asserted against my
14 client in this case There are two inventions in this
15 patent One invention involving multilateral contract
16 formation is not asserted against my client And all of
17 these drawings pertain to that The only drawings that
18 pertain to the asserted claims are 25 and 33 to 37 And
19 that was established below and its established in this
20 Court And Mr Phillips has never disputed it
21 So the claim hes pointed the Court shyshy the
22 figure hes pointed the Court to has nothing to do with
23 the invention Its for a different invention that is
24 not at issue in this case
25 Remember there are hundreds and hundreds of
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1 pages of these patents They all pertain to the other
2 invention Thats why in the back of our red brief we
3 excerpted the very little bit that actually pertains to
4 this You sort of tack on patent shyshy the tack on claim
5 that Mr Phillips is asserting here Its 4 columns
6 Its less than five pages in the printed appendix that
7 actually pertains to this invention And it contains no
8 disclosure whatever
9 Justice Scalia to your question about how
10 the computer does it Of course a patent that
11 describes sufficiently how a computer does a new and
12 useful thing whether its data compression or any other
13 technological solution to a business problem a social
14 problem or a technological problem would be within the
15 realm of the shyshy of the patent laws That is what the
16 patent laws have always been for
17 This is not such a patent And the reason
18 for that is this is a preshyBilski set of patents These
19 were prosecuted under the old State Street test where
20 all the applicant had to claim was a result
21 JUSTICE KENNEDY Would you give me shyshy
22 again you already did it once shyshy an example of a
23 business process patent shyshy of a business process idea
24 and invention that is patentable
25 MR PERRY Your Honor there are many
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1 examples One would be a technological solution to a
2 business problem So that for example shyshy Ill give a
3 different example There are many applications today
4 The Court may be familiar with streaming video to watch
5 video on your computer
6 It is not possible to get enough data
7 through existing lines in its raw format The data has
8 to be manipulated in order to see live video So if you
9 want to watch TV on your phone for example
10 Those algorithms those inventions are
11 undoubtedly technological And if they are used in a
12 trading platform or a hedging system or something else
13 that wouldnt disable them And this is what the Diehr
14 case shyshy
15 JUSTICE KENNEDY Well I shyshy I shyshy in my
16 language Ive called that mechanical rather than
17 process Can you give me an example of process
18 MR PERRY Yes Your Honor The process in
19 that example would be a computer running the particular
20 data compression algorithm
21 JUSTICE KENNEDY But thats how to make
22 a shyshy thats how to make a machine work better
23 MR PERRY Yes Your Honor
24 JUSTICE KENNEDY Im asking you Is there
25 any business process any business activity that is
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1 susceptible to a patent a pure patent innovations that
2 deserve patents
3 MR PERRY Your Honor again a
4 technological solution to a business problem could well
5 be whether its a method or a process is equivalent
6 Again Congress said method in a corresponding shyshy
7 JUSTICE KENNEDY Can you give me an
8 example
9 MR PERRY I thought the data compression
10 example was a good one Ill try an encryption
11 technology Many of these trading platforms you know
12 dealing with securities and money would require some
13 sort of security devices You could have a process for
14 securely transmitting data would be another computer
15 implemented technological solution to a business
16 problem Again nothing like that claimed here
17 JUSTICE SOTOMAYOR How about eshymail and
18 just word processing programs
19 MR PERRY Your Honor a program shyshy let me
20 try it this way to both of your questions In our view
21 if what is claimed as the inventive contribution under
22 Mayo shyshy in other words if we have an abstract idea as
23 we do here and what is claimed is the inventive
24 contribution for Step 2 is the computer then the
25 computer must be essential to that operation and
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1 represent an advancement in computer science or other
2 technology And we know thats not met here Justice
3 Sotomayor because shyshy
4 JUSTICE SOTOMAYOR So youre saying no to
5 eshymail and word processing
6 MR PERRY Your Honor I think at a
7 point shyshy
8 JUSTICE SOTOMAYOR They certainly have
9 functionality and shyshy and improvement of functionality
10 for the user
11 MR PERRY At a point in time in the past
12 I think both of those would have been technological
13 advances that were patentable
14 JUSTICE SOTOMAYOR How
15 MR PERRY Today shyshy because they would have
16 provided a technological solution to a then unmet
17 problem Today reciting and do it on a word processor
18 is no different than and do it on a typewriter or shyshy and
19 do it on a calculator
20 The inventive contribution component which
21 uses specifically the language of conventional and
22 routine and well understood will evolve with
23 technology Thats why its different than the abstract
24 idea component
25 And here we know that these patents dont
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1 claim anything that was not conventional well
2 understood and routine We went through that in great
3 detail and Alice has never disputed a word of it They
4 just say youre not supposed to do that analysis even
5 though the Court 9shy0 in Mayo said we should
6 And in this case its very important to
7 look at what Alices own experts said on the subject
8 This is not our expert This is Alices expert And
9 this is at Page 1327shy28 of the Joint Appendix It is
10 possible to do the business methods of maintaining
11 accounts adjusting accounts and providing an
12 instruction without a computer or other hardware
13 And then Justice Breyer directly to your
14 abacus If someone had thought of this invention
15 soshycalled invention 100 years ago they might have
16 implemented it in a nonelectronic manner using various
17 precomputing tools such as an abacus or handwritten
18 ledgers
19 We know from Benson the Courts seminal
20 computer implementation case that if you can do it by
21 head and hand then the computer doesnt add anything
22 inventive within the meaning of the 101 exception That
23 is the holding of Benson And the Court reiterated that
24 in Mayo
25 Flook said exactly the same thing If you
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1 can do it with pencil and paper then the computer is
2 not offering anything that the patent laws are or should
3 be concerned with
4 It is only where the method will not work
5 without a computer which is not these claims and where
6 the computer itself is doing something that the patent
7 law is willing to protect
8 CHIEF JUSTICE ROBERTS What if shyshy what if
9 you can do it without a computer but its going to
10 take you know 20 people a hundred years In other
11 words theoretically you can replicate what the
12 computer does shyshy
13 MR PERRY Two answers
14 CHIEF JUSTICE ROBERTS shyshy but its
15 impractical without looking to do it on the computer
16 MR PERRY Mr Chief Justice first these
17 claims literally read as Alice reads them on a single
18 transaction between two parties so its not 20 people
19 for a hundred years Its one person sitting in a room
20 so thats not a problem
21 Second if what is being claimed is the
22 necessary speed or efficiency or data crunching
23 capabilities if you will of a computer then it would
24 have to be claimed and theres nothing claimed here
25 All that is claimed shyshy and my friend is going to stand
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1 up on rebuttal and tell you all that the expert said
2 well what is claimed is a computer but its just a
3 computer It just says a computer configured too It
4 doesnt say that the computer actually has to shyshy
5 JUSTICE BREYER Yeah but the trouble with
6 that particular test is as I think partly the Chief
7 Justice said how long et cetera and then add to that
8 though you could do it without a computer what happens
9 at the end of the line is the automobile engine goes off
10 or it begins to sputter or it turns left
11 You see its possible to take Archimedes shyshy
12 shyshy you know I use that example purposely to call
13 attention to the problem You can take those things
14 and youre not just saying apply it and youre not even
15 just saying shyshy you are saying use the computer but at
16 the end of the road something physical in the world
17 changes and everybody would say now thats shyshy that
18 will falls within I mean probably I mean my
19 hesitation shows Im looking for the right words
20 MR PERRY Justice Breyer your point is
21 the reason that it is equally fallacious to suggest on
22 the one hand as Alice and IBM does that simply
23 reciting a computer is a magic key that gets you through
24 101 and you never have to any other inquiry and what
25 some of folks the amici on the other side say which
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1 is that computers or software are never eligible Both
2 of those things have to be wrong because what the Court
3 said in Bilski was future innovation is too uncertain
4 We are not going to do that as a Court And the Court
5 laid out an approach using abstract ideas in Bilski and
6 inventive contribution in Mayo that is flexible enough
7 to take into account that innovation and to deal with
8 particular claims in context which is why at the end
9 of the day we have to come back to these patents and
10 decide which shyshy
11 JUSTICE KAGAN Mr Perry before we get
12 back to these matters you said to Justice Scalia if a
13 patent sufficiently describes how a computer will
14 implement an idea then its patentable So how
15 sufficiently does one have to describe it What do we
16 want a judge to do at this threshold level in terms of
17 trying to figure out whether the description is
18 sufficient to get you past it
19 MR PERRY If I can answer in two steps
20 Justice Kagan First in the negative What the
21 applicant or patentee must do shyshy must not do is simply
22 describe the desired result That would take us back to
23 State Street That would simply say I claim a magic
24 box that buys high and sells low or vice versa I
25 suppose I claim a magic box for investing Thats what
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1 these patents do
2 Then to put it in the affirmative and in the
3 language of Mayo the claim has to recite something
4 significantly more something significantly more than
5 the abstract idea itself That would be a contextual
6 analysis based on the claims and specifications and file
7 history and we know that some devices some methods
8 some programming will pass that
9 It is not going to be a brightshyline rule and
10 thats one of the tugshyofshywar issues that this Court and
11 the Federal Circuit have been having in these cases
12 The Federal Circuit wants brightshyline rules All
13 computers are in or all computers are out
14 This Court has been more contextual This
15 Court has been more nuanced This Court has looked at
16 things in a more robust way
17 JUSTICE KAGAN Youre not suggesting that
18 specific code is necessary
19 MR PERRY No Your Honor I think the shyshy
20 actual description of the programming is a 112 problem
21 I agree with that A 112 issue That is the realm of
22 the written description requirement What is a 101
23 problem is it is on the applicant to do more than simply
24 describe the results simply say A magic box that does
25 intermediate settlement And we can tie that back to
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1 this particular prosecution the 510 patent which is
2 the method patent
3 The examiner rejected it Under Section
4 101 the examiner said this is an abstract idea You
5 cant have this patent And the only change that this
6 applicant made was to add in the adjusting step
7 electronic adjustment It put in one word
8 electronic adjustment And under State Street which
9 is what this patent is prosecuted under that was
10 enough because the result of adjusting run through a
11 computer is enough
12 Under current law that cant be enough
13 That just cant get a patent over the line because this
14 Court said in Mayo and I got to quote this language
15 Simply implementing a fundamental principle on a
16 physical machine namely a computer is not a patentable
17 application of that principle Thats all that Alice
18 has done
19 These are preshyBilski patents They never
20 should have been issued General Verrilli will stand up
21 and address that point And certainly under current
22 law shyshy one point on the AIA Congress did not send all
23 this to the administrative process Congress created
24 two avenues the courts and the PTO to use the
25 standards Essentially it ratified Bilski and Mayo and
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1 said we agree with what you all are doing at the
2 Supreme Court and the existing standards are good enough
3 for us This is a judicial problem And that is a good
4 reason The abstract shyshy
5 JUSTICE GINSBURG The Federal Circuit in
6 this case split in many ways and it had our decisions
7 to deal with You said given Bilski and Mayo this is
8 an easy case What is the instruction that escaped a
9 good number of judges on the Federal Circuit How would
10 you state the rule
11 MR PERRY Your Honor I think theres a
12 significant element to the Federal Circuit that
13 disagrees with Mayo and has been resistant in applying
14 it Chief Judge shyshy former Chief Judge Michelle filed a
15 brief in this Court essentially saying Mayo is a
16 lifeshysciences case You should limit it to that because
17 if you apply it to everything else then these patents
18 are no good
19 Mayo we submit is a technologyshyneutral
20 industryshyneutral exceptionshyneutral framework that can
21 be used to answer all of these questions This is not
22 the death of software patents The software industry is
23 all before this Court saying this is fine with us
24 Every company in the United States practically except
25 for IBM is saying go ahead This will not affect
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1 software patents
2 Justice Ginsburg this Courts precedents
3 are clear They are unanimous They just need to be
4 applied To suggest that there is confusion that needs
5 to be addressed by retreating beating a retreat from
6 recent unanimous decisions would simply reward
7 intransigence difficulty refusal to adhere to what are
8 clear precedents because shyshy
9 JUSTICE KAGAN Should we be concerned
10 Mr Perry that there are old patents that in fact could
11 meet the test that you set forth but wont because they
12 were written in a different time and so used much more
13 general language
14 MR PERRY Your Honor the applicant or the
15 patent holder would have the opportunity to institute a
16 reexamination proceeding or some sort of administration
17 process to address that issue
18 And second it should be noted this is a
19 very small problem There are 2 million outstanding
20 patents in the United States In the last four fiscal
21 years there were 22000 infringement litigations
22 instituted but since Bilski there have only been 57
23 district court decisions on Section 101 issues There
24 have only been 12 Federal Circuit decisions total on
25 computer implementation
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1 We are talking about a group of patents
2 Justice Kagan thats way out at the tail end of
3 distribution Most patents never have a 101 challenge
4 This is not an issue with cotton gins and other things
5 This is a problem for the most marginal
6 most dubious most skeptical patents the ones that this
7 Court in Bilski shyshy and remember what Bilskis holding
8 is The majority said they are processes but it did
9 not say they are eligible
10 Thank you Mr Chief Justice
11 CHIEF JUSTICE ROBERTS Thank you counsel
12 General Verrilli
13 ORAL ARGUMENT OF DONALD B VERRILLI JR
14 ON BEHALF OF THE UNITED STATES AS AMICUS
15 CURIAE SUPPORTING RESPONDENTS
16 GENERAL VERRILLI Mr Chief Justice and
17 may it please the Court
18 An abstract idea does not become
19 patentshyeligible merely by tacking on an instruction to
20 use a computer to carry it out A computer makes a
21 difference under Section 101 when it imposes a
22 meaningful limit on the patent claim That occurs when
23 the claim is directed at improvement in computing
24 technology or an innovation that uses computing
25 technology to improve other technological functions
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1 Thats the test that we believe is most faithful to this
2 Courts precedents in Bilski and Mayo It keeps patents
3 within their traditional and appropriate domain and it
4 is capable of being administered consistently by Courts
5 and by PTO examiners
6 JUSTICE GINSBURG How do you answer the
7 argument that your view would extinguish businessshymethod
8 patents and make all software ineligible for patent
9 protection
10 GENERAL VERRILLI Yeah with shyshy let me
11 address software patents first because that I think is
12 obviously a significant question And its just not
13 correct to say that our approach would make software
14 patenting ineligible Any software patent that improves
15 the functioning of the computer technology is eligible
16 Any software patent that improves shyshy that is used to
17 improve another technology is eligible For example
18 the patent in the shyshy in the Diehr case is one in
19 which shyshy
20 JUSTICE SOTOMAYOR Why do we need to reach
21 this in that shyshy reach software patents at all in this
22 case
23 GENERAL VERRILLI Well shyshy
24 JUSTICE SOTOMAYOR Whats the necessity for
25 us to announce a general rule with respect to software
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1 There is no software being patented in this case
2 GENERAL VERRILLI Well I shyshy
3 JUSTICE SOTOMAYOR Theres a systems
4 GENERAL VERRILLI Well I shyshy I think shyshy
5 well they shyshy they shyshy theres a process being and shyshy and
6 one can think of software patents as process patents
7 And I think thats why my friends on the other side are
8 saying the sky is falling because they shyshy they are
9 interpreting what were saying about that when a
10 computer makes shyshy when a computers involvement makes
11 something eligible under 101 its calling those into
12 question and it doesnt
13 JUSTICE SOTOMAYOR Do you think we have to
14 reach the patentability of software to answer this case
15 GENERAL VERRILLI Well I think you can shyshy
16 I think the answer to that question is no not
17 necessarily You can decide it by saying that shyshy that
18 Bilski answers the question whether this is an abstract
19 idea because this form of hedging is really no
20 different than the form of hedging as a conceptual
21 matter at issue in Bilski And then Mayo answers the
22 question of whether the use of a computer in this case
23 adds enough to the abstract idea beyond conventional
24 steps because here all we have after all is just
25 conventional use of computing technology no computer
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1 innovation such that you dont qualify under 101 You
2 could take that approach
3 But it is important to the United States
4 that we shyshy and to our patent examiners that we get some
5 clarity if we can I think the clarity could come from
6 the text that I propose which I want to reiterate shyshy
7 JUSTICE SOTOMAYOR Well shyshy
8 JUSTICE BREYER Could shyshy could shyshy could you
9 go on with that because you were just getting to the
10 point where I think you say a computer improvement that
11 in fact leads to an improvement in harvesting cotton is
12 an improvement through a computer of technology so it
13 qualifies
14 But then I think you were going to say or I
15 got this also from the brief a computer improvement
16 that leads to an improvement in the methods of selling
17 bonds over the telephone is not an improvement in
18 technology reached by the computer Am I right about
19 the distinction youre making
20 GENERAL VERRILLI I dont think theres a
21 yes or no answer to that question
22 JUSTICE BREYER What is your view Yeah
23 what is shyshy how do we deal with just that problem
24 GENERAL VERRILLI If there is a genuine
25 innovation in the functioning of the computer shyshy
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1 JUSTICE BREYER Yes
2 GENERAL VERRILLI shyshy such that business
3 processes shyshy
4 JUSTICE BREYER Weve got that Yes yes
5 We got the computer But then it doesnt improve the
6 computer but rather it improves through the computer
7 the harvesting of cotton
8 Now youve got it in what you said was your
9 second category which is an improvement through the
10 computer of a technology And I thought in your brief
11 you were distinguishing an improvement through the
12 computer of a human activity that is not a technology
13 and in particular to pick an example of that
14 something in finance or something in business
15 Now am I right about the distinction youre
16 making
17 GENERAL VERRILLI Yeah that shyshy
18 JUSTICE BREYER If Im not right what is
19 the distinction
20 GENERAL VERRILLI That is generally the
21 line were drawing Frankly shyshy
22 JUSTICE BREYER And how is that justified
23 GENERAL VERRILLI I do want shyshy
24 JUSTICE BREYER That shyshy that is Judge Dyk
25 in shyshy in Bilski in the Federal circuit 4 people sort of
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1 picked it up maybe 5 didnt pick it up Would you say
2 a few words about it
3 GENERAL VERRILLI Sure About shyshy let me go
4 to Bilski there in that I do think while shyshy while
5 certainly the Court held that the term process got a
6 natural construction which could include business
7 methods it seems to me that thats not all the Court
8 said in Bilski The Court also said that it was
9 historically and traditionally quite rare that business
10 methods were patent eligible
11 It also said that shyshy that the shyshy that courts
12 and the PTO examiners should use the abstract ideas
13 exception to 101 to police the appropriate boundary
14 It also said that the
15 machineshyorshytransformation test that the United States
16 advocated remained a useful tool And of course that
17 directs to you seeing whether there is a technology
18 application
19 And of course the holding in Bilski was
20 that the shyshy the method for hedging risk was ineligible
21 because it was an abstract idea and I cant imagine
22 that if in Bilski the shyshy the claim had been exactly the
23 same but had added use a computer to carry out some of
24 these standard random analysis functions that are
25 claimed by the patent that you would have found it to
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1 be patent eligible
2 And I shyshy I would submit for the Court that
3 the key point here I think is that now given where
4 the Court shyshy what the Court has held in Bilski given
5 what its held in Mayo the abstract ideas exception is
6 really the only tool left to deal with what I shyshy what I
7 think I fairly read Bilski as saying is a significant
8 problem the proliferation of patents of business
9 methods
10 JUSTICE KENNEDY Is there an example that
11 you can give us of a shyshy what we can call a business
12 process that is patentable a process that doesnt
13 involve improving the workings of a computer
14 GENERAL VERRILLI I shyshy I think its going
15 to be difficult for me to do that I think for
16 example if you had a business method a process for
17 additional security pointshyofshysale credit card
18 transactions using particular encryption technology
19 that might well be patent eligible Its a technology
20 that it makes conduct of business more efficient or
21 effective
22 But there is a technological link here and
23 we do think thats critical to our shyshy to our point of
24 view with respect to the case And I shyshy and I do think
25 remember that when we say something is not patent
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1 eligible were not saying they cant do it Were
2 saying they cant monopolize it
3 And the concern in a situation like this one
4 is that if this is patent eligible its hard to see
5 why for example the first person who came up with a
6 frequent flier program wouldnt have been able to claim
7 a patent there because after all thats a business
8 method for improving customer loyalty implemented on a
9 computer
10 CHIEF JUSTICE ROBERTS General I shyshy you
11 mentioned a while ago the need for greater clarity and
12 certainty in this area And Im just wondering in your
13 brief youve got a nonshyexhaustive of factors to
14 consider and there are 6 different ones And Im just
15 doubtful that thats going to bring about greater
16 clarity and certainty
17 GENERAL VERRILLI I take shyshy I take the
18 point Mr Chief Justice but I think the key is that
19 they are all directed to answering the question of
20 whether the innovation that is claimed and is an
21 innovation in either A the improvement of a computers
22 functioning or B the use of computer technology to
23 improve the functioning of another technological
24 process and a case like Diehr would be in the latter
25 category
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1 And so I do think that thats the key
2 benchmark Thats the baseline Thats the test that
3 we do think can be applied clearly and consistently by
4 the courts or the PTO And it avoids the risk of things
5 like frequent flier programs or the Oakland As money
6 ball methods for evaluating the contributions in
7 individual baseball players make or any one of a host of
8 other things that our intuitions tell us just dont
9 belong in the patent system
10 Thats the shyshy drawing that line keeps them
11 out not drawing that line lets them in And with all
12 due respect I dont think that the novelty and
13 nonobviousness filters that 102 and 103 really deal with
14 that problem effectively because when you get to
15 nonobviousness in 103 for example youll be asking a
16 different question
17 If you take the frequent flier program you
18 would say well is this innovation in building consumer
19 loyalty something that would have been obvious to
20 somebody who runs an airline Its totally divorced
21 from the question of technology at that point and
22 therefore I dont think youre going to get the screen
23 that you need to get in order for the patent system to
24 be confined to its traditional and appropriate scope
25 If there are no further questions thank
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1 you
2 JUSTICE GINSBURG I have a question about
3 how do you identify an abstract concept The shyshy a
4 natural phenomenon a mathematical formula those are
5 easy to identify but there has been some confusion on
6 what qualifies as an abstract concept
7 GENERAL VERRILLI We would define
8 abstract shyshy an abstract concept as a claim that is not
9 directed to a concrete innovation in technology
10 science or the industrial arts So its the shyshy its
11 abstract in the sense that it is not a concrete
12 innovation in the traditional realm of patent law
13 Thank you
14 CHIEF JUSTICE ROBERTS Thank you General
15 Mr Phillips you have four minutes
16 remaining
17 REBUTTAL ARGUMENT OF CARTER G PHILLIPS
18 ON BEHALF OF THE PETITIONERS
19 MR PHILLIPS Thank you Mr Chief Justice
20 Id just like to make a few points
21 First of all with respect to the question
22 you asked which is looking at 159 et cetera all I can
23 tell you is that if you look at claim 33 it talks about
24 matched orders the matched orders that are described in
25 286 and 287 and then makes specific reference to 159
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1 and that flow chart thats there And its all designed
2 as a package Its only one element of the shyshy of the
3 invention but it is a central element and its an easy
4 one to understand And it goes well beyond simply the
5 notion of hedge shyshy hedge against settlement risk and do
6 it by a computer
7 JUSTICE SOTOMAYOR Your adversary says that
8 his shyshy the appendix to his brief are the only patents at
9 issue that the flow charts are not at issue in this
10 case
11 MR PHILLIPS Theres no basis for that
12 statement Your Honor There shyshy remember this went off
13 on a very truncated litigation process So theres shyshy
14 you know we shyshy we got cut off at the beginning of it
15 Theres been no construction of the shyshy of the claims
16 and shyshy and obviously these are specifications that go
17 to how you interpret the claim
18 JUSTICE SOTOMAYOR If we were to say that
19 there are no business patents shyshy
20 MR PHILLIPS Yes
21 JUSTICE SOTOMAYOR shyshy would your patent
22 survive at all
23 MR PHILLIPS No I dont shyshy I dont
24 believe so I think theres no question And you
25 know General Verrilli could not have been any plainer
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1 in his statement of how he wants to interpret the
2 abstract idea concept
3 JUSTICE SOTOMAYOR Yes he wants to say no
4 business patents
5 MR PHILLIPS No business shyshy just another
6 way of saying no business methods And you know the
7 Court rejected that And it seems to me extraordinary
8 to say Congress didnt reject no business methods in
9 101 but were going to do shyshy were going to manipulate
10 the judicial exception to accomplish precisely that same
11 thing It seems to me thats wholly inappropriate
12 Justice Ginsburg you asked my shyshy my friend
13 here you know whats his test He didnt answer that
14 question youll notice because he doesnt have an
15 answer His basic argument is whatever you do just
16 kill this patent
17 And if I were in his shoes I suppose Id
18 take that same position I think whats absolutely
19 clear is that the test ought to be one that is
20 structured as a very coarse filter not the kind of
21 filter that hes pushing for where it changes over time
22 I mean I thought his shyshy I thought his response to one
23 of the questions about eshymail and word processing that
24 Justice Sotomayor asked is over time it would change
25 Well thats exactly what 102 and 103 are for That is
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1 not the purpose of shyshy of Section 101
2 And then he uses the example of encryption
3 I guarantee you if we were arguing about encryption in
4 this case he would say to me that thats an abstract
5 principle because encryption is a concept thats been
6 around since time immemorial George Washington used
7 it Everybody has used encryption
8 And a question again thats not the
9 solution to these problems The question is how did we
10 go about doing it And we go beyond the basics of
11 simply saying use a computer and thats what we ask
12 this Court to focus on and to evaluate
13 As to the frequent flier program its
14 pretty clear to me that even though it was a novel idea
15 in some sense the concept itself would have been viewed
16 in shyshy in the KSR fashion as quite obvious as a means of
17 improving customer loyalty
18 There are solutions here Giving us 101
19 pass doesnt create a monopoly It just gets us to the
20 102 and 103 inquiries that are at the heart of what the
21 patent laws shyshy and 112 that are at the heart of what the
22 patent laws ought to be dealing with
23 If there are no further questions Your
24 Honor thank you
25 CHIEF JUSTICE ROBERTS Thank you counsel
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1 The case is submitted
2 (Whereupon at 1105 am the case in the
3 aboveshyentitled matter was submitted)
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
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58
A add 714 1023 algorithm 3320 41 automatically
As 525 3621 387 algorithms apply 72425 111
am 115 32 416 3013 3310 2019 281213 automobile 389
572 added 302 Alice 13 34 2822 3814 available 99
abacus 61213 4923 363 3717 4217 avenues 4124
710 1018 additional 5017 3822 4117 applying 4213 avoids 524
1325 3614 3617
address 4121 4317 4511
Alices 271 2919 3678
approach 226 395 4513 B
ability 1514 addressed 435 allow 94 472 B 121 29 4413
able 1511 167 addressing 181 allows 97 242 appropriate 5122
1919 516 adds 4623 amazing 2514 81516 1514 back 1621
aboveshyentitled adhere 437 amici 3825 453 4913 1922 2512
113 573 adjudication amicus 123 5224 3018 322
absolutely 125 241 210 4414 Archimedes 3991222
1215 159 adjusting 3611 analysis 424 281122 3811 4025
5518 41610 364 406 area 219 5112 ball 526
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414 65 1715 18267 2019 2324 2467 2545 2658 3622 3824 4022 414 4323 44321 4611 471 4913 559 56118
102 1717 187 2325 2425 5213 5525 5620
103 1717 187 2325 2435 521315 5525 5620
11 2445 1105 572 112 1921 4020
4021 5621 12 4324 13shy298 15 34
3 3 24 30 259 31 111 33 3118 5323 37 3118
4 4 325 4825 42 1524 1618 44 211
5 5 491 510 3019 411 53 214 57 4322
6 6 5114 65 3019
7
8
9 9 245 9shy0 365
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1 (Laughter)
2 JUSTICE KENNEDY shyshy is shyshy is whether or not
3 you could have patented that system idea process
4 method without attaching a computer program
5 MR PHILLIPS You cannot absolutely cannot
6 do that with this system because it is so complex and
7 so many interrelated parts
8 JUSTICE KENNEDY Suppose I thought shyshy and
9 again its just a thought because I dont have the
10 expertise shyshy that any computer group of people sitting
11 around a coffee shop in Silicon Valley could do this
12 over a weekend Suppose I thought that
13 MR PHILLIPS You mean wrote the code
14 JUSTICE KENNEDY Yes right
15 MR PHILLIPS Well thats absolutely shyshy
16 Im certain thats true
17 JUSTICE KENNEDY Well then shyshy then shyshy
18 MR PHILLIPS But thats true of almost all
19 software
20 JUSTICE KENNEDY Then why is the computer
21 program necessary to make the patent valid
22 MR PHILLIPS Well its shyshy its necessary
23 to make the invention effective As the Solicitor
24 General said the computer is essential to the efficacy
25 of this invention because of the complicated financial
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1 arrangements that exist and that can only be resolved on
2 a shyshy on a realtime basis Your abacus is great if you
3 happen to be waiting for the pyramids to be finished or
4 waiting for the gold to move in and out but it doesnt
5 help with you an abacus if youre dealing with literally
6 thousands of transactions simultaneously going on in
7 different countries at different points in time
8 JUSTICE KENNEDY But thats just an idea
9 hey lets use a computer
10 MR PHILLIPS But its not just shyshy I mean
11 obviously part of it is use the computer Justice
12 Kennedy But more fundamentally it goes beyond that
13 See I shyshy
14 JUSTICE SOTOMAYOR Is your software
15 copyrighted
16 MR PHILLIPS No I dont believe so
17 JUSTICE GINSBURG There is no special
18 software that comes with this shyshy thats part of this
19 patent is it shyshy is there
20 MR PHILLIPS No Justice Ginsburg what
21 we did here is what the Patent and Trademark Office
22 encourages us to do and encourages all software patent
23 writers to do which is to identify the functions that
24 you want to be provided for with the software and leave
25 it then to the software writers who I gather are you
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1 know quite capable of converting these functions into
2 very specific code
3 JUSTICE KAGAN Mr Phillips could you shyshy
4 could you disaggregate your argument for me Because
5 you just said look this Court has said its not
6 sufficient if you have an idea and then you say use a
7 computer to implement it right So are you saying that
8 your shyshy that shyshy are you saying that youre doing more
9 than saying use a computer to implement it or are you
10 saying that its shyshy that the idea itself is more than an
11 idea
12 MR PHILLIPS Yes Im saying shyshy
13 JUSTICE KAGAN Which part of what shyshy
14 MR PHILLIPS Im saying both actually I
15 mean Im making both of those arguments I shyshy I
16 believe that if you analyze the claims and you dont
17 caricature them and you dont strip them out of the
18 limitations that are embedded in there this is not some
19 kind of an abstract concept This is not some kind shyshy
20 its not an abstract idea Its a vary shyshy
21 JUSTICE KAGAN So putting the computer
22 stuff aside completely shyshy
23 MR PHILLIPS Right
24 JUSTICE KAGAN shyshy youre saying that youve
25 invented something or you shyshy
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1 MR PHILIPS Yes
2 JUSTICE KAGAN There is something that
3 youve patented that has shyshy that is not just simple use
4 a third party to do a settlement
5 MR PHILLIPS Right
6 JUSTICE KAGAN And what is that putting
7 the computer aside
8 MR PHILLIPS It is shyshy well shyshy and again
9 its difficult to do that because you absolutely need
10 the computer in order to implement this But the key to
11 the invention is the notion of being able
12 simultaneously dealing with it on a chronological basis
13 to stop transactions that will otherwise interfere with
14 the ability to settle on time and under the appropriate
15 circumstances And the only way you can do that in a
16 realtime basis when youre dealing with a global economy
17 is to use a computer It is necessary to the efficacy
18 of this
19 So in that sense I cant shyshy I cant
20 disaggregate it the way in some sense youre suggesting
21 It seems to me its bound up with in shyshy its bounds up
22 with the whole notion of is this an abstract concept
23 JUSTICE BREYER Can you in fact shyshy now
24 this is shyshy look there are 42 briefs in this case I
25 actually read them and I found them very very helpful
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1 up to the point where I have to make a decision because
2 theyre serious I mean you know shyshy now the problem
3 that I came away with is the one that youre beginning
4 to discuss that if you simply say take an idea thats
5 abstract and implement it on a computer there are shyshy
6 youre going to get it much faster youre going to be
7 able to do many many things and if thats good enough
8 there is a risk that you will take business in the
9 United States or large segments and instead of having
10 competition on price service and better production
11 methods well have competition on who has the best
12 patent lawyer You see where Im going on that one
13 MR PHILLIPS Yeah of course
14 JUSTICE BREYER And if you go the other way
15 and say never then what you do is you rule out real
16 inventions with computers
17 MR PHILLIPS Right
18 JUSTICE BREYER And so in those 42 briefs
19 there are a number of suggestions as to how to go
20 between Scylla and Charybdis Now I would like to
21 know shyshy I dont know if you can step back from your
22 representational model Thats a problem Youre all
23 we have now And shyshy and from my point of view I need
24 to know what in your opinion is the best way of sailing
25 between these two serious arms
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1 MR PHILLIPS Well Justice Breyer I guess
2 I would suggest to you that you might want to deal with
3 the problem you know as opposed to the problems you
4 dont know at this stage I mean we have had business
5 method patents and software patents in existence for
6 well over a decade and theyre obviously quite
7 significant in number And shyshy and we know what the
8 system is we have And Congress looked at that system
9 right and didnt say no to business methods patents
10 didnt say no to software patents instead said the
11 solution to this problem is to get it out of the
12 judicial process and create an administrative process
13 but leave the substantive standards intact
14 So my suggestion to you would be follow that
15 same advice a liberal interpretation of 101 and not a
16 caricature of the claims analyze the claims as written
17 and therefore say that the solution is 102 and 103 and
18 use the administrative process If you shyshy
19 JUSTICE GINSBURG Mr Phillips let me just
20 stop you there because four Justices of this Court did
21 not read that legislative history the way you do And
22 it was shyshy was in Bilski
23 MR PHILLIPS But this is postshyBilski
24 JUSTICE GINSBURG Justice Stevens went
25 carefully through that and he said Congress was
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1 reacting to a decision It had shyshy it was not addressing
2 101 So there are at least four Justices who say shyshy who
3 didnt buy that argument
4 MR PHILLIPS Well I mean it still seems
5 to me that the shyshy the natural inference is Congress did
6 not change 101 Congress created an entire
7 administrative system to deal with 101 102 and 103
8 And shyshy and I would hope shyshy
9 JUSTICE SCALIA And four is not five
10 anyway right
11 MR PHILLIPS Thats true
12 JUSTICE SCALIA Four is not five
13 MR PHILLIPS And youve exhausted my math
14 skills Your Honor
15 JUSTICE SCALIA By the way we shyshy we have
16 said that you cant take an abstract idea and then say
17 use a computer to implement it But we havent said
18 that you cant take an abstract idea and then say here
19 is how you use a computer to implement it shyshy
20 MR PHILLIPS Exactly
21 JUSTICE SCALIA shyshy which is basically what
22 youre doing
23 MR PHILLIPS And thats the argument were
24 doing and shyshy
25 JUSTICE SCALIA And thats a little
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1 different
2 MR PHILLIPS shyshy thats the line were
3 asking the Court to draw here
4 JUSTICE KAGAN Well how are you saying the
5 how Because I thought that your computers shyshy that your
6 patents really did just say do this on a computer as
7 opposed to saying anything substantive about how to do
8 it on a computer
9 MR PHILLIPS I would urge the Court to
10 look at Joint Appendix 159 285shy286 where it goes
11 through the flow charts This is shyshy and this is just a
12 specific example of the method by which you stop a
13 transaction and it goes through a varied series of
14 detailed steps and what the computer has to do in order
15 to do that It doesnt actually obviously put in the
16 code but thats what the PTO says dont do Dont put
17 in the code because nobody understands code so shyshy but
18 put in the functions and we know shyshy and we know that
19 someone skilled in the art will be able to put in the
20 code And if they arent if they cant do that then
21 its not enabled and thats a 112 problem
22 To go back Justice Breyer to your
23 question So on the one hand youve got a problem that
24 it seems to me Congress to some extent has said is okay
25 and weve got a solution and that solutions playing
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1 through On the other hand if this Court were to say
2 much more categorically either that theres no such
3 thing as business method patents or adopt the Solicitor
4 Generals interpretation which is to say that there
5 cannot be software unless the software somehow actually
6 improves the computer as opposed to software improving
7 every other device or any other mechanism that might be
8 out there
9 What we know is that this would inherently
10 declare and in one fell swoop hundreds of thousands of
11 patents invalid and the consequences of that it seems
12 to me are utterly unknowable And before the Court goes
13 down that path I would think it would think long and
14 hard about whether isnt that a judgment that Congress
15 ought to make And It seems to me in that sense youre
16 essentially where the Court was in Chakrabarty where
17 everybody was saying youve got to act in one way or the
18 other or the world comes to an end and the courts have
19 said well apply 101 directly
20 JUSTICE KENNEDY If we say that theres no
21 software patentability and agree with the Attorney
22 General do you lose in this case
23 MR PHILLIPS Well it would be very hard
24 for me to see how that shyshy how shyshy how I can get around
25 that particular problem because the computer is the
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1 essence of it so shyshy and a portion of it is clearly the
2 software So I think if you say there is no such thing
3 as software patentability I do lose in this case yes
4 Your Honor As do a whole lot of other people
5 JUSTICE KENNEDY Is there any common ground
6 between you and the government shyshy maybe a better
7 question to ask the government shyshy a common ground
8 between you and the government on something in the
9 software area thats patentable other than making the
10 computer itself work You understand the government to
11 say no software patents
12 MR PHILLIPS Thats the way I interpret
13 the governments shyshy the governments brief
14 JUSTICE BREYER It was like shyshy theres a
15 Bloomberg brief out here that was on this that said
16 no you can shyshy you can patent computer software when
17 its an improvement in the computer when its an
18 improvement in software when its an improvement in a
19 technology that is developed out of computers like
20 robotics when it is an improvement in a machine or
21 technology but you cannot improve it where it is simply
22 an improvement in an activity that is engaged in
23 primarily through mental processes But what they mean
24 by that is business finance and similar arts
25 Thats shyshy I mean thats shyshy it wasnt quite what shyshy I
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1 know Thats what I want to know what you dont agree
2 with about that because its a little more refined than
3 you suggested
4 MR PHILLIPS I read the Solicitor
5 Generals brief as broader than the Bloomberg brief
6 in shyshy in terms of the approach And IBMs argument is
7 if you knock out software patents you eliminate web
8 browsing word processing cellphones eshymail Those
9 are all activities that I dont think fall within the
10 meaning of the shyshy the meaning of the governments theory
11 of the case
12 JUSTICE BREYER But Im asking you shyshy Im
13 asking you what about this one that I just mentioned
14 You see I went through those five steps shyshy
15 MR PHILLIPS Right
16 JUSTICE BREYER shyshy and four of them you
17 could patent and the fifth one you cant
18 MR PHILLIPS Right But I shyshy and I guess
19 my answer to that is thats nowhere in the statute and
20 it doesnt seem to me to reflect an abstract idea Its
21 a shyshy its a line you draw that takes out business method
22 patents If the Court wants to eliminate business
23 method patents fine But you just said no to that in
24 Bilski two three terms ago
25 Now to be sure give the Solicitor General
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1 credit he comes here and says to you We didnt like
2 the result in Bilski we want you to say dont use
3 process in order to get there which is a statutory
4 interpretation come up with an extraordinarily
5 complicated way of looking at the exception and use that
6 to get to the exact same result
7 JUSTICE SOTOMAYOR Well youre doing a
8 very good job of proving shyshy
9 JUSTICE GINSBURG In Bilski Justice Breyer
10 did try to say that there wasnt that shyshy a whole lot of
11 distance between the four who thought business methods
12 were not patentable But he shyshy he also said something
13 else in shyshy in the other case Mayo Justice Scalia
14 asked you the question about doesnt that go to novelty
15 but didnt Justice Breyer say in Mayo that novelty can
16 be relevant to patent shyshy to patent eligibility He said
17 theres shyshy theres an overlap
18 MR PHILLIPS Well he said theres an
19 overlap Here in this context I think basically the
20 Respondents theory would mean that they are completely
21 coterminous And I dont think thats what the Court
22 meant And also we know from Diehr that theres got to
23 be at least some significant limitations on the extent
24 to which novelty has to be built into 101 That is the
25 province of 102 and 103 And as I said Congress
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1 modified the system of adjudication to create an
2 administrative mechanism that allows you to get to 102
3 and 103 And at least in context its important to
4 realize there have been 11 cases since that was created
5 9 of the 11 have been knocked down on 102 or 103 grounds
6 and not on 101 grounds And it seems to me thats the
7 answer to this problem is leave 101 as the coarse
8 filter If on its face it states these kinds of broad
9 abstract principles fundamental truths and even if it
10 says use a computer those should be struck down
11 JUSTICE SOTOMAYOR Which of the shyshy which of
12 the opinions below captures your position most
13 accurately
14 MR PHILLIPS I would guess it would be
15 Judge Moores opinion below that would capture ours most
16 correctly
17 JUSTICE SOTOMAYOR And if we were to think
18 your method claim is ineligible do you agree that your
19 systems and shyshy your medium and system claims fail as
20 well Do they rise and fall together
21 MR PHILLIPS No No I dont believe they
22 do rise and fall together I mean I think you could shyshy
23 if you wanted to interpret our medium claim shyshy I mean
24 our shyshy our method claims in a shyshy in particularly
25 abstract way I think you could still say that the
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1 system claims which clearly are shyshy are how to create a
2 computer system and how to implement it using that
3 method would be a much more concrete version of that in
4 a way that would take it out of 101 That said I
5 obviously believe that all of our claims satisfy 101
6 and should go on to the next stage
7 JUSTICE KAGAN Can I give you a
8 hypothetical Mr Phillips and you tell me how its
9 different or the same Lets say you know 30 years
10 somebody took a look around the world and said a lot of
11 people seem to order products by mail They get the
12 catalogues in the mail and then they send back their
13 return forms And lets say that one of the founders of
14 the Internet said wouldnt this be an amazing system
15 we could actually do this by computer and they had
16 patented that Is that the same
17 MR PHILLIPS I dont know if its the
18 same but I would shyshy I would argue that it could very
19 well be a patentable subject matter because shyshy but it
20 depends on how the claims play out
21 JUSTICE KAGAN No but exactly I mean
22 the claim would have said something along the lines of
23 you know theres this process by which people order
24 products and we want to do it over the Internet we want
25 to do it electronically and we will use a computer to
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1 do that to essentially take the process of mail order
2 catalogues and make it electronic
3 MR PHILLIPS I could certainly shyshy I think
4 I could write a claim shyshy a set of claims that I believe
5 would satisfy 101 And shyshy and to the extent that
6 youd shyshy that youd think those are no different than
7 the ones I have here then my argument is simply I think
8 I satisfy 101 with the claims we have before us Your
9 Honor
10 If there are no further questions then Id
11 like to reserve the rest of my time
12 CHIEF JUSTICE ROBERTS Thank you
13 Mr Phillips
14 Mr Perry
15 ORAL ARGUMENT OF MARK A PERRY
16 ON BEHALF OF THE RESPONDENTS
17 MR PERRY Mr Chief Justice and may it
18 please the Court
19 That path between Scylla and Charybdis was
20 charted in Bilski and Mayo Bilski holds that a
21 fundamental economic principle is an abstract idea and
22 Mayo holds that running such a principle on a computer
23 is quote not a patentable application of that
24 principle Those two propositions are sufficient to
25 dispose of this case
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1 If Bilski and Mayo stand Alices patents
2 fail Therefore Mr Phillips and his friends are
3 asking this Court to change the standard even though
4 this Court has had three unanimous decisions in the last
5 four terms establishing what the Court called a myriad
6 a wellshyestablished standard
7 On the abstract idea Justice Ginsburg you
8 asked Mr Phillips whats the difference between hedging
9 and this claim There is no difference This is
10 hedging It is hedging against credit default rather
11 than price fluctuation but it is simply hedging
12 And Mr Phillips stood up for 26 minutes and
13 never once referred to the patent Lets look at what
14 the inventor the soshycalled inventor said about this
15 invention This is at JA 293 to 94 in the
16 specification
17 This claim has simply two steps Its very
18 simple First debiting and crediting on a realtime
19 basis the relevant shadow records and second by
20 periodically affecting corresponding payment
21 instructions Those are direct quotes Debit credit
22 and pay Your Honor you cant get much more simple
23 than that
24 Mr Phillips suggests well we have
25 multilateral transactions global things chronological
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1 time zones and so forth None of those are claimed
2 Your Honor Those are all recited in specification
3 The claims read on a single transaction involving two
4 parties
5 JUSTICE BREYER Can I ask you at some
6 point not necessarily this second to say in my shyshy this
7 is just shyshy you know you have an opinion for a court
8 Different judges can have different interpretations
9 All youre getting is mine okay
10 But I think its pretty easy to say that
11 Archimedes cant just go to a boat builder and say
12 apply my idea All right Everybody agrees with that
13 But now we try to take that word apply and give
14 content to it
15 And what I suspect in my opinion Mayo did
16 and Bilski and the other cases is sketch an outer shell
17 of the content hoping that the experts you and the
18 other lawyers and the shyshy the circuit court could fill
19 in a little better than we had done the content of that
20 shell
21 So so far youre saying well this is
22 close enough to Archimedes saying apply it that we
23 neednt go further
24 Now will you at some point in the next few
25 minutes give me your impression of if it were necessary
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1 to go further what would the right words or example be
2 MR PERRY Your Honor as shyshy Justice
3 Breyer as to abstract ideas the PTO has filled in that
4 shell by listing economic concepts legal concepts
5 financial concepts teaching concepts dating and
6 interpersonal relationships and generally how business
7 should be conducted as examples of those things that are
8 likely abstract which of course all follow directly
9 from Bilski and the discussion this Court had in Bilski
10 And this patent shyshy these patents fall squarely within
11 that
12 Congress in the AIA confirmed that
13 reading Congress in the CBM method said business
14 methods that are subject to special scrutiny shyshy that is
15 dubious patents shyshy include methods and corresponding
16 apparatus which is what we have here that pertain to
17 data processing in the financial services industry and
18 do not offer a technological solution That describes
19 Alices patents to a letter Your Honor So that we
20 have shyshy
21 JUSTICE SOTOMAYOR What do you think is a
22 technological solution
23 MR PERRY Your Honor shyshy
24 JUSTICE SOTOMAYOR How could they if at
25 all written their patents to shyshy to make shyshy to make
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1 their software eligible What would shyshy what do they
2 need shyshy would have needed to have added
3 MR PERRY Justice Sotomayor they have no
4 software first Theyve never written software
5 Theyve never programmed a computer So thats a
6 nonexistent set
7 Second there are many technological
8 solutions to trading and settlement problems For
9 example data compression These shyshy these trading
10 platforms involve the movement of very large quantities
11 of data around the world The physical pipes that is
12 the fiber optic cables and data lines are limited
13 There are very sophisticated algorithms for both
14 security and speed to move data through the transmission
15 lines in novel and useful ways that could well be
16 patented
17 Nothing like that is claimed here To come
18 back to where I started if you look for example at
19 Claim 65 in the 510 patent as Mr Phillips reads it
20 it literally reads on a twoshyparty escrow to sell a
21 house so long as the escrow agent is typing this stuff
22 into the HUDshy1 using a computer That has nothing to do
23 with multilevel shyshy
24 CHIEF JUSTICE ROBERTS Well thats a
25 little more complicated He referred us to Joint
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1 Appendix Page 159 which is not a change in how
2 computers work But it is shyshy constitutes the
3 instructions about how to use the computer and where it
4 needs to be affected And just looking at it it looks
5 pretty complicated There are a lot of arrows and
6 they shyshy you know different things that go shyshy
7 (Laughter)
8 CHIEF JUSTICE ROBERTS Well but I mean
9 you know it shyshy in different directions And I
10 understand him to say that in each of those places
11 thats where the computer is needed
12 MR PERRY Mr Chief Justice Figure 16 has
13 nothing to do with the invention asserted against my
14 client in this case There are two inventions in this
15 patent One invention involving multilateral contract
16 formation is not asserted against my client And all of
17 these drawings pertain to that The only drawings that
18 pertain to the asserted claims are 25 and 33 to 37 And
19 that was established below and its established in this
20 Court And Mr Phillips has never disputed it
21 So the claim hes pointed the Court shyshy the
22 figure hes pointed the Court to has nothing to do with
23 the invention Its for a different invention that is
24 not at issue in this case
25 Remember there are hundreds and hundreds of
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1 pages of these patents They all pertain to the other
2 invention Thats why in the back of our red brief we
3 excerpted the very little bit that actually pertains to
4 this You sort of tack on patent shyshy the tack on claim
5 that Mr Phillips is asserting here Its 4 columns
6 Its less than five pages in the printed appendix that
7 actually pertains to this invention And it contains no
8 disclosure whatever
9 Justice Scalia to your question about how
10 the computer does it Of course a patent that
11 describes sufficiently how a computer does a new and
12 useful thing whether its data compression or any other
13 technological solution to a business problem a social
14 problem or a technological problem would be within the
15 realm of the shyshy of the patent laws That is what the
16 patent laws have always been for
17 This is not such a patent And the reason
18 for that is this is a preshyBilski set of patents These
19 were prosecuted under the old State Street test where
20 all the applicant had to claim was a result
21 JUSTICE KENNEDY Would you give me shyshy
22 again you already did it once shyshy an example of a
23 business process patent shyshy of a business process idea
24 and invention that is patentable
25 MR PERRY Your Honor there are many
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1 examples One would be a technological solution to a
2 business problem So that for example shyshy Ill give a
3 different example There are many applications today
4 The Court may be familiar with streaming video to watch
5 video on your computer
6 It is not possible to get enough data
7 through existing lines in its raw format The data has
8 to be manipulated in order to see live video So if you
9 want to watch TV on your phone for example
10 Those algorithms those inventions are
11 undoubtedly technological And if they are used in a
12 trading platform or a hedging system or something else
13 that wouldnt disable them And this is what the Diehr
14 case shyshy
15 JUSTICE KENNEDY Well I shyshy I shyshy in my
16 language Ive called that mechanical rather than
17 process Can you give me an example of process
18 MR PERRY Yes Your Honor The process in
19 that example would be a computer running the particular
20 data compression algorithm
21 JUSTICE KENNEDY But thats how to make
22 a shyshy thats how to make a machine work better
23 MR PERRY Yes Your Honor
24 JUSTICE KENNEDY Im asking you Is there
25 any business process any business activity that is
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1 susceptible to a patent a pure patent innovations that
2 deserve patents
3 MR PERRY Your Honor again a
4 technological solution to a business problem could well
5 be whether its a method or a process is equivalent
6 Again Congress said method in a corresponding shyshy
7 JUSTICE KENNEDY Can you give me an
8 example
9 MR PERRY I thought the data compression
10 example was a good one Ill try an encryption
11 technology Many of these trading platforms you know
12 dealing with securities and money would require some
13 sort of security devices You could have a process for
14 securely transmitting data would be another computer
15 implemented technological solution to a business
16 problem Again nothing like that claimed here
17 JUSTICE SOTOMAYOR How about eshymail and
18 just word processing programs
19 MR PERRY Your Honor a program shyshy let me
20 try it this way to both of your questions In our view
21 if what is claimed as the inventive contribution under
22 Mayo shyshy in other words if we have an abstract idea as
23 we do here and what is claimed is the inventive
24 contribution for Step 2 is the computer then the
25 computer must be essential to that operation and
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1 represent an advancement in computer science or other
2 technology And we know thats not met here Justice
3 Sotomayor because shyshy
4 JUSTICE SOTOMAYOR So youre saying no to
5 eshymail and word processing
6 MR PERRY Your Honor I think at a
7 point shyshy
8 JUSTICE SOTOMAYOR They certainly have
9 functionality and shyshy and improvement of functionality
10 for the user
11 MR PERRY At a point in time in the past
12 I think both of those would have been technological
13 advances that were patentable
14 JUSTICE SOTOMAYOR How
15 MR PERRY Today shyshy because they would have
16 provided a technological solution to a then unmet
17 problem Today reciting and do it on a word processor
18 is no different than and do it on a typewriter or shyshy and
19 do it on a calculator
20 The inventive contribution component which
21 uses specifically the language of conventional and
22 routine and well understood will evolve with
23 technology Thats why its different than the abstract
24 idea component
25 And here we know that these patents dont
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1 claim anything that was not conventional well
2 understood and routine We went through that in great
3 detail and Alice has never disputed a word of it They
4 just say youre not supposed to do that analysis even
5 though the Court 9shy0 in Mayo said we should
6 And in this case its very important to
7 look at what Alices own experts said on the subject
8 This is not our expert This is Alices expert And
9 this is at Page 1327shy28 of the Joint Appendix It is
10 possible to do the business methods of maintaining
11 accounts adjusting accounts and providing an
12 instruction without a computer or other hardware
13 And then Justice Breyer directly to your
14 abacus If someone had thought of this invention
15 soshycalled invention 100 years ago they might have
16 implemented it in a nonelectronic manner using various
17 precomputing tools such as an abacus or handwritten
18 ledgers
19 We know from Benson the Courts seminal
20 computer implementation case that if you can do it by
21 head and hand then the computer doesnt add anything
22 inventive within the meaning of the 101 exception That
23 is the holding of Benson And the Court reiterated that
24 in Mayo
25 Flook said exactly the same thing If you
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1 can do it with pencil and paper then the computer is
2 not offering anything that the patent laws are or should
3 be concerned with
4 It is only where the method will not work
5 without a computer which is not these claims and where
6 the computer itself is doing something that the patent
7 law is willing to protect
8 CHIEF JUSTICE ROBERTS What if shyshy what if
9 you can do it without a computer but its going to
10 take you know 20 people a hundred years In other
11 words theoretically you can replicate what the
12 computer does shyshy
13 MR PERRY Two answers
14 CHIEF JUSTICE ROBERTS shyshy but its
15 impractical without looking to do it on the computer
16 MR PERRY Mr Chief Justice first these
17 claims literally read as Alice reads them on a single
18 transaction between two parties so its not 20 people
19 for a hundred years Its one person sitting in a room
20 so thats not a problem
21 Second if what is being claimed is the
22 necessary speed or efficiency or data crunching
23 capabilities if you will of a computer then it would
24 have to be claimed and theres nothing claimed here
25 All that is claimed shyshy and my friend is going to stand
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1 up on rebuttal and tell you all that the expert said
2 well what is claimed is a computer but its just a
3 computer It just says a computer configured too It
4 doesnt say that the computer actually has to shyshy
5 JUSTICE BREYER Yeah but the trouble with
6 that particular test is as I think partly the Chief
7 Justice said how long et cetera and then add to that
8 though you could do it without a computer what happens
9 at the end of the line is the automobile engine goes off
10 or it begins to sputter or it turns left
11 You see its possible to take Archimedes shyshy
12 shyshy you know I use that example purposely to call
13 attention to the problem You can take those things
14 and youre not just saying apply it and youre not even
15 just saying shyshy you are saying use the computer but at
16 the end of the road something physical in the world
17 changes and everybody would say now thats shyshy that
18 will falls within I mean probably I mean my
19 hesitation shows Im looking for the right words
20 MR PERRY Justice Breyer your point is
21 the reason that it is equally fallacious to suggest on
22 the one hand as Alice and IBM does that simply
23 reciting a computer is a magic key that gets you through
24 101 and you never have to any other inquiry and what
25 some of folks the amici on the other side say which
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1 is that computers or software are never eligible Both
2 of those things have to be wrong because what the Court
3 said in Bilski was future innovation is too uncertain
4 We are not going to do that as a Court And the Court
5 laid out an approach using abstract ideas in Bilski and
6 inventive contribution in Mayo that is flexible enough
7 to take into account that innovation and to deal with
8 particular claims in context which is why at the end
9 of the day we have to come back to these patents and
10 decide which shyshy
11 JUSTICE KAGAN Mr Perry before we get
12 back to these matters you said to Justice Scalia if a
13 patent sufficiently describes how a computer will
14 implement an idea then its patentable So how
15 sufficiently does one have to describe it What do we
16 want a judge to do at this threshold level in terms of
17 trying to figure out whether the description is
18 sufficient to get you past it
19 MR PERRY If I can answer in two steps
20 Justice Kagan First in the negative What the
21 applicant or patentee must do shyshy must not do is simply
22 describe the desired result That would take us back to
23 State Street That would simply say I claim a magic
24 box that buys high and sells low or vice versa I
25 suppose I claim a magic box for investing Thats what
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1 these patents do
2 Then to put it in the affirmative and in the
3 language of Mayo the claim has to recite something
4 significantly more something significantly more than
5 the abstract idea itself That would be a contextual
6 analysis based on the claims and specifications and file
7 history and we know that some devices some methods
8 some programming will pass that
9 It is not going to be a brightshyline rule and
10 thats one of the tugshyofshywar issues that this Court and
11 the Federal Circuit have been having in these cases
12 The Federal Circuit wants brightshyline rules All
13 computers are in or all computers are out
14 This Court has been more contextual This
15 Court has been more nuanced This Court has looked at
16 things in a more robust way
17 JUSTICE KAGAN Youre not suggesting that
18 specific code is necessary
19 MR PERRY No Your Honor I think the shyshy
20 actual description of the programming is a 112 problem
21 I agree with that A 112 issue That is the realm of
22 the written description requirement What is a 101
23 problem is it is on the applicant to do more than simply
24 describe the results simply say A magic box that does
25 intermediate settlement And we can tie that back to
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1 this particular prosecution the 510 patent which is
2 the method patent
3 The examiner rejected it Under Section
4 101 the examiner said this is an abstract idea You
5 cant have this patent And the only change that this
6 applicant made was to add in the adjusting step
7 electronic adjustment It put in one word
8 electronic adjustment And under State Street which
9 is what this patent is prosecuted under that was
10 enough because the result of adjusting run through a
11 computer is enough
12 Under current law that cant be enough
13 That just cant get a patent over the line because this
14 Court said in Mayo and I got to quote this language
15 Simply implementing a fundamental principle on a
16 physical machine namely a computer is not a patentable
17 application of that principle Thats all that Alice
18 has done
19 These are preshyBilski patents They never
20 should have been issued General Verrilli will stand up
21 and address that point And certainly under current
22 law shyshy one point on the AIA Congress did not send all
23 this to the administrative process Congress created
24 two avenues the courts and the PTO to use the
25 standards Essentially it ratified Bilski and Mayo and
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1 said we agree with what you all are doing at the
2 Supreme Court and the existing standards are good enough
3 for us This is a judicial problem And that is a good
4 reason The abstract shyshy
5 JUSTICE GINSBURG The Federal Circuit in
6 this case split in many ways and it had our decisions
7 to deal with You said given Bilski and Mayo this is
8 an easy case What is the instruction that escaped a
9 good number of judges on the Federal Circuit How would
10 you state the rule
11 MR PERRY Your Honor I think theres a
12 significant element to the Federal Circuit that
13 disagrees with Mayo and has been resistant in applying
14 it Chief Judge shyshy former Chief Judge Michelle filed a
15 brief in this Court essentially saying Mayo is a
16 lifeshysciences case You should limit it to that because
17 if you apply it to everything else then these patents
18 are no good
19 Mayo we submit is a technologyshyneutral
20 industryshyneutral exceptionshyneutral framework that can
21 be used to answer all of these questions This is not
22 the death of software patents The software industry is
23 all before this Court saying this is fine with us
24 Every company in the United States practically except
25 for IBM is saying go ahead This will not affect
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1 software patents
2 Justice Ginsburg this Courts precedents
3 are clear They are unanimous They just need to be
4 applied To suggest that there is confusion that needs
5 to be addressed by retreating beating a retreat from
6 recent unanimous decisions would simply reward
7 intransigence difficulty refusal to adhere to what are
8 clear precedents because shyshy
9 JUSTICE KAGAN Should we be concerned
10 Mr Perry that there are old patents that in fact could
11 meet the test that you set forth but wont because they
12 were written in a different time and so used much more
13 general language
14 MR PERRY Your Honor the applicant or the
15 patent holder would have the opportunity to institute a
16 reexamination proceeding or some sort of administration
17 process to address that issue
18 And second it should be noted this is a
19 very small problem There are 2 million outstanding
20 patents in the United States In the last four fiscal
21 years there were 22000 infringement litigations
22 instituted but since Bilski there have only been 57
23 district court decisions on Section 101 issues There
24 have only been 12 Federal Circuit decisions total on
25 computer implementation
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1 We are talking about a group of patents
2 Justice Kagan thats way out at the tail end of
3 distribution Most patents never have a 101 challenge
4 This is not an issue with cotton gins and other things
5 This is a problem for the most marginal
6 most dubious most skeptical patents the ones that this
7 Court in Bilski shyshy and remember what Bilskis holding
8 is The majority said they are processes but it did
9 not say they are eligible
10 Thank you Mr Chief Justice
11 CHIEF JUSTICE ROBERTS Thank you counsel
12 General Verrilli
13 ORAL ARGUMENT OF DONALD B VERRILLI JR
14 ON BEHALF OF THE UNITED STATES AS AMICUS
15 CURIAE SUPPORTING RESPONDENTS
16 GENERAL VERRILLI Mr Chief Justice and
17 may it please the Court
18 An abstract idea does not become
19 patentshyeligible merely by tacking on an instruction to
20 use a computer to carry it out A computer makes a
21 difference under Section 101 when it imposes a
22 meaningful limit on the patent claim That occurs when
23 the claim is directed at improvement in computing
24 technology or an innovation that uses computing
25 technology to improve other technological functions
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1 Thats the test that we believe is most faithful to this
2 Courts precedents in Bilski and Mayo It keeps patents
3 within their traditional and appropriate domain and it
4 is capable of being administered consistently by Courts
5 and by PTO examiners
6 JUSTICE GINSBURG How do you answer the
7 argument that your view would extinguish businessshymethod
8 patents and make all software ineligible for patent
9 protection
10 GENERAL VERRILLI Yeah with shyshy let me
11 address software patents first because that I think is
12 obviously a significant question And its just not
13 correct to say that our approach would make software
14 patenting ineligible Any software patent that improves
15 the functioning of the computer technology is eligible
16 Any software patent that improves shyshy that is used to
17 improve another technology is eligible For example
18 the patent in the shyshy in the Diehr case is one in
19 which shyshy
20 JUSTICE SOTOMAYOR Why do we need to reach
21 this in that shyshy reach software patents at all in this
22 case
23 GENERAL VERRILLI Well shyshy
24 JUSTICE SOTOMAYOR Whats the necessity for
25 us to announce a general rule with respect to software
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1 There is no software being patented in this case
2 GENERAL VERRILLI Well I shyshy
3 JUSTICE SOTOMAYOR Theres a systems
4 GENERAL VERRILLI Well I shyshy I think shyshy
5 well they shyshy they shyshy theres a process being and shyshy and
6 one can think of software patents as process patents
7 And I think thats why my friends on the other side are
8 saying the sky is falling because they shyshy they are
9 interpreting what were saying about that when a
10 computer makes shyshy when a computers involvement makes
11 something eligible under 101 its calling those into
12 question and it doesnt
13 JUSTICE SOTOMAYOR Do you think we have to
14 reach the patentability of software to answer this case
15 GENERAL VERRILLI Well I think you can shyshy
16 I think the answer to that question is no not
17 necessarily You can decide it by saying that shyshy that
18 Bilski answers the question whether this is an abstract
19 idea because this form of hedging is really no
20 different than the form of hedging as a conceptual
21 matter at issue in Bilski And then Mayo answers the
22 question of whether the use of a computer in this case
23 adds enough to the abstract idea beyond conventional
24 steps because here all we have after all is just
25 conventional use of computing technology no computer
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1 innovation such that you dont qualify under 101 You
2 could take that approach
3 But it is important to the United States
4 that we shyshy and to our patent examiners that we get some
5 clarity if we can I think the clarity could come from
6 the text that I propose which I want to reiterate shyshy
7 JUSTICE SOTOMAYOR Well shyshy
8 JUSTICE BREYER Could shyshy could shyshy could you
9 go on with that because you were just getting to the
10 point where I think you say a computer improvement that
11 in fact leads to an improvement in harvesting cotton is
12 an improvement through a computer of technology so it
13 qualifies
14 But then I think you were going to say or I
15 got this also from the brief a computer improvement
16 that leads to an improvement in the methods of selling
17 bonds over the telephone is not an improvement in
18 technology reached by the computer Am I right about
19 the distinction youre making
20 GENERAL VERRILLI I dont think theres a
21 yes or no answer to that question
22 JUSTICE BREYER What is your view Yeah
23 what is shyshy how do we deal with just that problem
24 GENERAL VERRILLI If there is a genuine
25 innovation in the functioning of the computer shyshy
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1 JUSTICE BREYER Yes
2 GENERAL VERRILLI shyshy such that business
3 processes shyshy
4 JUSTICE BREYER Weve got that Yes yes
5 We got the computer But then it doesnt improve the
6 computer but rather it improves through the computer
7 the harvesting of cotton
8 Now youve got it in what you said was your
9 second category which is an improvement through the
10 computer of a technology And I thought in your brief
11 you were distinguishing an improvement through the
12 computer of a human activity that is not a technology
13 and in particular to pick an example of that
14 something in finance or something in business
15 Now am I right about the distinction youre
16 making
17 GENERAL VERRILLI Yeah that shyshy
18 JUSTICE BREYER If Im not right what is
19 the distinction
20 GENERAL VERRILLI That is generally the
21 line were drawing Frankly shyshy
22 JUSTICE BREYER And how is that justified
23 GENERAL VERRILLI I do want shyshy
24 JUSTICE BREYER That shyshy that is Judge Dyk
25 in shyshy in Bilski in the Federal circuit 4 people sort of
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1 picked it up maybe 5 didnt pick it up Would you say
2 a few words about it
3 GENERAL VERRILLI Sure About shyshy let me go
4 to Bilski there in that I do think while shyshy while
5 certainly the Court held that the term process got a
6 natural construction which could include business
7 methods it seems to me that thats not all the Court
8 said in Bilski The Court also said that it was
9 historically and traditionally quite rare that business
10 methods were patent eligible
11 It also said that shyshy that the shyshy that courts
12 and the PTO examiners should use the abstract ideas
13 exception to 101 to police the appropriate boundary
14 It also said that the
15 machineshyorshytransformation test that the United States
16 advocated remained a useful tool And of course that
17 directs to you seeing whether there is a technology
18 application
19 And of course the holding in Bilski was
20 that the shyshy the method for hedging risk was ineligible
21 because it was an abstract idea and I cant imagine
22 that if in Bilski the shyshy the claim had been exactly the
23 same but had added use a computer to carry out some of
24 these standard random analysis functions that are
25 claimed by the patent that you would have found it to
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1 be patent eligible
2 And I shyshy I would submit for the Court that
3 the key point here I think is that now given where
4 the Court shyshy what the Court has held in Bilski given
5 what its held in Mayo the abstract ideas exception is
6 really the only tool left to deal with what I shyshy what I
7 think I fairly read Bilski as saying is a significant
8 problem the proliferation of patents of business
9 methods
10 JUSTICE KENNEDY Is there an example that
11 you can give us of a shyshy what we can call a business
12 process that is patentable a process that doesnt
13 involve improving the workings of a computer
14 GENERAL VERRILLI I shyshy I think its going
15 to be difficult for me to do that I think for
16 example if you had a business method a process for
17 additional security pointshyofshysale credit card
18 transactions using particular encryption technology
19 that might well be patent eligible Its a technology
20 that it makes conduct of business more efficient or
21 effective
22 But there is a technological link here and
23 we do think thats critical to our shyshy to our point of
24 view with respect to the case And I shyshy and I do think
25 remember that when we say something is not patent
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1 eligible were not saying they cant do it Were
2 saying they cant monopolize it
3 And the concern in a situation like this one
4 is that if this is patent eligible its hard to see
5 why for example the first person who came up with a
6 frequent flier program wouldnt have been able to claim
7 a patent there because after all thats a business
8 method for improving customer loyalty implemented on a
9 computer
10 CHIEF JUSTICE ROBERTS General I shyshy you
11 mentioned a while ago the need for greater clarity and
12 certainty in this area And Im just wondering in your
13 brief youve got a nonshyexhaustive of factors to
14 consider and there are 6 different ones And Im just
15 doubtful that thats going to bring about greater
16 clarity and certainty
17 GENERAL VERRILLI I take shyshy I take the
18 point Mr Chief Justice but I think the key is that
19 they are all directed to answering the question of
20 whether the innovation that is claimed and is an
21 innovation in either A the improvement of a computers
22 functioning or B the use of computer technology to
23 improve the functioning of another technological
24 process and a case like Diehr would be in the latter
25 category
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1 And so I do think that thats the key
2 benchmark Thats the baseline Thats the test that
3 we do think can be applied clearly and consistently by
4 the courts or the PTO And it avoids the risk of things
5 like frequent flier programs or the Oakland As money
6 ball methods for evaluating the contributions in
7 individual baseball players make or any one of a host of
8 other things that our intuitions tell us just dont
9 belong in the patent system
10 Thats the shyshy drawing that line keeps them
11 out not drawing that line lets them in And with all
12 due respect I dont think that the novelty and
13 nonobviousness filters that 102 and 103 really deal with
14 that problem effectively because when you get to
15 nonobviousness in 103 for example youll be asking a
16 different question
17 If you take the frequent flier program you
18 would say well is this innovation in building consumer
19 loyalty something that would have been obvious to
20 somebody who runs an airline Its totally divorced
21 from the question of technology at that point and
22 therefore I dont think youre going to get the screen
23 that you need to get in order for the patent system to
24 be confined to its traditional and appropriate scope
25 If there are no further questions thank
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1 you
2 JUSTICE GINSBURG I have a question about
3 how do you identify an abstract concept The shyshy a
4 natural phenomenon a mathematical formula those are
5 easy to identify but there has been some confusion on
6 what qualifies as an abstract concept
7 GENERAL VERRILLI We would define
8 abstract shyshy an abstract concept as a claim that is not
9 directed to a concrete innovation in technology
10 science or the industrial arts So its the shyshy its
11 abstract in the sense that it is not a concrete
12 innovation in the traditional realm of patent law
13 Thank you
14 CHIEF JUSTICE ROBERTS Thank you General
15 Mr Phillips you have four minutes
16 remaining
17 REBUTTAL ARGUMENT OF CARTER G PHILLIPS
18 ON BEHALF OF THE PETITIONERS
19 MR PHILLIPS Thank you Mr Chief Justice
20 Id just like to make a few points
21 First of all with respect to the question
22 you asked which is looking at 159 et cetera all I can
23 tell you is that if you look at claim 33 it talks about
24 matched orders the matched orders that are described in
25 286 and 287 and then makes specific reference to 159
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1 and that flow chart thats there And its all designed
2 as a package Its only one element of the shyshy of the
3 invention but it is a central element and its an easy
4 one to understand And it goes well beyond simply the
5 notion of hedge shyshy hedge against settlement risk and do
6 it by a computer
7 JUSTICE SOTOMAYOR Your adversary says that
8 his shyshy the appendix to his brief are the only patents at
9 issue that the flow charts are not at issue in this
10 case
11 MR PHILLIPS Theres no basis for that
12 statement Your Honor There shyshy remember this went off
13 on a very truncated litigation process So theres shyshy
14 you know we shyshy we got cut off at the beginning of it
15 Theres been no construction of the shyshy of the claims
16 and shyshy and obviously these are specifications that go
17 to how you interpret the claim
18 JUSTICE SOTOMAYOR If we were to say that
19 there are no business patents shyshy
20 MR PHILLIPS Yes
21 JUSTICE SOTOMAYOR shyshy would your patent
22 survive at all
23 MR PHILLIPS No I dont shyshy I dont
24 believe so I think theres no question And you
25 know General Verrilli could not have been any plainer
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1 in his statement of how he wants to interpret the
2 abstract idea concept
3 JUSTICE SOTOMAYOR Yes he wants to say no
4 business patents
5 MR PHILLIPS No business shyshy just another
6 way of saying no business methods And you know the
7 Court rejected that And it seems to me extraordinary
8 to say Congress didnt reject no business methods in
9 101 but were going to do shyshy were going to manipulate
10 the judicial exception to accomplish precisely that same
11 thing It seems to me thats wholly inappropriate
12 Justice Ginsburg you asked my shyshy my friend
13 here you know whats his test He didnt answer that
14 question youll notice because he doesnt have an
15 answer His basic argument is whatever you do just
16 kill this patent
17 And if I were in his shoes I suppose Id
18 take that same position I think whats absolutely
19 clear is that the test ought to be one that is
20 structured as a very coarse filter not the kind of
21 filter that hes pushing for where it changes over time
22 I mean I thought his shyshy I thought his response to one
23 of the questions about eshymail and word processing that
24 Justice Sotomayor asked is over time it would change
25 Well thats exactly what 102 and 103 are for That is
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1 not the purpose of shyshy of Section 101
2 And then he uses the example of encryption
3 I guarantee you if we were arguing about encryption in
4 this case he would say to me that thats an abstract
5 principle because encryption is a concept thats been
6 around since time immemorial George Washington used
7 it Everybody has used encryption
8 And a question again thats not the
9 solution to these problems The question is how did we
10 go about doing it And we go beyond the basics of
11 simply saying use a computer and thats what we ask
12 this Court to focus on and to evaluate
13 As to the frequent flier program its
14 pretty clear to me that even though it was a novel idea
15 in some sense the concept itself would have been viewed
16 in shyshy in the KSR fashion as quite obvious as a means of
17 improving customer loyalty
18 There are solutions here Giving us 101
19 pass doesnt create a monopoly It just gets us to the
20 102 and 103 inquiries that are at the heart of what the
21 patent laws shyshy and 112 that are at the heart of what the
22 patent laws ought to be dealing with
23 If there are no further questions Your
24 Honor thank you
25 CHIEF JUSTICE ROBERTS Thank you counsel
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1 The case is submitted
2 (Whereupon at 1105 am the case in the
3 aboveshyentitled matter was submitted)
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
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25
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58
A add 714 1023 algorithm 3320 41 automatically
As 525 3621 387 algorithms apply 72425 111
am 115 32 416 3013 3310 2019 281213 automobile 389
572 added 302 Alice 13 34 2822 3814 available 99
abacus 61213 4923 363 3717 4217 avenues 4124
710 1018 additional 5017 3822 4117 applying 4213 avoids 524
1325 3614 3617
address 4121 4317 4511
Alices 271 2919 3678
approach 226 395 4513 B
ability 1514 addressed 435 allow 94 472 B 121 29 4413
able 1511 167 addressing 181 allows 97 242 appropriate 5122
1919 516 adds 4623 amazing 2514 81516 1514 back 1621
aboveshyentitled adhere 437 amici 3825 453 4913 1922 2512
113 573 adjudication amicus 123 5224 3018 322
absolutely 125 241 210 4414 Archimedes 3991222
1215 159 adjusting 3611 analysis 424 281122 3811 4025
5518 41610 364 406 area 219 5112 ball 526
abstract 4267 adjustment 417 4924 argue 2518 Bank 17 35
48 6682023 418 analyze 1416 arguing 563 banks 95
721 8218 administered 1716 argument 114 bars 43
141920 1522 454 announce 4525 225812 33 baseball 527
165 181618 administration answer 119 37 41 144 based 423 406
2220 24925 4316 2219 247 18323 226 baseline 522
2621 277 administrative 3919 4221 26715 4413 basic 413 5515
2938 3422 171218 187 456 461416 457 5317 basically 1821
3523 395 242 4123 4721 551315 5515 2319
405 414 424 adopt 203 answering 5119 arguments basics 5610
4418 461823 adopted 31317 answers 3713 1415 basis 132 1512
491221 505 advancement 461821 arms 1625 1516 2719
53368811 351 anyway 1810 arrangements 5411
552 564 advances 3513 apparatus 2916 131 beating 435
accept 102 adversary 547 APPEARAN arrows 315 beginning 163
accomplish advice 1715 116 art 1919 5414
5510 advocated 4916 appears 820 arts 2124 5310 begins 3810
account 55 618 affect 4225 appendix 1910 aside 1422 157 behalf 11719
397 affirmative 402 311 326 369 asked 2314 122 24710
accounts 823 agent 52 3021 548 278 5322 214 38 2616
9356 3611 ago 318 2224 applicant 3220 551224 4414 5318
3611 3615 5111 3921 4023 asking 193 believe 1316
accurately 2413 agree 920 2021 416 4314 221213 273 1416 2421
acknowledges 221 2418 application 3324 5215 255 264 451
1121 4021 421 2623 4117 aspect 517 5424
act 99 2017 agrees 2812 4918 asserted 3113 belong 529
activities 229 ahead 4225 applications 311618 benchmark 522
activity 2122 AIA 2912 4122 333 asserting 325 Benson 361923
3325 4812 airline 5220 applied 434 attaching 124 best 161124
actual 4020 AL 18 523 attention 3813 better 1610 albeit 923 applies 31418 Attorney 2021 216 2819
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59
3322 brightshyline 409 2313 37 71 4338 5519 beyond 115 4012 5317 checks 618 5614
1312 4623 bring 5115 case 3412 46 Chief 339 clearly 211 251 544 5610 broad 248 116 1524 261217 3024 523
Bilski 313 46 broader 225 2022 213 31812 378 client 311416 415 1722 browsing 228 2211 2313 371416 386 close 2822 2224 2329 builder 2811 2625 311424 421414 4410 CLS 17 35 262020 271 building 5218 3314 36620 441116 5110 1120 2816 2999 built 2324 426816 5118 531419 coarse 247 3935 4125 business 168 451822 461 5625 5520 427 4322 1749 203 461422 5024 chits 611 code 1213 142 447 452 2124 222122 5124 5410 chronological 1916171720 461821 4825 2311 29613 564 5712 1512 2725 4018 49481922 32132323 cases 244 2816 chronologically coffee 1211 5047 3322525 4011 423 colleagues 116
Bilskis 447 34415 3610 catalogues 2512 circuit 2818 college 58 bit 323 48214 4969 262 401112 425 columns 325 blocks 54 508111620 categorically 42912 4324 come 108 234 Bloomberg 517 5419 202 4825 3017 399
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1 arrangements that exist and that can only be resolved on
2 a shyshy on a realtime basis Your abacus is great if you
3 happen to be waiting for the pyramids to be finished or
4 waiting for the gold to move in and out but it doesnt
5 help with you an abacus if youre dealing with literally
6 thousands of transactions simultaneously going on in
7 different countries at different points in time
8 JUSTICE KENNEDY But thats just an idea
9 hey lets use a computer
10 MR PHILLIPS But its not just shyshy I mean
11 obviously part of it is use the computer Justice
12 Kennedy But more fundamentally it goes beyond that
13 See I shyshy
14 JUSTICE SOTOMAYOR Is your software
15 copyrighted
16 MR PHILLIPS No I dont believe so
17 JUSTICE GINSBURG There is no special
18 software that comes with this shyshy thats part of this
19 patent is it shyshy is there
20 MR PHILLIPS No Justice Ginsburg what
21 we did here is what the Patent and Trademark Office
22 encourages us to do and encourages all software patent
23 writers to do which is to identify the functions that
24 you want to be provided for with the software and leave
25 it then to the software writers who I gather are you
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1 know quite capable of converting these functions into
2 very specific code
3 JUSTICE KAGAN Mr Phillips could you shyshy
4 could you disaggregate your argument for me Because
5 you just said look this Court has said its not
6 sufficient if you have an idea and then you say use a
7 computer to implement it right So are you saying that
8 your shyshy that shyshy are you saying that youre doing more
9 than saying use a computer to implement it or are you
10 saying that its shyshy that the idea itself is more than an
11 idea
12 MR PHILLIPS Yes Im saying shyshy
13 JUSTICE KAGAN Which part of what shyshy
14 MR PHILLIPS Im saying both actually I
15 mean Im making both of those arguments I shyshy I
16 believe that if you analyze the claims and you dont
17 caricature them and you dont strip them out of the
18 limitations that are embedded in there this is not some
19 kind of an abstract concept This is not some kind shyshy
20 its not an abstract idea Its a vary shyshy
21 JUSTICE KAGAN So putting the computer
22 stuff aside completely shyshy
23 MR PHILLIPS Right
24 JUSTICE KAGAN shyshy youre saying that youve
25 invented something or you shyshy
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1 MR PHILIPS Yes
2 JUSTICE KAGAN There is something that
3 youve patented that has shyshy that is not just simple use
4 a third party to do a settlement
5 MR PHILLIPS Right
6 JUSTICE KAGAN And what is that putting
7 the computer aside
8 MR PHILLIPS It is shyshy well shyshy and again
9 its difficult to do that because you absolutely need
10 the computer in order to implement this But the key to
11 the invention is the notion of being able
12 simultaneously dealing with it on a chronological basis
13 to stop transactions that will otherwise interfere with
14 the ability to settle on time and under the appropriate
15 circumstances And the only way you can do that in a
16 realtime basis when youre dealing with a global economy
17 is to use a computer It is necessary to the efficacy
18 of this
19 So in that sense I cant shyshy I cant
20 disaggregate it the way in some sense youre suggesting
21 It seems to me its bound up with in shyshy its bounds up
22 with the whole notion of is this an abstract concept
23 JUSTICE BREYER Can you in fact shyshy now
24 this is shyshy look there are 42 briefs in this case I
25 actually read them and I found them very very helpful
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1 up to the point where I have to make a decision because
2 theyre serious I mean you know shyshy now the problem
3 that I came away with is the one that youre beginning
4 to discuss that if you simply say take an idea thats
5 abstract and implement it on a computer there are shyshy
6 youre going to get it much faster youre going to be
7 able to do many many things and if thats good enough
8 there is a risk that you will take business in the
9 United States or large segments and instead of having
10 competition on price service and better production
11 methods well have competition on who has the best
12 patent lawyer You see where Im going on that one
13 MR PHILLIPS Yeah of course
14 JUSTICE BREYER And if you go the other way
15 and say never then what you do is you rule out real
16 inventions with computers
17 MR PHILLIPS Right
18 JUSTICE BREYER And so in those 42 briefs
19 there are a number of suggestions as to how to go
20 between Scylla and Charybdis Now I would like to
21 know shyshy I dont know if you can step back from your
22 representational model Thats a problem Youre all
23 we have now And shyshy and from my point of view I need
24 to know what in your opinion is the best way of sailing
25 between these two serious arms
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1 MR PHILLIPS Well Justice Breyer I guess
2 I would suggest to you that you might want to deal with
3 the problem you know as opposed to the problems you
4 dont know at this stage I mean we have had business
5 method patents and software patents in existence for
6 well over a decade and theyre obviously quite
7 significant in number And shyshy and we know what the
8 system is we have And Congress looked at that system
9 right and didnt say no to business methods patents
10 didnt say no to software patents instead said the
11 solution to this problem is to get it out of the
12 judicial process and create an administrative process
13 but leave the substantive standards intact
14 So my suggestion to you would be follow that
15 same advice a liberal interpretation of 101 and not a
16 caricature of the claims analyze the claims as written
17 and therefore say that the solution is 102 and 103 and
18 use the administrative process If you shyshy
19 JUSTICE GINSBURG Mr Phillips let me just
20 stop you there because four Justices of this Court did
21 not read that legislative history the way you do And
22 it was shyshy was in Bilski
23 MR PHILLIPS But this is postshyBilski
24 JUSTICE GINSBURG Justice Stevens went
25 carefully through that and he said Congress was
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1 reacting to a decision It had shyshy it was not addressing
2 101 So there are at least four Justices who say shyshy who
3 didnt buy that argument
4 MR PHILLIPS Well I mean it still seems
5 to me that the shyshy the natural inference is Congress did
6 not change 101 Congress created an entire
7 administrative system to deal with 101 102 and 103
8 And shyshy and I would hope shyshy
9 JUSTICE SCALIA And four is not five
10 anyway right
11 MR PHILLIPS Thats true
12 JUSTICE SCALIA Four is not five
13 MR PHILLIPS And youve exhausted my math
14 skills Your Honor
15 JUSTICE SCALIA By the way we shyshy we have
16 said that you cant take an abstract idea and then say
17 use a computer to implement it But we havent said
18 that you cant take an abstract idea and then say here
19 is how you use a computer to implement it shyshy
20 MR PHILLIPS Exactly
21 JUSTICE SCALIA shyshy which is basically what
22 youre doing
23 MR PHILLIPS And thats the argument were
24 doing and shyshy
25 JUSTICE SCALIA And thats a little
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1 different
2 MR PHILLIPS shyshy thats the line were
3 asking the Court to draw here
4 JUSTICE KAGAN Well how are you saying the
5 how Because I thought that your computers shyshy that your
6 patents really did just say do this on a computer as
7 opposed to saying anything substantive about how to do
8 it on a computer
9 MR PHILLIPS I would urge the Court to
10 look at Joint Appendix 159 285shy286 where it goes
11 through the flow charts This is shyshy and this is just a
12 specific example of the method by which you stop a
13 transaction and it goes through a varied series of
14 detailed steps and what the computer has to do in order
15 to do that It doesnt actually obviously put in the
16 code but thats what the PTO says dont do Dont put
17 in the code because nobody understands code so shyshy but
18 put in the functions and we know shyshy and we know that
19 someone skilled in the art will be able to put in the
20 code And if they arent if they cant do that then
21 its not enabled and thats a 112 problem
22 To go back Justice Breyer to your
23 question So on the one hand youve got a problem that
24 it seems to me Congress to some extent has said is okay
25 and weve got a solution and that solutions playing
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1 through On the other hand if this Court were to say
2 much more categorically either that theres no such
3 thing as business method patents or adopt the Solicitor
4 Generals interpretation which is to say that there
5 cannot be software unless the software somehow actually
6 improves the computer as opposed to software improving
7 every other device or any other mechanism that might be
8 out there
9 What we know is that this would inherently
10 declare and in one fell swoop hundreds of thousands of
11 patents invalid and the consequences of that it seems
12 to me are utterly unknowable And before the Court goes
13 down that path I would think it would think long and
14 hard about whether isnt that a judgment that Congress
15 ought to make And It seems to me in that sense youre
16 essentially where the Court was in Chakrabarty where
17 everybody was saying youve got to act in one way or the
18 other or the world comes to an end and the courts have
19 said well apply 101 directly
20 JUSTICE KENNEDY If we say that theres no
21 software patentability and agree with the Attorney
22 General do you lose in this case
23 MR PHILLIPS Well it would be very hard
24 for me to see how that shyshy how shyshy how I can get around
25 that particular problem because the computer is the
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1 essence of it so shyshy and a portion of it is clearly the
2 software So I think if you say there is no such thing
3 as software patentability I do lose in this case yes
4 Your Honor As do a whole lot of other people
5 JUSTICE KENNEDY Is there any common ground
6 between you and the government shyshy maybe a better
7 question to ask the government shyshy a common ground
8 between you and the government on something in the
9 software area thats patentable other than making the
10 computer itself work You understand the government to
11 say no software patents
12 MR PHILLIPS Thats the way I interpret
13 the governments shyshy the governments brief
14 JUSTICE BREYER It was like shyshy theres a
15 Bloomberg brief out here that was on this that said
16 no you can shyshy you can patent computer software when
17 its an improvement in the computer when its an
18 improvement in software when its an improvement in a
19 technology that is developed out of computers like
20 robotics when it is an improvement in a machine or
21 technology but you cannot improve it where it is simply
22 an improvement in an activity that is engaged in
23 primarily through mental processes But what they mean
24 by that is business finance and similar arts
25 Thats shyshy I mean thats shyshy it wasnt quite what shyshy I
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1 know Thats what I want to know what you dont agree
2 with about that because its a little more refined than
3 you suggested
4 MR PHILLIPS I read the Solicitor
5 Generals brief as broader than the Bloomberg brief
6 in shyshy in terms of the approach And IBMs argument is
7 if you knock out software patents you eliminate web
8 browsing word processing cellphones eshymail Those
9 are all activities that I dont think fall within the
10 meaning of the shyshy the meaning of the governments theory
11 of the case
12 JUSTICE BREYER But Im asking you shyshy Im
13 asking you what about this one that I just mentioned
14 You see I went through those five steps shyshy
15 MR PHILLIPS Right
16 JUSTICE BREYER shyshy and four of them you
17 could patent and the fifth one you cant
18 MR PHILLIPS Right But I shyshy and I guess
19 my answer to that is thats nowhere in the statute and
20 it doesnt seem to me to reflect an abstract idea Its
21 a shyshy its a line you draw that takes out business method
22 patents If the Court wants to eliminate business
23 method patents fine But you just said no to that in
24 Bilski two three terms ago
25 Now to be sure give the Solicitor General
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1 credit he comes here and says to you We didnt like
2 the result in Bilski we want you to say dont use
3 process in order to get there which is a statutory
4 interpretation come up with an extraordinarily
5 complicated way of looking at the exception and use that
6 to get to the exact same result
7 JUSTICE SOTOMAYOR Well youre doing a
8 very good job of proving shyshy
9 JUSTICE GINSBURG In Bilski Justice Breyer
10 did try to say that there wasnt that shyshy a whole lot of
11 distance between the four who thought business methods
12 were not patentable But he shyshy he also said something
13 else in shyshy in the other case Mayo Justice Scalia
14 asked you the question about doesnt that go to novelty
15 but didnt Justice Breyer say in Mayo that novelty can
16 be relevant to patent shyshy to patent eligibility He said
17 theres shyshy theres an overlap
18 MR PHILLIPS Well he said theres an
19 overlap Here in this context I think basically the
20 Respondents theory would mean that they are completely
21 coterminous And I dont think thats what the Court
22 meant And also we know from Diehr that theres got to
23 be at least some significant limitations on the extent
24 to which novelty has to be built into 101 That is the
25 province of 102 and 103 And as I said Congress
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1 modified the system of adjudication to create an
2 administrative mechanism that allows you to get to 102
3 and 103 And at least in context its important to
4 realize there have been 11 cases since that was created
5 9 of the 11 have been knocked down on 102 or 103 grounds
6 and not on 101 grounds And it seems to me thats the
7 answer to this problem is leave 101 as the coarse
8 filter If on its face it states these kinds of broad
9 abstract principles fundamental truths and even if it
10 says use a computer those should be struck down
11 JUSTICE SOTOMAYOR Which of the shyshy which of
12 the opinions below captures your position most
13 accurately
14 MR PHILLIPS I would guess it would be
15 Judge Moores opinion below that would capture ours most
16 correctly
17 JUSTICE SOTOMAYOR And if we were to think
18 your method claim is ineligible do you agree that your
19 systems and shyshy your medium and system claims fail as
20 well Do they rise and fall together
21 MR PHILLIPS No No I dont believe they
22 do rise and fall together I mean I think you could shyshy
23 if you wanted to interpret our medium claim shyshy I mean
24 our shyshy our method claims in a shyshy in particularly
25 abstract way I think you could still say that the
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1 system claims which clearly are shyshy are how to create a
2 computer system and how to implement it using that
3 method would be a much more concrete version of that in
4 a way that would take it out of 101 That said I
5 obviously believe that all of our claims satisfy 101
6 and should go on to the next stage
7 JUSTICE KAGAN Can I give you a
8 hypothetical Mr Phillips and you tell me how its
9 different or the same Lets say you know 30 years
10 somebody took a look around the world and said a lot of
11 people seem to order products by mail They get the
12 catalogues in the mail and then they send back their
13 return forms And lets say that one of the founders of
14 the Internet said wouldnt this be an amazing system
15 we could actually do this by computer and they had
16 patented that Is that the same
17 MR PHILLIPS I dont know if its the
18 same but I would shyshy I would argue that it could very
19 well be a patentable subject matter because shyshy but it
20 depends on how the claims play out
21 JUSTICE KAGAN No but exactly I mean
22 the claim would have said something along the lines of
23 you know theres this process by which people order
24 products and we want to do it over the Internet we want
25 to do it electronically and we will use a computer to
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1 do that to essentially take the process of mail order
2 catalogues and make it electronic
3 MR PHILLIPS I could certainly shyshy I think
4 I could write a claim shyshy a set of claims that I believe
5 would satisfy 101 And shyshy and to the extent that
6 youd shyshy that youd think those are no different than
7 the ones I have here then my argument is simply I think
8 I satisfy 101 with the claims we have before us Your
9 Honor
10 If there are no further questions then Id
11 like to reserve the rest of my time
12 CHIEF JUSTICE ROBERTS Thank you
13 Mr Phillips
14 Mr Perry
15 ORAL ARGUMENT OF MARK A PERRY
16 ON BEHALF OF THE RESPONDENTS
17 MR PERRY Mr Chief Justice and may it
18 please the Court
19 That path between Scylla and Charybdis was
20 charted in Bilski and Mayo Bilski holds that a
21 fundamental economic principle is an abstract idea and
22 Mayo holds that running such a principle on a computer
23 is quote not a patentable application of that
24 principle Those two propositions are sufficient to
25 dispose of this case
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1 If Bilski and Mayo stand Alices patents
2 fail Therefore Mr Phillips and his friends are
3 asking this Court to change the standard even though
4 this Court has had three unanimous decisions in the last
5 four terms establishing what the Court called a myriad
6 a wellshyestablished standard
7 On the abstract idea Justice Ginsburg you
8 asked Mr Phillips whats the difference between hedging
9 and this claim There is no difference This is
10 hedging It is hedging against credit default rather
11 than price fluctuation but it is simply hedging
12 And Mr Phillips stood up for 26 minutes and
13 never once referred to the patent Lets look at what
14 the inventor the soshycalled inventor said about this
15 invention This is at JA 293 to 94 in the
16 specification
17 This claim has simply two steps Its very
18 simple First debiting and crediting on a realtime
19 basis the relevant shadow records and second by
20 periodically affecting corresponding payment
21 instructions Those are direct quotes Debit credit
22 and pay Your Honor you cant get much more simple
23 than that
24 Mr Phillips suggests well we have
25 multilateral transactions global things chronological
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1 time zones and so forth None of those are claimed
2 Your Honor Those are all recited in specification
3 The claims read on a single transaction involving two
4 parties
5 JUSTICE BREYER Can I ask you at some
6 point not necessarily this second to say in my shyshy this
7 is just shyshy you know you have an opinion for a court
8 Different judges can have different interpretations
9 All youre getting is mine okay
10 But I think its pretty easy to say that
11 Archimedes cant just go to a boat builder and say
12 apply my idea All right Everybody agrees with that
13 But now we try to take that word apply and give
14 content to it
15 And what I suspect in my opinion Mayo did
16 and Bilski and the other cases is sketch an outer shell
17 of the content hoping that the experts you and the
18 other lawyers and the shyshy the circuit court could fill
19 in a little better than we had done the content of that
20 shell
21 So so far youre saying well this is
22 close enough to Archimedes saying apply it that we
23 neednt go further
24 Now will you at some point in the next few
25 minutes give me your impression of if it were necessary
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1 to go further what would the right words or example be
2 MR PERRY Your Honor as shyshy Justice
3 Breyer as to abstract ideas the PTO has filled in that
4 shell by listing economic concepts legal concepts
5 financial concepts teaching concepts dating and
6 interpersonal relationships and generally how business
7 should be conducted as examples of those things that are
8 likely abstract which of course all follow directly
9 from Bilski and the discussion this Court had in Bilski
10 And this patent shyshy these patents fall squarely within
11 that
12 Congress in the AIA confirmed that
13 reading Congress in the CBM method said business
14 methods that are subject to special scrutiny shyshy that is
15 dubious patents shyshy include methods and corresponding
16 apparatus which is what we have here that pertain to
17 data processing in the financial services industry and
18 do not offer a technological solution That describes
19 Alices patents to a letter Your Honor So that we
20 have shyshy
21 JUSTICE SOTOMAYOR What do you think is a
22 technological solution
23 MR PERRY Your Honor shyshy
24 JUSTICE SOTOMAYOR How could they if at
25 all written their patents to shyshy to make shyshy to make
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1 their software eligible What would shyshy what do they
2 need shyshy would have needed to have added
3 MR PERRY Justice Sotomayor they have no
4 software first Theyve never written software
5 Theyve never programmed a computer So thats a
6 nonexistent set
7 Second there are many technological
8 solutions to trading and settlement problems For
9 example data compression These shyshy these trading
10 platforms involve the movement of very large quantities
11 of data around the world The physical pipes that is
12 the fiber optic cables and data lines are limited
13 There are very sophisticated algorithms for both
14 security and speed to move data through the transmission
15 lines in novel and useful ways that could well be
16 patented
17 Nothing like that is claimed here To come
18 back to where I started if you look for example at
19 Claim 65 in the 510 patent as Mr Phillips reads it
20 it literally reads on a twoshyparty escrow to sell a
21 house so long as the escrow agent is typing this stuff
22 into the HUDshy1 using a computer That has nothing to do
23 with multilevel shyshy
24 CHIEF JUSTICE ROBERTS Well thats a
25 little more complicated He referred us to Joint
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1 Appendix Page 159 which is not a change in how
2 computers work But it is shyshy constitutes the
3 instructions about how to use the computer and where it
4 needs to be affected And just looking at it it looks
5 pretty complicated There are a lot of arrows and
6 they shyshy you know different things that go shyshy
7 (Laughter)
8 CHIEF JUSTICE ROBERTS Well but I mean
9 you know it shyshy in different directions And I
10 understand him to say that in each of those places
11 thats where the computer is needed
12 MR PERRY Mr Chief Justice Figure 16 has
13 nothing to do with the invention asserted against my
14 client in this case There are two inventions in this
15 patent One invention involving multilateral contract
16 formation is not asserted against my client And all of
17 these drawings pertain to that The only drawings that
18 pertain to the asserted claims are 25 and 33 to 37 And
19 that was established below and its established in this
20 Court And Mr Phillips has never disputed it
21 So the claim hes pointed the Court shyshy the
22 figure hes pointed the Court to has nothing to do with
23 the invention Its for a different invention that is
24 not at issue in this case
25 Remember there are hundreds and hundreds of
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1 pages of these patents They all pertain to the other
2 invention Thats why in the back of our red brief we
3 excerpted the very little bit that actually pertains to
4 this You sort of tack on patent shyshy the tack on claim
5 that Mr Phillips is asserting here Its 4 columns
6 Its less than five pages in the printed appendix that
7 actually pertains to this invention And it contains no
8 disclosure whatever
9 Justice Scalia to your question about how
10 the computer does it Of course a patent that
11 describes sufficiently how a computer does a new and
12 useful thing whether its data compression or any other
13 technological solution to a business problem a social
14 problem or a technological problem would be within the
15 realm of the shyshy of the patent laws That is what the
16 patent laws have always been for
17 This is not such a patent And the reason
18 for that is this is a preshyBilski set of patents These
19 were prosecuted under the old State Street test where
20 all the applicant had to claim was a result
21 JUSTICE KENNEDY Would you give me shyshy
22 again you already did it once shyshy an example of a
23 business process patent shyshy of a business process idea
24 and invention that is patentable
25 MR PERRY Your Honor there are many
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1 examples One would be a technological solution to a
2 business problem So that for example shyshy Ill give a
3 different example There are many applications today
4 The Court may be familiar with streaming video to watch
5 video on your computer
6 It is not possible to get enough data
7 through existing lines in its raw format The data has
8 to be manipulated in order to see live video So if you
9 want to watch TV on your phone for example
10 Those algorithms those inventions are
11 undoubtedly technological And if they are used in a
12 trading platform or a hedging system or something else
13 that wouldnt disable them And this is what the Diehr
14 case shyshy
15 JUSTICE KENNEDY Well I shyshy I shyshy in my
16 language Ive called that mechanical rather than
17 process Can you give me an example of process
18 MR PERRY Yes Your Honor The process in
19 that example would be a computer running the particular
20 data compression algorithm
21 JUSTICE KENNEDY But thats how to make
22 a shyshy thats how to make a machine work better
23 MR PERRY Yes Your Honor
24 JUSTICE KENNEDY Im asking you Is there
25 any business process any business activity that is
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1 susceptible to a patent a pure patent innovations that
2 deserve patents
3 MR PERRY Your Honor again a
4 technological solution to a business problem could well
5 be whether its a method or a process is equivalent
6 Again Congress said method in a corresponding shyshy
7 JUSTICE KENNEDY Can you give me an
8 example
9 MR PERRY I thought the data compression
10 example was a good one Ill try an encryption
11 technology Many of these trading platforms you know
12 dealing with securities and money would require some
13 sort of security devices You could have a process for
14 securely transmitting data would be another computer
15 implemented technological solution to a business
16 problem Again nothing like that claimed here
17 JUSTICE SOTOMAYOR How about eshymail and
18 just word processing programs
19 MR PERRY Your Honor a program shyshy let me
20 try it this way to both of your questions In our view
21 if what is claimed as the inventive contribution under
22 Mayo shyshy in other words if we have an abstract idea as
23 we do here and what is claimed is the inventive
24 contribution for Step 2 is the computer then the
25 computer must be essential to that operation and
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1 represent an advancement in computer science or other
2 technology And we know thats not met here Justice
3 Sotomayor because shyshy
4 JUSTICE SOTOMAYOR So youre saying no to
5 eshymail and word processing
6 MR PERRY Your Honor I think at a
7 point shyshy
8 JUSTICE SOTOMAYOR They certainly have
9 functionality and shyshy and improvement of functionality
10 for the user
11 MR PERRY At a point in time in the past
12 I think both of those would have been technological
13 advances that were patentable
14 JUSTICE SOTOMAYOR How
15 MR PERRY Today shyshy because they would have
16 provided a technological solution to a then unmet
17 problem Today reciting and do it on a word processor
18 is no different than and do it on a typewriter or shyshy and
19 do it on a calculator
20 The inventive contribution component which
21 uses specifically the language of conventional and
22 routine and well understood will evolve with
23 technology Thats why its different than the abstract
24 idea component
25 And here we know that these patents dont
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1 claim anything that was not conventional well
2 understood and routine We went through that in great
3 detail and Alice has never disputed a word of it They
4 just say youre not supposed to do that analysis even
5 though the Court 9shy0 in Mayo said we should
6 And in this case its very important to
7 look at what Alices own experts said on the subject
8 This is not our expert This is Alices expert And
9 this is at Page 1327shy28 of the Joint Appendix It is
10 possible to do the business methods of maintaining
11 accounts adjusting accounts and providing an
12 instruction without a computer or other hardware
13 And then Justice Breyer directly to your
14 abacus If someone had thought of this invention
15 soshycalled invention 100 years ago they might have
16 implemented it in a nonelectronic manner using various
17 precomputing tools such as an abacus or handwritten
18 ledgers
19 We know from Benson the Courts seminal
20 computer implementation case that if you can do it by
21 head and hand then the computer doesnt add anything
22 inventive within the meaning of the 101 exception That
23 is the holding of Benson And the Court reiterated that
24 in Mayo
25 Flook said exactly the same thing If you
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1 can do it with pencil and paper then the computer is
2 not offering anything that the patent laws are or should
3 be concerned with
4 It is only where the method will not work
5 without a computer which is not these claims and where
6 the computer itself is doing something that the patent
7 law is willing to protect
8 CHIEF JUSTICE ROBERTS What if shyshy what if
9 you can do it without a computer but its going to
10 take you know 20 people a hundred years In other
11 words theoretically you can replicate what the
12 computer does shyshy
13 MR PERRY Two answers
14 CHIEF JUSTICE ROBERTS shyshy but its
15 impractical without looking to do it on the computer
16 MR PERRY Mr Chief Justice first these
17 claims literally read as Alice reads them on a single
18 transaction between two parties so its not 20 people
19 for a hundred years Its one person sitting in a room
20 so thats not a problem
21 Second if what is being claimed is the
22 necessary speed or efficiency or data crunching
23 capabilities if you will of a computer then it would
24 have to be claimed and theres nothing claimed here
25 All that is claimed shyshy and my friend is going to stand
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1 up on rebuttal and tell you all that the expert said
2 well what is claimed is a computer but its just a
3 computer It just says a computer configured too It
4 doesnt say that the computer actually has to shyshy
5 JUSTICE BREYER Yeah but the trouble with
6 that particular test is as I think partly the Chief
7 Justice said how long et cetera and then add to that
8 though you could do it without a computer what happens
9 at the end of the line is the automobile engine goes off
10 or it begins to sputter or it turns left
11 You see its possible to take Archimedes shyshy
12 shyshy you know I use that example purposely to call
13 attention to the problem You can take those things
14 and youre not just saying apply it and youre not even
15 just saying shyshy you are saying use the computer but at
16 the end of the road something physical in the world
17 changes and everybody would say now thats shyshy that
18 will falls within I mean probably I mean my
19 hesitation shows Im looking for the right words
20 MR PERRY Justice Breyer your point is
21 the reason that it is equally fallacious to suggest on
22 the one hand as Alice and IBM does that simply
23 reciting a computer is a magic key that gets you through
24 101 and you never have to any other inquiry and what
25 some of folks the amici on the other side say which
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1 is that computers or software are never eligible Both
2 of those things have to be wrong because what the Court
3 said in Bilski was future innovation is too uncertain
4 We are not going to do that as a Court And the Court
5 laid out an approach using abstract ideas in Bilski and
6 inventive contribution in Mayo that is flexible enough
7 to take into account that innovation and to deal with
8 particular claims in context which is why at the end
9 of the day we have to come back to these patents and
10 decide which shyshy
11 JUSTICE KAGAN Mr Perry before we get
12 back to these matters you said to Justice Scalia if a
13 patent sufficiently describes how a computer will
14 implement an idea then its patentable So how
15 sufficiently does one have to describe it What do we
16 want a judge to do at this threshold level in terms of
17 trying to figure out whether the description is
18 sufficient to get you past it
19 MR PERRY If I can answer in two steps
20 Justice Kagan First in the negative What the
21 applicant or patentee must do shyshy must not do is simply
22 describe the desired result That would take us back to
23 State Street That would simply say I claim a magic
24 box that buys high and sells low or vice versa I
25 suppose I claim a magic box for investing Thats what
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1 these patents do
2 Then to put it in the affirmative and in the
3 language of Mayo the claim has to recite something
4 significantly more something significantly more than
5 the abstract idea itself That would be a contextual
6 analysis based on the claims and specifications and file
7 history and we know that some devices some methods
8 some programming will pass that
9 It is not going to be a brightshyline rule and
10 thats one of the tugshyofshywar issues that this Court and
11 the Federal Circuit have been having in these cases
12 The Federal Circuit wants brightshyline rules All
13 computers are in or all computers are out
14 This Court has been more contextual This
15 Court has been more nuanced This Court has looked at
16 things in a more robust way
17 JUSTICE KAGAN Youre not suggesting that
18 specific code is necessary
19 MR PERRY No Your Honor I think the shyshy
20 actual description of the programming is a 112 problem
21 I agree with that A 112 issue That is the realm of
22 the written description requirement What is a 101
23 problem is it is on the applicant to do more than simply
24 describe the results simply say A magic box that does
25 intermediate settlement And we can tie that back to
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1 this particular prosecution the 510 patent which is
2 the method patent
3 The examiner rejected it Under Section
4 101 the examiner said this is an abstract idea You
5 cant have this patent And the only change that this
6 applicant made was to add in the adjusting step
7 electronic adjustment It put in one word
8 electronic adjustment And under State Street which
9 is what this patent is prosecuted under that was
10 enough because the result of adjusting run through a
11 computer is enough
12 Under current law that cant be enough
13 That just cant get a patent over the line because this
14 Court said in Mayo and I got to quote this language
15 Simply implementing a fundamental principle on a
16 physical machine namely a computer is not a patentable
17 application of that principle Thats all that Alice
18 has done
19 These are preshyBilski patents They never
20 should have been issued General Verrilli will stand up
21 and address that point And certainly under current
22 law shyshy one point on the AIA Congress did not send all
23 this to the administrative process Congress created
24 two avenues the courts and the PTO to use the
25 standards Essentially it ratified Bilski and Mayo and
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1 said we agree with what you all are doing at the
2 Supreme Court and the existing standards are good enough
3 for us This is a judicial problem And that is a good
4 reason The abstract shyshy
5 JUSTICE GINSBURG The Federal Circuit in
6 this case split in many ways and it had our decisions
7 to deal with You said given Bilski and Mayo this is
8 an easy case What is the instruction that escaped a
9 good number of judges on the Federal Circuit How would
10 you state the rule
11 MR PERRY Your Honor I think theres a
12 significant element to the Federal Circuit that
13 disagrees with Mayo and has been resistant in applying
14 it Chief Judge shyshy former Chief Judge Michelle filed a
15 brief in this Court essentially saying Mayo is a
16 lifeshysciences case You should limit it to that because
17 if you apply it to everything else then these patents
18 are no good
19 Mayo we submit is a technologyshyneutral
20 industryshyneutral exceptionshyneutral framework that can
21 be used to answer all of these questions This is not
22 the death of software patents The software industry is
23 all before this Court saying this is fine with us
24 Every company in the United States practically except
25 for IBM is saying go ahead This will not affect
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1 software patents
2 Justice Ginsburg this Courts precedents
3 are clear They are unanimous They just need to be
4 applied To suggest that there is confusion that needs
5 to be addressed by retreating beating a retreat from
6 recent unanimous decisions would simply reward
7 intransigence difficulty refusal to adhere to what are
8 clear precedents because shyshy
9 JUSTICE KAGAN Should we be concerned
10 Mr Perry that there are old patents that in fact could
11 meet the test that you set forth but wont because they
12 were written in a different time and so used much more
13 general language
14 MR PERRY Your Honor the applicant or the
15 patent holder would have the opportunity to institute a
16 reexamination proceeding or some sort of administration
17 process to address that issue
18 And second it should be noted this is a
19 very small problem There are 2 million outstanding
20 patents in the United States In the last four fiscal
21 years there were 22000 infringement litigations
22 instituted but since Bilski there have only been 57
23 district court decisions on Section 101 issues There
24 have only been 12 Federal Circuit decisions total on
25 computer implementation
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1 We are talking about a group of patents
2 Justice Kagan thats way out at the tail end of
3 distribution Most patents never have a 101 challenge
4 This is not an issue with cotton gins and other things
5 This is a problem for the most marginal
6 most dubious most skeptical patents the ones that this
7 Court in Bilski shyshy and remember what Bilskis holding
8 is The majority said they are processes but it did
9 not say they are eligible
10 Thank you Mr Chief Justice
11 CHIEF JUSTICE ROBERTS Thank you counsel
12 General Verrilli
13 ORAL ARGUMENT OF DONALD B VERRILLI JR
14 ON BEHALF OF THE UNITED STATES AS AMICUS
15 CURIAE SUPPORTING RESPONDENTS
16 GENERAL VERRILLI Mr Chief Justice and
17 may it please the Court
18 An abstract idea does not become
19 patentshyeligible merely by tacking on an instruction to
20 use a computer to carry it out A computer makes a
21 difference under Section 101 when it imposes a
22 meaningful limit on the patent claim That occurs when
23 the claim is directed at improvement in computing
24 technology or an innovation that uses computing
25 technology to improve other technological functions
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1 Thats the test that we believe is most faithful to this
2 Courts precedents in Bilski and Mayo It keeps patents
3 within their traditional and appropriate domain and it
4 is capable of being administered consistently by Courts
5 and by PTO examiners
6 JUSTICE GINSBURG How do you answer the
7 argument that your view would extinguish businessshymethod
8 patents and make all software ineligible for patent
9 protection
10 GENERAL VERRILLI Yeah with shyshy let me
11 address software patents first because that I think is
12 obviously a significant question And its just not
13 correct to say that our approach would make software
14 patenting ineligible Any software patent that improves
15 the functioning of the computer technology is eligible
16 Any software patent that improves shyshy that is used to
17 improve another technology is eligible For example
18 the patent in the shyshy in the Diehr case is one in
19 which shyshy
20 JUSTICE SOTOMAYOR Why do we need to reach
21 this in that shyshy reach software patents at all in this
22 case
23 GENERAL VERRILLI Well shyshy
24 JUSTICE SOTOMAYOR Whats the necessity for
25 us to announce a general rule with respect to software
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1 There is no software being patented in this case
2 GENERAL VERRILLI Well I shyshy
3 JUSTICE SOTOMAYOR Theres a systems
4 GENERAL VERRILLI Well I shyshy I think shyshy
5 well they shyshy they shyshy theres a process being and shyshy and
6 one can think of software patents as process patents
7 And I think thats why my friends on the other side are
8 saying the sky is falling because they shyshy they are
9 interpreting what were saying about that when a
10 computer makes shyshy when a computers involvement makes
11 something eligible under 101 its calling those into
12 question and it doesnt
13 JUSTICE SOTOMAYOR Do you think we have to
14 reach the patentability of software to answer this case
15 GENERAL VERRILLI Well I think you can shyshy
16 I think the answer to that question is no not
17 necessarily You can decide it by saying that shyshy that
18 Bilski answers the question whether this is an abstract
19 idea because this form of hedging is really no
20 different than the form of hedging as a conceptual
21 matter at issue in Bilski And then Mayo answers the
22 question of whether the use of a computer in this case
23 adds enough to the abstract idea beyond conventional
24 steps because here all we have after all is just
25 conventional use of computing technology no computer
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1 innovation such that you dont qualify under 101 You
2 could take that approach
3 But it is important to the United States
4 that we shyshy and to our patent examiners that we get some
5 clarity if we can I think the clarity could come from
6 the text that I propose which I want to reiterate shyshy
7 JUSTICE SOTOMAYOR Well shyshy
8 JUSTICE BREYER Could shyshy could shyshy could you
9 go on with that because you were just getting to the
10 point where I think you say a computer improvement that
11 in fact leads to an improvement in harvesting cotton is
12 an improvement through a computer of technology so it
13 qualifies
14 But then I think you were going to say or I
15 got this also from the brief a computer improvement
16 that leads to an improvement in the methods of selling
17 bonds over the telephone is not an improvement in
18 technology reached by the computer Am I right about
19 the distinction youre making
20 GENERAL VERRILLI I dont think theres a
21 yes or no answer to that question
22 JUSTICE BREYER What is your view Yeah
23 what is shyshy how do we deal with just that problem
24 GENERAL VERRILLI If there is a genuine
25 innovation in the functioning of the computer shyshy
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1 JUSTICE BREYER Yes
2 GENERAL VERRILLI shyshy such that business
3 processes shyshy
4 JUSTICE BREYER Weve got that Yes yes
5 We got the computer But then it doesnt improve the
6 computer but rather it improves through the computer
7 the harvesting of cotton
8 Now youve got it in what you said was your
9 second category which is an improvement through the
10 computer of a technology And I thought in your brief
11 you were distinguishing an improvement through the
12 computer of a human activity that is not a technology
13 and in particular to pick an example of that
14 something in finance or something in business
15 Now am I right about the distinction youre
16 making
17 GENERAL VERRILLI Yeah that shyshy
18 JUSTICE BREYER If Im not right what is
19 the distinction
20 GENERAL VERRILLI That is generally the
21 line were drawing Frankly shyshy
22 JUSTICE BREYER And how is that justified
23 GENERAL VERRILLI I do want shyshy
24 JUSTICE BREYER That shyshy that is Judge Dyk
25 in shyshy in Bilski in the Federal circuit 4 people sort of
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1 picked it up maybe 5 didnt pick it up Would you say
2 a few words about it
3 GENERAL VERRILLI Sure About shyshy let me go
4 to Bilski there in that I do think while shyshy while
5 certainly the Court held that the term process got a
6 natural construction which could include business
7 methods it seems to me that thats not all the Court
8 said in Bilski The Court also said that it was
9 historically and traditionally quite rare that business
10 methods were patent eligible
11 It also said that shyshy that the shyshy that courts
12 and the PTO examiners should use the abstract ideas
13 exception to 101 to police the appropriate boundary
14 It also said that the
15 machineshyorshytransformation test that the United States
16 advocated remained a useful tool And of course that
17 directs to you seeing whether there is a technology
18 application
19 And of course the holding in Bilski was
20 that the shyshy the method for hedging risk was ineligible
21 because it was an abstract idea and I cant imagine
22 that if in Bilski the shyshy the claim had been exactly the
23 same but had added use a computer to carry out some of
24 these standard random analysis functions that are
25 claimed by the patent that you would have found it to
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1 be patent eligible
2 And I shyshy I would submit for the Court that
3 the key point here I think is that now given where
4 the Court shyshy what the Court has held in Bilski given
5 what its held in Mayo the abstract ideas exception is
6 really the only tool left to deal with what I shyshy what I
7 think I fairly read Bilski as saying is a significant
8 problem the proliferation of patents of business
9 methods
10 JUSTICE KENNEDY Is there an example that
11 you can give us of a shyshy what we can call a business
12 process that is patentable a process that doesnt
13 involve improving the workings of a computer
14 GENERAL VERRILLI I shyshy I think its going
15 to be difficult for me to do that I think for
16 example if you had a business method a process for
17 additional security pointshyofshysale credit card
18 transactions using particular encryption technology
19 that might well be patent eligible Its a technology
20 that it makes conduct of business more efficient or
21 effective
22 But there is a technological link here and
23 we do think thats critical to our shyshy to our point of
24 view with respect to the case And I shyshy and I do think
25 remember that when we say something is not patent
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1 eligible were not saying they cant do it Were
2 saying they cant monopolize it
3 And the concern in a situation like this one
4 is that if this is patent eligible its hard to see
5 why for example the first person who came up with a
6 frequent flier program wouldnt have been able to claim
7 a patent there because after all thats a business
8 method for improving customer loyalty implemented on a
9 computer
10 CHIEF JUSTICE ROBERTS General I shyshy you
11 mentioned a while ago the need for greater clarity and
12 certainty in this area And Im just wondering in your
13 brief youve got a nonshyexhaustive of factors to
14 consider and there are 6 different ones And Im just
15 doubtful that thats going to bring about greater
16 clarity and certainty
17 GENERAL VERRILLI I take shyshy I take the
18 point Mr Chief Justice but I think the key is that
19 they are all directed to answering the question of
20 whether the innovation that is claimed and is an
21 innovation in either A the improvement of a computers
22 functioning or B the use of computer technology to
23 improve the functioning of another technological
24 process and a case like Diehr would be in the latter
25 category
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1 And so I do think that thats the key
2 benchmark Thats the baseline Thats the test that
3 we do think can be applied clearly and consistently by
4 the courts or the PTO And it avoids the risk of things
5 like frequent flier programs or the Oakland As money
6 ball methods for evaluating the contributions in
7 individual baseball players make or any one of a host of
8 other things that our intuitions tell us just dont
9 belong in the patent system
10 Thats the shyshy drawing that line keeps them
11 out not drawing that line lets them in And with all
12 due respect I dont think that the novelty and
13 nonobviousness filters that 102 and 103 really deal with
14 that problem effectively because when you get to
15 nonobviousness in 103 for example youll be asking a
16 different question
17 If you take the frequent flier program you
18 would say well is this innovation in building consumer
19 loyalty something that would have been obvious to
20 somebody who runs an airline Its totally divorced
21 from the question of technology at that point and
22 therefore I dont think youre going to get the screen
23 that you need to get in order for the patent system to
24 be confined to its traditional and appropriate scope
25 If there are no further questions thank
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1 you
2 JUSTICE GINSBURG I have a question about
3 how do you identify an abstract concept The shyshy a
4 natural phenomenon a mathematical formula those are
5 easy to identify but there has been some confusion on
6 what qualifies as an abstract concept
7 GENERAL VERRILLI We would define
8 abstract shyshy an abstract concept as a claim that is not
9 directed to a concrete innovation in technology
10 science or the industrial arts So its the shyshy its
11 abstract in the sense that it is not a concrete
12 innovation in the traditional realm of patent law
13 Thank you
14 CHIEF JUSTICE ROBERTS Thank you General
15 Mr Phillips you have four minutes
16 remaining
17 REBUTTAL ARGUMENT OF CARTER G PHILLIPS
18 ON BEHALF OF THE PETITIONERS
19 MR PHILLIPS Thank you Mr Chief Justice
20 Id just like to make a few points
21 First of all with respect to the question
22 you asked which is looking at 159 et cetera all I can
23 tell you is that if you look at claim 33 it talks about
24 matched orders the matched orders that are described in
25 286 and 287 and then makes specific reference to 159
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1 and that flow chart thats there And its all designed
2 as a package Its only one element of the shyshy of the
3 invention but it is a central element and its an easy
4 one to understand And it goes well beyond simply the
5 notion of hedge shyshy hedge against settlement risk and do
6 it by a computer
7 JUSTICE SOTOMAYOR Your adversary says that
8 his shyshy the appendix to his brief are the only patents at
9 issue that the flow charts are not at issue in this
10 case
11 MR PHILLIPS Theres no basis for that
12 statement Your Honor There shyshy remember this went off
13 on a very truncated litigation process So theres shyshy
14 you know we shyshy we got cut off at the beginning of it
15 Theres been no construction of the shyshy of the claims
16 and shyshy and obviously these are specifications that go
17 to how you interpret the claim
18 JUSTICE SOTOMAYOR If we were to say that
19 there are no business patents shyshy
20 MR PHILLIPS Yes
21 JUSTICE SOTOMAYOR shyshy would your patent
22 survive at all
23 MR PHILLIPS No I dont shyshy I dont
24 believe so I think theres no question And you
25 know General Verrilli could not have been any plainer
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1 in his statement of how he wants to interpret the
2 abstract idea concept
3 JUSTICE SOTOMAYOR Yes he wants to say no
4 business patents
5 MR PHILLIPS No business shyshy just another
6 way of saying no business methods And you know the
7 Court rejected that And it seems to me extraordinary
8 to say Congress didnt reject no business methods in
9 101 but were going to do shyshy were going to manipulate
10 the judicial exception to accomplish precisely that same
11 thing It seems to me thats wholly inappropriate
12 Justice Ginsburg you asked my shyshy my friend
13 here you know whats his test He didnt answer that
14 question youll notice because he doesnt have an
15 answer His basic argument is whatever you do just
16 kill this patent
17 And if I were in his shoes I suppose Id
18 take that same position I think whats absolutely
19 clear is that the test ought to be one that is
20 structured as a very coarse filter not the kind of
21 filter that hes pushing for where it changes over time
22 I mean I thought his shyshy I thought his response to one
23 of the questions about eshymail and word processing that
24 Justice Sotomayor asked is over time it would change
25 Well thats exactly what 102 and 103 are for That is
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1 not the purpose of shyshy of Section 101
2 And then he uses the example of encryption
3 I guarantee you if we were arguing about encryption in
4 this case he would say to me that thats an abstract
5 principle because encryption is a concept thats been
6 around since time immemorial George Washington used
7 it Everybody has used encryption
8 And a question again thats not the
9 solution to these problems The question is how did we
10 go about doing it And we go beyond the basics of
11 simply saying use a computer and thats what we ask
12 this Court to focus on and to evaluate
13 As to the frequent flier program its
14 pretty clear to me that even though it was a novel idea
15 in some sense the concept itself would have been viewed
16 in shyshy in the KSR fashion as quite obvious as a means of
17 improving customer loyalty
18 There are solutions here Giving us 101
19 pass doesnt create a monopoly It just gets us to the
20 102 and 103 inquiries that are at the heart of what the
21 patent laws shyshy and 112 that are at the heart of what the
22 patent laws ought to be dealing with
23 If there are no further questions Your
24 Honor thank you
25 CHIEF JUSTICE ROBERTS Thank you counsel
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1 The case is submitted
2 (Whereupon at 1105 am the case in the
3 aboveshyentitled matter was submitted)
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
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25
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58
A add 714 1023 algorithm 3320 41 automatically
As 525 3621 387 algorithms apply 72425 111
am 115 32 416 3013 3310 2019 281213 automobile 389
572 added 302 Alice 13 34 2822 3814 available 99
abacus 61213 4923 363 3717 4217 avenues 4124
710 1018 additional 5017 3822 4117 applying 4213 avoids 524
1325 3614 3617
address 4121 4317 4511
Alices 271 2919 3678
approach 226 395 4513 B
ability 1514 addressed 435 allow 94 472 B 121 29 4413
able 1511 167 addressing 181 allows 97 242 appropriate 5122
1919 516 adds 4623 amazing 2514 81516 1514 back 1621
aboveshyentitled adhere 437 amici 3825 453 4913 1922 2512
113 573 adjudication amicus 123 5224 3018 322
absolutely 125 241 210 4414 Archimedes 3991222
1215 159 adjusting 3611 analysis 424 281122 3811 4025
5518 41610 364 406 area 219 5112 ball 526
abstract 4267 adjustment 417 4924 argue 2518 Bank 17 35
48 6682023 418 analyze 1416 arguing 563 banks 95
721 8218 administered 1716 argument 114 bars 43
141920 1522 454 announce 4525 225812 33 baseball 527
165 181618 administration answer 119 37 41 144 based 423 406
2220 24925 4316 2219 247 18323 226 baseline 522
2621 277 administrative 3919 4221 26715 4413 basic 413 5515
2938 3422 171218 187 456 461416 457 5317 basically 1821
3523 395 242 4123 4721 551315 5515 2319
405 414 424 adopt 203 answering 5119 arguments basics 5610
4418 461823 adopted 31317 answers 3713 1415 basis 132 1512
491221 505 advancement 461821 arms 1625 1516 2719
53368811 351 anyway 1810 arrangements 5411
552 564 advances 3513 apparatus 2916 131 beating 435
accept 102 adversary 547 APPEARAN arrows 315 beginning 163
accomplish advice 1715 116 art 1919 5414
5510 advocated 4916 appears 820 arts 2124 5310 begins 3810
account 55 618 affect 4225 appendix 1910 aside 1422 157 behalf 11719
397 affirmative 402 311 326 369 asked 2314 122 24710
accounts 823 agent 52 3021 548 278 5322 214 38 2616
9356 3611 ago 318 2224 applicant 3220 551224 4414 5318
3611 3615 5111 3921 4023 asking 193 believe 1316
accurately 2413 agree 920 2021 416 4314 221213 273 1416 2421
acknowledges 221 2418 application 3324 5215 255 264 451
1121 4021 421 2623 4117 aspect 517 5424
act 99 2017 agrees 2812 4918 asserted 3113 belong 529
activities 229 ahead 4225 applications 311618 benchmark 522
activity 2122 AIA 2912 4122 333 asserting 325 Benson 361923
3325 4812 airline 5220 applied 434 attaching 124 best 161124
actual 4020 AL 18 523 attention 3813 better 1610 albeit 923 applies 31418 Attorney 2021 216 2819
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59
3322 brightshyline 409 2313 37 71 4338 5519 beyond 115 4012 5317 checks 618 5614
1312 4623 bring 5115 case 3412 46 Chief 339 clearly 211 251 544 5610 broad 248 116 1524 261217 3024 523
Bilski 313 46 broader 225 2022 213 31812 378 client 311416 415 1722 browsing 228 2211 2313 371416 386 close 2822 2224 2329 builder 2811 2625 311424 421414 4410 CLS 17 35 262020 271 building 5218 3314 36620 441116 5110 1120 2816 2999 built 2324 426816 5118 531419 coarse 247 3935 4125 business 168 451822 461 5625 5520 427 4322 1749 203 461422 5024 chits 611 code 1213 142 447 452 2124 222122 5124 5410 chronological 1916171720 461821 4825 2311 29613 564 5712 1512 2725 4018 49481922 32132323 cases 244 2816 chronologically coffee 1211 5047 3322525 4011 423 colleagues 116
Bilskis 447 34415 3610 catalogues 2512 circuit 2818 college 58 bit 323 48214 4969 262 401112 425 columns 325 blocks 54 508111620 categorically 42912 4324 come 108 234 Bloomberg 517 5419 202 4825 3017 399
2115 225 554568 category 489 circumstances 475 boat 2811 businessshymeth 5125 318 1515 comes 1318 bonds 4717 457 CBM 2913 claim 416 2418 2018 231 bothering 118 buy 183 cellphones 228 2423 2522 coming 923 bound 1521 buys 3924 central 95 543 264 27917 common 31120 boundary 4913 certain 1216 3019 3121 2157 bounds 1521 C certainly 518 32420 361 company 4224 box 392425 C 21 31 263 358 392325 403 competition
4024 cables 3012 4121 495 442223 4922 161011 Breyer 66823 calculator 3519 certainty 5112 516 53823 completely 921
74691923 call 3812 5011 5116 5417 1422 2320 85810 1012 called 721 275 cetera 387 claimed 41014 complex 126 1021 1523 3316 5322 281 3017 complicated 161418 171 calling 4611 Chakrabarty 34162123 1225 235 1922 2114 capabilities 2016 3721242425 3025 315 221216 239 3723 challenge 443 382 4925 component 2315 285 capable 141 change 186 5120 352024 293 3613 454 273 311 415 claims 1416 compression 38520 478 capture 2415 5524 171616 2419 309 3212 4722 4814 captures 2412 changes 3817 2424 2515 3320 349 48182224 card 5017 5521 2520 2648 computer 422
brief 211315 carefully 1725 chart 541 283 3118 516 621 710 2255 322 caricature 718 charted 2620 37517 398 71325 9113 4215 4715 72020 1417 charts 1911 406 5415 91824 1035 4810 5113 1716 549 clarity 4755 10725 1116 548 carry 4420 Charybdis 511116 124102024
briefs 1524 4923 1620 2619 class 59 13911 1479 1618 CARTER 117 checkbook 617 clear 1015 118 1421 15710
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1517 165 confess 1111 coterminous 4121 5324 181719 196 configured 383 2321 customer 518 describes 425 19814 206 confined 5224 cotton 914 444 5617 2918 3211 2025 211016 confirmed 2912 4711 487 cut 5414 3913 2117 2410 confusion 434 counsel 4411 description
D2521525 535 5625 3917 402022 D 312622 30522 Congress 178 countries 137 deserve 342 DC 1101719 31311 3210 1725 1856 course 719 designed 720
1223211 33519 1924 2014 1613 298 812 541 data 2917 309 34142425 2325 291213 3210 491619 desired 3922
30111214 351 361220 346 412223 court 1114 detail 363 3212 3367 3621 37156 558 3101317 detailed 1914 3320 34914 379121523 consequences 922 145 developed 2119 3722382334815 2011 1720 1939 device 207
dating 2953823 3913 consider 5114 2011216 devices 3413 day 612 813 411116 4325 consistently 2222 2321 407
910 399442020 4515 454 523 2618 27345 dicta 923 1012 deal 42023 46102225 constitutes 312 28718 299 Diehr 2322
172 187 397 4710121518 construction 31202122 3313 4518 427 47234725 48566 496 5415 334 36523 5124 506 5213481012 4923 consumer 5218 39244 4010 difference 921
dealing 4175013 51922 contains 327 40141515 2789 4421 1119 135546 5611 content 281417 4114 42215 different 421 151216 3412 computers 2819 4223 4323 79 919 1377 56224610 5121 context 2319 44717 4957 191 259 266
deals 814computers 243 398 498 50244 2888 3169 death 42221616 195 contextual 405 557 5612 3123 333 Debit 27212119 312 4014 Courts 3619 351823 4312 debiting 2718391 401313 contract 3115 432 452 4620 5114 decade 176computing contribution courts 2018 5216 decide 3910442324 4625 342124 3520 4124 454 difficult 817
4617concept 413 396 4911 524 159 5015 decision 161810 1419 contributions create 96 1712 difficulties 420
1811522 53368 526 241 251 difficulty 437 decisions 274552 56515 conventional 5619 direct 2721
426 43623 concepts 2944 3521 361 created 186 directed 4423 43242955 462325 244 4123 5119 539
declare 2010conceptual converting 141 creates 93 directions 319 default 27104620 copyrighted creation 518 directly 31415 define 537concern 513 1315 credit 231 322 2019 Departmentconcerned 373 Corporation 13 271021 5017 298 3613
122439 34 crediting 2718 directs 4917 depends 2520concerns 93 correct 4513 critical 5023 disable 3313 describe 58concrete 1118 correctly 2416 crunching 3722 disaggregate
1112 391522 253 53911 corresponding curiae 123 211 144 1520 4024conduct 5020 2720 2915 4415 disagree 513
described 717conducted 297 346 current 4112 disagrees 4213
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disclosure 328 413 302021 4220 figure 1146 discuss 164 economy 1516 ESQ 1171921 excerpted 323 311222 3917 discussion 299 effective 1223 236913 exhausted 1813 file 406 dispose 2625 5021 essence 211 exist 420 131 filed 4214 dispute 325 effectively 5214 essential 1224 existence 1119 fill 2818 disputed 3120 efficacy 1224 3425 175 filled 293
363 1517 essentially 2016 existing 337 filter 248 5520 distance 2311 efficiency 3722 261 4125 422 5521 distinction 415 efficient 5020 4215 exists 42 filters 5213
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1 know quite capable of converting these functions into
2 very specific code
3 JUSTICE KAGAN Mr Phillips could you shyshy
4 could you disaggregate your argument for me Because
5 you just said look this Court has said its not
6 sufficient if you have an idea and then you say use a
7 computer to implement it right So are you saying that
8 your shyshy that shyshy are you saying that youre doing more
9 than saying use a computer to implement it or are you
10 saying that its shyshy that the idea itself is more than an
11 idea
12 MR PHILLIPS Yes Im saying shyshy
13 JUSTICE KAGAN Which part of what shyshy
14 MR PHILLIPS Im saying both actually I
15 mean Im making both of those arguments I shyshy I
16 believe that if you analyze the claims and you dont
17 caricature them and you dont strip them out of the
18 limitations that are embedded in there this is not some
19 kind of an abstract concept This is not some kind shyshy
20 its not an abstract idea Its a vary shyshy
21 JUSTICE KAGAN So putting the computer
22 stuff aside completely shyshy
23 MR PHILLIPS Right
24 JUSTICE KAGAN shyshy youre saying that youve
25 invented something or you shyshy
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1 MR PHILIPS Yes
2 JUSTICE KAGAN There is something that
3 youve patented that has shyshy that is not just simple use
4 a third party to do a settlement
5 MR PHILLIPS Right
6 JUSTICE KAGAN And what is that putting
7 the computer aside
8 MR PHILLIPS It is shyshy well shyshy and again
9 its difficult to do that because you absolutely need
10 the computer in order to implement this But the key to
11 the invention is the notion of being able
12 simultaneously dealing with it on a chronological basis
13 to stop transactions that will otherwise interfere with
14 the ability to settle on time and under the appropriate
15 circumstances And the only way you can do that in a
16 realtime basis when youre dealing with a global economy
17 is to use a computer It is necessary to the efficacy
18 of this
19 So in that sense I cant shyshy I cant
20 disaggregate it the way in some sense youre suggesting
21 It seems to me its bound up with in shyshy its bounds up
22 with the whole notion of is this an abstract concept
23 JUSTICE BREYER Can you in fact shyshy now
24 this is shyshy look there are 42 briefs in this case I
25 actually read them and I found them very very helpful
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1 up to the point where I have to make a decision because
2 theyre serious I mean you know shyshy now the problem
3 that I came away with is the one that youre beginning
4 to discuss that if you simply say take an idea thats
5 abstract and implement it on a computer there are shyshy
6 youre going to get it much faster youre going to be
7 able to do many many things and if thats good enough
8 there is a risk that you will take business in the
9 United States or large segments and instead of having
10 competition on price service and better production
11 methods well have competition on who has the best
12 patent lawyer You see where Im going on that one
13 MR PHILLIPS Yeah of course
14 JUSTICE BREYER And if you go the other way
15 and say never then what you do is you rule out real
16 inventions with computers
17 MR PHILLIPS Right
18 JUSTICE BREYER And so in those 42 briefs
19 there are a number of suggestions as to how to go
20 between Scylla and Charybdis Now I would like to
21 know shyshy I dont know if you can step back from your
22 representational model Thats a problem Youre all
23 we have now And shyshy and from my point of view I need
24 to know what in your opinion is the best way of sailing
25 between these two serious arms
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1 MR PHILLIPS Well Justice Breyer I guess
2 I would suggest to you that you might want to deal with
3 the problem you know as opposed to the problems you
4 dont know at this stage I mean we have had business
5 method patents and software patents in existence for
6 well over a decade and theyre obviously quite
7 significant in number And shyshy and we know what the
8 system is we have And Congress looked at that system
9 right and didnt say no to business methods patents
10 didnt say no to software patents instead said the
11 solution to this problem is to get it out of the
12 judicial process and create an administrative process
13 but leave the substantive standards intact
14 So my suggestion to you would be follow that
15 same advice a liberal interpretation of 101 and not a
16 caricature of the claims analyze the claims as written
17 and therefore say that the solution is 102 and 103 and
18 use the administrative process If you shyshy
19 JUSTICE GINSBURG Mr Phillips let me just
20 stop you there because four Justices of this Court did
21 not read that legislative history the way you do And
22 it was shyshy was in Bilski
23 MR PHILLIPS But this is postshyBilski
24 JUSTICE GINSBURG Justice Stevens went
25 carefully through that and he said Congress was
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1 reacting to a decision It had shyshy it was not addressing
2 101 So there are at least four Justices who say shyshy who
3 didnt buy that argument
4 MR PHILLIPS Well I mean it still seems
5 to me that the shyshy the natural inference is Congress did
6 not change 101 Congress created an entire
7 administrative system to deal with 101 102 and 103
8 And shyshy and I would hope shyshy
9 JUSTICE SCALIA And four is not five
10 anyway right
11 MR PHILLIPS Thats true
12 JUSTICE SCALIA Four is not five
13 MR PHILLIPS And youve exhausted my math
14 skills Your Honor
15 JUSTICE SCALIA By the way we shyshy we have
16 said that you cant take an abstract idea and then say
17 use a computer to implement it But we havent said
18 that you cant take an abstract idea and then say here
19 is how you use a computer to implement it shyshy
20 MR PHILLIPS Exactly
21 JUSTICE SCALIA shyshy which is basically what
22 youre doing
23 MR PHILLIPS And thats the argument were
24 doing and shyshy
25 JUSTICE SCALIA And thats a little
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1 different
2 MR PHILLIPS shyshy thats the line were
3 asking the Court to draw here
4 JUSTICE KAGAN Well how are you saying the
5 how Because I thought that your computers shyshy that your
6 patents really did just say do this on a computer as
7 opposed to saying anything substantive about how to do
8 it on a computer
9 MR PHILLIPS I would urge the Court to
10 look at Joint Appendix 159 285shy286 where it goes
11 through the flow charts This is shyshy and this is just a
12 specific example of the method by which you stop a
13 transaction and it goes through a varied series of
14 detailed steps and what the computer has to do in order
15 to do that It doesnt actually obviously put in the
16 code but thats what the PTO says dont do Dont put
17 in the code because nobody understands code so shyshy but
18 put in the functions and we know shyshy and we know that
19 someone skilled in the art will be able to put in the
20 code And if they arent if they cant do that then
21 its not enabled and thats a 112 problem
22 To go back Justice Breyer to your
23 question So on the one hand youve got a problem that
24 it seems to me Congress to some extent has said is okay
25 and weve got a solution and that solutions playing
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1 through On the other hand if this Court were to say
2 much more categorically either that theres no such
3 thing as business method patents or adopt the Solicitor
4 Generals interpretation which is to say that there
5 cannot be software unless the software somehow actually
6 improves the computer as opposed to software improving
7 every other device or any other mechanism that might be
8 out there
9 What we know is that this would inherently
10 declare and in one fell swoop hundreds of thousands of
11 patents invalid and the consequences of that it seems
12 to me are utterly unknowable And before the Court goes
13 down that path I would think it would think long and
14 hard about whether isnt that a judgment that Congress
15 ought to make And It seems to me in that sense youre
16 essentially where the Court was in Chakrabarty where
17 everybody was saying youve got to act in one way or the
18 other or the world comes to an end and the courts have
19 said well apply 101 directly
20 JUSTICE KENNEDY If we say that theres no
21 software patentability and agree with the Attorney
22 General do you lose in this case
23 MR PHILLIPS Well it would be very hard
24 for me to see how that shyshy how shyshy how I can get around
25 that particular problem because the computer is the
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1 essence of it so shyshy and a portion of it is clearly the
2 software So I think if you say there is no such thing
3 as software patentability I do lose in this case yes
4 Your Honor As do a whole lot of other people
5 JUSTICE KENNEDY Is there any common ground
6 between you and the government shyshy maybe a better
7 question to ask the government shyshy a common ground
8 between you and the government on something in the
9 software area thats patentable other than making the
10 computer itself work You understand the government to
11 say no software patents
12 MR PHILLIPS Thats the way I interpret
13 the governments shyshy the governments brief
14 JUSTICE BREYER It was like shyshy theres a
15 Bloomberg brief out here that was on this that said
16 no you can shyshy you can patent computer software when
17 its an improvement in the computer when its an
18 improvement in software when its an improvement in a
19 technology that is developed out of computers like
20 robotics when it is an improvement in a machine or
21 technology but you cannot improve it where it is simply
22 an improvement in an activity that is engaged in
23 primarily through mental processes But what they mean
24 by that is business finance and similar arts
25 Thats shyshy I mean thats shyshy it wasnt quite what shyshy I
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1 know Thats what I want to know what you dont agree
2 with about that because its a little more refined than
3 you suggested
4 MR PHILLIPS I read the Solicitor
5 Generals brief as broader than the Bloomberg brief
6 in shyshy in terms of the approach And IBMs argument is
7 if you knock out software patents you eliminate web
8 browsing word processing cellphones eshymail Those
9 are all activities that I dont think fall within the
10 meaning of the shyshy the meaning of the governments theory
11 of the case
12 JUSTICE BREYER But Im asking you shyshy Im
13 asking you what about this one that I just mentioned
14 You see I went through those five steps shyshy
15 MR PHILLIPS Right
16 JUSTICE BREYER shyshy and four of them you
17 could patent and the fifth one you cant
18 MR PHILLIPS Right But I shyshy and I guess
19 my answer to that is thats nowhere in the statute and
20 it doesnt seem to me to reflect an abstract idea Its
21 a shyshy its a line you draw that takes out business method
22 patents If the Court wants to eliminate business
23 method patents fine But you just said no to that in
24 Bilski two three terms ago
25 Now to be sure give the Solicitor General
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1 credit he comes here and says to you We didnt like
2 the result in Bilski we want you to say dont use
3 process in order to get there which is a statutory
4 interpretation come up with an extraordinarily
5 complicated way of looking at the exception and use that
6 to get to the exact same result
7 JUSTICE SOTOMAYOR Well youre doing a
8 very good job of proving shyshy
9 JUSTICE GINSBURG In Bilski Justice Breyer
10 did try to say that there wasnt that shyshy a whole lot of
11 distance between the four who thought business methods
12 were not patentable But he shyshy he also said something
13 else in shyshy in the other case Mayo Justice Scalia
14 asked you the question about doesnt that go to novelty
15 but didnt Justice Breyer say in Mayo that novelty can
16 be relevant to patent shyshy to patent eligibility He said
17 theres shyshy theres an overlap
18 MR PHILLIPS Well he said theres an
19 overlap Here in this context I think basically the
20 Respondents theory would mean that they are completely
21 coterminous And I dont think thats what the Court
22 meant And also we know from Diehr that theres got to
23 be at least some significant limitations on the extent
24 to which novelty has to be built into 101 That is the
25 province of 102 and 103 And as I said Congress
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1 modified the system of adjudication to create an
2 administrative mechanism that allows you to get to 102
3 and 103 And at least in context its important to
4 realize there have been 11 cases since that was created
5 9 of the 11 have been knocked down on 102 or 103 grounds
6 and not on 101 grounds And it seems to me thats the
7 answer to this problem is leave 101 as the coarse
8 filter If on its face it states these kinds of broad
9 abstract principles fundamental truths and even if it
10 says use a computer those should be struck down
11 JUSTICE SOTOMAYOR Which of the shyshy which of
12 the opinions below captures your position most
13 accurately
14 MR PHILLIPS I would guess it would be
15 Judge Moores opinion below that would capture ours most
16 correctly
17 JUSTICE SOTOMAYOR And if we were to think
18 your method claim is ineligible do you agree that your
19 systems and shyshy your medium and system claims fail as
20 well Do they rise and fall together
21 MR PHILLIPS No No I dont believe they
22 do rise and fall together I mean I think you could shyshy
23 if you wanted to interpret our medium claim shyshy I mean
24 our shyshy our method claims in a shyshy in particularly
25 abstract way I think you could still say that the
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1 system claims which clearly are shyshy are how to create a
2 computer system and how to implement it using that
3 method would be a much more concrete version of that in
4 a way that would take it out of 101 That said I
5 obviously believe that all of our claims satisfy 101
6 and should go on to the next stage
7 JUSTICE KAGAN Can I give you a
8 hypothetical Mr Phillips and you tell me how its
9 different or the same Lets say you know 30 years
10 somebody took a look around the world and said a lot of
11 people seem to order products by mail They get the
12 catalogues in the mail and then they send back their
13 return forms And lets say that one of the founders of
14 the Internet said wouldnt this be an amazing system
15 we could actually do this by computer and they had
16 patented that Is that the same
17 MR PHILLIPS I dont know if its the
18 same but I would shyshy I would argue that it could very
19 well be a patentable subject matter because shyshy but it
20 depends on how the claims play out
21 JUSTICE KAGAN No but exactly I mean
22 the claim would have said something along the lines of
23 you know theres this process by which people order
24 products and we want to do it over the Internet we want
25 to do it electronically and we will use a computer to
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1 do that to essentially take the process of mail order
2 catalogues and make it electronic
3 MR PHILLIPS I could certainly shyshy I think
4 I could write a claim shyshy a set of claims that I believe
5 would satisfy 101 And shyshy and to the extent that
6 youd shyshy that youd think those are no different than
7 the ones I have here then my argument is simply I think
8 I satisfy 101 with the claims we have before us Your
9 Honor
10 If there are no further questions then Id
11 like to reserve the rest of my time
12 CHIEF JUSTICE ROBERTS Thank you
13 Mr Phillips
14 Mr Perry
15 ORAL ARGUMENT OF MARK A PERRY
16 ON BEHALF OF THE RESPONDENTS
17 MR PERRY Mr Chief Justice and may it
18 please the Court
19 That path between Scylla and Charybdis was
20 charted in Bilski and Mayo Bilski holds that a
21 fundamental economic principle is an abstract idea and
22 Mayo holds that running such a principle on a computer
23 is quote not a patentable application of that
24 principle Those two propositions are sufficient to
25 dispose of this case
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1 If Bilski and Mayo stand Alices patents
2 fail Therefore Mr Phillips and his friends are
3 asking this Court to change the standard even though
4 this Court has had three unanimous decisions in the last
5 four terms establishing what the Court called a myriad
6 a wellshyestablished standard
7 On the abstract idea Justice Ginsburg you
8 asked Mr Phillips whats the difference between hedging
9 and this claim There is no difference This is
10 hedging It is hedging against credit default rather
11 than price fluctuation but it is simply hedging
12 And Mr Phillips stood up for 26 minutes and
13 never once referred to the patent Lets look at what
14 the inventor the soshycalled inventor said about this
15 invention This is at JA 293 to 94 in the
16 specification
17 This claim has simply two steps Its very
18 simple First debiting and crediting on a realtime
19 basis the relevant shadow records and second by
20 periodically affecting corresponding payment
21 instructions Those are direct quotes Debit credit
22 and pay Your Honor you cant get much more simple
23 than that
24 Mr Phillips suggests well we have
25 multilateral transactions global things chronological
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1 time zones and so forth None of those are claimed
2 Your Honor Those are all recited in specification
3 The claims read on a single transaction involving two
4 parties
5 JUSTICE BREYER Can I ask you at some
6 point not necessarily this second to say in my shyshy this
7 is just shyshy you know you have an opinion for a court
8 Different judges can have different interpretations
9 All youre getting is mine okay
10 But I think its pretty easy to say that
11 Archimedes cant just go to a boat builder and say
12 apply my idea All right Everybody agrees with that
13 But now we try to take that word apply and give
14 content to it
15 And what I suspect in my opinion Mayo did
16 and Bilski and the other cases is sketch an outer shell
17 of the content hoping that the experts you and the
18 other lawyers and the shyshy the circuit court could fill
19 in a little better than we had done the content of that
20 shell
21 So so far youre saying well this is
22 close enough to Archimedes saying apply it that we
23 neednt go further
24 Now will you at some point in the next few
25 minutes give me your impression of if it were necessary
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1 to go further what would the right words or example be
2 MR PERRY Your Honor as shyshy Justice
3 Breyer as to abstract ideas the PTO has filled in that
4 shell by listing economic concepts legal concepts
5 financial concepts teaching concepts dating and
6 interpersonal relationships and generally how business
7 should be conducted as examples of those things that are
8 likely abstract which of course all follow directly
9 from Bilski and the discussion this Court had in Bilski
10 And this patent shyshy these patents fall squarely within
11 that
12 Congress in the AIA confirmed that
13 reading Congress in the CBM method said business
14 methods that are subject to special scrutiny shyshy that is
15 dubious patents shyshy include methods and corresponding
16 apparatus which is what we have here that pertain to
17 data processing in the financial services industry and
18 do not offer a technological solution That describes
19 Alices patents to a letter Your Honor So that we
20 have shyshy
21 JUSTICE SOTOMAYOR What do you think is a
22 technological solution
23 MR PERRY Your Honor shyshy
24 JUSTICE SOTOMAYOR How could they if at
25 all written their patents to shyshy to make shyshy to make
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1 their software eligible What would shyshy what do they
2 need shyshy would have needed to have added
3 MR PERRY Justice Sotomayor they have no
4 software first Theyve never written software
5 Theyve never programmed a computer So thats a
6 nonexistent set
7 Second there are many technological
8 solutions to trading and settlement problems For
9 example data compression These shyshy these trading
10 platforms involve the movement of very large quantities
11 of data around the world The physical pipes that is
12 the fiber optic cables and data lines are limited
13 There are very sophisticated algorithms for both
14 security and speed to move data through the transmission
15 lines in novel and useful ways that could well be
16 patented
17 Nothing like that is claimed here To come
18 back to where I started if you look for example at
19 Claim 65 in the 510 patent as Mr Phillips reads it
20 it literally reads on a twoshyparty escrow to sell a
21 house so long as the escrow agent is typing this stuff
22 into the HUDshy1 using a computer That has nothing to do
23 with multilevel shyshy
24 CHIEF JUSTICE ROBERTS Well thats a
25 little more complicated He referred us to Joint
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1 Appendix Page 159 which is not a change in how
2 computers work But it is shyshy constitutes the
3 instructions about how to use the computer and where it
4 needs to be affected And just looking at it it looks
5 pretty complicated There are a lot of arrows and
6 they shyshy you know different things that go shyshy
7 (Laughter)
8 CHIEF JUSTICE ROBERTS Well but I mean
9 you know it shyshy in different directions And I
10 understand him to say that in each of those places
11 thats where the computer is needed
12 MR PERRY Mr Chief Justice Figure 16 has
13 nothing to do with the invention asserted against my
14 client in this case There are two inventions in this
15 patent One invention involving multilateral contract
16 formation is not asserted against my client And all of
17 these drawings pertain to that The only drawings that
18 pertain to the asserted claims are 25 and 33 to 37 And
19 that was established below and its established in this
20 Court And Mr Phillips has never disputed it
21 So the claim hes pointed the Court shyshy the
22 figure hes pointed the Court to has nothing to do with
23 the invention Its for a different invention that is
24 not at issue in this case
25 Remember there are hundreds and hundreds of
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1 pages of these patents They all pertain to the other
2 invention Thats why in the back of our red brief we
3 excerpted the very little bit that actually pertains to
4 this You sort of tack on patent shyshy the tack on claim
5 that Mr Phillips is asserting here Its 4 columns
6 Its less than five pages in the printed appendix that
7 actually pertains to this invention And it contains no
8 disclosure whatever
9 Justice Scalia to your question about how
10 the computer does it Of course a patent that
11 describes sufficiently how a computer does a new and
12 useful thing whether its data compression or any other
13 technological solution to a business problem a social
14 problem or a technological problem would be within the
15 realm of the shyshy of the patent laws That is what the
16 patent laws have always been for
17 This is not such a patent And the reason
18 for that is this is a preshyBilski set of patents These
19 were prosecuted under the old State Street test where
20 all the applicant had to claim was a result
21 JUSTICE KENNEDY Would you give me shyshy
22 again you already did it once shyshy an example of a
23 business process patent shyshy of a business process idea
24 and invention that is patentable
25 MR PERRY Your Honor there are many
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1 examples One would be a technological solution to a
2 business problem So that for example shyshy Ill give a
3 different example There are many applications today
4 The Court may be familiar with streaming video to watch
5 video on your computer
6 It is not possible to get enough data
7 through existing lines in its raw format The data has
8 to be manipulated in order to see live video So if you
9 want to watch TV on your phone for example
10 Those algorithms those inventions are
11 undoubtedly technological And if they are used in a
12 trading platform or a hedging system or something else
13 that wouldnt disable them And this is what the Diehr
14 case shyshy
15 JUSTICE KENNEDY Well I shyshy I shyshy in my
16 language Ive called that mechanical rather than
17 process Can you give me an example of process
18 MR PERRY Yes Your Honor The process in
19 that example would be a computer running the particular
20 data compression algorithm
21 JUSTICE KENNEDY But thats how to make
22 a shyshy thats how to make a machine work better
23 MR PERRY Yes Your Honor
24 JUSTICE KENNEDY Im asking you Is there
25 any business process any business activity that is
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34
1 susceptible to a patent a pure patent innovations that
2 deserve patents
3 MR PERRY Your Honor again a
4 technological solution to a business problem could well
5 be whether its a method or a process is equivalent
6 Again Congress said method in a corresponding shyshy
7 JUSTICE KENNEDY Can you give me an
8 example
9 MR PERRY I thought the data compression
10 example was a good one Ill try an encryption
11 technology Many of these trading platforms you know
12 dealing with securities and money would require some
13 sort of security devices You could have a process for
14 securely transmitting data would be another computer
15 implemented technological solution to a business
16 problem Again nothing like that claimed here
17 JUSTICE SOTOMAYOR How about eshymail and
18 just word processing programs
19 MR PERRY Your Honor a program shyshy let me
20 try it this way to both of your questions In our view
21 if what is claimed as the inventive contribution under
22 Mayo shyshy in other words if we have an abstract idea as
23 we do here and what is claimed is the inventive
24 contribution for Step 2 is the computer then the
25 computer must be essential to that operation and
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1 represent an advancement in computer science or other
2 technology And we know thats not met here Justice
3 Sotomayor because shyshy
4 JUSTICE SOTOMAYOR So youre saying no to
5 eshymail and word processing
6 MR PERRY Your Honor I think at a
7 point shyshy
8 JUSTICE SOTOMAYOR They certainly have
9 functionality and shyshy and improvement of functionality
10 for the user
11 MR PERRY At a point in time in the past
12 I think both of those would have been technological
13 advances that were patentable
14 JUSTICE SOTOMAYOR How
15 MR PERRY Today shyshy because they would have
16 provided a technological solution to a then unmet
17 problem Today reciting and do it on a word processor
18 is no different than and do it on a typewriter or shyshy and
19 do it on a calculator
20 The inventive contribution component which
21 uses specifically the language of conventional and
22 routine and well understood will evolve with
23 technology Thats why its different than the abstract
24 idea component
25 And here we know that these patents dont
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1 claim anything that was not conventional well
2 understood and routine We went through that in great
3 detail and Alice has never disputed a word of it They
4 just say youre not supposed to do that analysis even
5 though the Court 9shy0 in Mayo said we should
6 And in this case its very important to
7 look at what Alices own experts said on the subject
8 This is not our expert This is Alices expert And
9 this is at Page 1327shy28 of the Joint Appendix It is
10 possible to do the business methods of maintaining
11 accounts adjusting accounts and providing an
12 instruction without a computer or other hardware
13 And then Justice Breyer directly to your
14 abacus If someone had thought of this invention
15 soshycalled invention 100 years ago they might have
16 implemented it in a nonelectronic manner using various
17 precomputing tools such as an abacus or handwritten
18 ledgers
19 We know from Benson the Courts seminal
20 computer implementation case that if you can do it by
21 head and hand then the computer doesnt add anything
22 inventive within the meaning of the 101 exception That
23 is the holding of Benson And the Court reiterated that
24 in Mayo
25 Flook said exactly the same thing If you
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1 can do it with pencil and paper then the computer is
2 not offering anything that the patent laws are or should
3 be concerned with
4 It is only where the method will not work
5 without a computer which is not these claims and where
6 the computer itself is doing something that the patent
7 law is willing to protect
8 CHIEF JUSTICE ROBERTS What if shyshy what if
9 you can do it without a computer but its going to
10 take you know 20 people a hundred years In other
11 words theoretically you can replicate what the
12 computer does shyshy
13 MR PERRY Two answers
14 CHIEF JUSTICE ROBERTS shyshy but its
15 impractical without looking to do it on the computer
16 MR PERRY Mr Chief Justice first these
17 claims literally read as Alice reads them on a single
18 transaction between two parties so its not 20 people
19 for a hundred years Its one person sitting in a room
20 so thats not a problem
21 Second if what is being claimed is the
22 necessary speed or efficiency or data crunching
23 capabilities if you will of a computer then it would
24 have to be claimed and theres nothing claimed here
25 All that is claimed shyshy and my friend is going to stand
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1 up on rebuttal and tell you all that the expert said
2 well what is claimed is a computer but its just a
3 computer It just says a computer configured too It
4 doesnt say that the computer actually has to shyshy
5 JUSTICE BREYER Yeah but the trouble with
6 that particular test is as I think partly the Chief
7 Justice said how long et cetera and then add to that
8 though you could do it without a computer what happens
9 at the end of the line is the automobile engine goes off
10 or it begins to sputter or it turns left
11 You see its possible to take Archimedes shyshy
12 shyshy you know I use that example purposely to call
13 attention to the problem You can take those things
14 and youre not just saying apply it and youre not even
15 just saying shyshy you are saying use the computer but at
16 the end of the road something physical in the world
17 changes and everybody would say now thats shyshy that
18 will falls within I mean probably I mean my
19 hesitation shows Im looking for the right words
20 MR PERRY Justice Breyer your point is
21 the reason that it is equally fallacious to suggest on
22 the one hand as Alice and IBM does that simply
23 reciting a computer is a magic key that gets you through
24 101 and you never have to any other inquiry and what
25 some of folks the amici on the other side say which
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1 is that computers or software are never eligible Both
2 of those things have to be wrong because what the Court
3 said in Bilski was future innovation is too uncertain
4 We are not going to do that as a Court And the Court
5 laid out an approach using abstract ideas in Bilski and
6 inventive contribution in Mayo that is flexible enough
7 to take into account that innovation and to deal with
8 particular claims in context which is why at the end
9 of the day we have to come back to these patents and
10 decide which shyshy
11 JUSTICE KAGAN Mr Perry before we get
12 back to these matters you said to Justice Scalia if a
13 patent sufficiently describes how a computer will
14 implement an idea then its patentable So how
15 sufficiently does one have to describe it What do we
16 want a judge to do at this threshold level in terms of
17 trying to figure out whether the description is
18 sufficient to get you past it
19 MR PERRY If I can answer in two steps
20 Justice Kagan First in the negative What the
21 applicant or patentee must do shyshy must not do is simply
22 describe the desired result That would take us back to
23 State Street That would simply say I claim a magic
24 box that buys high and sells low or vice versa I
25 suppose I claim a magic box for investing Thats what
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1 these patents do
2 Then to put it in the affirmative and in the
3 language of Mayo the claim has to recite something
4 significantly more something significantly more than
5 the abstract idea itself That would be a contextual
6 analysis based on the claims and specifications and file
7 history and we know that some devices some methods
8 some programming will pass that
9 It is not going to be a brightshyline rule and
10 thats one of the tugshyofshywar issues that this Court and
11 the Federal Circuit have been having in these cases
12 The Federal Circuit wants brightshyline rules All
13 computers are in or all computers are out
14 This Court has been more contextual This
15 Court has been more nuanced This Court has looked at
16 things in a more robust way
17 JUSTICE KAGAN Youre not suggesting that
18 specific code is necessary
19 MR PERRY No Your Honor I think the shyshy
20 actual description of the programming is a 112 problem
21 I agree with that A 112 issue That is the realm of
22 the written description requirement What is a 101
23 problem is it is on the applicant to do more than simply
24 describe the results simply say A magic box that does
25 intermediate settlement And we can tie that back to
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1 this particular prosecution the 510 patent which is
2 the method patent
3 The examiner rejected it Under Section
4 101 the examiner said this is an abstract idea You
5 cant have this patent And the only change that this
6 applicant made was to add in the adjusting step
7 electronic adjustment It put in one word
8 electronic adjustment And under State Street which
9 is what this patent is prosecuted under that was
10 enough because the result of adjusting run through a
11 computer is enough
12 Under current law that cant be enough
13 That just cant get a patent over the line because this
14 Court said in Mayo and I got to quote this language
15 Simply implementing a fundamental principle on a
16 physical machine namely a computer is not a patentable
17 application of that principle Thats all that Alice
18 has done
19 These are preshyBilski patents They never
20 should have been issued General Verrilli will stand up
21 and address that point And certainly under current
22 law shyshy one point on the AIA Congress did not send all
23 this to the administrative process Congress created
24 two avenues the courts and the PTO to use the
25 standards Essentially it ratified Bilski and Mayo and
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1 said we agree with what you all are doing at the
2 Supreme Court and the existing standards are good enough
3 for us This is a judicial problem And that is a good
4 reason The abstract shyshy
5 JUSTICE GINSBURG The Federal Circuit in
6 this case split in many ways and it had our decisions
7 to deal with You said given Bilski and Mayo this is
8 an easy case What is the instruction that escaped a
9 good number of judges on the Federal Circuit How would
10 you state the rule
11 MR PERRY Your Honor I think theres a
12 significant element to the Federal Circuit that
13 disagrees with Mayo and has been resistant in applying
14 it Chief Judge shyshy former Chief Judge Michelle filed a
15 brief in this Court essentially saying Mayo is a
16 lifeshysciences case You should limit it to that because
17 if you apply it to everything else then these patents
18 are no good
19 Mayo we submit is a technologyshyneutral
20 industryshyneutral exceptionshyneutral framework that can
21 be used to answer all of these questions This is not
22 the death of software patents The software industry is
23 all before this Court saying this is fine with us
24 Every company in the United States practically except
25 for IBM is saying go ahead This will not affect
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1 software patents
2 Justice Ginsburg this Courts precedents
3 are clear They are unanimous They just need to be
4 applied To suggest that there is confusion that needs
5 to be addressed by retreating beating a retreat from
6 recent unanimous decisions would simply reward
7 intransigence difficulty refusal to adhere to what are
8 clear precedents because shyshy
9 JUSTICE KAGAN Should we be concerned
10 Mr Perry that there are old patents that in fact could
11 meet the test that you set forth but wont because they
12 were written in a different time and so used much more
13 general language
14 MR PERRY Your Honor the applicant or the
15 patent holder would have the opportunity to institute a
16 reexamination proceeding or some sort of administration
17 process to address that issue
18 And second it should be noted this is a
19 very small problem There are 2 million outstanding
20 patents in the United States In the last four fiscal
21 years there were 22000 infringement litigations
22 instituted but since Bilski there have only been 57
23 district court decisions on Section 101 issues There
24 have only been 12 Federal Circuit decisions total on
25 computer implementation
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1 We are talking about a group of patents
2 Justice Kagan thats way out at the tail end of
3 distribution Most patents never have a 101 challenge
4 This is not an issue with cotton gins and other things
5 This is a problem for the most marginal
6 most dubious most skeptical patents the ones that this
7 Court in Bilski shyshy and remember what Bilskis holding
8 is The majority said they are processes but it did
9 not say they are eligible
10 Thank you Mr Chief Justice
11 CHIEF JUSTICE ROBERTS Thank you counsel
12 General Verrilli
13 ORAL ARGUMENT OF DONALD B VERRILLI JR
14 ON BEHALF OF THE UNITED STATES AS AMICUS
15 CURIAE SUPPORTING RESPONDENTS
16 GENERAL VERRILLI Mr Chief Justice and
17 may it please the Court
18 An abstract idea does not become
19 patentshyeligible merely by tacking on an instruction to
20 use a computer to carry it out A computer makes a
21 difference under Section 101 when it imposes a
22 meaningful limit on the patent claim That occurs when
23 the claim is directed at improvement in computing
24 technology or an innovation that uses computing
25 technology to improve other technological functions
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1 Thats the test that we believe is most faithful to this
2 Courts precedents in Bilski and Mayo It keeps patents
3 within their traditional and appropriate domain and it
4 is capable of being administered consistently by Courts
5 and by PTO examiners
6 JUSTICE GINSBURG How do you answer the
7 argument that your view would extinguish businessshymethod
8 patents and make all software ineligible for patent
9 protection
10 GENERAL VERRILLI Yeah with shyshy let me
11 address software patents first because that I think is
12 obviously a significant question And its just not
13 correct to say that our approach would make software
14 patenting ineligible Any software patent that improves
15 the functioning of the computer technology is eligible
16 Any software patent that improves shyshy that is used to
17 improve another technology is eligible For example
18 the patent in the shyshy in the Diehr case is one in
19 which shyshy
20 JUSTICE SOTOMAYOR Why do we need to reach
21 this in that shyshy reach software patents at all in this
22 case
23 GENERAL VERRILLI Well shyshy
24 JUSTICE SOTOMAYOR Whats the necessity for
25 us to announce a general rule with respect to software
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1 There is no software being patented in this case
2 GENERAL VERRILLI Well I shyshy
3 JUSTICE SOTOMAYOR Theres a systems
4 GENERAL VERRILLI Well I shyshy I think shyshy
5 well they shyshy they shyshy theres a process being and shyshy and
6 one can think of software patents as process patents
7 And I think thats why my friends on the other side are
8 saying the sky is falling because they shyshy they are
9 interpreting what were saying about that when a
10 computer makes shyshy when a computers involvement makes
11 something eligible under 101 its calling those into
12 question and it doesnt
13 JUSTICE SOTOMAYOR Do you think we have to
14 reach the patentability of software to answer this case
15 GENERAL VERRILLI Well I think you can shyshy
16 I think the answer to that question is no not
17 necessarily You can decide it by saying that shyshy that
18 Bilski answers the question whether this is an abstract
19 idea because this form of hedging is really no
20 different than the form of hedging as a conceptual
21 matter at issue in Bilski And then Mayo answers the
22 question of whether the use of a computer in this case
23 adds enough to the abstract idea beyond conventional
24 steps because here all we have after all is just
25 conventional use of computing technology no computer
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1 innovation such that you dont qualify under 101 You
2 could take that approach
3 But it is important to the United States
4 that we shyshy and to our patent examiners that we get some
5 clarity if we can I think the clarity could come from
6 the text that I propose which I want to reiterate shyshy
7 JUSTICE SOTOMAYOR Well shyshy
8 JUSTICE BREYER Could shyshy could shyshy could you
9 go on with that because you were just getting to the
10 point where I think you say a computer improvement that
11 in fact leads to an improvement in harvesting cotton is
12 an improvement through a computer of technology so it
13 qualifies
14 But then I think you were going to say or I
15 got this also from the brief a computer improvement
16 that leads to an improvement in the methods of selling
17 bonds over the telephone is not an improvement in
18 technology reached by the computer Am I right about
19 the distinction youre making
20 GENERAL VERRILLI I dont think theres a
21 yes or no answer to that question
22 JUSTICE BREYER What is your view Yeah
23 what is shyshy how do we deal with just that problem
24 GENERAL VERRILLI If there is a genuine
25 innovation in the functioning of the computer shyshy
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1 JUSTICE BREYER Yes
2 GENERAL VERRILLI shyshy such that business
3 processes shyshy
4 JUSTICE BREYER Weve got that Yes yes
5 We got the computer But then it doesnt improve the
6 computer but rather it improves through the computer
7 the harvesting of cotton
8 Now youve got it in what you said was your
9 second category which is an improvement through the
10 computer of a technology And I thought in your brief
11 you were distinguishing an improvement through the
12 computer of a human activity that is not a technology
13 and in particular to pick an example of that
14 something in finance or something in business
15 Now am I right about the distinction youre
16 making
17 GENERAL VERRILLI Yeah that shyshy
18 JUSTICE BREYER If Im not right what is
19 the distinction
20 GENERAL VERRILLI That is generally the
21 line were drawing Frankly shyshy
22 JUSTICE BREYER And how is that justified
23 GENERAL VERRILLI I do want shyshy
24 JUSTICE BREYER That shyshy that is Judge Dyk
25 in shyshy in Bilski in the Federal circuit 4 people sort of
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1 picked it up maybe 5 didnt pick it up Would you say
2 a few words about it
3 GENERAL VERRILLI Sure About shyshy let me go
4 to Bilski there in that I do think while shyshy while
5 certainly the Court held that the term process got a
6 natural construction which could include business
7 methods it seems to me that thats not all the Court
8 said in Bilski The Court also said that it was
9 historically and traditionally quite rare that business
10 methods were patent eligible
11 It also said that shyshy that the shyshy that courts
12 and the PTO examiners should use the abstract ideas
13 exception to 101 to police the appropriate boundary
14 It also said that the
15 machineshyorshytransformation test that the United States
16 advocated remained a useful tool And of course that
17 directs to you seeing whether there is a technology
18 application
19 And of course the holding in Bilski was
20 that the shyshy the method for hedging risk was ineligible
21 because it was an abstract idea and I cant imagine
22 that if in Bilski the shyshy the claim had been exactly the
23 same but had added use a computer to carry out some of
24 these standard random analysis functions that are
25 claimed by the patent that you would have found it to
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1 be patent eligible
2 And I shyshy I would submit for the Court that
3 the key point here I think is that now given where
4 the Court shyshy what the Court has held in Bilski given
5 what its held in Mayo the abstract ideas exception is
6 really the only tool left to deal with what I shyshy what I
7 think I fairly read Bilski as saying is a significant
8 problem the proliferation of patents of business
9 methods
10 JUSTICE KENNEDY Is there an example that
11 you can give us of a shyshy what we can call a business
12 process that is patentable a process that doesnt
13 involve improving the workings of a computer
14 GENERAL VERRILLI I shyshy I think its going
15 to be difficult for me to do that I think for
16 example if you had a business method a process for
17 additional security pointshyofshysale credit card
18 transactions using particular encryption technology
19 that might well be patent eligible Its a technology
20 that it makes conduct of business more efficient or
21 effective
22 But there is a technological link here and
23 we do think thats critical to our shyshy to our point of
24 view with respect to the case And I shyshy and I do think
25 remember that when we say something is not patent
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1 eligible were not saying they cant do it Were
2 saying they cant monopolize it
3 And the concern in a situation like this one
4 is that if this is patent eligible its hard to see
5 why for example the first person who came up with a
6 frequent flier program wouldnt have been able to claim
7 a patent there because after all thats a business
8 method for improving customer loyalty implemented on a
9 computer
10 CHIEF JUSTICE ROBERTS General I shyshy you
11 mentioned a while ago the need for greater clarity and
12 certainty in this area And Im just wondering in your
13 brief youve got a nonshyexhaustive of factors to
14 consider and there are 6 different ones And Im just
15 doubtful that thats going to bring about greater
16 clarity and certainty
17 GENERAL VERRILLI I take shyshy I take the
18 point Mr Chief Justice but I think the key is that
19 they are all directed to answering the question of
20 whether the innovation that is claimed and is an
21 innovation in either A the improvement of a computers
22 functioning or B the use of computer technology to
23 improve the functioning of another technological
24 process and a case like Diehr would be in the latter
25 category
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1 And so I do think that thats the key
2 benchmark Thats the baseline Thats the test that
3 we do think can be applied clearly and consistently by
4 the courts or the PTO And it avoids the risk of things
5 like frequent flier programs or the Oakland As money
6 ball methods for evaluating the contributions in
7 individual baseball players make or any one of a host of
8 other things that our intuitions tell us just dont
9 belong in the patent system
10 Thats the shyshy drawing that line keeps them
11 out not drawing that line lets them in And with all
12 due respect I dont think that the novelty and
13 nonobviousness filters that 102 and 103 really deal with
14 that problem effectively because when you get to
15 nonobviousness in 103 for example youll be asking a
16 different question
17 If you take the frequent flier program you
18 would say well is this innovation in building consumer
19 loyalty something that would have been obvious to
20 somebody who runs an airline Its totally divorced
21 from the question of technology at that point and
22 therefore I dont think youre going to get the screen
23 that you need to get in order for the patent system to
24 be confined to its traditional and appropriate scope
25 If there are no further questions thank
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1 you
2 JUSTICE GINSBURG I have a question about
3 how do you identify an abstract concept The shyshy a
4 natural phenomenon a mathematical formula those are
5 easy to identify but there has been some confusion on
6 what qualifies as an abstract concept
7 GENERAL VERRILLI We would define
8 abstract shyshy an abstract concept as a claim that is not
9 directed to a concrete innovation in technology
10 science or the industrial arts So its the shyshy its
11 abstract in the sense that it is not a concrete
12 innovation in the traditional realm of patent law
13 Thank you
14 CHIEF JUSTICE ROBERTS Thank you General
15 Mr Phillips you have four minutes
16 remaining
17 REBUTTAL ARGUMENT OF CARTER G PHILLIPS
18 ON BEHALF OF THE PETITIONERS
19 MR PHILLIPS Thank you Mr Chief Justice
20 Id just like to make a few points
21 First of all with respect to the question
22 you asked which is looking at 159 et cetera all I can
23 tell you is that if you look at claim 33 it talks about
24 matched orders the matched orders that are described in
25 286 and 287 and then makes specific reference to 159
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1 and that flow chart thats there And its all designed
2 as a package Its only one element of the shyshy of the
3 invention but it is a central element and its an easy
4 one to understand And it goes well beyond simply the
5 notion of hedge shyshy hedge against settlement risk and do
6 it by a computer
7 JUSTICE SOTOMAYOR Your adversary says that
8 his shyshy the appendix to his brief are the only patents at
9 issue that the flow charts are not at issue in this
10 case
11 MR PHILLIPS Theres no basis for that
12 statement Your Honor There shyshy remember this went off
13 on a very truncated litigation process So theres shyshy
14 you know we shyshy we got cut off at the beginning of it
15 Theres been no construction of the shyshy of the claims
16 and shyshy and obviously these are specifications that go
17 to how you interpret the claim
18 JUSTICE SOTOMAYOR If we were to say that
19 there are no business patents shyshy
20 MR PHILLIPS Yes
21 JUSTICE SOTOMAYOR shyshy would your patent
22 survive at all
23 MR PHILLIPS No I dont shyshy I dont
24 believe so I think theres no question And you
25 know General Verrilli could not have been any plainer
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1 in his statement of how he wants to interpret the
2 abstract idea concept
3 JUSTICE SOTOMAYOR Yes he wants to say no
4 business patents
5 MR PHILLIPS No business shyshy just another
6 way of saying no business methods And you know the
7 Court rejected that And it seems to me extraordinary
8 to say Congress didnt reject no business methods in
9 101 but were going to do shyshy were going to manipulate
10 the judicial exception to accomplish precisely that same
11 thing It seems to me thats wholly inappropriate
12 Justice Ginsburg you asked my shyshy my friend
13 here you know whats his test He didnt answer that
14 question youll notice because he doesnt have an
15 answer His basic argument is whatever you do just
16 kill this patent
17 And if I were in his shoes I suppose Id
18 take that same position I think whats absolutely
19 clear is that the test ought to be one that is
20 structured as a very coarse filter not the kind of
21 filter that hes pushing for where it changes over time
22 I mean I thought his shyshy I thought his response to one
23 of the questions about eshymail and word processing that
24 Justice Sotomayor asked is over time it would change
25 Well thats exactly what 102 and 103 are for That is
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1 not the purpose of shyshy of Section 101
2 And then he uses the example of encryption
3 I guarantee you if we were arguing about encryption in
4 this case he would say to me that thats an abstract
5 principle because encryption is a concept thats been
6 around since time immemorial George Washington used
7 it Everybody has used encryption
8 And a question again thats not the
9 solution to these problems The question is how did we
10 go about doing it And we go beyond the basics of
11 simply saying use a computer and thats what we ask
12 this Court to focus on and to evaluate
13 As to the frequent flier program its
14 pretty clear to me that even though it was a novel idea
15 in some sense the concept itself would have been viewed
16 in shyshy in the KSR fashion as quite obvious as a means of
17 improving customer loyalty
18 There are solutions here Giving us 101
19 pass doesnt create a monopoly It just gets us to the
20 102 and 103 inquiries that are at the heart of what the
21 patent laws shyshy and 112 that are at the heart of what the
22 patent laws ought to be dealing with
23 If there are no further questions Your
24 Honor thank you
25 CHIEF JUSTICE ROBERTS Thank you counsel
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1 The case is submitted
2 (Whereupon at 1105 am the case in the
3 aboveshyentitled matter was submitted)
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
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25
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58
A add 714 1023 algorithm 3320 41 automatically
As 525 3621 387 algorithms apply 72425 111
am 115 32 416 3013 3310 2019 281213 automobile 389
572 added 302 Alice 13 34 2822 3814 available 99
abacus 61213 4923 363 3717 4217 avenues 4124
710 1018 additional 5017 3822 4117 applying 4213 avoids 524
1325 3614 3617
address 4121 4317 4511
Alices 271 2919 3678
approach 226 395 4513 B
ability 1514 addressed 435 allow 94 472 B 121 29 4413
able 1511 167 addressing 181 allows 97 242 appropriate 5122
1919 516 adds 4623 amazing 2514 81516 1514 back 1621
aboveshyentitled adhere 437 amici 3825 453 4913 1922 2512
113 573 adjudication amicus 123 5224 3018 322
absolutely 125 241 210 4414 Archimedes 3991222
1215 159 adjusting 3611 analysis 424 281122 3811 4025
5518 41610 364 406 area 219 5112 ball 526
abstract 4267 adjustment 417 4924 argue 2518 Bank 17 35
48 6682023 418 analyze 1416 arguing 563 banks 95
721 8218 administered 1716 argument 114 bars 43
141920 1522 454 announce 4525 225812 33 baseball 527
165 181618 administration answer 119 37 41 144 based 423 406
2220 24925 4316 2219 247 18323 226 baseline 522
2621 277 administrative 3919 4221 26715 4413 basic 413 5515
2938 3422 171218 187 456 461416 457 5317 basically 1821
3523 395 242 4123 4721 551315 5515 2319
405 414 424 adopt 203 answering 5119 arguments basics 5610
4418 461823 adopted 31317 answers 3713 1415 basis 132 1512
491221 505 advancement 461821 arms 1625 1516 2719
53368811 351 anyway 1810 arrangements 5411
552 564 advances 3513 apparatus 2916 131 beating 435
accept 102 adversary 547 APPEARAN arrows 315 beginning 163
accomplish advice 1715 116 art 1919 5414
5510 advocated 4916 appears 820 arts 2124 5310 begins 3810
account 55 618 affect 4225 appendix 1910 aside 1422 157 behalf 11719
397 affirmative 402 311 326 369 asked 2314 122 24710
accounts 823 agent 52 3021 548 278 5322 214 38 2616
9356 3611 ago 318 2224 applicant 3220 551224 4414 5318
3611 3615 5111 3921 4023 asking 193 believe 1316
accurately 2413 agree 920 2021 416 4314 221213 273 1416 2421
acknowledges 221 2418 application 3324 5215 255 264 451
1121 4021 421 2623 4117 aspect 517 5424
act 99 2017 agrees 2812 4918 asserted 3113 belong 529
activities 229 ahead 4225 applications 311618 benchmark 522
activity 2122 AIA 2912 4122 333 asserting 325 Benson 361923
3325 4812 airline 5220 applied 434 attaching 124 best 161124
actual 4020 AL 18 523 attention 3813 better 1610 albeit 923 applies 31418 Attorney 2021 216 2819
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3322 brightshyline 409 2313 37 71 4338 5519 beyond 115 4012 5317 checks 618 5614
1312 4623 bring 5115 case 3412 46 Chief 339 clearly 211 251 544 5610 broad 248 116 1524 261217 3024 523
Bilski 313 46 broader 225 2022 213 31812 378 client 311416 415 1722 browsing 228 2211 2313 371416 386 close 2822 2224 2329 builder 2811 2625 311424 421414 4410 CLS 17 35 262020 271 building 5218 3314 36620 441116 5110 1120 2816 2999 built 2324 426816 5118 531419 coarse 247 3935 4125 business 168 451822 461 5625 5520 427 4322 1749 203 461422 5024 chits 611 code 1213 142 447 452 2124 222122 5124 5410 chronological 1916171720 461821 4825 2311 29613 564 5712 1512 2725 4018 49481922 32132323 cases 244 2816 chronologically coffee 1211 5047 3322525 4011 423 colleagues 116
Bilskis 447 34415 3610 catalogues 2512 circuit 2818 college 58 bit 323 48214 4969 262 401112 425 columns 325 blocks 54 508111620 categorically 42912 4324 come 108 234 Bloomberg 517 5419 202 4825 3017 399
2115 225 554568 category 489 circumstances 475 boat 2811 businessshymeth 5125 318 1515 comes 1318 bonds 4717 457 CBM 2913 claim 416 2418 2018 231 bothering 118 buy 183 cellphones 228 2423 2522 coming 923 bound 1521 buys 3924 central 95 543 264 27917 common 31120 boundary 4913 certain 1216 3019 3121 2157 bounds 1521 C certainly 518 32420 361 company 4224 box 392425 C 21 31 263 358 392325 403 competition
4024 cables 3012 4121 495 442223 4922 161011 Breyer 66823 calculator 3519 certainty 5112 516 53823 completely 921
74691923 call 3812 5011 5116 5417 1422 2320 85810 1012 called 721 275 cetera 387 claimed 41014 complex 126 1021 1523 3316 5322 281 3017 complicated 161418 171 calling 4611 Chakrabarty 34162123 1225 235 1922 2114 capabilities 2016 3721242425 3025 315 221216 239 3723 challenge 443 382 4925 component 2315 285 capable 141 change 186 5120 352024 293 3613 454 273 311 415 claims 1416 compression 38520 478 capture 2415 5524 171616 2419 309 3212 4722 4814 captures 2412 changes 3817 2424 2515 3320 349 48182224 card 5017 5521 2520 2648 computer 422
brief 211315 carefully 1725 chart 541 283 3118 516 621 710 2255 322 caricature 718 charted 2620 37517 398 71325 9113 4215 4715 72020 1417 charts 1911 406 5415 91824 1035 4810 5113 1716 549 clarity 4755 10725 1116 548 carry 4420 Charybdis 511116 124102024
briefs 1524 4923 1620 2619 class 59 13911 1479 1618 CARTER 117 checkbook 617 clear 1015 118 1421 15710
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1517 165 confess 1111 coterminous 4121 5324 181719 196 configured 383 2321 customer 518 describes 425 19814 206 confined 5224 cotton 914 444 5617 2918 3211 2025 211016 confirmed 2912 4711 487 cut 5414 3913 2117 2410 confusion 434 counsel 4411 description
D2521525 535 5625 3917 402022 D 312622 30522 Congress 178 countries 137 deserve 342 DC 1101719 31311 3210 1725 1856 course 719 designed 720
1223211 33519 1924 2014 1613 298 812 541 data 2917 309 34142425 2325 291213 3210 491619 desired 3922
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910 399442020 4515 454 523 2618 27345 dicta 923 1012 deal 42023 46102225 constitutes 312 28718 299 Diehr 2322
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dealing 4175013 51922 contains 327 40141515 2789 4421 1119 135546 5611 content 281417 4114 42215 different 421 151216 3412 computers 2819 4223 4323 79 919 1377 56224610 5121 context 2319 44717 4957 191 259 266
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4617concept 413 396 4911 524 159 5015 decision 161810 1419 contributions create 96 1712 difficulties 420
1811522 53368 526 241 251 difficulty 437 decisions 274552 56515 conventional 5619 direct 2721
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declare 2010conceptual converting 141 creates 93 directions 319 default 27104620 copyrighted creation 518 directly 31415 define 537concern 513 1315 credit 231 322 2019 Departmentconcerned 373 Corporation 13 271021 5017 298 3613
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1112 391522 253 53911 corresponding curiae 123 211 144 1520 4024conduct 5020 2720 2915 4415 disagree 513
described 717conducted 297 346 current 4112 disagrees 4213
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disclosure 328 413 302021 4220 figure 1146 discuss 164 economy 1516 ESQ 1171921 excerpted 323 311222 3917 discussion 299 effective 1223 236913 exhausted 1813 file 406 dispose 2625 5021 essence 211 exist 420 131 filed 4214 dispute 325 effectively 5214 essential 1224 existence 1119 fill 2818 disputed 3120 efficacy 1224 3425 175 filled 293
363 1517 essentially 2016 existing 337 filter 248 5520 distance 2311 efficiency 3722 261 4125 422 5521 distinction 415 efficient 5020 4215 exists 42 filters 5213
4719 481519 either 202 established expert 3688 finance 2124 distinguishing 5121 311919 381 4814
4811 electronic 262 establishing expertise 1210 financial 1225 distribution 4178 275 experts 2817 29517
443 electronically et 18 387 5322 367 fine 103 2223 district 4323 2525 evaluate 97 extent 1924 4223 divorced 5220 element 811 5612 2323 265 finished 133 doing 91315 4212 5423 evaluating 526 extinguish 457 first 1111 2718
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economic 2621 fell 2010equivalent 345 4913 505 found 1525 294 fiber 3012escaped 428 5510 4925
economics 413 fifth 2217escrow 52 exceptionshyneu founders 2513
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four 1720 182 48172023 5599 3312 461920 1016 123 18912 2216 493 5014 gold 6101114 4920 138 14610 2311 275 511017 537 134 held 46 495 141120 164 4320 5315 5314 5425 good 611 167 5045 181618 2220
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52517 5613 genuine 4724 governments high 3924 414 4418 friend 3725 George 566 211313 2210 hires 612 461923 4921
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functionality 277 425 432 group 1210 home 510 immemorial 3599 456 532 441 Honor 1814 566
functioning 5512 guarantee 563 214 269 implement 911 4515 4725 give 2225 257 guess 51111 2722 282 102125 147 512223 281325 3221 171 2218 2921923 149 1510
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future 393 316 4225 hard 201423 3719 imposes 4421 479 493 514 hundreds 2010 impractical
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317 5317 1312 191013 4711 487 258 2825 gather 1325 2012 389 head 3621 improve 2121 general 121 544 hear 33 I 4425 4517
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48911 5121 410 53 issue 316 1010 31812 329 141919 5520 improvements International 3124 4021 3221 331521 kinds 248
324 17 35 4317 444 3324 34717 King 6924 improves 206 Internet 2514 4621 5499 3524814 1016 1124
451416 486 2524 issued 4120 3613 37814 knock 227 improving 206 interpersonal issues 4010 3716 3857 knocked 245
5013 518 296 4323 3820 391112 know 4611 53 5617 interpret 2112 3920 4017 54 109 141
inappropriate 2423 5417 J 425 4329 162212124 5511 551 JA 2715 442101116 17347 1918
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1 MR PHILIPS Yes
2 JUSTICE KAGAN There is something that
3 youve patented that has shyshy that is not just simple use
4 a third party to do a settlement
5 MR PHILLIPS Right
6 JUSTICE KAGAN And what is that putting
7 the computer aside
8 MR PHILLIPS It is shyshy well shyshy and again
9 its difficult to do that because you absolutely need
10 the computer in order to implement this But the key to
11 the invention is the notion of being able
12 simultaneously dealing with it on a chronological basis
13 to stop transactions that will otherwise interfere with
14 the ability to settle on time and under the appropriate
15 circumstances And the only way you can do that in a
16 realtime basis when youre dealing with a global economy
17 is to use a computer It is necessary to the efficacy
18 of this
19 So in that sense I cant shyshy I cant
20 disaggregate it the way in some sense youre suggesting
21 It seems to me its bound up with in shyshy its bounds up
22 with the whole notion of is this an abstract concept
23 JUSTICE BREYER Can you in fact shyshy now
24 this is shyshy look there are 42 briefs in this case I
25 actually read them and I found them very very helpful
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1 up to the point where I have to make a decision because
2 theyre serious I mean you know shyshy now the problem
3 that I came away with is the one that youre beginning
4 to discuss that if you simply say take an idea thats
5 abstract and implement it on a computer there are shyshy
6 youre going to get it much faster youre going to be
7 able to do many many things and if thats good enough
8 there is a risk that you will take business in the
9 United States or large segments and instead of having
10 competition on price service and better production
11 methods well have competition on who has the best
12 patent lawyer You see where Im going on that one
13 MR PHILLIPS Yeah of course
14 JUSTICE BREYER And if you go the other way
15 and say never then what you do is you rule out real
16 inventions with computers
17 MR PHILLIPS Right
18 JUSTICE BREYER And so in those 42 briefs
19 there are a number of suggestions as to how to go
20 between Scylla and Charybdis Now I would like to
21 know shyshy I dont know if you can step back from your
22 representational model Thats a problem Youre all
23 we have now And shyshy and from my point of view I need
24 to know what in your opinion is the best way of sailing
25 between these two serious arms
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1 MR PHILLIPS Well Justice Breyer I guess
2 I would suggest to you that you might want to deal with
3 the problem you know as opposed to the problems you
4 dont know at this stage I mean we have had business
5 method patents and software patents in existence for
6 well over a decade and theyre obviously quite
7 significant in number And shyshy and we know what the
8 system is we have And Congress looked at that system
9 right and didnt say no to business methods patents
10 didnt say no to software patents instead said the
11 solution to this problem is to get it out of the
12 judicial process and create an administrative process
13 but leave the substantive standards intact
14 So my suggestion to you would be follow that
15 same advice a liberal interpretation of 101 and not a
16 caricature of the claims analyze the claims as written
17 and therefore say that the solution is 102 and 103 and
18 use the administrative process If you shyshy
19 JUSTICE GINSBURG Mr Phillips let me just
20 stop you there because four Justices of this Court did
21 not read that legislative history the way you do And
22 it was shyshy was in Bilski
23 MR PHILLIPS But this is postshyBilski
24 JUSTICE GINSBURG Justice Stevens went
25 carefully through that and he said Congress was
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1 reacting to a decision It had shyshy it was not addressing
2 101 So there are at least four Justices who say shyshy who
3 didnt buy that argument
4 MR PHILLIPS Well I mean it still seems
5 to me that the shyshy the natural inference is Congress did
6 not change 101 Congress created an entire
7 administrative system to deal with 101 102 and 103
8 And shyshy and I would hope shyshy
9 JUSTICE SCALIA And four is not five
10 anyway right
11 MR PHILLIPS Thats true
12 JUSTICE SCALIA Four is not five
13 MR PHILLIPS And youve exhausted my math
14 skills Your Honor
15 JUSTICE SCALIA By the way we shyshy we have
16 said that you cant take an abstract idea and then say
17 use a computer to implement it But we havent said
18 that you cant take an abstract idea and then say here
19 is how you use a computer to implement it shyshy
20 MR PHILLIPS Exactly
21 JUSTICE SCALIA shyshy which is basically what
22 youre doing
23 MR PHILLIPS And thats the argument were
24 doing and shyshy
25 JUSTICE SCALIA And thats a little
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1 different
2 MR PHILLIPS shyshy thats the line were
3 asking the Court to draw here
4 JUSTICE KAGAN Well how are you saying the
5 how Because I thought that your computers shyshy that your
6 patents really did just say do this on a computer as
7 opposed to saying anything substantive about how to do
8 it on a computer
9 MR PHILLIPS I would urge the Court to
10 look at Joint Appendix 159 285shy286 where it goes
11 through the flow charts This is shyshy and this is just a
12 specific example of the method by which you stop a
13 transaction and it goes through a varied series of
14 detailed steps and what the computer has to do in order
15 to do that It doesnt actually obviously put in the
16 code but thats what the PTO says dont do Dont put
17 in the code because nobody understands code so shyshy but
18 put in the functions and we know shyshy and we know that
19 someone skilled in the art will be able to put in the
20 code And if they arent if they cant do that then
21 its not enabled and thats a 112 problem
22 To go back Justice Breyer to your
23 question So on the one hand youve got a problem that
24 it seems to me Congress to some extent has said is okay
25 and weve got a solution and that solutions playing
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1 through On the other hand if this Court were to say
2 much more categorically either that theres no such
3 thing as business method patents or adopt the Solicitor
4 Generals interpretation which is to say that there
5 cannot be software unless the software somehow actually
6 improves the computer as opposed to software improving
7 every other device or any other mechanism that might be
8 out there
9 What we know is that this would inherently
10 declare and in one fell swoop hundreds of thousands of
11 patents invalid and the consequences of that it seems
12 to me are utterly unknowable And before the Court goes
13 down that path I would think it would think long and
14 hard about whether isnt that a judgment that Congress
15 ought to make And It seems to me in that sense youre
16 essentially where the Court was in Chakrabarty where
17 everybody was saying youve got to act in one way or the
18 other or the world comes to an end and the courts have
19 said well apply 101 directly
20 JUSTICE KENNEDY If we say that theres no
21 software patentability and agree with the Attorney
22 General do you lose in this case
23 MR PHILLIPS Well it would be very hard
24 for me to see how that shyshy how shyshy how I can get around
25 that particular problem because the computer is the
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1 essence of it so shyshy and a portion of it is clearly the
2 software So I think if you say there is no such thing
3 as software patentability I do lose in this case yes
4 Your Honor As do a whole lot of other people
5 JUSTICE KENNEDY Is there any common ground
6 between you and the government shyshy maybe a better
7 question to ask the government shyshy a common ground
8 between you and the government on something in the
9 software area thats patentable other than making the
10 computer itself work You understand the government to
11 say no software patents
12 MR PHILLIPS Thats the way I interpret
13 the governments shyshy the governments brief
14 JUSTICE BREYER It was like shyshy theres a
15 Bloomberg brief out here that was on this that said
16 no you can shyshy you can patent computer software when
17 its an improvement in the computer when its an
18 improvement in software when its an improvement in a
19 technology that is developed out of computers like
20 robotics when it is an improvement in a machine or
21 technology but you cannot improve it where it is simply
22 an improvement in an activity that is engaged in
23 primarily through mental processes But what they mean
24 by that is business finance and similar arts
25 Thats shyshy I mean thats shyshy it wasnt quite what shyshy I
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1 know Thats what I want to know what you dont agree
2 with about that because its a little more refined than
3 you suggested
4 MR PHILLIPS I read the Solicitor
5 Generals brief as broader than the Bloomberg brief
6 in shyshy in terms of the approach And IBMs argument is
7 if you knock out software patents you eliminate web
8 browsing word processing cellphones eshymail Those
9 are all activities that I dont think fall within the
10 meaning of the shyshy the meaning of the governments theory
11 of the case
12 JUSTICE BREYER But Im asking you shyshy Im
13 asking you what about this one that I just mentioned
14 You see I went through those five steps shyshy
15 MR PHILLIPS Right
16 JUSTICE BREYER shyshy and four of them you
17 could patent and the fifth one you cant
18 MR PHILLIPS Right But I shyshy and I guess
19 my answer to that is thats nowhere in the statute and
20 it doesnt seem to me to reflect an abstract idea Its
21 a shyshy its a line you draw that takes out business method
22 patents If the Court wants to eliminate business
23 method patents fine But you just said no to that in
24 Bilski two three terms ago
25 Now to be sure give the Solicitor General
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1 credit he comes here and says to you We didnt like
2 the result in Bilski we want you to say dont use
3 process in order to get there which is a statutory
4 interpretation come up with an extraordinarily
5 complicated way of looking at the exception and use that
6 to get to the exact same result
7 JUSTICE SOTOMAYOR Well youre doing a
8 very good job of proving shyshy
9 JUSTICE GINSBURG In Bilski Justice Breyer
10 did try to say that there wasnt that shyshy a whole lot of
11 distance between the four who thought business methods
12 were not patentable But he shyshy he also said something
13 else in shyshy in the other case Mayo Justice Scalia
14 asked you the question about doesnt that go to novelty
15 but didnt Justice Breyer say in Mayo that novelty can
16 be relevant to patent shyshy to patent eligibility He said
17 theres shyshy theres an overlap
18 MR PHILLIPS Well he said theres an
19 overlap Here in this context I think basically the
20 Respondents theory would mean that they are completely
21 coterminous And I dont think thats what the Court
22 meant And also we know from Diehr that theres got to
23 be at least some significant limitations on the extent
24 to which novelty has to be built into 101 That is the
25 province of 102 and 103 And as I said Congress
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1 modified the system of adjudication to create an
2 administrative mechanism that allows you to get to 102
3 and 103 And at least in context its important to
4 realize there have been 11 cases since that was created
5 9 of the 11 have been knocked down on 102 or 103 grounds
6 and not on 101 grounds And it seems to me thats the
7 answer to this problem is leave 101 as the coarse
8 filter If on its face it states these kinds of broad
9 abstract principles fundamental truths and even if it
10 says use a computer those should be struck down
11 JUSTICE SOTOMAYOR Which of the shyshy which of
12 the opinions below captures your position most
13 accurately
14 MR PHILLIPS I would guess it would be
15 Judge Moores opinion below that would capture ours most
16 correctly
17 JUSTICE SOTOMAYOR And if we were to think
18 your method claim is ineligible do you agree that your
19 systems and shyshy your medium and system claims fail as
20 well Do they rise and fall together
21 MR PHILLIPS No No I dont believe they
22 do rise and fall together I mean I think you could shyshy
23 if you wanted to interpret our medium claim shyshy I mean
24 our shyshy our method claims in a shyshy in particularly
25 abstract way I think you could still say that the
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1 system claims which clearly are shyshy are how to create a
2 computer system and how to implement it using that
3 method would be a much more concrete version of that in
4 a way that would take it out of 101 That said I
5 obviously believe that all of our claims satisfy 101
6 and should go on to the next stage
7 JUSTICE KAGAN Can I give you a
8 hypothetical Mr Phillips and you tell me how its
9 different or the same Lets say you know 30 years
10 somebody took a look around the world and said a lot of
11 people seem to order products by mail They get the
12 catalogues in the mail and then they send back their
13 return forms And lets say that one of the founders of
14 the Internet said wouldnt this be an amazing system
15 we could actually do this by computer and they had
16 patented that Is that the same
17 MR PHILLIPS I dont know if its the
18 same but I would shyshy I would argue that it could very
19 well be a patentable subject matter because shyshy but it
20 depends on how the claims play out
21 JUSTICE KAGAN No but exactly I mean
22 the claim would have said something along the lines of
23 you know theres this process by which people order
24 products and we want to do it over the Internet we want
25 to do it electronically and we will use a computer to
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1 do that to essentially take the process of mail order
2 catalogues and make it electronic
3 MR PHILLIPS I could certainly shyshy I think
4 I could write a claim shyshy a set of claims that I believe
5 would satisfy 101 And shyshy and to the extent that
6 youd shyshy that youd think those are no different than
7 the ones I have here then my argument is simply I think
8 I satisfy 101 with the claims we have before us Your
9 Honor
10 If there are no further questions then Id
11 like to reserve the rest of my time
12 CHIEF JUSTICE ROBERTS Thank you
13 Mr Phillips
14 Mr Perry
15 ORAL ARGUMENT OF MARK A PERRY
16 ON BEHALF OF THE RESPONDENTS
17 MR PERRY Mr Chief Justice and may it
18 please the Court
19 That path between Scylla and Charybdis was
20 charted in Bilski and Mayo Bilski holds that a
21 fundamental economic principle is an abstract idea and
22 Mayo holds that running such a principle on a computer
23 is quote not a patentable application of that
24 principle Those two propositions are sufficient to
25 dispose of this case
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1 If Bilski and Mayo stand Alices patents
2 fail Therefore Mr Phillips and his friends are
3 asking this Court to change the standard even though
4 this Court has had three unanimous decisions in the last
5 four terms establishing what the Court called a myriad
6 a wellshyestablished standard
7 On the abstract idea Justice Ginsburg you
8 asked Mr Phillips whats the difference between hedging
9 and this claim There is no difference This is
10 hedging It is hedging against credit default rather
11 than price fluctuation but it is simply hedging
12 And Mr Phillips stood up for 26 minutes and
13 never once referred to the patent Lets look at what
14 the inventor the soshycalled inventor said about this
15 invention This is at JA 293 to 94 in the
16 specification
17 This claim has simply two steps Its very
18 simple First debiting and crediting on a realtime
19 basis the relevant shadow records and second by
20 periodically affecting corresponding payment
21 instructions Those are direct quotes Debit credit
22 and pay Your Honor you cant get much more simple
23 than that
24 Mr Phillips suggests well we have
25 multilateral transactions global things chronological
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1 time zones and so forth None of those are claimed
2 Your Honor Those are all recited in specification
3 The claims read on a single transaction involving two
4 parties
5 JUSTICE BREYER Can I ask you at some
6 point not necessarily this second to say in my shyshy this
7 is just shyshy you know you have an opinion for a court
8 Different judges can have different interpretations
9 All youre getting is mine okay
10 But I think its pretty easy to say that
11 Archimedes cant just go to a boat builder and say
12 apply my idea All right Everybody agrees with that
13 But now we try to take that word apply and give
14 content to it
15 And what I suspect in my opinion Mayo did
16 and Bilski and the other cases is sketch an outer shell
17 of the content hoping that the experts you and the
18 other lawyers and the shyshy the circuit court could fill
19 in a little better than we had done the content of that
20 shell
21 So so far youre saying well this is
22 close enough to Archimedes saying apply it that we
23 neednt go further
24 Now will you at some point in the next few
25 minutes give me your impression of if it were necessary
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1 to go further what would the right words or example be
2 MR PERRY Your Honor as shyshy Justice
3 Breyer as to abstract ideas the PTO has filled in that
4 shell by listing economic concepts legal concepts
5 financial concepts teaching concepts dating and
6 interpersonal relationships and generally how business
7 should be conducted as examples of those things that are
8 likely abstract which of course all follow directly
9 from Bilski and the discussion this Court had in Bilski
10 And this patent shyshy these patents fall squarely within
11 that
12 Congress in the AIA confirmed that
13 reading Congress in the CBM method said business
14 methods that are subject to special scrutiny shyshy that is
15 dubious patents shyshy include methods and corresponding
16 apparatus which is what we have here that pertain to
17 data processing in the financial services industry and
18 do not offer a technological solution That describes
19 Alices patents to a letter Your Honor So that we
20 have shyshy
21 JUSTICE SOTOMAYOR What do you think is a
22 technological solution
23 MR PERRY Your Honor shyshy
24 JUSTICE SOTOMAYOR How could they if at
25 all written their patents to shyshy to make shyshy to make
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1 their software eligible What would shyshy what do they
2 need shyshy would have needed to have added
3 MR PERRY Justice Sotomayor they have no
4 software first Theyve never written software
5 Theyve never programmed a computer So thats a
6 nonexistent set
7 Second there are many technological
8 solutions to trading and settlement problems For
9 example data compression These shyshy these trading
10 platforms involve the movement of very large quantities
11 of data around the world The physical pipes that is
12 the fiber optic cables and data lines are limited
13 There are very sophisticated algorithms for both
14 security and speed to move data through the transmission
15 lines in novel and useful ways that could well be
16 patented
17 Nothing like that is claimed here To come
18 back to where I started if you look for example at
19 Claim 65 in the 510 patent as Mr Phillips reads it
20 it literally reads on a twoshyparty escrow to sell a
21 house so long as the escrow agent is typing this stuff
22 into the HUDshy1 using a computer That has nothing to do
23 with multilevel shyshy
24 CHIEF JUSTICE ROBERTS Well thats a
25 little more complicated He referred us to Joint
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1 Appendix Page 159 which is not a change in how
2 computers work But it is shyshy constitutes the
3 instructions about how to use the computer and where it
4 needs to be affected And just looking at it it looks
5 pretty complicated There are a lot of arrows and
6 they shyshy you know different things that go shyshy
7 (Laughter)
8 CHIEF JUSTICE ROBERTS Well but I mean
9 you know it shyshy in different directions And I
10 understand him to say that in each of those places
11 thats where the computer is needed
12 MR PERRY Mr Chief Justice Figure 16 has
13 nothing to do with the invention asserted against my
14 client in this case There are two inventions in this
15 patent One invention involving multilateral contract
16 formation is not asserted against my client And all of
17 these drawings pertain to that The only drawings that
18 pertain to the asserted claims are 25 and 33 to 37 And
19 that was established below and its established in this
20 Court And Mr Phillips has never disputed it
21 So the claim hes pointed the Court shyshy the
22 figure hes pointed the Court to has nothing to do with
23 the invention Its for a different invention that is
24 not at issue in this case
25 Remember there are hundreds and hundreds of
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1 pages of these patents They all pertain to the other
2 invention Thats why in the back of our red brief we
3 excerpted the very little bit that actually pertains to
4 this You sort of tack on patent shyshy the tack on claim
5 that Mr Phillips is asserting here Its 4 columns
6 Its less than five pages in the printed appendix that
7 actually pertains to this invention And it contains no
8 disclosure whatever
9 Justice Scalia to your question about how
10 the computer does it Of course a patent that
11 describes sufficiently how a computer does a new and
12 useful thing whether its data compression or any other
13 technological solution to a business problem a social
14 problem or a technological problem would be within the
15 realm of the shyshy of the patent laws That is what the
16 patent laws have always been for
17 This is not such a patent And the reason
18 for that is this is a preshyBilski set of patents These
19 were prosecuted under the old State Street test where
20 all the applicant had to claim was a result
21 JUSTICE KENNEDY Would you give me shyshy
22 again you already did it once shyshy an example of a
23 business process patent shyshy of a business process idea
24 and invention that is patentable
25 MR PERRY Your Honor there are many
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1 examples One would be a technological solution to a
2 business problem So that for example shyshy Ill give a
3 different example There are many applications today
4 The Court may be familiar with streaming video to watch
5 video on your computer
6 It is not possible to get enough data
7 through existing lines in its raw format The data has
8 to be manipulated in order to see live video So if you
9 want to watch TV on your phone for example
10 Those algorithms those inventions are
11 undoubtedly technological And if they are used in a
12 trading platform or a hedging system or something else
13 that wouldnt disable them And this is what the Diehr
14 case shyshy
15 JUSTICE KENNEDY Well I shyshy I shyshy in my
16 language Ive called that mechanical rather than
17 process Can you give me an example of process
18 MR PERRY Yes Your Honor The process in
19 that example would be a computer running the particular
20 data compression algorithm
21 JUSTICE KENNEDY But thats how to make
22 a shyshy thats how to make a machine work better
23 MR PERRY Yes Your Honor
24 JUSTICE KENNEDY Im asking you Is there
25 any business process any business activity that is
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1 susceptible to a patent a pure patent innovations that
2 deserve patents
3 MR PERRY Your Honor again a
4 technological solution to a business problem could well
5 be whether its a method or a process is equivalent
6 Again Congress said method in a corresponding shyshy
7 JUSTICE KENNEDY Can you give me an
8 example
9 MR PERRY I thought the data compression
10 example was a good one Ill try an encryption
11 technology Many of these trading platforms you know
12 dealing with securities and money would require some
13 sort of security devices You could have a process for
14 securely transmitting data would be another computer
15 implemented technological solution to a business
16 problem Again nothing like that claimed here
17 JUSTICE SOTOMAYOR How about eshymail and
18 just word processing programs
19 MR PERRY Your Honor a program shyshy let me
20 try it this way to both of your questions In our view
21 if what is claimed as the inventive contribution under
22 Mayo shyshy in other words if we have an abstract idea as
23 we do here and what is claimed is the inventive
24 contribution for Step 2 is the computer then the
25 computer must be essential to that operation and
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1 represent an advancement in computer science or other
2 technology And we know thats not met here Justice
3 Sotomayor because shyshy
4 JUSTICE SOTOMAYOR So youre saying no to
5 eshymail and word processing
6 MR PERRY Your Honor I think at a
7 point shyshy
8 JUSTICE SOTOMAYOR They certainly have
9 functionality and shyshy and improvement of functionality
10 for the user
11 MR PERRY At a point in time in the past
12 I think both of those would have been technological
13 advances that were patentable
14 JUSTICE SOTOMAYOR How
15 MR PERRY Today shyshy because they would have
16 provided a technological solution to a then unmet
17 problem Today reciting and do it on a word processor
18 is no different than and do it on a typewriter or shyshy and
19 do it on a calculator
20 The inventive contribution component which
21 uses specifically the language of conventional and
22 routine and well understood will evolve with
23 technology Thats why its different than the abstract
24 idea component
25 And here we know that these patents dont
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1 claim anything that was not conventional well
2 understood and routine We went through that in great
3 detail and Alice has never disputed a word of it They
4 just say youre not supposed to do that analysis even
5 though the Court 9shy0 in Mayo said we should
6 And in this case its very important to
7 look at what Alices own experts said on the subject
8 This is not our expert This is Alices expert And
9 this is at Page 1327shy28 of the Joint Appendix It is
10 possible to do the business methods of maintaining
11 accounts adjusting accounts and providing an
12 instruction without a computer or other hardware
13 And then Justice Breyer directly to your
14 abacus If someone had thought of this invention
15 soshycalled invention 100 years ago they might have
16 implemented it in a nonelectronic manner using various
17 precomputing tools such as an abacus or handwritten
18 ledgers
19 We know from Benson the Courts seminal
20 computer implementation case that if you can do it by
21 head and hand then the computer doesnt add anything
22 inventive within the meaning of the 101 exception That
23 is the holding of Benson And the Court reiterated that
24 in Mayo
25 Flook said exactly the same thing If you
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1 can do it with pencil and paper then the computer is
2 not offering anything that the patent laws are or should
3 be concerned with
4 It is only where the method will not work
5 without a computer which is not these claims and where
6 the computer itself is doing something that the patent
7 law is willing to protect
8 CHIEF JUSTICE ROBERTS What if shyshy what if
9 you can do it without a computer but its going to
10 take you know 20 people a hundred years In other
11 words theoretically you can replicate what the
12 computer does shyshy
13 MR PERRY Two answers
14 CHIEF JUSTICE ROBERTS shyshy but its
15 impractical without looking to do it on the computer
16 MR PERRY Mr Chief Justice first these
17 claims literally read as Alice reads them on a single
18 transaction between two parties so its not 20 people
19 for a hundred years Its one person sitting in a room
20 so thats not a problem
21 Second if what is being claimed is the
22 necessary speed or efficiency or data crunching
23 capabilities if you will of a computer then it would
24 have to be claimed and theres nothing claimed here
25 All that is claimed shyshy and my friend is going to stand
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1 up on rebuttal and tell you all that the expert said
2 well what is claimed is a computer but its just a
3 computer It just says a computer configured too It
4 doesnt say that the computer actually has to shyshy
5 JUSTICE BREYER Yeah but the trouble with
6 that particular test is as I think partly the Chief
7 Justice said how long et cetera and then add to that
8 though you could do it without a computer what happens
9 at the end of the line is the automobile engine goes off
10 or it begins to sputter or it turns left
11 You see its possible to take Archimedes shyshy
12 shyshy you know I use that example purposely to call
13 attention to the problem You can take those things
14 and youre not just saying apply it and youre not even
15 just saying shyshy you are saying use the computer but at
16 the end of the road something physical in the world
17 changes and everybody would say now thats shyshy that
18 will falls within I mean probably I mean my
19 hesitation shows Im looking for the right words
20 MR PERRY Justice Breyer your point is
21 the reason that it is equally fallacious to suggest on
22 the one hand as Alice and IBM does that simply
23 reciting a computer is a magic key that gets you through
24 101 and you never have to any other inquiry and what
25 some of folks the amici on the other side say which
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1 is that computers or software are never eligible Both
2 of those things have to be wrong because what the Court
3 said in Bilski was future innovation is too uncertain
4 We are not going to do that as a Court And the Court
5 laid out an approach using abstract ideas in Bilski and
6 inventive contribution in Mayo that is flexible enough
7 to take into account that innovation and to deal with
8 particular claims in context which is why at the end
9 of the day we have to come back to these patents and
10 decide which shyshy
11 JUSTICE KAGAN Mr Perry before we get
12 back to these matters you said to Justice Scalia if a
13 patent sufficiently describes how a computer will
14 implement an idea then its patentable So how
15 sufficiently does one have to describe it What do we
16 want a judge to do at this threshold level in terms of
17 trying to figure out whether the description is
18 sufficient to get you past it
19 MR PERRY If I can answer in two steps
20 Justice Kagan First in the negative What the
21 applicant or patentee must do shyshy must not do is simply
22 describe the desired result That would take us back to
23 State Street That would simply say I claim a magic
24 box that buys high and sells low or vice versa I
25 suppose I claim a magic box for investing Thats what
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1 these patents do
2 Then to put it in the affirmative and in the
3 language of Mayo the claim has to recite something
4 significantly more something significantly more than
5 the abstract idea itself That would be a contextual
6 analysis based on the claims and specifications and file
7 history and we know that some devices some methods
8 some programming will pass that
9 It is not going to be a brightshyline rule and
10 thats one of the tugshyofshywar issues that this Court and
11 the Federal Circuit have been having in these cases
12 The Federal Circuit wants brightshyline rules All
13 computers are in or all computers are out
14 This Court has been more contextual This
15 Court has been more nuanced This Court has looked at
16 things in a more robust way
17 JUSTICE KAGAN Youre not suggesting that
18 specific code is necessary
19 MR PERRY No Your Honor I think the shyshy
20 actual description of the programming is a 112 problem
21 I agree with that A 112 issue That is the realm of
22 the written description requirement What is a 101
23 problem is it is on the applicant to do more than simply
24 describe the results simply say A magic box that does
25 intermediate settlement And we can tie that back to
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1 this particular prosecution the 510 patent which is
2 the method patent
3 The examiner rejected it Under Section
4 101 the examiner said this is an abstract idea You
5 cant have this patent And the only change that this
6 applicant made was to add in the adjusting step
7 electronic adjustment It put in one word
8 electronic adjustment And under State Street which
9 is what this patent is prosecuted under that was
10 enough because the result of adjusting run through a
11 computer is enough
12 Under current law that cant be enough
13 That just cant get a patent over the line because this
14 Court said in Mayo and I got to quote this language
15 Simply implementing a fundamental principle on a
16 physical machine namely a computer is not a patentable
17 application of that principle Thats all that Alice
18 has done
19 These are preshyBilski patents They never
20 should have been issued General Verrilli will stand up
21 and address that point And certainly under current
22 law shyshy one point on the AIA Congress did not send all
23 this to the administrative process Congress created
24 two avenues the courts and the PTO to use the
25 standards Essentially it ratified Bilski and Mayo and
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1 said we agree with what you all are doing at the
2 Supreme Court and the existing standards are good enough
3 for us This is a judicial problem And that is a good
4 reason The abstract shyshy
5 JUSTICE GINSBURG The Federal Circuit in
6 this case split in many ways and it had our decisions
7 to deal with You said given Bilski and Mayo this is
8 an easy case What is the instruction that escaped a
9 good number of judges on the Federal Circuit How would
10 you state the rule
11 MR PERRY Your Honor I think theres a
12 significant element to the Federal Circuit that
13 disagrees with Mayo and has been resistant in applying
14 it Chief Judge shyshy former Chief Judge Michelle filed a
15 brief in this Court essentially saying Mayo is a
16 lifeshysciences case You should limit it to that because
17 if you apply it to everything else then these patents
18 are no good
19 Mayo we submit is a technologyshyneutral
20 industryshyneutral exceptionshyneutral framework that can
21 be used to answer all of these questions This is not
22 the death of software patents The software industry is
23 all before this Court saying this is fine with us
24 Every company in the United States practically except
25 for IBM is saying go ahead This will not affect
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1 software patents
2 Justice Ginsburg this Courts precedents
3 are clear They are unanimous They just need to be
4 applied To suggest that there is confusion that needs
5 to be addressed by retreating beating a retreat from
6 recent unanimous decisions would simply reward
7 intransigence difficulty refusal to adhere to what are
8 clear precedents because shyshy
9 JUSTICE KAGAN Should we be concerned
10 Mr Perry that there are old patents that in fact could
11 meet the test that you set forth but wont because they
12 were written in a different time and so used much more
13 general language
14 MR PERRY Your Honor the applicant or the
15 patent holder would have the opportunity to institute a
16 reexamination proceeding or some sort of administration
17 process to address that issue
18 And second it should be noted this is a
19 very small problem There are 2 million outstanding
20 patents in the United States In the last four fiscal
21 years there were 22000 infringement litigations
22 instituted but since Bilski there have only been 57
23 district court decisions on Section 101 issues There
24 have only been 12 Federal Circuit decisions total on
25 computer implementation
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1 We are talking about a group of patents
2 Justice Kagan thats way out at the tail end of
3 distribution Most patents never have a 101 challenge
4 This is not an issue with cotton gins and other things
5 This is a problem for the most marginal
6 most dubious most skeptical patents the ones that this
7 Court in Bilski shyshy and remember what Bilskis holding
8 is The majority said they are processes but it did
9 not say they are eligible
10 Thank you Mr Chief Justice
11 CHIEF JUSTICE ROBERTS Thank you counsel
12 General Verrilli
13 ORAL ARGUMENT OF DONALD B VERRILLI JR
14 ON BEHALF OF THE UNITED STATES AS AMICUS
15 CURIAE SUPPORTING RESPONDENTS
16 GENERAL VERRILLI Mr Chief Justice and
17 may it please the Court
18 An abstract idea does not become
19 patentshyeligible merely by tacking on an instruction to
20 use a computer to carry it out A computer makes a
21 difference under Section 101 when it imposes a
22 meaningful limit on the patent claim That occurs when
23 the claim is directed at improvement in computing
24 technology or an innovation that uses computing
25 technology to improve other technological functions
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1 Thats the test that we believe is most faithful to this
2 Courts precedents in Bilski and Mayo It keeps patents
3 within their traditional and appropriate domain and it
4 is capable of being administered consistently by Courts
5 and by PTO examiners
6 JUSTICE GINSBURG How do you answer the
7 argument that your view would extinguish businessshymethod
8 patents and make all software ineligible for patent
9 protection
10 GENERAL VERRILLI Yeah with shyshy let me
11 address software patents first because that I think is
12 obviously a significant question And its just not
13 correct to say that our approach would make software
14 patenting ineligible Any software patent that improves
15 the functioning of the computer technology is eligible
16 Any software patent that improves shyshy that is used to
17 improve another technology is eligible For example
18 the patent in the shyshy in the Diehr case is one in
19 which shyshy
20 JUSTICE SOTOMAYOR Why do we need to reach
21 this in that shyshy reach software patents at all in this
22 case
23 GENERAL VERRILLI Well shyshy
24 JUSTICE SOTOMAYOR Whats the necessity for
25 us to announce a general rule with respect to software
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1 There is no software being patented in this case
2 GENERAL VERRILLI Well I shyshy
3 JUSTICE SOTOMAYOR Theres a systems
4 GENERAL VERRILLI Well I shyshy I think shyshy
5 well they shyshy they shyshy theres a process being and shyshy and
6 one can think of software patents as process patents
7 And I think thats why my friends on the other side are
8 saying the sky is falling because they shyshy they are
9 interpreting what were saying about that when a
10 computer makes shyshy when a computers involvement makes
11 something eligible under 101 its calling those into
12 question and it doesnt
13 JUSTICE SOTOMAYOR Do you think we have to
14 reach the patentability of software to answer this case
15 GENERAL VERRILLI Well I think you can shyshy
16 I think the answer to that question is no not
17 necessarily You can decide it by saying that shyshy that
18 Bilski answers the question whether this is an abstract
19 idea because this form of hedging is really no
20 different than the form of hedging as a conceptual
21 matter at issue in Bilski And then Mayo answers the
22 question of whether the use of a computer in this case
23 adds enough to the abstract idea beyond conventional
24 steps because here all we have after all is just
25 conventional use of computing technology no computer
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1 innovation such that you dont qualify under 101 You
2 could take that approach
3 But it is important to the United States
4 that we shyshy and to our patent examiners that we get some
5 clarity if we can I think the clarity could come from
6 the text that I propose which I want to reiterate shyshy
7 JUSTICE SOTOMAYOR Well shyshy
8 JUSTICE BREYER Could shyshy could shyshy could you
9 go on with that because you were just getting to the
10 point where I think you say a computer improvement that
11 in fact leads to an improvement in harvesting cotton is
12 an improvement through a computer of technology so it
13 qualifies
14 But then I think you were going to say or I
15 got this also from the brief a computer improvement
16 that leads to an improvement in the methods of selling
17 bonds over the telephone is not an improvement in
18 technology reached by the computer Am I right about
19 the distinction youre making
20 GENERAL VERRILLI I dont think theres a
21 yes or no answer to that question
22 JUSTICE BREYER What is your view Yeah
23 what is shyshy how do we deal with just that problem
24 GENERAL VERRILLI If there is a genuine
25 innovation in the functioning of the computer shyshy
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1 JUSTICE BREYER Yes
2 GENERAL VERRILLI shyshy such that business
3 processes shyshy
4 JUSTICE BREYER Weve got that Yes yes
5 We got the computer But then it doesnt improve the
6 computer but rather it improves through the computer
7 the harvesting of cotton
8 Now youve got it in what you said was your
9 second category which is an improvement through the
10 computer of a technology And I thought in your brief
11 you were distinguishing an improvement through the
12 computer of a human activity that is not a technology
13 and in particular to pick an example of that
14 something in finance or something in business
15 Now am I right about the distinction youre
16 making
17 GENERAL VERRILLI Yeah that shyshy
18 JUSTICE BREYER If Im not right what is
19 the distinction
20 GENERAL VERRILLI That is generally the
21 line were drawing Frankly shyshy
22 JUSTICE BREYER And how is that justified
23 GENERAL VERRILLI I do want shyshy
24 JUSTICE BREYER That shyshy that is Judge Dyk
25 in shyshy in Bilski in the Federal circuit 4 people sort of
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1 picked it up maybe 5 didnt pick it up Would you say
2 a few words about it
3 GENERAL VERRILLI Sure About shyshy let me go
4 to Bilski there in that I do think while shyshy while
5 certainly the Court held that the term process got a
6 natural construction which could include business
7 methods it seems to me that thats not all the Court
8 said in Bilski The Court also said that it was
9 historically and traditionally quite rare that business
10 methods were patent eligible
11 It also said that shyshy that the shyshy that courts
12 and the PTO examiners should use the abstract ideas
13 exception to 101 to police the appropriate boundary
14 It also said that the
15 machineshyorshytransformation test that the United States
16 advocated remained a useful tool And of course that
17 directs to you seeing whether there is a technology
18 application
19 And of course the holding in Bilski was
20 that the shyshy the method for hedging risk was ineligible
21 because it was an abstract idea and I cant imagine
22 that if in Bilski the shyshy the claim had been exactly the
23 same but had added use a computer to carry out some of
24 these standard random analysis functions that are
25 claimed by the patent that you would have found it to
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1 be patent eligible
2 And I shyshy I would submit for the Court that
3 the key point here I think is that now given where
4 the Court shyshy what the Court has held in Bilski given
5 what its held in Mayo the abstract ideas exception is
6 really the only tool left to deal with what I shyshy what I
7 think I fairly read Bilski as saying is a significant
8 problem the proliferation of patents of business
9 methods
10 JUSTICE KENNEDY Is there an example that
11 you can give us of a shyshy what we can call a business
12 process that is patentable a process that doesnt
13 involve improving the workings of a computer
14 GENERAL VERRILLI I shyshy I think its going
15 to be difficult for me to do that I think for
16 example if you had a business method a process for
17 additional security pointshyofshysale credit card
18 transactions using particular encryption technology
19 that might well be patent eligible Its a technology
20 that it makes conduct of business more efficient or
21 effective
22 But there is a technological link here and
23 we do think thats critical to our shyshy to our point of
24 view with respect to the case And I shyshy and I do think
25 remember that when we say something is not patent
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1 eligible were not saying they cant do it Were
2 saying they cant monopolize it
3 And the concern in a situation like this one
4 is that if this is patent eligible its hard to see
5 why for example the first person who came up with a
6 frequent flier program wouldnt have been able to claim
7 a patent there because after all thats a business
8 method for improving customer loyalty implemented on a
9 computer
10 CHIEF JUSTICE ROBERTS General I shyshy you
11 mentioned a while ago the need for greater clarity and
12 certainty in this area And Im just wondering in your
13 brief youve got a nonshyexhaustive of factors to
14 consider and there are 6 different ones And Im just
15 doubtful that thats going to bring about greater
16 clarity and certainty
17 GENERAL VERRILLI I take shyshy I take the
18 point Mr Chief Justice but I think the key is that
19 they are all directed to answering the question of
20 whether the innovation that is claimed and is an
21 innovation in either A the improvement of a computers
22 functioning or B the use of computer technology to
23 improve the functioning of another technological
24 process and a case like Diehr would be in the latter
25 category
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1 And so I do think that thats the key
2 benchmark Thats the baseline Thats the test that
3 we do think can be applied clearly and consistently by
4 the courts or the PTO And it avoids the risk of things
5 like frequent flier programs or the Oakland As money
6 ball methods for evaluating the contributions in
7 individual baseball players make or any one of a host of
8 other things that our intuitions tell us just dont
9 belong in the patent system
10 Thats the shyshy drawing that line keeps them
11 out not drawing that line lets them in And with all
12 due respect I dont think that the novelty and
13 nonobviousness filters that 102 and 103 really deal with
14 that problem effectively because when you get to
15 nonobviousness in 103 for example youll be asking a
16 different question
17 If you take the frequent flier program you
18 would say well is this innovation in building consumer
19 loyalty something that would have been obvious to
20 somebody who runs an airline Its totally divorced
21 from the question of technology at that point and
22 therefore I dont think youre going to get the screen
23 that you need to get in order for the patent system to
24 be confined to its traditional and appropriate scope
25 If there are no further questions thank
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1 you
2 JUSTICE GINSBURG I have a question about
3 how do you identify an abstract concept The shyshy a
4 natural phenomenon a mathematical formula those are
5 easy to identify but there has been some confusion on
6 what qualifies as an abstract concept
7 GENERAL VERRILLI We would define
8 abstract shyshy an abstract concept as a claim that is not
9 directed to a concrete innovation in technology
10 science or the industrial arts So its the shyshy its
11 abstract in the sense that it is not a concrete
12 innovation in the traditional realm of patent law
13 Thank you
14 CHIEF JUSTICE ROBERTS Thank you General
15 Mr Phillips you have four minutes
16 remaining
17 REBUTTAL ARGUMENT OF CARTER G PHILLIPS
18 ON BEHALF OF THE PETITIONERS
19 MR PHILLIPS Thank you Mr Chief Justice
20 Id just like to make a few points
21 First of all with respect to the question
22 you asked which is looking at 159 et cetera all I can
23 tell you is that if you look at claim 33 it talks about
24 matched orders the matched orders that are described in
25 286 and 287 and then makes specific reference to 159
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1 and that flow chart thats there And its all designed
2 as a package Its only one element of the shyshy of the
3 invention but it is a central element and its an easy
4 one to understand And it goes well beyond simply the
5 notion of hedge shyshy hedge against settlement risk and do
6 it by a computer
7 JUSTICE SOTOMAYOR Your adversary says that
8 his shyshy the appendix to his brief are the only patents at
9 issue that the flow charts are not at issue in this
10 case
11 MR PHILLIPS Theres no basis for that
12 statement Your Honor There shyshy remember this went off
13 on a very truncated litigation process So theres shyshy
14 you know we shyshy we got cut off at the beginning of it
15 Theres been no construction of the shyshy of the claims
16 and shyshy and obviously these are specifications that go
17 to how you interpret the claim
18 JUSTICE SOTOMAYOR If we were to say that
19 there are no business patents shyshy
20 MR PHILLIPS Yes
21 JUSTICE SOTOMAYOR shyshy would your patent
22 survive at all
23 MR PHILLIPS No I dont shyshy I dont
24 believe so I think theres no question And you
25 know General Verrilli could not have been any plainer
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1 in his statement of how he wants to interpret the
2 abstract idea concept
3 JUSTICE SOTOMAYOR Yes he wants to say no
4 business patents
5 MR PHILLIPS No business shyshy just another
6 way of saying no business methods And you know the
7 Court rejected that And it seems to me extraordinary
8 to say Congress didnt reject no business methods in
9 101 but were going to do shyshy were going to manipulate
10 the judicial exception to accomplish precisely that same
11 thing It seems to me thats wholly inappropriate
12 Justice Ginsburg you asked my shyshy my friend
13 here you know whats his test He didnt answer that
14 question youll notice because he doesnt have an
15 answer His basic argument is whatever you do just
16 kill this patent
17 And if I were in his shoes I suppose Id
18 take that same position I think whats absolutely
19 clear is that the test ought to be one that is
20 structured as a very coarse filter not the kind of
21 filter that hes pushing for where it changes over time
22 I mean I thought his shyshy I thought his response to one
23 of the questions about eshymail and word processing that
24 Justice Sotomayor asked is over time it would change
25 Well thats exactly what 102 and 103 are for That is
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1 not the purpose of shyshy of Section 101
2 And then he uses the example of encryption
3 I guarantee you if we were arguing about encryption in
4 this case he would say to me that thats an abstract
5 principle because encryption is a concept thats been
6 around since time immemorial George Washington used
7 it Everybody has used encryption
8 And a question again thats not the
9 solution to these problems The question is how did we
10 go about doing it And we go beyond the basics of
11 simply saying use a computer and thats what we ask
12 this Court to focus on and to evaluate
13 As to the frequent flier program its
14 pretty clear to me that even though it was a novel idea
15 in some sense the concept itself would have been viewed
16 in shyshy in the KSR fashion as quite obvious as a means of
17 improving customer loyalty
18 There are solutions here Giving us 101
19 pass doesnt create a monopoly It just gets us to the
20 102 and 103 inquiries that are at the heart of what the
21 patent laws shyshy and 112 that are at the heart of what the
22 patent laws ought to be dealing with
23 If there are no further questions Your
24 Honor thank you
25 CHIEF JUSTICE ROBERTS Thank you counsel
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1 The case is submitted
2 (Whereupon at 1105 am the case in the
3 aboveshyentitled matter was submitted)
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
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58
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disclosure 328 413 302021 4220 figure 1146 discuss 164 economy 1516 ESQ 1171921 excerpted 323 311222 3917 discussion 299 effective 1223 236913 exhausted 1813 file 406 dispose 2625 5021 essence 211 exist 420 131 filed 4214 dispute 325 effectively 5214 essential 1224 existence 1119 fill 2818 disputed 3120 efficacy 1224 3425 175 filled 293
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1 up to the point where I have to make a decision because
2 theyre serious I mean you know shyshy now the problem
3 that I came away with is the one that youre beginning
4 to discuss that if you simply say take an idea thats
5 abstract and implement it on a computer there are shyshy
6 youre going to get it much faster youre going to be
7 able to do many many things and if thats good enough
8 there is a risk that you will take business in the
9 United States or large segments and instead of having
10 competition on price service and better production
11 methods well have competition on who has the best
12 patent lawyer You see where Im going on that one
13 MR PHILLIPS Yeah of course
14 JUSTICE BREYER And if you go the other way
15 and say never then what you do is you rule out real
16 inventions with computers
17 MR PHILLIPS Right
18 JUSTICE BREYER And so in those 42 briefs
19 there are a number of suggestions as to how to go
20 between Scylla and Charybdis Now I would like to
21 know shyshy I dont know if you can step back from your
22 representational model Thats a problem Youre all
23 we have now And shyshy and from my point of view I need
24 to know what in your opinion is the best way of sailing
25 between these two serious arms
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1 MR PHILLIPS Well Justice Breyer I guess
2 I would suggest to you that you might want to deal with
3 the problem you know as opposed to the problems you
4 dont know at this stage I mean we have had business
5 method patents and software patents in existence for
6 well over a decade and theyre obviously quite
7 significant in number And shyshy and we know what the
8 system is we have And Congress looked at that system
9 right and didnt say no to business methods patents
10 didnt say no to software patents instead said the
11 solution to this problem is to get it out of the
12 judicial process and create an administrative process
13 but leave the substantive standards intact
14 So my suggestion to you would be follow that
15 same advice a liberal interpretation of 101 and not a
16 caricature of the claims analyze the claims as written
17 and therefore say that the solution is 102 and 103 and
18 use the administrative process If you shyshy
19 JUSTICE GINSBURG Mr Phillips let me just
20 stop you there because four Justices of this Court did
21 not read that legislative history the way you do And
22 it was shyshy was in Bilski
23 MR PHILLIPS But this is postshyBilski
24 JUSTICE GINSBURG Justice Stevens went
25 carefully through that and he said Congress was
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1 reacting to a decision It had shyshy it was not addressing
2 101 So there are at least four Justices who say shyshy who
3 didnt buy that argument
4 MR PHILLIPS Well I mean it still seems
5 to me that the shyshy the natural inference is Congress did
6 not change 101 Congress created an entire
7 administrative system to deal with 101 102 and 103
8 And shyshy and I would hope shyshy
9 JUSTICE SCALIA And four is not five
10 anyway right
11 MR PHILLIPS Thats true
12 JUSTICE SCALIA Four is not five
13 MR PHILLIPS And youve exhausted my math
14 skills Your Honor
15 JUSTICE SCALIA By the way we shyshy we have
16 said that you cant take an abstract idea and then say
17 use a computer to implement it But we havent said
18 that you cant take an abstract idea and then say here
19 is how you use a computer to implement it shyshy
20 MR PHILLIPS Exactly
21 JUSTICE SCALIA shyshy which is basically what
22 youre doing
23 MR PHILLIPS And thats the argument were
24 doing and shyshy
25 JUSTICE SCALIA And thats a little
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1 different
2 MR PHILLIPS shyshy thats the line were
3 asking the Court to draw here
4 JUSTICE KAGAN Well how are you saying the
5 how Because I thought that your computers shyshy that your
6 patents really did just say do this on a computer as
7 opposed to saying anything substantive about how to do
8 it on a computer
9 MR PHILLIPS I would urge the Court to
10 look at Joint Appendix 159 285shy286 where it goes
11 through the flow charts This is shyshy and this is just a
12 specific example of the method by which you stop a
13 transaction and it goes through a varied series of
14 detailed steps and what the computer has to do in order
15 to do that It doesnt actually obviously put in the
16 code but thats what the PTO says dont do Dont put
17 in the code because nobody understands code so shyshy but
18 put in the functions and we know shyshy and we know that
19 someone skilled in the art will be able to put in the
20 code And if they arent if they cant do that then
21 its not enabled and thats a 112 problem
22 To go back Justice Breyer to your
23 question So on the one hand youve got a problem that
24 it seems to me Congress to some extent has said is okay
25 and weve got a solution and that solutions playing
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1 through On the other hand if this Court were to say
2 much more categorically either that theres no such
3 thing as business method patents or adopt the Solicitor
4 Generals interpretation which is to say that there
5 cannot be software unless the software somehow actually
6 improves the computer as opposed to software improving
7 every other device or any other mechanism that might be
8 out there
9 What we know is that this would inherently
10 declare and in one fell swoop hundreds of thousands of
11 patents invalid and the consequences of that it seems
12 to me are utterly unknowable And before the Court goes
13 down that path I would think it would think long and
14 hard about whether isnt that a judgment that Congress
15 ought to make And It seems to me in that sense youre
16 essentially where the Court was in Chakrabarty where
17 everybody was saying youve got to act in one way or the
18 other or the world comes to an end and the courts have
19 said well apply 101 directly
20 JUSTICE KENNEDY If we say that theres no
21 software patentability and agree with the Attorney
22 General do you lose in this case
23 MR PHILLIPS Well it would be very hard
24 for me to see how that shyshy how shyshy how I can get around
25 that particular problem because the computer is the
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1 essence of it so shyshy and a portion of it is clearly the
2 software So I think if you say there is no such thing
3 as software patentability I do lose in this case yes
4 Your Honor As do a whole lot of other people
5 JUSTICE KENNEDY Is there any common ground
6 between you and the government shyshy maybe a better
7 question to ask the government shyshy a common ground
8 between you and the government on something in the
9 software area thats patentable other than making the
10 computer itself work You understand the government to
11 say no software patents
12 MR PHILLIPS Thats the way I interpret
13 the governments shyshy the governments brief
14 JUSTICE BREYER It was like shyshy theres a
15 Bloomberg brief out here that was on this that said
16 no you can shyshy you can patent computer software when
17 its an improvement in the computer when its an
18 improvement in software when its an improvement in a
19 technology that is developed out of computers like
20 robotics when it is an improvement in a machine or
21 technology but you cannot improve it where it is simply
22 an improvement in an activity that is engaged in
23 primarily through mental processes But what they mean
24 by that is business finance and similar arts
25 Thats shyshy I mean thats shyshy it wasnt quite what shyshy I
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1 know Thats what I want to know what you dont agree
2 with about that because its a little more refined than
3 you suggested
4 MR PHILLIPS I read the Solicitor
5 Generals brief as broader than the Bloomberg brief
6 in shyshy in terms of the approach And IBMs argument is
7 if you knock out software patents you eliminate web
8 browsing word processing cellphones eshymail Those
9 are all activities that I dont think fall within the
10 meaning of the shyshy the meaning of the governments theory
11 of the case
12 JUSTICE BREYER But Im asking you shyshy Im
13 asking you what about this one that I just mentioned
14 You see I went through those five steps shyshy
15 MR PHILLIPS Right
16 JUSTICE BREYER shyshy and four of them you
17 could patent and the fifth one you cant
18 MR PHILLIPS Right But I shyshy and I guess
19 my answer to that is thats nowhere in the statute and
20 it doesnt seem to me to reflect an abstract idea Its
21 a shyshy its a line you draw that takes out business method
22 patents If the Court wants to eliminate business
23 method patents fine But you just said no to that in
24 Bilski two three terms ago
25 Now to be sure give the Solicitor General
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1 credit he comes here and says to you We didnt like
2 the result in Bilski we want you to say dont use
3 process in order to get there which is a statutory
4 interpretation come up with an extraordinarily
5 complicated way of looking at the exception and use that
6 to get to the exact same result
7 JUSTICE SOTOMAYOR Well youre doing a
8 very good job of proving shyshy
9 JUSTICE GINSBURG In Bilski Justice Breyer
10 did try to say that there wasnt that shyshy a whole lot of
11 distance between the four who thought business methods
12 were not patentable But he shyshy he also said something
13 else in shyshy in the other case Mayo Justice Scalia
14 asked you the question about doesnt that go to novelty
15 but didnt Justice Breyer say in Mayo that novelty can
16 be relevant to patent shyshy to patent eligibility He said
17 theres shyshy theres an overlap
18 MR PHILLIPS Well he said theres an
19 overlap Here in this context I think basically the
20 Respondents theory would mean that they are completely
21 coterminous And I dont think thats what the Court
22 meant And also we know from Diehr that theres got to
23 be at least some significant limitations on the extent
24 to which novelty has to be built into 101 That is the
25 province of 102 and 103 And as I said Congress
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1 modified the system of adjudication to create an
2 administrative mechanism that allows you to get to 102
3 and 103 And at least in context its important to
4 realize there have been 11 cases since that was created
5 9 of the 11 have been knocked down on 102 or 103 grounds
6 and not on 101 grounds And it seems to me thats the
7 answer to this problem is leave 101 as the coarse
8 filter If on its face it states these kinds of broad
9 abstract principles fundamental truths and even if it
10 says use a computer those should be struck down
11 JUSTICE SOTOMAYOR Which of the shyshy which of
12 the opinions below captures your position most
13 accurately
14 MR PHILLIPS I would guess it would be
15 Judge Moores opinion below that would capture ours most
16 correctly
17 JUSTICE SOTOMAYOR And if we were to think
18 your method claim is ineligible do you agree that your
19 systems and shyshy your medium and system claims fail as
20 well Do they rise and fall together
21 MR PHILLIPS No No I dont believe they
22 do rise and fall together I mean I think you could shyshy
23 if you wanted to interpret our medium claim shyshy I mean
24 our shyshy our method claims in a shyshy in particularly
25 abstract way I think you could still say that the
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1 system claims which clearly are shyshy are how to create a
2 computer system and how to implement it using that
3 method would be a much more concrete version of that in
4 a way that would take it out of 101 That said I
5 obviously believe that all of our claims satisfy 101
6 and should go on to the next stage
7 JUSTICE KAGAN Can I give you a
8 hypothetical Mr Phillips and you tell me how its
9 different or the same Lets say you know 30 years
10 somebody took a look around the world and said a lot of
11 people seem to order products by mail They get the
12 catalogues in the mail and then they send back their
13 return forms And lets say that one of the founders of
14 the Internet said wouldnt this be an amazing system
15 we could actually do this by computer and they had
16 patented that Is that the same
17 MR PHILLIPS I dont know if its the
18 same but I would shyshy I would argue that it could very
19 well be a patentable subject matter because shyshy but it
20 depends on how the claims play out
21 JUSTICE KAGAN No but exactly I mean
22 the claim would have said something along the lines of
23 you know theres this process by which people order
24 products and we want to do it over the Internet we want
25 to do it electronically and we will use a computer to
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1 do that to essentially take the process of mail order
2 catalogues and make it electronic
3 MR PHILLIPS I could certainly shyshy I think
4 I could write a claim shyshy a set of claims that I believe
5 would satisfy 101 And shyshy and to the extent that
6 youd shyshy that youd think those are no different than
7 the ones I have here then my argument is simply I think
8 I satisfy 101 with the claims we have before us Your
9 Honor
10 If there are no further questions then Id
11 like to reserve the rest of my time
12 CHIEF JUSTICE ROBERTS Thank you
13 Mr Phillips
14 Mr Perry
15 ORAL ARGUMENT OF MARK A PERRY
16 ON BEHALF OF THE RESPONDENTS
17 MR PERRY Mr Chief Justice and may it
18 please the Court
19 That path between Scylla and Charybdis was
20 charted in Bilski and Mayo Bilski holds that a
21 fundamental economic principle is an abstract idea and
22 Mayo holds that running such a principle on a computer
23 is quote not a patentable application of that
24 principle Those two propositions are sufficient to
25 dispose of this case
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1 If Bilski and Mayo stand Alices patents
2 fail Therefore Mr Phillips and his friends are
3 asking this Court to change the standard even though
4 this Court has had three unanimous decisions in the last
5 four terms establishing what the Court called a myriad
6 a wellshyestablished standard
7 On the abstract idea Justice Ginsburg you
8 asked Mr Phillips whats the difference between hedging
9 and this claim There is no difference This is
10 hedging It is hedging against credit default rather
11 than price fluctuation but it is simply hedging
12 And Mr Phillips stood up for 26 minutes and
13 never once referred to the patent Lets look at what
14 the inventor the soshycalled inventor said about this
15 invention This is at JA 293 to 94 in the
16 specification
17 This claim has simply two steps Its very
18 simple First debiting and crediting on a realtime
19 basis the relevant shadow records and second by
20 periodically affecting corresponding payment
21 instructions Those are direct quotes Debit credit
22 and pay Your Honor you cant get much more simple
23 than that
24 Mr Phillips suggests well we have
25 multilateral transactions global things chronological
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1 time zones and so forth None of those are claimed
2 Your Honor Those are all recited in specification
3 The claims read on a single transaction involving two
4 parties
5 JUSTICE BREYER Can I ask you at some
6 point not necessarily this second to say in my shyshy this
7 is just shyshy you know you have an opinion for a court
8 Different judges can have different interpretations
9 All youre getting is mine okay
10 But I think its pretty easy to say that
11 Archimedes cant just go to a boat builder and say
12 apply my idea All right Everybody agrees with that
13 But now we try to take that word apply and give
14 content to it
15 And what I suspect in my opinion Mayo did
16 and Bilski and the other cases is sketch an outer shell
17 of the content hoping that the experts you and the
18 other lawyers and the shyshy the circuit court could fill
19 in a little better than we had done the content of that
20 shell
21 So so far youre saying well this is
22 close enough to Archimedes saying apply it that we
23 neednt go further
24 Now will you at some point in the next few
25 minutes give me your impression of if it were necessary
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1 to go further what would the right words or example be
2 MR PERRY Your Honor as shyshy Justice
3 Breyer as to abstract ideas the PTO has filled in that
4 shell by listing economic concepts legal concepts
5 financial concepts teaching concepts dating and
6 interpersonal relationships and generally how business
7 should be conducted as examples of those things that are
8 likely abstract which of course all follow directly
9 from Bilski and the discussion this Court had in Bilski
10 And this patent shyshy these patents fall squarely within
11 that
12 Congress in the AIA confirmed that
13 reading Congress in the CBM method said business
14 methods that are subject to special scrutiny shyshy that is
15 dubious patents shyshy include methods and corresponding
16 apparatus which is what we have here that pertain to
17 data processing in the financial services industry and
18 do not offer a technological solution That describes
19 Alices patents to a letter Your Honor So that we
20 have shyshy
21 JUSTICE SOTOMAYOR What do you think is a
22 technological solution
23 MR PERRY Your Honor shyshy
24 JUSTICE SOTOMAYOR How could they if at
25 all written their patents to shyshy to make shyshy to make
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1 their software eligible What would shyshy what do they
2 need shyshy would have needed to have added
3 MR PERRY Justice Sotomayor they have no
4 software first Theyve never written software
5 Theyve never programmed a computer So thats a
6 nonexistent set
7 Second there are many technological
8 solutions to trading and settlement problems For
9 example data compression These shyshy these trading
10 platforms involve the movement of very large quantities
11 of data around the world The physical pipes that is
12 the fiber optic cables and data lines are limited
13 There are very sophisticated algorithms for both
14 security and speed to move data through the transmission
15 lines in novel and useful ways that could well be
16 patented
17 Nothing like that is claimed here To come
18 back to where I started if you look for example at
19 Claim 65 in the 510 patent as Mr Phillips reads it
20 it literally reads on a twoshyparty escrow to sell a
21 house so long as the escrow agent is typing this stuff
22 into the HUDshy1 using a computer That has nothing to do
23 with multilevel shyshy
24 CHIEF JUSTICE ROBERTS Well thats a
25 little more complicated He referred us to Joint
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1 Appendix Page 159 which is not a change in how
2 computers work But it is shyshy constitutes the
3 instructions about how to use the computer and where it
4 needs to be affected And just looking at it it looks
5 pretty complicated There are a lot of arrows and
6 they shyshy you know different things that go shyshy
7 (Laughter)
8 CHIEF JUSTICE ROBERTS Well but I mean
9 you know it shyshy in different directions And I
10 understand him to say that in each of those places
11 thats where the computer is needed
12 MR PERRY Mr Chief Justice Figure 16 has
13 nothing to do with the invention asserted against my
14 client in this case There are two inventions in this
15 patent One invention involving multilateral contract
16 formation is not asserted against my client And all of
17 these drawings pertain to that The only drawings that
18 pertain to the asserted claims are 25 and 33 to 37 And
19 that was established below and its established in this
20 Court And Mr Phillips has never disputed it
21 So the claim hes pointed the Court shyshy the
22 figure hes pointed the Court to has nothing to do with
23 the invention Its for a different invention that is
24 not at issue in this case
25 Remember there are hundreds and hundreds of
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1 pages of these patents They all pertain to the other
2 invention Thats why in the back of our red brief we
3 excerpted the very little bit that actually pertains to
4 this You sort of tack on patent shyshy the tack on claim
5 that Mr Phillips is asserting here Its 4 columns
6 Its less than five pages in the printed appendix that
7 actually pertains to this invention And it contains no
8 disclosure whatever
9 Justice Scalia to your question about how
10 the computer does it Of course a patent that
11 describes sufficiently how a computer does a new and
12 useful thing whether its data compression or any other
13 technological solution to a business problem a social
14 problem or a technological problem would be within the
15 realm of the shyshy of the patent laws That is what the
16 patent laws have always been for
17 This is not such a patent And the reason
18 for that is this is a preshyBilski set of patents These
19 were prosecuted under the old State Street test where
20 all the applicant had to claim was a result
21 JUSTICE KENNEDY Would you give me shyshy
22 again you already did it once shyshy an example of a
23 business process patent shyshy of a business process idea
24 and invention that is patentable
25 MR PERRY Your Honor there are many
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1 examples One would be a technological solution to a
2 business problem So that for example shyshy Ill give a
3 different example There are many applications today
4 The Court may be familiar with streaming video to watch
5 video on your computer
6 It is not possible to get enough data
7 through existing lines in its raw format The data has
8 to be manipulated in order to see live video So if you
9 want to watch TV on your phone for example
10 Those algorithms those inventions are
11 undoubtedly technological And if they are used in a
12 trading platform or a hedging system or something else
13 that wouldnt disable them And this is what the Diehr
14 case shyshy
15 JUSTICE KENNEDY Well I shyshy I shyshy in my
16 language Ive called that mechanical rather than
17 process Can you give me an example of process
18 MR PERRY Yes Your Honor The process in
19 that example would be a computer running the particular
20 data compression algorithm
21 JUSTICE KENNEDY But thats how to make
22 a shyshy thats how to make a machine work better
23 MR PERRY Yes Your Honor
24 JUSTICE KENNEDY Im asking you Is there
25 any business process any business activity that is
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1 susceptible to a patent a pure patent innovations that
2 deserve patents
3 MR PERRY Your Honor again a
4 technological solution to a business problem could well
5 be whether its a method or a process is equivalent
6 Again Congress said method in a corresponding shyshy
7 JUSTICE KENNEDY Can you give me an
8 example
9 MR PERRY I thought the data compression
10 example was a good one Ill try an encryption
11 technology Many of these trading platforms you know
12 dealing with securities and money would require some
13 sort of security devices You could have a process for
14 securely transmitting data would be another computer
15 implemented technological solution to a business
16 problem Again nothing like that claimed here
17 JUSTICE SOTOMAYOR How about eshymail and
18 just word processing programs
19 MR PERRY Your Honor a program shyshy let me
20 try it this way to both of your questions In our view
21 if what is claimed as the inventive contribution under
22 Mayo shyshy in other words if we have an abstract idea as
23 we do here and what is claimed is the inventive
24 contribution for Step 2 is the computer then the
25 computer must be essential to that operation and
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1 represent an advancement in computer science or other
2 technology And we know thats not met here Justice
3 Sotomayor because shyshy
4 JUSTICE SOTOMAYOR So youre saying no to
5 eshymail and word processing
6 MR PERRY Your Honor I think at a
7 point shyshy
8 JUSTICE SOTOMAYOR They certainly have
9 functionality and shyshy and improvement of functionality
10 for the user
11 MR PERRY At a point in time in the past
12 I think both of those would have been technological
13 advances that were patentable
14 JUSTICE SOTOMAYOR How
15 MR PERRY Today shyshy because they would have
16 provided a technological solution to a then unmet
17 problem Today reciting and do it on a word processor
18 is no different than and do it on a typewriter or shyshy and
19 do it on a calculator
20 The inventive contribution component which
21 uses specifically the language of conventional and
22 routine and well understood will evolve with
23 technology Thats why its different than the abstract
24 idea component
25 And here we know that these patents dont
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1 claim anything that was not conventional well
2 understood and routine We went through that in great
3 detail and Alice has never disputed a word of it They
4 just say youre not supposed to do that analysis even
5 though the Court 9shy0 in Mayo said we should
6 And in this case its very important to
7 look at what Alices own experts said on the subject
8 This is not our expert This is Alices expert And
9 this is at Page 1327shy28 of the Joint Appendix It is
10 possible to do the business methods of maintaining
11 accounts adjusting accounts and providing an
12 instruction without a computer or other hardware
13 And then Justice Breyer directly to your
14 abacus If someone had thought of this invention
15 soshycalled invention 100 years ago they might have
16 implemented it in a nonelectronic manner using various
17 precomputing tools such as an abacus or handwritten
18 ledgers
19 We know from Benson the Courts seminal
20 computer implementation case that if you can do it by
21 head and hand then the computer doesnt add anything
22 inventive within the meaning of the 101 exception That
23 is the holding of Benson And the Court reiterated that
24 in Mayo
25 Flook said exactly the same thing If you
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1 can do it with pencil and paper then the computer is
2 not offering anything that the patent laws are or should
3 be concerned with
4 It is only where the method will not work
5 without a computer which is not these claims and where
6 the computer itself is doing something that the patent
7 law is willing to protect
8 CHIEF JUSTICE ROBERTS What if shyshy what if
9 you can do it without a computer but its going to
10 take you know 20 people a hundred years In other
11 words theoretically you can replicate what the
12 computer does shyshy
13 MR PERRY Two answers
14 CHIEF JUSTICE ROBERTS shyshy but its
15 impractical without looking to do it on the computer
16 MR PERRY Mr Chief Justice first these
17 claims literally read as Alice reads them on a single
18 transaction between two parties so its not 20 people
19 for a hundred years Its one person sitting in a room
20 so thats not a problem
21 Second if what is being claimed is the
22 necessary speed or efficiency or data crunching
23 capabilities if you will of a computer then it would
24 have to be claimed and theres nothing claimed here
25 All that is claimed shyshy and my friend is going to stand
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1 up on rebuttal and tell you all that the expert said
2 well what is claimed is a computer but its just a
3 computer It just says a computer configured too It
4 doesnt say that the computer actually has to shyshy
5 JUSTICE BREYER Yeah but the trouble with
6 that particular test is as I think partly the Chief
7 Justice said how long et cetera and then add to that
8 though you could do it without a computer what happens
9 at the end of the line is the automobile engine goes off
10 or it begins to sputter or it turns left
11 You see its possible to take Archimedes shyshy
12 shyshy you know I use that example purposely to call
13 attention to the problem You can take those things
14 and youre not just saying apply it and youre not even
15 just saying shyshy you are saying use the computer but at
16 the end of the road something physical in the world
17 changes and everybody would say now thats shyshy that
18 will falls within I mean probably I mean my
19 hesitation shows Im looking for the right words
20 MR PERRY Justice Breyer your point is
21 the reason that it is equally fallacious to suggest on
22 the one hand as Alice and IBM does that simply
23 reciting a computer is a magic key that gets you through
24 101 and you never have to any other inquiry and what
25 some of folks the amici on the other side say which
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1 is that computers or software are never eligible Both
2 of those things have to be wrong because what the Court
3 said in Bilski was future innovation is too uncertain
4 We are not going to do that as a Court And the Court
5 laid out an approach using abstract ideas in Bilski and
6 inventive contribution in Mayo that is flexible enough
7 to take into account that innovation and to deal with
8 particular claims in context which is why at the end
9 of the day we have to come back to these patents and
10 decide which shyshy
11 JUSTICE KAGAN Mr Perry before we get
12 back to these matters you said to Justice Scalia if a
13 patent sufficiently describes how a computer will
14 implement an idea then its patentable So how
15 sufficiently does one have to describe it What do we
16 want a judge to do at this threshold level in terms of
17 trying to figure out whether the description is
18 sufficient to get you past it
19 MR PERRY If I can answer in two steps
20 Justice Kagan First in the negative What the
21 applicant or patentee must do shyshy must not do is simply
22 describe the desired result That would take us back to
23 State Street That would simply say I claim a magic
24 box that buys high and sells low or vice versa I
25 suppose I claim a magic box for investing Thats what
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1 these patents do
2 Then to put it in the affirmative and in the
3 language of Mayo the claim has to recite something
4 significantly more something significantly more than
5 the abstract idea itself That would be a contextual
6 analysis based on the claims and specifications and file
7 history and we know that some devices some methods
8 some programming will pass that
9 It is not going to be a brightshyline rule and
10 thats one of the tugshyofshywar issues that this Court and
11 the Federal Circuit have been having in these cases
12 The Federal Circuit wants brightshyline rules All
13 computers are in or all computers are out
14 This Court has been more contextual This
15 Court has been more nuanced This Court has looked at
16 things in a more robust way
17 JUSTICE KAGAN Youre not suggesting that
18 specific code is necessary
19 MR PERRY No Your Honor I think the shyshy
20 actual description of the programming is a 112 problem
21 I agree with that A 112 issue That is the realm of
22 the written description requirement What is a 101
23 problem is it is on the applicant to do more than simply
24 describe the results simply say A magic box that does
25 intermediate settlement And we can tie that back to
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1 this particular prosecution the 510 patent which is
2 the method patent
3 The examiner rejected it Under Section
4 101 the examiner said this is an abstract idea You
5 cant have this patent And the only change that this
6 applicant made was to add in the adjusting step
7 electronic adjustment It put in one word
8 electronic adjustment And under State Street which
9 is what this patent is prosecuted under that was
10 enough because the result of adjusting run through a
11 computer is enough
12 Under current law that cant be enough
13 That just cant get a patent over the line because this
14 Court said in Mayo and I got to quote this language
15 Simply implementing a fundamental principle on a
16 physical machine namely a computer is not a patentable
17 application of that principle Thats all that Alice
18 has done
19 These are preshyBilski patents They never
20 should have been issued General Verrilli will stand up
21 and address that point And certainly under current
22 law shyshy one point on the AIA Congress did not send all
23 this to the administrative process Congress created
24 two avenues the courts and the PTO to use the
25 standards Essentially it ratified Bilski and Mayo and
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1 said we agree with what you all are doing at the
2 Supreme Court and the existing standards are good enough
3 for us This is a judicial problem And that is a good
4 reason The abstract shyshy
5 JUSTICE GINSBURG The Federal Circuit in
6 this case split in many ways and it had our decisions
7 to deal with You said given Bilski and Mayo this is
8 an easy case What is the instruction that escaped a
9 good number of judges on the Federal Circuit How would
10 you state the rule
11 MR PERRY Your Honor I think theres a
12 significant element to the Federal Circuit that
13 disagrees with Mayo and has been resistant in applying
14 it Chief Judge shyshy former Chief Judge Michelle filed a
15 brief in this Court essentially saying Mayo is a
16 lifeshysciences case You should limit it to that because
17 if you apply it to everything else then these patents
18 are no good
19 Mayo we submit is a technologyshyneutral
20 industryshyneutral exceptionshyneutral framework that can
21 be used to answer all of these questions This is not
22 the death of software patents The software industry is
23 all before this Court saying this is fine with us
24 Every company in the United States practically except
25 for IBM is saying go ahead This will not affect
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1 software patents
2 Justice Ginsburg this Courts precedents
3 are clear They are unanimous They just need to be
4 applied To suggest that there is confusion that needs
5 to be addressed by retreating beating a retreat from
6 recent unanimous decisions would simply reward
7 intransigence difficulty refusal to adhere to what are
8 clear precedents because shyshy
9 JUSTICE KAGAN Should we be concerned
10 Mr Perry that there are old patents that in fact could
11 meet the test that you set forth but wont because they
12 were written in a different time and so used much more
13 general language
14 MR PERRY Your Honor the applicant or the
15 patent holder would have the opportunity to institute a
16 reexamination proceeding or some sort of administration
17 process to address that issue
18 And second it should be noted this is a
19 very small problem There are 2 million outstanding
20 patents in the United States In the last four fiscal
21 years there were 22000 infringement litigations
22 instituted but since Bilski there have only been 57
23 district court decisions on Section 101 issues There
24 have only been 12 Federal Circuit decisions total on
25 computer implementation
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1 We are talking about a group of patents
2 Justice Kagan thats way out at the tail end of
3 distribution Most patents never have a 101 challenge
4 This is not an issue with cotton gins and other things
5 This is a problem for the most marginal
6 most dubious most skeptical patents the ones that this
7 Court in Bilski shyshy and remember what Bilskis holding
8 is The majority said they are processes but it did
9 not say they are eligible
10 Thank you Mr Chief Justice
11 CHIEF JUSTICE ROBERTS Thank you counsel
12 General Verrilli
13 ORAL ARGUMENT OF DONALD B VERRILLI JR
14 ON BEHALF OF THE UNITED STATES AS AMICUS
15 CURIAE SUPPORTING RESPONDENTS
16 GENERAL VERRILLI Mr Chief Justice and
17 may it please the Court
18 An abstract idea does not become
19 patentshyeligible merely by tacking on an instruction to
20 use a computer to carry it out A computer makes a
21 difference under Section 101 when it imposes a
22 meaningful limit on the patent claim That occurs when
23 the claim is directed at improvement in computing
24 technology or an innovation that uses computing
25 technology to improve other technological functions
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1 Thats the test that we believe is most faithful to this
2 Courts precedents in Bilski and Mayo It keeps patents
3 within their traditional and appropriate domain and it
4 is capable of being administered consistently by Courts
5 and by PTO examiners
6 JUSTICE GINSBURG How do you answer the
7 argument that your view would extinguish businessshymethod
8 patents and make all software ineligible for patent
9 protection
10 GENERAL VERRILLI Yeah with shyshy let me
11 address software patents first because that I think is
12 obviously a significant question And its just not
13 correct to say that our approach would make software
14 patenting ineligible Any software patent that improves
15 the functioning of the computer technology is eligible
16 Any software patent that improves shyshy that is used to
17 improve another technology is eligible For example
18 the patent in the shyshy in the Diehr case is one in
19 which shyshy
20 JUSTICE SOTOMAYOR Why do we need to reach
21 this in that shyshy reach software patents at all in this
22 case
23 GENERAL VERRILLI Well shyshy
24 JUSTICE SOTOMAYOR Whats the necessity for
25 us to announce a general rule with respect to software
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1 There is no software being patented in this case
2 GENERAL VERRILLI Well I shyshy
3 JUSTICE SOTOMAYOR Theres a systems
4 GENERAL VERRILLI Well I shyshy I think shyshy
5 well they shyshy they shyshy theres a process being and shyshy and
6 one can think of software patents as process patents
7 And I think thats why my friends on the other side are
8 saying the sky is falling because they shyshy they are
9 interpreting what were saying about that when a
10 computer makes shyshy when a computers involvement makes
11 something eligible under 101 its calling those into
12 question and it doesnt
13 JUSTICE SOTOMAYOR Do you think we have to
14 reach the patentability of software to answer this case
15 GENERAL VERRILLI Well I think you can shyshy
16 I think the answer to that question is no not
17 necessarily You can decide it by saying that shyshy that
18 Bilski answers the question whether this is an abstract
19 idea because this form of hedging is really no
20 different than the form of hedging as a conceptual
21 matter at issue in Bilski And then Mayo answers the
22 question of whether the use of a computer in this case
23 adds enough to the abstract idea beyond conventional
24 steps because here all we have after all is just
25 conventional use of computing technology no computer
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1 innovation such that you dont qualify under 101 You
2 could take that approach
3 But it is important to the United States
4 that we shyshy and to our patent examiners that we get some
5 clarity if we can I think the clarity could come from
6 the text that I propose which I want to reiterate shyshy
7 JUSTICE SOTOMAYOR Well shyshy
8 JUSTICE BREYER Could shyshy could shyshy could you
9 go on with that because you were just getting to the
10 point where I think you say a computer improvement that
11 in fact leads to an improvement in harvesting cotton is
12 an improvement through a computer of technology so it
13 qualifies
14 But then I think you were going to say or I
15 got this also from the brief a computer improvement
16 that leads to an improvement in the methods of selling
17 bonds over the telephone is not an improvement in
18 technology reached by the computer Am I right about
19 the distinction youre making
20 GENERAL VERRILLI I dont think theres a
21 yes or no answer to that question
22 JUSTICE BREYER What is your view Yeah
23 what is shyshy how do we deal with just that problem
24 GENERAL VERRILLI If there is a genuine
25 innovation in the functioning of the computer shyshy
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1 JUSTICE BREYER Yes
2 GENERAL VERRILLI shyshy such that business
3 processes shyshy
4 JUSTICE BREYER Weve got that Yes yes
5 We got the computer But then it doesnt improve the
6 computer but rather it improves through the computer
7 the harvesting of cotton
8 Now youve got it in what you said was your
9 second category which is an improvement through the
10 computer of a technology And I thought in your brief
11 you were distinguishing an improvement through the
12 computer of a human activity that is not a technology
13 and in particular to pick an example of that
14 something in finance or something in business
15 Now am I right about the distinction youre
16 making
17 GENERAL VERRILLI Yeah that shyshy
18 JUSTICE BREYER If Im not right what is
19 the distinction
20 GENERAL VERRILLI That is generally the
21 line were drawing Frankly shyshy
22 JUSTICE BREYER And how is that justified
23 GENERAL VERRILLI I do want shyshy
24 JUSTICE BREYER That shyshy that is Judge Dyk
25 in shyshy in Bilski in the Federal circuit 4 people sort of
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1 picked it up maybe 5 didnt pick it up Would you say
2 a few words about it
3 GENERAL VERRILLI Sure About shyshy let me go
4 to Bilski there in that I do think while shyshy while
5 certainly the Court held that the term process got a
6 natural construction which could include business
7 methods it seems to me that thats not all the Court
8 said in Bilski The Court also said that it was
9 historically and traditionally quite rare that business
10 methods were patent eligible
11 It also said that shyshy that the shyshy that courts
12 and the PTO examiners should use the abstract ideas
13 exception to 101 to police the appropriate boundary
14 It also said that the
15 machineshyorshytransformation test that the United States
16 advocated remained a useful tool And of course that
17 directs to you seeing whether there is a technology
18 application
19 And of course the holding in Bilski was
20 that the shyshy the method for hedging risk was ineligible
21 because it was an abstract idea and I cant imagine
22 that if in Bilski the shyshy the claim had been exactly the
23 same but had added use a computer to carry out some of
24 these standard random analysis functions that are
25 claimed by the patent that you would have found it to
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1 be patent eligible
2 And I shyshy I would submit for the Court that
3 the key point here I think is that now given where
4 the Court shyshy what the Court has held in Bilski given
5 what its held in Mayo the abstract ideas exception is
6 really the only tool left to deal with what I shyshy what I
7 think I fairly read Bilski as saying is a significant
8 problem the proliferation of patents of business
9 methods
10 JUSTICE KENNEDY Is there an example that
11 you can give us of a shyshy what we can call a business
12 process that is patentable a process that doesnt
13 involve improving the workings of a computer
14 GENERAL VERRILLI I shyshy I think its going
15 to be difficult for me to do that I think for
16 example if you had a business method a process for
17 additional security pointshyofshysale credit card
18 transactions using particular encryption technology
19 that might well be patent eligible Its a technology
20 that it makes conduct of business more efficient or
21 effective
22 But there is a technological link here and
23 we do think thats critical to our shyshy to our point of
24 view with respect to the case And I shyshy and I do think
25 remember that when we say something is not patent
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1 eligible were not saying they cant do it Were
2 saying they cant monopolize it
3 And the concern in a situation like this one
4 is that if this is patent eligible its hard to see
5 why for example the first person who came up with a
6 frequent flier program wouldnt have been able to claim
7 a patent there because after all thats a business
8 method for improving customer loyalty implemented on a
9 computer
10 CHIEF JUSTICE ROBERTS General I shyshy you
11 mentioned a while ago the need for greater clarity and
12 certainty in this area And Im just wondering in your
13 brief youve got a nonshyexhaustive of factors to
14 consider and there are 6 different ones And Im just
15 doubtful that thats going to bring about greater
16 clarity and certainty
17 GENERAL VERRILLI I take shyshy I take the
18 point Mr Chief Justice but I think the key is that
19 they are all directed to answering the question of
20 whether the innovation that is claimed and is an
21 innovation in either A the improvement of a computers
22 functioning or B the use of computer technology to
23 improve the functioning of another technological
24 process and a case like Diehr would be in the latter
25 category
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1 And so I do think that thats the key
2 benchmark Thats the baseline Thats the test that
3 we do think can be applied clearly and consistently by
4 the courts or the PTO And it avoids the risk of things
5 like frequent flier programs or the Oakland As money
6 ball methods for evaluating the contributions in
7 individual baseball players make or any one of a host of
8 other things that our intuitions tell us just dont
9 belong in the patent system
10 Thats the shyshy drawing that line keeps them
11 out not drawing that line lets them in And with all
12 due respect I dont think that the novelty and
13 nonobviousness filters that 102 and 103 really deal with
14 that problem effectively because when you get to
15 nonobviousness in 103 for example youll be asking a
16 different question
17 If you take the frequent flier program you
18 would say well is this innovation in building consumer
19 loyalty something that would have been obvious to
20 somebody who runs an airline Its totally divorced
21 from the question of technology at that point and
22 therefore I dont think youre going to get the screen
23 that you need to get in order for the patent system to
24 be confined to its traditional and appropriate scope
25 If there are no further questions thank
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1 you
2 JUSTICE GINSBURG I have a question about
3 how do you identify an abstract concept The shyshy a
4 natural phenomenon a mathematical formula those are
5 easy to identify but there has been some confusion on
6 what qualifies as an abstract concept
7 GENERAL VERRILLI We would define
8 abstract shyshy an abstract concept as a claim that is not
9 directed to a concrete innovation in technology
10 science or the industrial arts So its the shyshy its
11 abstract in the sense that it is not a concrete
12 innovation in the traditional realm of patent law
13 Thank you
14 CHIEF JUSTICE ROBERTS Thank you General
15 Mr Phillips you have four minutes
16 remaining
17 REBUTTAL ARGUMENT OF CARTER G PHILLIPS
18 ON BEHALF OF THE PETITIONERS
19 MR PHILLIPS Thank you Mr Chief Justice
20 Id just like to make a few points
21 First of all with respect to the question
22 you asked which is looking at 159 et cetera all I can
23 tell you is that if you look at claim 33 it talks about
24 matched orders the matched orders that are described in
25 286 and 287 and then makes specific reference to 159
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1 and that flow chart thats there And its all designed
2 as a package Its only one element of the shyshy of the
3 invention but it is a central element and its an easy
4 one to understand And it goes well beyond simply the
5 notion of hedge shyshy hedge against settlement risk and do
6 it by a computer
7 JUSTICE SOTOMAYOR Your adversary says that
8 his shyshy the appendix to his brief are the only patents at
9 issue that the flow charts are not at issue in this
10 case
11 MR PHILLIPS Theres no basis for that
12 statement Your Honor There shyshy remember this went off
13 on a very truncated litigation process So theres shyshy
14 you know we shyshy we got cut off at the beginning of it
15 Theres been no construction of the shyshy of the claims
16 and shyshy and obviously these are specifications that go
17 to how you interpret the claim
18 JUSTICE SOTOMAYOR If we were to say that
19 there are no business patents shyshy
20 MR PHILLIPS Yes
21 JUSTICE SOTOMAYOR shyshy would your patent
22 survive at all
23 MR PHILLIPS No I dont shyshy I dont
24 believe so I think theres no question And you
25 know General Verrilli could not have been any plainer
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1 in his statement of how he wants to interpret the
2 abstract idea concept
3 JUSTICE SOTOMAYOR Yes he wants to say no
4 business patents
5 MR PHILLIPS No business shyshy just another
6 way of saying no business methods And you know the
7 Court rejected that And it seems to me extraordinary
8 to say Congress didnt reject no business methods in
9 101 but were going to do shyshy were going to manipulate
10 the judicial exception to accomplish precisely that same
11 thing It seems to me thats wholly inappropriate
12 Justice Ginsburg you asked my shyshy my friend
13 here you know whats his test He didnt answer that
14 question youll notice because he doesnt have an
15 answer His basic argument is whatever you do just
16 kill this patent
17 And if I were in his shoes I suppose Id
18 take that same position I think whats absolutely
19 clear is that the test ought to be one that is
20 structured as a very coarse filter not the kind of
21 filter that hes pushing for where it changes over time
22 I mean I thought his shyshy I thought his response to one
23 of the questions about eshymail and word processing that
24 Justice Sotomayor asked is over time it would change
25 Well thats exactly what 102 and 103 are for That is
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1 not the purpose of shyshy of Section 101
2 And then he uses the example of encryption
3 I guarantee you if we were arguing about encryption in
4 this case he would say to me that thats an abstract
5 principle because encryption is a concept thats been
6 around since time immemorial George Washington used
7 it Everybody has used encryption
8 And a question again thats not the
9 solution to these problems The question is how did we
10 go about doing it And we go beyond the basics of
11 simply saying use a computer and thats what we ask
12 this Court to focus on and to evaluate
13 As to the frequent flier program its
14 pretty clear to me that even though it was a novel idea
15 in some sense the concept itself would have been viewed
16 in shyshy in the KSR fashion as quite obvious as a means of
17 improving customer loyalty
18 There are solutions here Giving us 101
19 pass doesnt create a monopoly It just gets us to the
20 102 and 103 inquiries that are at the heart of what the
21 patent laws shyshy and 112 that are at the heart of what the
22 patent laws ought to be dealing with
23 If there are no further questions Your
24 Honor thank you
25 CHIEF JUSTICE ROBERTS Thank you counsel
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1 The case is submitted
2 (Whereupon at 1105 am the case in the
3 aboveshyentitled matter was submitted)
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vice 3924 video 33458 view 1015
wellshyestablished 276
went 1724
Z zones 421 281
285shy286 1910 286 5325 287 5325
1623 3420 2214 362 0 293 2715 457 4722 5024
viewed 5615 violate 55
W waiting 1334 want 1324 172
221 232 252424 339 3916 476 4823
wanted 2423 wants 2222
4012 5513 Washington
110171922 566
wasnt 2125 2310
watch 3349 water 71 way 416 58
81625 1113 151520 1614 1624 1721 1815 2017 2112 235 2425 254
5412 wholly 5511 willing 377 wondering
5112 word 52021
821 228 2813 3418 35517 363 417 5523
words 713 291 3422 3711 3819 492
work 51719 1124 2110 312 3322 374
workings 5013 world 2018
2510 3011 3816
wouldnt 414 415 2514 3313 516
write 264 writers 132325 written 617
1716 2925 304 4022
1 1004 115 32 100 3615 101 3121522
414 65 1715 18267 2019 2324 2467 2545 2658 3622 3824 4022 414 4323 44321 4611 471 4913 559 56118
102 1717 187 2325 2425 5213 5525 5620
103 1717 187 2325 2435 521315 5525 5620
11 2445 1105 572 112 1921 4020
4021 5621 12 4324 13shy298 15 34
3 3 24 30 259 31 111 33 3118 5323 37 3118
4 4 325 4825 42 1524 1618 44 211
5 5 491 510 3019 411 53 214 57 4322
6 6 5114 65 3019
7
8
9 9 245 9shy0 365
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1 MR PHILLIPS Well Justice Breyer I guess
2 I would suggest to you that you might want to deal with
3 the problem you know as opposed to the problems you
4 dont know at this stage I mean we have had business
5 method patents and software patents in existence for
6 well over a decade and theyre obviously quite
7 significant in number And shyshy and we know what the
8 system is we have And Congress looked at that system
9 right and didnt say no to business methods patents
10 didnt say no to software patents instead said the
11 solution to this problem is to get it out of the
12 judicial process and create an administrative process
13 but leave the substantive standards intact
14 So my suggestion to you would be follow that
15 same advice a liberal interpretation of 101 and not a
16 caricature of the claims analyze the claims as written
17 and therefore say that the solution is 102 and 103 and
18 use the administrative process If you shyshy
19 JUSTICE GINSBURG Mr Phillips let me just
20 stop you there because four Justices of this Court did
21 not read that legislative history the way you do And
22 it was shyshy was in Bilski
23 MR PHILLIPS But this is postshyBilski
24 JUSTICE GINSBURG Justice Stevens went
25 carefully through that and he said Congress was
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1 reacting to a decision It had shyshy it was not addressing
2 101 So there are at least four Justices who say shyshy who
3 didnt buy that argument
4 MR PHILLIPS Well I mean it still seems
5 to me that the shyshy the natural inference is Congress did
6 not change 101 Congress created an entire
7 administrative system to deal with 101 102 and 103
8 And shyshy and I would hope shyshy
9 JUSTICE SCALIA And four is not five
10 anyway right
11 MR PHILLIPS Thats true
12 JUSTICE SCALIA Four is not five
13 MR PHILLIPS And youve exhausted my math
14 skills Your Honor
15 JUSTICE SCALIA By the way we shyshy we have
16 said that you cant take an abstract idea and then say
17 use a computer to implement it But we havent said
18 that you cant take an abstract idea and then say here
19 is how you use a computer to implement it shyshy
20 MR PHILLIPS Exactly
21 JUSTICE SCALIA shyshy which is basically what
22 youre doing
23 MR PHILLIPS And thats the argument were
24 doing and shyshy
25 JUSTICE SCALIA And thats a little
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1 different
2 MR PHILLIPS shyshy thats the line were
3 asking the Court to draw here
4 JUSTICE KAGAN Well how are you saying the
5 how Because I thought that your computers shyshy that your
6 patents really did just say do this on a computer as
7 opposed to saying anything substantive about how to do
8 it on a computer
9 MR PHILLIPS I would urge the Court to
10 look at Joint Appendix 159 285shy286 where it goes
11 through the flow charts This is shyshy and this is just a
12 specific example of the method by which you stop a
13 transaction and it goes through a varied series of
14 detailed steps and what the computer has to do in order
15 to do that It doesnt actually obviously put in the
16 code but thats what the PTO says dont do Dont put
17 in the code because nobody understands code so shyshy but
18 put in the functions and we know shyshy and we know that
19 someone skilled in the art will be able to put in the
20 code And if they arent if they cant do that then
21 its not enabled and thats a 112 problem
22 To go back Justice Breyer to your
23 question So on the one hand youve got a problem that
24 it seems to me Congress to some extent has said is okay
25 and weve got a solution and that solutions playing
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1 through On the other hand if this Court were to say
2 much more categorically either that theres no such
3 thing as business method patents or adopt the Solicitor
4 Generals interpretation which is to say that there
5 cannot be software unless the software somehow actually
6 improves the computer as opposed to software improving
7 every other device or any other mechanism that might be
8 out there
9 What we know is that this would inherently
10 declare and in one fell swoop hundreds of thousands of
11 patents invalid and the consequences of that it seems
12 to me are utterly unknowable And before the Court goes
13 down that path I would think it would think long and
14 hard about whether isnt that a judgment that Congress
15 ought to make And It seems to me in that sense youre
16 essentially where the Court was in Chakrabarty where
17 everybody was saying youve got to act in one way or the
18 other or the world comes to an end and the courts have
19 said well apply 101 directly
20 JUSTICE KENNEDY If we say that theres no
21 software patentability and agree with the Attorney
22 General do you lose in this case
23 MR PHILLIPS Well it would be very hard
24 for me to see how that shyshy how shyshy how I can get around
25 that particular problem because the computer is the
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1 essence of it so shyshy and a portion of it is clearly the
2 software So I think if you say there is no such thing
3 as software patentability I do lose in this case yes
4 Your Honor As do a whole lot of other people
5 JUSTICE KENNEDY Is there any common ground
6 between you and the government shyshy maybe a better
7 question to ask the government shyshy a common ground
8 between you and the government on something in the
9 software area thats patentable other than making the
10 computer itself work You understand the government to
11 say no software patents
12 MR PHILLIPS Thats the way I interpret
13 the governments shyshy the governments brief
14 JUSTICE BREYER It was like shyshy theres a
15 Bloomberg brief out here that was on this that said
16 no you can shyshy you can patent computer software when
17 its an improvement in the computer when its an
18 improvement in software when its an improvement in a
19 technology that is developed out of computers like
20 robotics when it is an improvement in a machine or
21 technology but you cannot improve it where it is simply
22 an improvement in an activity that is engaged in
23 primarily through mental processes But what they mean
24 by that is business finance and similar arts
25 Thats shyshy I mean thats shyshy it wasnt quite what shyshy I
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1 know Thats what I want to know what you dont agree
2 with about that because its a little more refined than
3 you suggested
4 MR PHILLIPS I read the Solicitor
5 Generals brief as broader than the Bloomberg brief
6 in shyshy in terms of the approach And IBMs argument is
7 if you knock out software patents you eliminate web
8 browsing word processing cellphones eshymail Those
9 are all activities that I dont think fall within the
10 meaning of the shyshy the meaning of the governments theory
11 of the case
12 JUSTICE BREYER But Im asking you shyshy Im
13 asking you what about this one that I just mentioned
14 You see I went through those five steps shyshy
15 MR PHILLIPS Right
16 JUSTICE BREYER shyshy and four of them you
17 could patent and the fifth one you cant
18 MR PHILLIPS Right But I shyshy and I guess
19 my answer to that is thats nowhere in the statute and
20 it doesnt seem to me to reflect an abstract idea Its
21 a shyshy its a line you draw that takes out business method
22 patents If the Court wants to eliminate business
23 method patents fine But you just said no to that in
24 Bilski two three terms ago
25 Now to be sure give the Solicitor General
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1 credit he comes here and says to you We didnt like
2 the result in Bilski we want you to say dont use
3 process in order to get there which is a statutory
4 interpretation come up with an extraordinarily
5 complicated way of looking at the exception and use that
6 to get to the exact same result
7 JUSTICE SOTOMAYOR Well youre doing a
8 very good job of proving shyshy
9 JUSTICE GINSBURG In Bilski Justice Breyer
10 did try to say that there wasnt that shyshy a whole lot of
11 distance between the four who thought business methods
12 were not patentable But he shyshy he also said something
13 else in shyshy in the other case Mayo Justice Scalia
14 asked you the question about doesnt that go to novelty
15 but didnt Justice Breyer say in Mayo that novelty can
16 be relevant to patent shyshy to patent eligibility He said
17 theres shyshy theres an overlap
18 MR PHILLIPS Well he said theres an
19 overlap Here in this context I think basically the
20 Respondents theory would mean that they are completely
21 coterminous And I dont think thats what the Court
22 meant And also we know from Diehr that theres got to
23 be at least some significant limitations on the extent
24 to which novelty has to be built into 101 That is the
25 province of 102 and 103 And as I said Congress
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1 modified the system of adjudication to create an
2 administrative mechanism that allows you to get to 102
3 and 103 And at least in context its important to
4 realize there have been 11 cases since that was created
5 9 of the 11 have been knocked down on 102 or 103 grounds
6 and not on 101 grounds And it seems to me thats the
7 answer to this problem is leave 101 as the coarse
8 filter If on its face it states these kinds of broad
9 abstract principles fundamental truths and even if it
10 says use a computer those should be struck down
11 JUSTICE SOTOMAYOR Which of the shyshy which of
12 the opinions below captures your position most
13 accurately
14 MR PHILLIPS I would guess it would be
15 Judge Moores opinion below that would capture ours most
16 correctly
17 JUSTICE SOTOMAYOR And if we were to think
18 your method claim is ineligible do you agree that your
19 systems and shyshy your medium and system claims fail as
20 well Do they rise and fall together
21 MR PHILLIPS No No I dont believe they
22 do rise and fall together I mean I think you could shyshy
23 if you wanted to interpret our medium claim shyshy I mean
24 our shyshy our method claims in a shyshy in particularly
25 abstract way I think you could still say that the
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1 system claims which clearly are shyshy are how to create a
2 computer system and how to implement it using that
3 method would be a much more concrete version of that in
4 a way that would take it out of 101 That said I
5 obviously believe that all of our claims satisfy 101
6 and should go on to the next stage
7 JUSTICE KAGAN Can I give you a
8 hypothetical Mr Phillips and you tell me how its
9 different or the same Lets say you know 30 years
10 somebody took a look around the world and said a lot of
11 people seem to order products by mail They get the
12 catalogues in the mail and then they send back their
13 return forms And lets say that one of the founders of
14 the Internet said wouldnt this be an amazing system
15 we could actually do this by computer and they had
16 patented that Is that the same
17 MR PHILLIPS I dont know if its the
18 same but I would shyshy I would argue that it could very
19 well be a patentable subject matter because shyshy but it
20 depends on how the claims play out
21 JUSTICE KAGAN No but exactly I mean
22 the claim would have said something along the lines of
23 you know theres this process by which people order
24 products and we want to do it over the Internet we want
25 to do it electronically and we will use a computer to
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1 do that to essentially take the process of mail order
2 catalogues and make it electronic
3 MR PHILLIPS I could certainly shyshy I think
4 I could write a claim shyshy a set of claims that I believe
5 would satisfy 101 And shyshy and to the extent that
6 youd shyshy that youd think those are no different than
7 the ones I have here then my argument is simply I think
8 I satisfy 101 with the claims we have before us Your
9 Honor
10 If there are no further questions then Id
11 like to reserve the rest of my time
12 CHIEF JUSTICE ROBERTS Thank you
13 Mr Phillips
14 Mr Perry
15 ORAL ARGUMENT OF MARK A PERRY
16 ON BEHALF OF THE RESPONDENTS
17 MR PERRY Mr Chief Justice and may it
18 please the Court
19 That path between Scylla and Charybdis was
20 charted in Bilski and Mayo Bilski holds that a
21 fundamental economic principle is an abstract idea and
22 Mayo holds that running such a principle on a computer
23 is quote not a patentable application of that
24 principle Those two propositions are sufficient to
25 dispose of this case
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1 If Bilski and Mayo stand Alices patents
2 fail Therefore Mr Phillips and his friends are
3 asking this Court to change the standard even though
4 this Court has had three unanimous decisions in the last
5 four terms establishing what the Court called a myriad
6 a wellshyestablished standard
7 On the abstract idea Justice Ginsburg you
8 asked Mr Phillips whats the difference between hedging
9 and this claim There is no difference This is
10 hedging It is hedging against credit default rather
11 than price fluctuation but it is simply hedging
12 And Mr Phillips stood up for 26 minutes and
13 never once referred to the patent Lets look at what
14 the inventor the soshycalled inventor said about this
15 invention This is at JA 293 to 94 in the
16 specification
17 This claim has simply two steps Its very
18 simple First debiting and crediting on a realtime
19 basis the relevant shadow records and second by
20 periodically affecting corresponding payment
21 instructions Those are direct quotes Debit credit
22 and pay Your Honor you cant get much more simple
23 than that
24 Mr Phillips suggests well we have
25 multilateral transactions global things chronological
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1 time zones and so forth None of those are claimed
2 Your Honor Those are all recited in specification
3 The claims read on a single transaction involving two
4 parties
5 JUSTICE BREYER Can I ask you at some
6 point not necessarily this second to say in my shyshy this
7 is just shyshy you know you have an opinion for a court
8 Different judges can have different interpretations
9 All youre getting is mine okay
10 But I think its pretty easy to say that
11 Archimedes cant just go to a boat builder and say
12 apply my idea All right Everybody agrees with that
13 But now we try to take that word apply and give
14 content to it
15 And what I suspect in my opinion Mayo did
16 and Bilski and the other cases is sketch an outer shell
17 of the content hoping that the experts you and the
18 other lawyers and the shyshy the circuit court could fill
19 in a little better than we had done the content of that
20 shell
21 So so far youre saying well this is
22 close enough to Archimedes saying apply it that we
23 neednt go further
24 Now will you at some point in the next few
25 minutes give me your impression of if it were necessary
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1 to go further what would the right words or example be
2 MR PERRY Your Honor as shyshy Justice
3 Breyer as to abstract ideas the PTO has filled in that
4 shell by listing economic concepts legal concepts
5 financial concepts teaching concepts dating and
6 interpersonal relationships and generally how business
7 should be conducted as examples of those things that are
8 likely abstract which of course all follow directly
9 from Bilski and the discussion this Court had in Bilski
10 And this patent shyshy these patents fall squarely within
11 that
12 Congress in the AIA confirmed that
13 reading Congress in the CBM method said business
14 methods that are subject to special scrutiny shyshy that is
15 dubious patents shyshy include methods and corresponding
16 apparatus which is what we have here that pertain to
17 data processing in the financial services industry and
18 do not offer a technological solution That describes
19 Alices patents to a letter Your Honor So that we
20 have shyshy
21 JUSTICE SOTOMAYOR What do you think is a
22 technological solution
23 MR PERRY Your Honor shyshy
24 JUSTICE SOTOMAYOR How could they if at
25 all written their patents to shyshy to make shyshy to make
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1 their software eligible What would shyshy what do they
2 need shyshy would have needed to have added
3 MR PERRY Justice Sotomayor they have no
4 software first Theyve never written software
5 Theyve never programmed a computer So thats a
6 nonexistent set
7 Second there are many technological
8 solutions to trading and settlement problems For
9 example data compression These shyshy these trading
10 platforms involve the movement of very large quantities
11 of data around the world The physical pipes that is
12 the fiber optic cables and data lines are limited
13 There are very sophisticated algorithms for both
14 security and speed to move data through the transmission
15 lines in novel and useful ways that could well be
16 patented
17 Nothing like that is claimed here To come
18 back to where I started if you look for example at
19 Claim 65 in the 510 patent as Mr Phillips reads it
20 it literally reads on a twoshyparty escrow to sell a
21 house so long as the escrow agent is typing this stuff
22 into the HUDshy1 using a computer That has nothing to do
23 with multilevel shyshy
24 CHIEF JUSTICE ROBERTS Well thats a
25 little more complicated He referred us to Joint
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1 Appendix Page 159 which is not a change in how
2 computers work But it is shyshy constitutes the
3 instructions about how to use the computer and where it
4 needs to be affected And just looking at it it looks
5 pretty complicated There are a lot of arrows and
6 they shyshy you know different things that go shyshy
7 (Laughter)
8 CHIEF JUSTICE ROBERTS Well but I mean
9 you know it shyshy in different directions And I
10 understand him to say that in each of those places
11 thats where the computer is needed
12 MR PERRY Mr Chief Justice Figure 16 has
13 nothing to do with the invention asserted against my
14 client in this case There are two inventions in this
15 patent One invention involving multilateral contract
16 formation is not asserted against my client And all of
17 these drawings pertain to that The only drawings that
18 pertain to the asserted claims are 25 and 33 to 37 And
19 that was established below and its established in this
20 Court And Mr Phillips has never disputed it
21 So the claim hes pointed the Court shyshy the
22 figure hes pointed the Court to has nothing to do with
23 the invention Its for a different invention that is
24 not at issue in this case
25 Remember there are hundreds and hundreds of
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1 pages of these patents They all pertain to the other
2 invention Thats why in the back of our red brief we
3 excerpted the very little bit that actually pertains to
4 this You sort of tack on patent shyshy the tack on claim
5 that Mr Phillips is asserting here Its 4 columns
6 Its less than five pages in the printed appendix that
7 actually pertains to this invention And it contains no
8 disclosure whatever
9 Justice Scalia to your question about how
10 the computer does it Of course a patent that
11 describes sufficiently how a computer does a new and
12 useful thing whether its data compression or any other
13 technological solution to a business problem a social
14 problem or a technological problem would be within the
15 realm of the shyshy of the patent laws That is what the
16 patent laws have always been for
17 This is not such a patent And the reason
18 for that is this is a preshyBilski set of patents These
19 were prosecuted under the old State Street test where
20 all the applicant had to claim was a result
21 JUSTICE KENNEDY Would you give me shyshy
22 again you already did it once shyshy an example of a
23 business process patent shyshy of a business process idea
24 and invention that is patentable
25 MR PERRY Your Honor there are many
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1 examples One would be a technological solution to a
2 business problem So that for example shyshy Ill give a
3 different example There are many applications today
4 The Court may be familiar with streaming video to watch
5 video on your computer
6 It is not possible to get enough data
7 through existing lines in its raw format The data has
8 to be manipulated in order to see live video So if you
9 want to watch TV on your phone for example
10 Those algorithms those inventions are
11 undoubtedly technological And if they are used in a
12 trading platform or a hedging system or something else
13 that wouldnt disable them And this is what the Diehr
14 case shyshy
15 JUSTICE KENNEDY Well I shyshy I shyshy in my
16 language Ive called that mechanical rather than
17 process Can you give me an example of process
18 MR PERRY Yes Your Honor The process in
19 that example would be a computer running the particular
20 data compression algorithm
21 JUSTICE KENNEDY But thats how to make
22 a shyshy thats how to make a machine work better
23 MR PERRY Yes Your Honor
24 JUSTICE KENNEDY Im asking you Is there
25 any business process any business activity that is
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1 susceptible to a patent a pure patent innovations that
2 deserve patents
3 MR PERRY Your Honor again a
4 technological solution to a business problem could well
5 be whether its a method or a process is equivalent
6 Again Congress said method in a corresponding shyshy
7 JUSTICE KENNEDY Can you give me an
8 example
9 MR PERRY I thought the data compression
10 example was a good one Ill try an encryption
11 technology Many of these trading platforms you know
12 dealing with securities and money would require some
13 sort of security devices You could have a process for
14 securely transmitting data would be another computer
15 implemented technological solution to a business
16 problem Again nothing like that claimed here
17 JUSTICE SOTOMAYOR How about eshymail and
18 just word processing programs
19 MR PERRY Your Honor a program shyshy let me
20 try it this way to both of your questions In our view
21 if what is claimed as the inventive contribution under
22 Mayo shyshy in other words if we have an abstract idea as
23 we do here and what is claimed is the inventive
24 contribution for Step 2 is the computer then the
25 computer must be essential to that operation and
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1 represent an advancement in computer science or other
2 technology And we know thats not met here Justice
3 Sotomayor because shyshy
4 JUSTICE SOTOMAYOR So youre saying no to
5 eshymail and word processing
6 MR PERRY Your Honor I think at a
7 point shyshy
8 JUSTICE SOTOMAYOR They certainly have
9 functionality and shyshy and improvement of functionality
10 for the user
11 MR PERRY At a point in time in the past
12 I think both of those would have been technological
13 advances that were patentable
14 JUSTICE SOTOMAYOR How
15 MR PERRY Today shyshy because they would have
16 provided a technological solution to a then unmet
17 problem Today reciting and do it on a word processor
18 is no different than and do it on a typewriter or shyshy and
19 do it on a calculator
20 The inventive contribution component which
21 uses specifically the language of conventional and
22 routine and well understood will evolve with
23 technology Thats why its different than the abstract
24 idea component
25 And here we know that these patents dont
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1 claim anything that was not conventional well
2 understood and routine We went through that in great
3 detail and Alice has never disputed a word of it They
4 just say youre not supposed to do that analysis even
5 though the Court 9shy0 in Mayo said we should
6 And in this case its very important to
7 look at what Alices own experts said on the subject
8 This is not our expert This is Alices expert And
9 this is at Page 1327shy28 of the Joint Appendix It is
10 possible to do the business methods of maintaining
11 accounts adjusting accounts and providing an
12 instruction without a computer or other hardware
13 And then Justice Breyer directly to your
14 abacus If someone had thought of this invention
15 soshycalled invention 100 years ago they might have
16 implemented it in a nonelectronic manner using various
17 precomputing tools such as an abacus or handwritten
18 ledgers
19 We know from Benson the Courts seminal
20 computer implementation case that if you can do it by
21 head and hand then the computer doesnt add anything
22 inventive within the meaning of the 101 exception That
23 is the holding of Benson And the Court reiterated that
24 in Mayo
25 Flook said exactly the same thing If you
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1 can do it with pencil and paper then the computer is
2 not offering anything that the patent laws are or should
3 be concerned with
4 It is only where the method will not work
5 without a computer which is not these claims and where
6 the computer itself is doing something that the patent
7 law is willing to protect
8 CHIEF JUSTICE ROBERTS What if shyshy what if
9 you can do it without a computer but its going to
10 take you know 20 people a hundred years In other
11 words theoretically you can replicate what the
12 computer does shyshy
13 MR PERRY Two answers
14 CHIEF JUSTICE ROBERTS shyshy but its
15 impractical without looking to do it on the computer
16 MR PERRY Mr Chief Justice first these
17 claims literally read as Alice reads them on a single
18 transaction between two parties so its not 20 people
19 for a hundred years Its one person sitting in a room
20 so thats not a problem
21 Second if what is being claimed is the
22 necessary speed or efficiency or data crunching
23 capabilities if you will of a computer then it would
24 have to be claimed and theres nothing claimed here
25 All that is claimed shyshy and my friend is going to stand
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1 up on rebuttal and tell you all that the expert said
2 well what is claimed is a computer but its just a
3 computer It just says a computer configured too It
4 doesnt say that the computer actually has to shyshy
5 JUSTICE BREYER Yeah but the trouble with
6 that particular test is as I think partly the Chief
7 Justice said how long et cetera and then add to that
8 though you could do it without a computer what happens
9 at the end of the line is the automobile engine goes off
10 or it begins to sputter or it turns left
11 You see its possible to take Archimedes shyshy
12 shyshy you know I use that example purposely to call
13 attention to the problem You can take those things
14 and youre not just saying apply it and youre not even
15 just saying shyshy you are saying use the computer but at
16 the end of the road something physical in the world
17 changes and everybody would say now thats shyshy that
18 will falls within I mean probably I mean my
19 hesitation shows Im looking for the right words
20 MR PERRY Justice Breyer your point is
21 the reason that it is equally fallacious to suggest on
22 the one hand as Alice and IBM does that simply
23 reciting a computer is a magic key that gets you through
24 101 and you never have to any other inquiry and what
25 some of folks the amici on the other side say which
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1 is that computers or software are never eligible Both
2 of those things have to be wrong because what the Court
3 said in Bilski was future innovation is too uncertain
4 We are not going to do that as a Court And the Court
5 laid out an approach using abstract ideas in Bilski and
6 inventive contribution in Mayo that is flexible enough
7 to take into account that innovation and to deal with
8 particular claims in context which is why at the end
9 of the day we have to come back to these patents and
10 decide which shyshy
11 JUSTICE KAGAN Mr Perry before we get
12 back to these matters you said to Justice Scalia if a
13 patent sufficiently describes how a computer will
14 implement an idea then its patentable So how
15 sufficiently does one have to describe it What do we
16 want a judge to do at this threshold level in terms of
17 trying to figure out whether the description is
18 sufficient to get you past it
19 MR PERRY If I can answer in two steps
20 Justice Kagan First in the negative What the
21 applicant or patentee must do shyshy must not do is simply
22 describe the desired result That would take us back to
23 State Street That would simply say I claim a magic
24 box that buys high and sells low or vice versa I
25 suppose I claim a magic box for investing Thats what
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1 these patents do
2 Then to put it in the affirmative and in the
3 language of Mayo the claim has to recite something
4 significantly more something significantly more than
5 the abstract idea itself That would be a contextual
6 analysis based on the claims and specifications and file
7 history and we know that some devices some methods
8 some programming will pass that
9 It is not going to be a brightshyline rule and
10 thats one of the tugshyofshywar issues that this Court and
11 the Federal Circuit have been having in these cases
12 The Federal Circuit wants brightshyline rules All
13 computers are in or all computers are out
14 This Court has been more contextual This
15 Court has been more nuanced This Court has looked at
16 things in a more robust way
17 JUSTICE KAGAN Youre not suggesting that
18 specific code is necessary
19 MR PERRY No Your Honor I think the shyshy
20 actual description of the programming is a 112 problem
21 I agree with that A 112 issue That is the realm of
22 the written description requirement What is a 101
23 problem is it is on the applicant to do more than simply
24 describe the results simply say A magic box that does
25 intermediate settlement And we can tie that back to
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1 this particular prosecution the 510 patent which is
2 the method patent
3 The examiner rejected it Under Section
4 101 the examiner said this is an abstract idea You
5 cant have this patent And the only change that this
6 applicant made was to add in the adjusting step
7 electronic adjustment It put in one word
8 electronic adjustment And under State Street which
9 is what this patent is prosecuted under that was
10 enough because the result of adjusting run through a
11 computer is enough
12 Under current law that cant be enough
13 That just cant get a patent over the line because this
14 Court said in Mayo and I got to quote this language
15 Simply implementing a fundamental principle on a
16 physical machine namely a computer is not a patentable
17 application of that principle Thats all that Alice
18 has done
19 These are preshyBilski patents They never
20 should have been issued General Verrilli will stand up
21 and address that point And certainly under current
22 law shyshy one point on the AIA Congress did not send all
23 this to the administrative process Congress created
24 two avenues the courts and the PTO to use the
25 standards Essentially it ratified Bilski and Mayo and
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1 said we agree with what you all are doing at the
2 Supreme Court and the existing standards are good enough
3 for us This is a judicial problem And that is a good
4 reason The abstract shyshy
5 JUSTICE GINSBURG The Federal Circuit in
6 this case split in many ways and it had our decisions
7 to deal with You said given Bilski and Mayo this is
8 an easy case What is the instruction that escaped a
9 good number of judges on the Federal Circuit How would
10 you state the rule
11 MR PERRY Your Honor I think theres a
12 significant element to the Federal Circuit that
13 disagrees with Mayo and has been resistant in applying
14 it Chief Judge shyshy former Chief Judge Michelle filed a
15 brief in this Court essentially saying Mayo is a
16 lifeshysciences case You should limit it to that because
17 if you apply it to everything else then these patents
18 are no good
19 Mayo we submit is a technologyshyneutral
20 industryshyneutral exceptionshyneutral framework that can
21 be used to answer all of these questions This is not
22 the death of software patents The software industry is
23 all before this Court saying this is fine with us
24 Every company in the United States practically except
25 for IBM is saying go ahead This will not affect
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1 software patents
2 Justice Ginsburg this Courts precedents
3 are clear They are unanimous They just need to be
4 applied To suggest that there is confusion that needs
5 to be addressed by retreating beating a retreat from
6 recent unanimous decisions would simply reward
7 intransigence difficulty refusal to adhere to what are
8 clear precedents because shyshy
9 JUSTICE KAGAN Should we be concerned
10 Mr Perry that there are old patents that in fact could
11 meet the test that you set forth but wont because they
12 were written in a different time and so used much more
13 general language
14 MR PERRY Your Honor the applicant or the
15 patent holder would have the opportunity to institute a
16 reexamination proceeding or some sort of administration
17 process to address that issue
18 And second it should be noted this is a
19 very small problem There are 2 million outstanding
20 patents in the United States In the last four fiscal
21 years there were 22000 infringement litigations
22 instituted but since Bilski there have only been 57
23 district court decisions on Section 101 issues There
24 have only been 12 Federal Circuit decisions total on
25 computer implementation
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1 We are talking about a group of patents
2 Justice Kagan thats way out at the tail end of
3 distribution Most patents never have a 101 challenge
4 This is not an issue with cotton gins and other things
5 This is a problem for the most marginal
6 most dubious most skeptical patents the ones that this
7 Court in Bilski shyshy and remember what Bilskis holding
8 is The majority said they are processes but it did
9 not say they are eligible
10 Thank you Mr Chief Justice
11 CHIEF JUSTICE ROBERTS Thank you counsel
12 General Verrilli
13 ORAL ARGUMENT OF DONALD B VERRILLI JR
14 ON BEHALF OF THE UNITED STATES AS AMICUS
15 CURIAE SUPPORTING RESPONDENTS
16 GENERAL VERRILLI Mr Chief Justice and
17 may it please the Court
18 An abstract idea does not become
19 patentshyeligible merely by tacking on an instruction to
20 use a computer to carry it out A computer makes a
21 difference under Section 101 when it imposes a
22 meaningful limit on the patent claim That occurs when
23 the claim is directed at improvement in computing
24 technology or an innovation that uses computing
25 technology to improve other technological functions
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1 Thats the test that we believe is most faithful to this
2 Courts precedents in Bilski and Mayo It keeps patents
3 within their traditional and appropriate domain and it
4 is capable of being administered consistently by Courts
5 and by PTO examiners
6 JUSTICE GINSBURG How do you answer the
7 argument that your view would extinguish businessshymethod
8 patents and make all software ineligible for patent
9 protection
10 GENERAL VERRILLI Yeah with shyshy let me
11 address software patents first because that I think is
12 obviously a significant question And its just not
13 correct to say that our approach would make software
14 patenting ineligible Any software patent that improves
15 the functioning of the computer technology is eligible
16 Any software patent that improves shyshy that is used to
17 improve another technology is eligible For example
18 the patent in the shyshy in the Diehr case is one in
19 which shyshy
20 JUSTICE SOTOMAYOR Why do we need to reach
21 this in that shyshy reach software patents at all in this
22 case
23 GENERAL VERRILLI Well shyshy
24 JUSTICE SOTOMAYOR Whats the necessity for
25 us to announce a general rule with respect to software
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1 There is no software being patented in this case
2 GENERAL VERRILLI Well I shyshy
3 JUSTICE SOTOMAYOR Theres a systems
4 GENERAL VERRILLI Well I shyshy I think shyshy
5 well they shyshy they shyshy theres a process being and shyshy and
6 one can think of software patents as process patents
7 And I think thats why my friends on the other side are
8 saying the sky is falling because they shyshy they are
9 interpreting what were saying about that when a
10 computer makes shyshy when a computers involvement makes
11 something eligible under 101 its calling those into
12 question and it doesnt
13 JUSTICE SOTOMAYOR Do you think we have to
14 reach the patentability of software to answer this case
15 GENERAL VERRILLI Well I think you can shyshy
16 I think the answer to that question is no not
17 necessarily You can decide it by saying that shyshy that
18 Bilski answers the question whether this is an abstract
19 idea because this form of hedging is really no
20 different than the form of hedging as a conceptual
21 matter at issue in Bilski And then Mayo answers the
22 question of whether the use of a computer in this case
23 adds enough to the abstract idea beyond conventional
24 steps because here all we have after all is just
25 conventional use of computing technology no computer
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1 innovation such that you dont qualify under 101 You
2 could take that approach
3 But it is important to the United States
4 that we shyshy and to our patent examiners that we get some
5 clarity if we can I think the clarity could come from
6 the text that I propose which I want to reiterate shyshy
7 JUSTICE SOTOMAYOR Well shyshy
8 JUSTICE BREYER Could shyshy could shyshy could you
9 go on with that because you were just getting to the
10 point where I think you say a computer improvement that
11 in fact leads to an improvement in harvesting cotton is
12 an improvement through a computer of technology so it
13 qualifies
14 But then I think you were going to say or I
15 got this also from the brief a computer improvement
16 that leads to an improvement in the methods of selling
17 bonds over the telephone is not an improvement in
18 technology reached by the computer Am I right about
19 the distinction youre making
20 GENERAL VERRILLI I dont think theres a
21 yes or no answer to that question
22 JUSTICE BREYER What is your view Yeah
23 what is shyshy how do we deal with just that problem
24 GENERAL VERRILLI If there is a genuine
25 innovation in the functioning of the computer shyshy
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1 JUSTICE BREYER Yes
2 GENERAL VERRILLI shyshy such that business
3 processes shyshy
4 JUSTICE BREYER Weve got that Yes yes
5 We got the computer But then it doesnt improve the
6 computer but rather it improves through the computer
7 the harvesting of cotton
8 Now youve got it in what you said was your
9 second category which is an improvement through the
10 computer of a technology And I thought in your brief
11 you were distinguishing an improvement through the
12 computer of a human activity that is not a technology
13 and in particular to pick an example of that
14 something in finance or something in business
15 Now am I right about the distinction youre
16 making
17 GENERAL VERRILLI Yeah that shyshy
18 JUSTICE BREYER If Im not right what is
19 the distinction
20 GENERAL VERRILLI That is generally the
21 line were drawing Frankly shyshy
22 JUSTICE BREYER And how is that justified
23 GENERAL VERRILLI I do want shyshy
24 JUSTICE BREYER That shyshy that is Judge Dyk
25 in shyshy in Bilski in the Federal circuit 4 people sort of
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1 picked it up maybe 5 didnt pick it up Would you say
2 a few words about it
3 GENERAL VERRILLI Sure About shyshy let me go
4 to Bilski there in that I do think while shyshy while
5 certainly the Court held that the term process got a
6 natural construction which could include business
7 methods it seems to me that thats not all the Court
8 said in Bilski The Court also said that it was
9 historically and traditionally quite rare that business
10 methods were patent eligible
11 It also said that shyshy that the shyshy that courts
12 and the PTO examiners should use the abstract ideas
13 exception to 101 to police the appropriate boundary
14 It also said that the
15 machineshyorshytransformation test that the United States
16 advocated remained a useful tool And of course that
17 directs to you seeing whether there is a technology
18 application
19 And of course the holding in Bilski was
20 that the shyshy the method for hedging risk was ineligible
21 because it was an abstract idea and I cant imagine
22 that if in Bilski the shyshy the claim had been exactly the
23 same but had added use a computer to carry out some of
24 these standard random analysis functions that are
25 claimed by the patent that you would have found it to
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1 be patent eligible
2 And I shyshy I would submit for the Court that
3 the key point here I think is that now given where
4 the Court shyshy what the Court has held in Bilski given
5 what its held in Mayo the abstract ideas exception is
6 really the only tool left to deal with what I shyshy what I
7 think I fairly read Bilski as saying is a significant
8 problem the proliferation of patents of business
9 methods
10 JUSTICE KENNEDY Is there an example that
11 you can give us of a shyshy what we can call a business
12 process that is patentable a process that doesnt
13 involve improving the workings of a computer
14 GENERAL VERRILLI I shyshy I think its going
15 to be difficult for me to do that I think for
16 example if you had a business method a process for
17 additional security pointshyofshysale credit card
18 transactions using particular encryption technology
19 that might well be patent eligible Its a technology
20 that it makes conduct of business more efficient or
21 effective
22 But there is a technological link here and
23 we do think thats critical to our shyshy to our point of
24 view with respect to the case And I shyshy and I do think
25 remember that when we say something is not patent
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1 eligible were not saying they cant do it Were
2 saying they cant monopolize it
3 And the concern in a situation like this one
4 is that if this is patent eligible its hard to see
5 why for example the first person who came up with a
6 frequent flier program wouldnt have been able to claim
7 a patent there because after all thats a business
8 method for improving customer loyalty implemented on a
9 computer
10 CHIEF JUSTICE ROBERTS General I shyshy you
11 mentioned a while ago the need for greater clarity and
12 certainty in this area And Im just wondering in your
13 brief youve got a nonshyexhaustive of factors to
14 consider and there are 6 different ones And Im just
15 doubtful that thats going to bring about greater
16 clarity and certainty
17 GENERAL VERRILLI I take shyshy I take the
18 point Mr Chief Justice but I think the key is that
19 they are all directed to answering the question of
20 whether the innovation that is claimed and is an
21 innovation in either A the improvement of a computers
22 functioning or B the use of computer technology to
23 improve the functioning of another technological
24 process and a case like Diehr would be in the latter
25 category
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1 And so I do think that thats the key
2 benchmark Thats the baseline Thats the test that
3 we do think can be applied clearly and consistently by
4 the courts or the PTO And it avoids the risk of things
5 like frequent flier programs or the Oakland As money
6 ball methods for evaluating the contributions in
7 individual baseball players make or any one of a host of
8 other things that our intuitions tell us just dont
9 belong in the patent system
10 Thats the shyshy drawing that line keeps them
11 out not drawing that line lets them in And with all
12 due respect I dont think that the novelty and
13 nonobviousness filters that 102 and 103 really deal with
14 that problem effectively because when you get to
15 nonobviousness in 103 for example youll be asking a
16 different question
17 If you take the frequent flier program you
18 would say well is this innovation in building consumer
19 loyalty something that would have been obvious to
20 somebody who runs an airline Its totally divorced
21 from the question of technology at that point and
22 therefore I dont think youre going to get the screen
23 that you need to get in order for the patent system to
24 be confined to its traditional and appropriate scope
25 If there are no further questions thank
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1 you
2 JUSTICE GINSBURG I have a question about
3 how do you identify an abstract concept The shyshy a
4 natural phenomenon a mathematical formula those are
5 easy to identify but there has been some confusion on
6 what qualifies as an abstract concept
7 GENERAL VERRILLI We would define
8 abstract shyshy an abstract concept as a claim that is not
9 directed to a concrete innovation in technology
10 science or the industrial arts So its the shyshy its
11 abstract in the sense that it is not a concrete
12 innovation in the traditional realm of patent law
13 Thank you
14 CHIEF JUSTICE ROBERTS Thank you General
15 Mr Phillips you have four minutes
16 remaining
17 REBUTTAL ARGUMENT OF CARTER G PHILLIPS
18 ON BEHALF OF THE PETITIONERS
19 MR PHILLIPS Thank you Mr Chief Justice
20 Id just like to make a few points
21 First of all with respect to the question
22 you asked which is looking at 159 et cetera all I can
23 tell you is that if you look at claim 33 it talks about
24 matched orders the matched orders that are described in
25 286 and 287 and then makes specific reference to 159
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1 and that flow chart thats there And its all designed
2 as a package Its only one element of the shyshy of the
3 invention but it is a central element and its an easy
4 one to understand And it goes well beyond simply the
5 notion of hedge shyshy hedge against settlement risk and do
6 it by a computer
7 JUSTICE SOTOMAYOR Your adversary says that
8 his shyshy the appendix to his brief are the only patents at
9 issue that the flow charts are not at issue in this
10 case
11 MR PHILLIPS Theres no basis for that
12 statement Your Honor There shyshy remember this went off
13 on a very truncated litigation process So theres shyshy
14 you know we shyshy we got cut off at the beginning of it
15 Theres been no construction of the shyshy of the claims
16 and shyshy and obviously these are specifications that go
17 to how you interpret the claim
18 JUSTICE SOTOMAYOR If we were to say that
19 there are no business patents shyshy
20 MR PHILLIPS Yes
21 JUSTICE SOTOMAYOR shyshy would your patent
22 survive at all
23 MR PHILLIPS No I dont shyshy I dont
24 believe so I think theres no question And you
25 know General Verrilli could not have been any plainer
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1 in his statement of how he wants to interpret the
2 abstract idea concept
3 JUSTICE SOTOMAYOR Yes he wants to say no
4 business patents
5 MR PHILLIPS No business shyshy just another
6 way of saying no business methods And you know the
7 Court rejected that And it seems to me extraordinary
8 to say Congress didnt reject no business methods in
9 101 but were going to do shyshy were going to manipulate
10 the judicial exception to accomplish precisely that same
11 thing It seems to me thats wholly inappropriate
12 Justice Ginsburg you asked my shyshy my friend
13 here you know whats his test He didnt answer that
14 question youll notice because he doesnt have an
15 answer His basic argument is whatever you do just
16 kill this patent
17 And if I were in his shoes I suppose Id
18 take that same position I think whats absolutely
19 clear is that the test ought to be one that is
20 structured as a very coarse filter not the kind of
21 filter that hes pushing for where it changes over time
22 I mean I thought his shyshy I thought his response to one
23 of the questions about eshymail and word processing that
24 Justice Sotomayor asked is over time it would change
25 Well thats exactly what 102 and 103 are for That is
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1 not the purpose of shyshy of Section 101
2 And then he uses the example of encryption
3 I guarantee you if we were arguing about encryption in
4 this case he would say to me that thats an abstract
5 principle because encryption is a concept thats been
6 around since time immemorial George Washington used
7 it Everybody has used encryption
8 And a question again thats not the
9 solution to these problems The question is how did we
10 go about doing it And we go beyond the basics of
11 simply saying use a computer and thats what we ask
12 this Court to focus on and to evaluate
13 As to the frequent flier program its
14 pretty clear to me that even though it was a novel idea
15 in some sense the concept itself would have been viewed
16 in shyshy in the KSR fashion as quite obvious as a means of
17 improving customer loyalty
18 There are solutions here Giving us 101
19 pass doesnt create a monopoly It just gets us to the
20 102 and 103 inquiries that are at the heart of what the
21 patent laws shyshy and 112 that are at the heart of what the
22 patent laws ought to be dealing with
23 If there are no further questions Your
24 Honor thank you
25 CHIEF JUSTICE ROBERTS Thank you counsel
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1 The case is submitted
2 (Whereupon at 1105 am the case in the
3 aboveshyentitled matter was submitted)
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
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25
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58
A add 714 1023 algorithm 3320 41 automatically
As 525 3621 387 algorithms apply 72425 111
am 115 32 416 3013 3310 2019 281213 automobile 389
572 added 302 Alice 13 34 2822 3814 available 99
abacus 61213 4923 363 3717 4217 avenues 4124
710 1018 additional 5017 3822 4117 applying 4213 avoids 524
1325 3614 3617
address 4121 4317 4511
Alices 271 2919 3678
approach 226 395 4513 B
ability 1514 addressed 435 allow 94 472 B 121 29 4413
able 1511 167 addressing 181 allows 97 242 appropriate 5122
1919 516 adds 4623 amazing 2514 81516 1514 back 1621
aboveshyentitled adhere 437 amici 3825 453 4913 1922 2512
113 573 adjudication amicus 123 5224 3018 322
absolutely 125 241 210 4414 Archimedes 3991222
1215 159 adjusting 3611 analysis 424 281122 3811 4025
5518 41610 364 406 area 219 5112 ball 526
abstract 4267 adjustment 417 4924 argue 2518 Bank 17 35
48 6682023 418 analyze 1416 arguing 563 banks 95
721 8218 administered 1716 argument 114 bars 43
141920 1522 454 announce 4525 225812 33 baseball 527
165 181618 administration answer 119 37 41 144 based 423 406
2220 24925 4316 2219 247 18323 226 baseline 522
2621 277 administrative 3919 4221 26715 4413 basic 413 5515
2938 3422 171218 187 456 461416 457 5317 basically 1821
3523 395 242 4123 4721 551315 5515 2319
405 414 424 adopt 203 answering 5119 arguments basics 5610
4418 461823 adopted 31317 answers 3713 1415 basis 132 1512
491221 505 advancement 461821 arms 1625 1516 2719
53368811 351 anyway 1810 arrangements 5411
552 564 advances 3513 apparatus 2916 131 beating 435
accept 102 adversary 547 APPEARAN arrows 315 beginning 163
accomplish advice 1715 116 art 1919 5414
5510 advocated 4916 appears 820 arts 2124 5310 begins 3810
account 55 618 affect 4225 appendix 1910 aside 1422 157 behalf 11719
397 affirmative 402 311 326 369 asked 2314 122 24710
accounts 823 agent 52 3021 548 278 5322 214 38 2616
9356 3611 ago 318 2224 applicant 3220 551224 4414 5318
3611 3615 5111 3921 4023 asking 193 believe 1316
accurately 2413 agree 920 2021 416 4314 221213 273 1416 2421
acknowledges 221 2418 application 3324 5215 255 264 451
1121 4021 421 2623 4117 aspect 517 5424
act 99 2017 agrees 2812 4918 asserted 3113 belong 529
activities 229 ahead 4225 applications 311618 benchmark 522
activity 2122 AIA 2912 4122 333 asserting 325 Benson 361923
3325 4812 airline 5220 applied 434 attaching 124 best 161124
actual 4020 AL 18 523 attention 3813 better 1610 albeit 923 applies 31418 Attorney 2021 216 2819
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59
3322 brightshyline 409 2313 37 71 4338 5519 beyond 115 4012 5317 checks 618 5614
1312 4623 bring 5115 case 3412 46 Chief 339 clearly 211 251 544 5610 broad 248 116 1524 261217 3024 523
Bilski 313 46 broader 225 2022 213 31812 378 client 311416 415 1722 browsing 228 2211 2313 371416 386 close 2822 2224 2329 builder 2811 2625 311424 421414 4410 CLS 17 35 262020 271 building 5218 3314 36620 441116 5110 1120 2816 2999 built 2324 426816 5118 531419 coarse 247 3935 4125 business 168 451822 461 5625 5520 427 4322 1749 203 461422 5024 chits 611 code 1213 142 447 452 2124 222122 5124 5410 chronological 1916171720 461821 4825 2311 29613 564 5712 1512 2725 4018 49481922 32132323 cases 244 2816 chronologically coffee 1211 5047 3322525 4011 423 colleagues 116
Bilskis 447 34415 3610 catalogues 2512 circuit 2818 college 58 bit 323 48214 4969 262 401112 425 columns 325 blocks 54 508111620 categorically 42912 4324 come 108 234 Bloomberg 517 5419 202 4825 3017 399
2115 225 554568 category 489 circumstances 475 boat 2811 businessshymeth 5125 318 1515 comes 1318 bonds 4717 457 CBM 2913 claim 416 2418 2018 231 bothering 118 buy 183 cellphones 228 2423 2522 coming 923 bound 1521 buys 3924 central 95 543 264 27917 common 31120 boundary 4913 certain 1216 3019 3121 2157 bounds 1521 C certainly 518 32420 361 company 4224 box 392425 C 21 31 263 358 392325 403 competition
4024 cables 3012 4121 495 442223 4922 161011 Breyer 66823 calculator 3519 certainty 5112 516 53823 completely 921
74691923 call 3812 5011 5116 5417 1422 2320 85810 1012 called 721 275 cetera 387 claimed 41014 complex 126 1021 1523 3316 5322 281 3017 complicated 161418 171 calling 4611 Chakrabarty 34162123 1225 235 1922 2114 capabilities 2016 3721242425 3025 315 221216 239 3723 challenge 443 382 4925 component 2315 285 capable 141 change 186 5120 352024 293 3613 454 273 311 415 claims 1416 compression 38520 478 capture 2415 5524 171616 2419 309 3212 4722 4814 captures 2412 changes 3817 2424 2515 3320 349 48182224 card 5017 5521 2520 2648 computer 422
brief 211315 carefully 1725 chart 541 283 3118 516 621 710 2255 322 caricature 718 charted 2620 37517 398 71325 9113 4215 4715 72020 1417 charts 1911 406 5415 91824 1035 4810 5113 1716 549 clarity 4755 10725 1116 548 carry 4420 Charybdis 511116 124102024
briefs 1524 4923 1620 2619 class 59 13911 1479 1618 CARTER 117 checkbook 617 clear 1015 118 1421 15710
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1517 165 confess 1111 coterminous 4121 5324 181719 196 configured 383 2321 customer 518 describes 425 19814 206 confined 5224 cotton 914 444 5617 2918 3211 2025 211016 confirmed 2912 4711 487 cut 5414 3913 2117 2410 confusion 434 counsel 4411 description
D2521525 535 5625 3917 402022 D 312622 30522 Congress 178 countries 137 deserve 342 DC 1101719 31311 3210 1725 1856 course 719 designed 720
1223211 33519 1924 2014 1613 298 812 541 data 2917 309 34142425 2325 291213 3210 491619 desired 3922
30111214 351 361220 346 412223 court 1114 detail 363 3212 3367 3621 37156 558 3101317 detailed 1914 3320 34914 379121523 consequences 922 145 developed 2119 3722382334815 2011 1720 1939 device 207
dating 2953823 3913 consider 5114 2011216 devices 3413 day 612 813 411116 4325 consistently 2222 2321 407
910 399442020 4515 454 523 2618 27345 dicta 923 1012 deal 42023 46102225 constitutes 312 28718 299 Diehr 2322
172 187 397 4710121518 construction 31202122 3313 4518 427 47234725 48566 496 5415 334 36523 5124 506 5213481012 4923 consumer 5218 39244 4010 difference 921
dealing 4175013 51922 contains 327 40141515 2789 4421 1119 135546 5611 content 281417 4114 42215 different 421 151216 3412 computers 2819 4223 4323 79 919 1377 56224610 5121 context 2319 44717 4957 191 259 266
deals 814computers 243 398 498 50244 2888 3169 death 42221616 195 contextual 405 557 5612 3123 333 Debit 27212119 312 4014 Courts 3619 351823 4312 debiting 2718391 401313 contract 3115 432 452 4620 5114 decade 176computing contribution courts 2018 5216 decide 3910442324 4625 342124 3520 4124 454 difficult 817
4617concept 413 396 4911 524 159 5015 decision 161810 1419 contributions create 96 1712 difficulties 420
1811522 53368 526 241 251 difficulty 437 decisions 274552 56515 conventional 5619 direct 2721
426 43623 concepts 2944 3521 361 created 186 directed 4423 43242955 462325 244 4123 5119 539
declare 2010conceptual converting 141 creates 93 directions 319 default 27104620 copyrighted creation 518 directly 31415 define 537concern 513 1315 credit 231 322 2019 Departmentconcerned 373 Corporation 13 271021 5017 298 3613
122439 34 crediting 2718 directs 4917 depends 2520concerns 93 correct 4513 critical 5023 disable 3313 describe 58concrete 1118 correctly 2416 crunching 3722 disaggregate
1112 391522 253 53911 corresponding curiae 123 211 144 1520 4024conduct 5020 2720 2915 4415 disagree 513
described 717conducted 297 346 current 4112 disagrees 4213
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disclosure 328 413 302021 4220 figure 1146 discuss 164 economy 1516 ESQ 1171921 excerpted 323 311222 3917 discussion 299 effective 1223 236913 exhausted 1813 file 406 dispose 2625 5021 essence 211 exist 420 131 filed 4214 dispute 325 effectively 5214 essential 1224 existence 1119 fill 2818 disputed 3120 efficacy 1224 3425 175 filled 293
363 1517 essentially 2016 existing 337 filter 248 5520 distance 2311 efficiency 3722 261 4125 422 5521 distinction 415 efficient 5020 4215 exists 42 filters 5213
4719 481519 either 202 established expert 3688 finance 2124 distinguishing 5121 311919 381 4814
4811 electronic 262 establishing expertise 1210 financial 1225 distribution 4178 275 experts 2817 29517
443 electronically et 18 387 5322 367 fine 103 2223 district 4323 2525 evaluate 97 extent 1924 4223 divorced 5220 element 811 5612 2323 265 finished 133 doing 91315 4212 5423 evaluating 526 extinguish 457 first 1111 2718
148 182224 elevator 625 everybody 2017 extraordinarily 304 3716 237 376 421 712 2812 3817 234 3920 4511 5610 eligibility 2316 567 extraordinary 515 5321
domain 453 eligible 301 evolve 3522 557 fiscal 4320 DONALD 121 391 449 exact 236 five 18912
F29 4413 451517 4611 exactly 411 2214 326 face 248doubtful 5115 4910 50119 1012 1820 flexible 396 fact 515 617 draw 193 2221 5114 2521 3625 flier 516 525
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1 reacting to a decision It had shyshy it was not addressing
2 101 So there are at least four Justices who say shyshy who
3 didnt buy that argument
4 MR PHILLIPS Well I mean it still seems
5 to me that the shyshy the natural inference is Congress did
6 not change 101 Congress created an entire
7 administrative system to deal with 101 102 and 103
8 And shyshy and I would hope shyshy
9 JUSTICE SCALIA And four is not five
10 anyway right
11 MR PHILLIPS Thats true
12 JUSTICE SCALIA Four is not five
13 MR PHILLIPS And youve exhausted my math
14 skills Your Honor
15 JUSTICE SCALIA By the way we shyshy we have
16 said that you cant take an abstract idea and then say
17 use a computer to implement it But we havent said
18 that you cant take an abstract idea and then say here
19 is how you use a computer to implement it shyshy
20 MR PHILLIPS Exactly
21 JUSTICE SCALIA shyshy which is basically what
22 youre doing
23 MR PHILLIPS And thats the argument were
24 doing and shyshy
25 JUSTICE SCALIA And thats a little
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1 different
2 MR PHILLIPS shyshy thats the line were
3 asking the Court to draw here
4 JUSTICE KAGAN Well how are you saying the
5 how Because I thought that your computers shyshy that your
6 patents really did just say do this on a computer as
7 opposed to saying anything substantive about how to do
8 it on a computer
9 MR PHILLIPS I would urge the Court to
10 look at Joint Appendix 159 285shy286 where it goes
11 through the flow charts This is shyshy and this is just a
12 specific example of the method by which you stop a
13 transaction and it goes through a varied series of
14 detailed steps and what the computer has to do in order
15 to do that It doesnt actually obviously put in the
16 code but thats what the PTO says dont do Dont put
17 in the code because nobody understands code so shyshy but
18 put in the functions and we know shyshy and we know that
19 someone skilled in the art will be able to put in the
20 code And if they arent if they cant do that then
21 its not enabled and thats a 112 problem
22 To go back Justice Breyer to your
23 question So on the one hand youve got a problem that
24 it seems to me Congress to some extent has said is okay
25 and weve got a solution and that solutions playing
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1 through On the other hand if this Court were to say
2 much more categorically either that theres no such
3 thing as business method patents or adopt the Solicitor
4 Generals interpretation which is to say that there
5 cannot be software unless the software somehow actually
6 improves the computer as opposed to software improving
7 every other device or any other mechanism that might be
8 out there
9 What we know is that this would inherently
10 declare and in one fell swoop hundreds of thousands of
11 patents invalid and the consequences of that it seems
12 to me are utterly unknowable And before the Court goes
13 down that path I would think it would think long and
14 hard about whether isnt that a judgment that Congress
15 ought to make And It seems to me in that sense youre
16 essentially where the Court was in Chakrabarty where
17 everybody was saying youve got to act in one way or the
18 other or the world comes to an end and the courts have
19 said well apply 101 directly
20 JUSTICE KENNEDY If we say that theres no
21 software patentability and agree with the Attorney
22 General do you lose in this case
23 MR PHILLIPS Well it would be very hard
24 for me to see how that shyshy how shyshy how I can get around
25 that particular problem because the computer is the
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1 essence of it so shyshy and a portion of it is clearly the
2 software So I think if you say there is no such thing
3 as software patentability I do lose in this case yes
4 Your Honor As do a whole lot of other people
5 JUSTICE KENNEDY Is there any common ground
6 between you and the government shyshy maybe a better
7 question to ask the government shyshy a common ground
8 between you and the government on something in the
9 software area thats patentable other than making the
10 computer itself work You understand the government to
11 say no software patents
12 MR PHILLIPS Thats the way I interpret
13 the governments shyshy the governments brief
14 JUSTICE BREYER It was like shyshy theres a
15 Bloomberg brief out here that was on this that said
16 no you can shyshy you can patent computer software when
17 its an improvement in the computer when its an
18 improvement in software when its an improvement in a
19 technology that is developed out of computers like
20 robotics when it is an improvement in a machine or
21 technology but you cannot improve it where it is simply
22 an improvement in an activity that is engaged in
23 primarily through mental processes But what they mean
24 by that is business finance and similar arts
25 Thats shyshy I mean thats shyshy it wasnt quite what shyshy I
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1 know Thats what I want to know what you dont agree
2 with about that because its a little more refined than
3 you suggested
4 MR PHILLIPS I read the Solicitor
5 Generals brief as broader than the Bloomberg brief
6 in shyshy in terms of the approach And IBMs argument is
7 if you knock out software patents you eliminate web
8 browsing word processing cellphones eshymail Those
9 are all activities that I dont think fall within the
10 meaning of the shyshy the meaning of the governments theory
11 of the case
12 JUSTICE BREYER But Im asking you shyshy Im
13 asking you what about this one that I just mentioned
14 You see I went through those five steps shyshy
15 MR PHILLIPS Right
16 JUSTICE BREYER shyshy and four of them you
17 could patent and the fifth one you cant
18 MR PHILLIPS Right But I shyshy and I guess
19 my answer to that is thats nowhere in the statute and
20 it doesnt seem to me to reflect an abstract idea Its
21 a shyshy its a line you draw that takes out business method
22 patents If the Court wants to eliminate business
23 method patents fine But you just said no to that in
24 Bilski two three terms ago
25 Now to be sure give the Solicitor General
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1 credit he comes here and says to you We didnt like
2 the result in Bilski we want you to say dont use
3 process in order to get there which is a statutory
4 interpretation come up with an extraordinarily
5 complicated way of looking at the exception and use that
6 to get to the exact same result
7 JUSTICE SOTOMAYOR Well youre doing a
8 very good job of proving shyshy
9 JUSTICE GINSBURG In Bilski Justice Breyer
10 did try to say that there wasnt that shyshy a whole lot of
11 distance between the four who thought business methods
12 were not patentable But he shyshy he also said something
13 else in shyshy in the other case Mayo Justice Scalia
14 asked you the question about doesnt that go to novelty
15 but didnt Justice Breyer say in Mayo that novelty can
16 be relevant to patent shyshy to patent eligibility He said
17 theres shyshy theres an overlap
18 MR PHILLIPS Well he said theres an
19 overlap Here in this context I think basically the
20 Respondents theory would mean that they are completely
21 coterminous And I dont think thats what the Court
22 meant And also we know from Diehr that theres got to
23 be at least some significant limitations on the extent
24 to which novelty has to be built into 101 That is the
25 province of 102 and 103 And as I said Congress
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1 modified the system of adjudication to create an
2 administrative mechanism that allows you to get to 102
3 and 103 And at least in context its important to
4 realize there have been 11 cases since that was created
5 9 of the 11 have been knocked down on 102 or 103 grounds
6 and not on 101 grounds And it seems to me thats the
7 answer to this problem is leave 101 as the coarse
8 filter If on its face it states these kinds of broad
9 abstract principles fundamental truths and even if it
10 says use a computer those should be struck down
11 JUSTICE SOTOMAYOR Which of the shyshy which of
12 the opinions below captures your position most
13 accurately
14 MR PHILLIPS I would guess it would be
15 Judge Moores opinion below that would capture ours most
16 correctly
17 JUSTICE SOTOMAYOR And if we were to think
18 your method claim is ineligible do you agree that your
19 systems and shyshy your medium and system claims fail as
20 well Do they rise and fall together
21 MR PHILLIPS No No I dont believe they
22 do rise and fall together I mean I think you could shyshy
23 if you wanted to interpret our medium claim shyshy I mean
24 our shyshy our method claims in a shyshy in particularly
25 abstract way I think you could still say that the
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1 system claims which clearly are shyshy are how to create a
2 computer system and how to implement it using that
3 method would be a much more concrete version of that in
4 a way that would take it out of 101 That said I
5 obviously believe that all of our claims satisfy 101
6 and should go on to the next stage
7 JUSTICE KAGAN Can I give you a
8 hypothetical Mr Phillips and you tell me how its
9 different or the same Lets say you know 30 years
10 somebody took a look around the world and said a lot of
11 people seem to order products by mail They get the
12 catalogues in the mail and then they send back their
13 return forms And lets say that one of the founders of
14 the Internet said wouldnt this be an amazing system
15 we could actually do this by computer and they had
16 patented that Is that the same
17 MR PHILLIPS I dont know if its the
18 same but I would shyshy I would argue that it could very
19 well be a patentable subject matter because shyshy but it
20 depends on how the claims play out
21 JUSTICE KAGAN No but exactly I mean
22 the claim would have said something along the lines of
23 you know theres this process by which people order
24 products and we want to do it over the Internet we want
25 to do it electronically and we will use a computer to
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1 do that to essentially take the process of mail order
2 catalogues and make it electronic
3 MR PHILLIPS I could certainly shyshy I think
4 I could write a claim shyshy a set of claims that I believe
5 would satisfy 101 And shyshy and to the extent that
6 youd shyshy that youd think those are no different than
7 the ones I have here then my argument is simply I think
8 I satisfy 101 with the claims we have before us Your
9 Honor
10 If there are no further questions then Id
11 like to reserve the rest of my time
12 CHIEF JUSTICE ROBERTS Thank you
13 Mr Phillips
14 Mr Perry
15 ORAL ARGUMENT OF MARK A PERRY
16 ON BEHALF OF THE RESPONDENTS
17 MR PERRY Mr Chief Justice and may it
18 please the Court
19 That path between Scylla and Charybdis was
20 charted in Bilski and Mayo Bilski holds that a
21 fundamental economic principle is an abstract idea and
22 Mayo holds that running such a principle on a computer
23 is quote not a patentable application of that
24 principle Those two propositions are sufficient to
25 dispose of this case
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1 If Bilski and Mayo stand Alices patents
2 fail Therefore Mr Phillips and his friends are
3 asking this Court to change the standard even though
4 this Court has had three unanimous decisions in the last
5 four terms establishing what the Court called a myriad
6 a wellshyestablished standard
7 On the abstract idea Justice Ginsburg you
8 asked Mr Phillips whats the difference between hedging
9 and this claim There is no difference This is
10 hedging It is hedging against credit default rather
11 than price fluctuation but it is simply hedging
12 And Mr Phillips stood up for 26 minutes and
13 never once referred to the patent Lets look at what
14 the inventor the soshycalled inventor said about this
15 invention This is at JA 293 to 94 in the
16 specification
17 This claim has simply two steps Its very
18 simple First debiting and crediting on a realtime
19 basis the relevant shadow records and second by
20 periodically affecting corresponding payment
21 instructions Those are direct quotes Debit credit
22 and pay Your Honor you cant get much more simple
23 than that
24 Mr Phillips suggests well we have
25 multilateral transactions global things chronological
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1 time zones and so forth None of those are claimed
2 Your Honor Those are all recited in specification
3 The claims read on a single transaction involving two
4 parties
5 JUSTICE BREYER Can I ask you at some
6 point not necessarily this second to say in my shyshy this
7 is just shyshy you know you have an opinion for a court
8 Different judges can have different interpretations
9 All youre getting is mine okay
10 But I think its pretty easy to say that
11 Archimedes cant just go to a boat builder and say
12 apply my idea All right Everybody agrees with that
13 But now we try to take that word apply and give
14 content to it
15 And what I suspect in my opinion Mayo did
16 and Bilski and the other cases is sketch an outer shell
17 of the content hoping that the experts you and the
18 other lawyers and the shyshy the circuit court could fill
19 in a little better than we had done the content of that
20 shell
21 So so far youre saying well this is
22 close enough to Archimedes saying apply it that we
23 neednt go further
24 Now will you at some point in the next few
25 minutes give me your impression of if it were necessary
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1 to go further what would the right words or example be
2 MR PERRY Your Honor as shyshy Justice
3 Breyer as to abstract ideas the PTO has filled in that
4 shell by listing economic concepts legal concepts
5 financial concepts teaching concepts dating and
6 interpersonal relationships and generally how business
7 should be conducted as examples of those things that are
8 likely abstract which of course all follow directly
9 from Bilski and the discussion this Court had in Bilski
10 And this patent shyshy these patents fall squarely within
11 that
12 Congress in the AIA confirmed that
13 reading Congress in the CBM method said business
14 methods that are subject to special scrutiny shyshy that is
15 dubious patents shyshy include methods and corresponding
16 apparatus which is what we have here that pertain to
17 data processing in the financial services industry and
18 do not offer a technological solution That describes
19 Alices patents to a letter Your Honor So that we
20 have shyshy
21 JUSTICE SOTOMAYOR What do you think is a
22 technological solution
23 MR PERRY Your Honor shyshy
24 JUSTICE SOTOMAYOR How could they if at
25 all written their patents to shyshy to make shyshy to make
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1 their software eligible What would shyshy what do they
2 need shyshy would have needed to have added
3 MR PERRY Justice Sotomayor they have no
4 software first Theyve never written software
5 Theyve never programmed a computer So thats a
6 nonexistent set
7 Second there are many technological
8 solutions to trading and settlement problems For
9 example data compression These shyshy these trading
10 platforms involve the movement of very large quantities
11 of data around the world The physical pipes that is
12 the fiber optic cables and data lines are limited
13 There are very sophisticated algorithms for both
14 security and speed to move data through the transmission
15 lines in novel and useful ways that could well be
16 patented
17 Nothing like that is claimed here To come
18 back to where I started if you look for example at
19 Claim 65 in the 510 patent as Mr Phillips reads it
20 it literally reads on a twoshyparty escrow to sell a
21 house so long as the escrow agent is typing this stuff
22 into the HUDshy1 using a computer That has nothing to do
23 with multilevel shyshy
24 CHIEF JUSTICE ROBERTS Well thats a
25 little more complicated He referred us to Joint
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1 Appendix Page 159 which is not a change in how
2 computers work But it is shyshy constitutes the
3 instructions about how to use the computer and where it
4 needs to be affected And just looking at it it looks
5 pretty complicated There are a lot of arrows and
6 they shyshy you know different things that go shyshy
7 (Laughter)
8 CHIEF JUSTICE ROBERTS Well but I mean
9 you know it shyshy in different directions And I
10 understand him to say that in each of those places
11 thats where the computer is needed
12 MR PERRY Mr Chief Justice Figure 16 has
13 nothing to do with the invention asserted against my
14 client in this case There are two inventions in this
15 patent One invention involving multilateral contract
16 formation is not asserted against my client And all of
17 these drawings pertain to that The only drawings that
18 pertain to the asserted claims are 25 and 33 to 37 And
19 that was established below and its established in this
20 Court And Mr Phillips has never disputed it
21 So the claim hes pointed the Court shyshy the
22 figure hes pointed the Court to has nothing to do with
23 the invention Its for a different invention that is
24 not at issue in this case
25 Remember there are hundreds and hundreds of
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1 pages of these patents They all pertain to the other
2 invention Thats why in the back of our red brief we
3 excerpted the very little bit that actually pertains to
4 this You sort of tack on patent shyshy the tack on claim
5 that Mr Phillips is asserting here Its 4 columns
6 Its less than five pages in the printed appendix that
7 actually pertains to this invention And it contains no
8 disclosure whatever
9 Justice Scalia to your question about how
10 the computer does it Of course a patent that
11 describes sufficiently how a computer does a new and
12 useful thing whether its data compression or any other
13 technological solution to a business problem a social
14 problem or a technological problem would be within the
15 realm of the shyshy of the patent laws That is what the
16 patent laws have always been for
17 This is not such a patent And the reason
18 for that is this is a preshyBilski set of patents These
19 were prosecuted under the old State Street test where
20 all the applicant had to claim was a result
21 JUSTICE KENNEDY Would you give me shyshy
22 again you already did it once shyshy an example of a
23 business process patent shyshy of a business process idea
24 and invention that is patentable
25 MR PERRY Your Honor there are many
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1 examples One would be a technological solution to a
2 business problem So that for example shyshy Ill give a
3 different example There are many applications today
4 The Court may be familiar with streaming video to watch
5 video on your computer
6 It is not possible to get enough data
7 through existing lines in its raw format The data has
8 to be manipulated in order to see live video So if you
9 want to watch TV on your phone for example
10 Those algorithms those inventions are
11 undoubtedly technological And if they are used in a
12 trading platform or a hedging system or something else
13 that wouldnt disable them And this is what the Diehr
14 case shyshy
15 JUSTICE KENNEDY Well I shyshy I shyshy in my
16 language Ive called that mechanical rather than
17 process Can you give me an example of process
18 MR PERRY Yes Your Honor The process in
19 that example would be a computer running the particular
20 data compression algorithm
21 JUSTICE KENNEDY But thats how to make
22 a shyshy thats how to make a machine work better
23 MR PERRY Yes Your Honor
24 JUSTICE KENNEDY Im asking you Is there
25 any business process any business activity that is
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1 susceptible to a patent a pure patent innovations that
2 deserve patents
3 MR PERRY Your Honor again a
4 technological solution to a business problem could well
5 be whether its a method or a process is equivalent
6 Again Congress said method in a corresponding shyshy
7 JUSTICE KENNEDY Can you give me an
8 example
9 MR PERRY I thought the data compression
10 example was a good one Ill try an encryption
11 technology Many of these trading platforms you know
12 dealing with securities and money would require some
13 sort of security devices You could have a process for
14 securely transmitting data would be another computer
15 implemented technological solution to a business
16 problem Again nothing like that claimed here
17 JUSTICE SOTOMAYOR How about eshymail and
18 just word processing programs
19 MR PERRY Your Honor a program shyshy let me
20 try it this way to both of your questions In our view
21 if what is claimed as the inventive contribution under
22 Mayo shyshy in other words if we have an abstract idea as
23 we do here and what is claimed is the inventive
24 contribution for Step 2 is the computer then the
25 computer must be essential to that operation and
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1 represent an advancement in computer science or other
2 technology And we know thats not met here Justice
3 Sotomayor because shyshy
4 JUSTICE SOTOMAYOR So youre saying no to
5 eshymail and word processing
6 MR PERRY Your Honor I think at a
7 point shyshy
8 JUSTICE SOTOMAYOR They certainly have
9 functionality and shyshy and improvement of functionality
10 for the user
11 MR PERRY At a point in time in the past
12 I think both of those would have been technological
13 advances that were patentable
14 JUSTICE SOTOMAYOR How
15 MR PERRY Today shyshy because they would have
16 provided a technological solution to a then unmet
17 problem Today reciting and do it on a word processor
18 is no different than and do it on a typewriter or shyshy and
19 do it on a calculator
20 The inventive contribution component which
21 uses specifically the language of conventional and
22 routine and well understood will evolve with
23 technology Thats why its different than the abstract
24 idea component
25 And here we know that these patents dont
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1 claim anything that was not conventional well
2 understood and routine We went through that in great
3 detail and Alice has never disputed a word of it They
4 just say youre not supposed to do that analysis even
5 though the Court 9shy0 in Mayo said we should
6 And in this case its very important to
7 look at what Alices own experts said on the subject
8 This is not our expert This is Alices expert And
9 this is at Page 1327shy28 of the Joint Appendix It is
10 possible to do the business methods of maintaining
11 accounts adjusting accounts and providing an
12 instruction without a computer or other hardware
13 And then Justice Breyer directly to your
14 abacus If someone had thought of this invention
15 soshycalled invention 100 years ago they might have
16 implemented it in a nonelectronic manner using various
17 precomputing tools such as an abacus or handwritten
18 ledgers
19 We know from Benson the Courts seminal
20 computer implementation case that if you can do it by
21 head and hand then the computer doesnt add anything
22 inventive within the meaning of the 101 exception That
23 is the holding of Benson And the Court reiterated that
24 in Mayo
25 Flook said exactly the same thing If you
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1 can do it with pencil and paper then the computer is
2 not offering anything that the patent laws are or should
3 be concerned with
4 It is only where the method will not work
5 without a computer which is not these claims and where
6 the computer itself is doing something that the patent
7 law is willing to protect
8 CHIEF JUSTICE ROBERTS What if shyshy what if
9 you can do it without a computer but its going to
10 take you know 20 people a hundred years In other
11 words theoretically you can replicate what the
12 computer does shyshy
13 MR PERRY Two answers
14 CHIEF JUSTICE ROBERTS shyshy but its
15 impractical without looking to do it on the computer
16 MR PERRY Mr Chief Justice first these
17 claims literally read as Alice reads them on a single
18 transaction between two parties so its not 20 people
19 for a hundred years Its one person sitting in a room
20 so thats not a problem
21 Second if what is being claimed is the
22 necessary speed or efficiency or data crunching
23 capabilities if you will of a computer then it would
24 have to be claimed and theres nothing claimed here
25 All that is claimed shyshy and my friend is going to stand
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1 up on rebuttal and tell you all that the expert said
2 well what is claimed is a computer but its just a
3 computer It just says a computer configured too It
4 doesnt say that the computer actually has to shyshy
5 JUSTICE BREYER Yeah but the trouble with
6 that particular test is as I think partly the Chief
7 Justice said how long et cetera and then add to that
8 though you could do it without a computer what happens
9 at the end of the line is the automobile engine goes off
10 or it begins to sputter or it turns left
11 You see its possible to take Archimedes shyshy
12 shyshy you know I use that example purposely to call
13 attention to the problem You can take those things
14 and youre not just saying apply it and youre not even
15 just saying shyshy you are saying use the computer but at
16 the end of the road something physical in the world
17 changes and everybody would say now thats shyshy that
18 will falls within I mean probably I mean my
19 hesitation shows Im looking for the right words
20 MR PERRY Justice Breyer your point is
21 the reason that it is equally fallacious to suggest on
22 the one hand as Alice and IBM does that simply
23 reciting a computer is a magic key that gets you through
24 101 and you never have to any other inquiry and what
25 some of folks the amici on the other side say which
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1 is that computers or software are never eligible Both
2 of those things have to be wrong because what the Court
3 said in Bilski was future innovation is too uncertain
4 We are not going to do that as a Court And the Court
5 laid out an approach using abstract ideas in Bilski and
6 inventive contribution in Mayo that is flexible enough
7 to take into account that innovation and to deal with
8 particular claims in context which is why at the end
9 of the day we have to come back to these patents and
10 decide which shyshy
11 JUSTICE KAGAN Mr Perry before we get
12 back to these matters you said to Justice Scalia if a
13 patent sufficiently describes how a computer will
14 implement an idea then its patentable So how
15 sufficiently does one have to describe it What do we
16 want a judge to do at this threshold level in terms of
17 trying to figure out whether the description is
18 sufficient to get you past it
19 MR PERRY If I can answer in two steps
20 Justice Kagan First in the negative What the
21 applicant or patentee must do shyshy must not do is simply
22 describe the desired result That would take us back to
23 State Street That would simply say I claim a magic
24 box that buys high and sells low or vice versa I
25 suppose I claim a magic box for investing Thats what
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1 these patents do
2 Then to put it in the affirmative and in the
3 language of Mayo the claim has to recite something
4 significantly more something significantly more than
5 the abstract idea itself That would be a contextual
6 analysis based on the claims and specifications and file
7 history and we know that some devices some methods
8 some programming will pass that
9 It is not going to be a brightshyline rule and
10 thats one of the tugshyofshywar issues that this Court and
11 the Federal Circuit have been having in these cases
12 The Federal Circuit wants brightshyline rules All
13 computers are in or all computers are out
14 This Court has been more contextual This
15 Court has been more nuanced This Court has looked at
16 things in a more robust way
17 JUSTICE KAGAN Youre not suggesting that
18 specific code is necessary
19 MR PERRY No Your Honor I think the shyshy
20 actual description of the programming is a 112 problem
21 I agree with that A 112 issue That is the realm of
22 the written description requirement What is a 101
23 problem is it is on the applicant to do more than simply
24 describe the results simply say A magic box that does
25 intermediate settlement And we can tie that back to
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1 this particular prosecution the 510 patent which is
2 the method patent
3 The examiner rejected it Under Section
4 101 the examiner said this is an abstract idea You
5 cant have this patent And the only change that this
6 applicant made was to add in the adjusting step
7 electronic adjustment It put in one word
8 electronic adjustment And under State Street which
9 is what this patent is prosecuted under that was
10 enough because the result of adjusting run through a
11 computer is enough
12 Under current law that cant be enough
13 That just cant get a patent over the line because this
14 Court said in Mayo and I got to quote this language
15 Simply implementing a fundamental principle on a
16 physical machine namely a computer is not a patentable
17 application of that principle Thats all that Alice
18 has done
19 These are preshyBilski patents They never
20 should have been issued General Verrilli will stand up
21 and address that point And certainly under current
22 law shyshy one point on the AIA Congress did not send all
23 this to the administrative process Congress created
24 two avenues the courts and the PTO to use the
25 standards Essentially it ratified Bilski and Mayo and
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1 said we agree with what you all are doing at the
2 Supreme Court and the existing standards are good enough
3 for us This is a judicial problem And that is a good
4 reason The abstract shyshy
5 JUSTICE GINSBURG The Federal Circuit in
6 this case split in many ways and it had our decisions
7 to deal with You said given Bilski and Mayo this is
8 an easy case What is the instruction that escaped a
9 good number of judges on the Federal Circuit How would
10 you state the rule
11 MR PERRY Your Honor I think theres a
12 significant element to the Federal Circuit that
13 disagrees with Mayo and has been resistant in applying
14 it Chief Judge shyshy former Chief Judge Michelle filed a
15 brief in this Court essentially saying Mayo is a
16 lifeshysciences case You should limit it to that because
17 if you apply it to everything else then these patents
18 are no good
19 Mayo we submit is a technologyshyneutral
20 industryshyneutral exceptionshyneutral framework that can
21 be used to answer all of these questions This is not
22 the death of software patents The software industry is
23 all before this Court saying this is fine with us
24 Every company in the United States practically except
25 for IBM is saying go ahead This will not affect
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1 software patents
2 Justice Ginsburg this Courts precedents
3 are clear They are unanimous They just need to be
4 applied To suggest that there is confusion that needs
5 to be addressed by retreating beating a retreat from
6 recent unanimous decisions would simply reward
7 intransigence difficulty refusal to adhere to what are
8 clear precedents because shyshy
9 JUSTICE KAGAN Should we be concerned
10 Mr Perry that there are old patents that in fact could
11 meet the test that you set forth but wont because they
12 were written in a different time and so used much more
13 general language
14 MR PERRY Your Honor the applicant or the
15 patent holder would have the opportunity to institute a
16 reexamination proceeding or some sort of administration
17 process to address that issue
18 And second it should be noted this is a
19 very small problem There are 2 million outstanding
20 patents in the United States In the last four fiscal
21 years there were 22000 infringement litigations
22 instituted but since Bilski there have only been 57
23 district court decisions on Section 101 issues There
24 have only been 12 Federal Circuit decisions total on
25 computer implementation
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1 We are talking about a group of patents
2 Justice Kagan thats way out at the tail end of
3 distribution Most patents never have a 101 challenge
4 This is not an issue with cotton gins and other things
5 This is a problem for the most marginal
6 most dubious most skeptical patents the ones that this
7 Court in Bilski shyshy and remember what Bilskis holding
8 is The majority said they are processes but it did
9 not say they are eligible
10 Thank you Mr Chief Justice
11 CHIEF JUSTICE ROBERTS Thank you counsel
12 General Verrilli
13 ORAL ARGUMENT OF DONALD B VERRILLI JR
14 ON BEHALF OF THE UNITED STATES AS AMICUS
15 CURIAE SUPPORTING RESPONDENTS
16 GENERAL VERRILLI Mr Chief Justice and
17 may it please the Court
18 An abstract idea does not become
19 patentshyeligible merely by tacking on an instruction to
20 use a computer to carry it out A computer makes a
21 difference under Section 101 when it imposes a
22 meaningful limit on the patent claim That occurs when
23 the claim is directed at improvement in computing
24 technology or an innovation that uses computing
25 technology to improve other technological functions
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1 Thats the test that we believe is most faithful to this
2 Courts precedents in Bilski and Mayo It keeps patents
3 within their traditional and appropriate domain and it
4 is capable of being administered consistently by Courts
5 and by PTO examiners
6 JUSTICE GINSBURG How do you answer the
7 argument that your view would extinguish businessshymethod
8 patents and make all software ineligible for patent
9 protection
10 GENERAL VERRILLI Yeah with shyshy let me
11 address software patents first because that I think is
12 obviously a significant question And its just not
13 correct to say that our approach would make software
14 patenting ineligible Any software patent that improves
15 the functioning of the computer technology is eligible
16 Any software patent that improves shyshy that is used to
17 improve another technology is eligible For example
18 the patent in the shyshy in the Diehr case is one in
19 which shyshy
20 JUSTICE SOTOMAYOR Why do we need to reach
21 this in that shyshy reach software patents at all in this
22 case
23 GENERAL VERRILLI Well shyshy
24 JUSTICE SOTOMAYOR Whats the necessity for
25 us to announce a general rule with respect to software
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1 There is no software being patented in this case
2 GENERAL VERRILLI Well I shyshy
3 JUSTICE SOTOMAYOR Theres a systems
4 GENERAL VERRILLI Well I shyshy I think shyshy
5 well they shyshy they shyshy theres a process being and shyshy and
6 one can think of software patents as process patents
7 And I think thats why my friends on the other side are
8 saying the sky is falling because they shyshy they are
9 interpreting what were saying about that when a
10 computer makes shyshy when a computers involvement makes
11 something eligible under 101 its calling those into
12 question and it doesnt
13 JUSTICE SOTOMAYOR Do you think we have to
14 reach the patentability of software to answer this case
15 GENERAL VERRILLI Well I think you can shyshy
16 I think the answer to that question is no not
17 necessarily You can decide it by saying that shyshy that
18 Bilski answers the question whether this is an abstract
19 idea because this form of hedging is really no
20 different than the form of hedging as a conceptual
21 matter at issue in Bilski And then Mayo answers the
22 question of whether the use of a computer in this case
23 adds enough to the abstract idea beyond conventional
24 steps because here all we have after all is just
25 conventional use of computing technology no computer
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1 innovation such that you dont qualify under 101 You
2 could take that approach
3 But it is important to the United States
4 that we shyshy and to our patent examiners that we get some
5 clarity if we can I think the clarity could come from
6 the text that I propose which I want to reiterate shyshy
7 JUSTICE SOTOMAYOR Well shyshy
8 JUSTICE BREYER Could shyshy could shyshy could you
9 go on with that because you were just getting to the
10 point where I think you say a computer improvement that
11 in fact leads to an improvement in harvesting cotton is
12 an improvement through a computer of technology so it
13 qualifies
14 But then I think you were going to say or I
15 got this also from the brief a computer improvement
16 that leads to an improvement in the methods of selling
17 bonds over the telephone is not an improvement in
18 technology reached by the computer Am I right about
19 the distinction youre making
20 GENERAL VERRILLI I dont think theres a
21 yes or no answer to that question
22 JUSTICE BREYER What is your view Yeah
23 what is shyshy how do we deal with just that problem
24 GENERAL VERRILLI If there is a genuine
25 innovation in the functioning of the computer shyshy
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1 JUSTICE BREYER Yes
2 GENERAL VERRILLI shyshy such that business
3 processes shyshy
4 JUSTICE BREYER Weve got that Yes yes
5 We got the computer But then it doesnt improve the
6 computer but rather it improves through the computer
7 the harvesting of cotton
8 Now youve got it in what you said was your
9 second category which is an improvement through the
10 computer of a technology And I thought in your brief
11 you were distinguishing an improvement through the
12 computer of a human activity that is not a technology
13 and in particular to pick an example of that
14 something in finance or something in business
15 Now am I right about the distinction youre
16 making
17 GENERAL VERRILLI Yeah that shyshy
18 JUSTICE BREYER If Im not right what is
19 the distinction
20 GENERAL VERRILLI That is generally the
21 line were drawing Frankly shyshy
22 JUSTICE BREYER And how is that justified
23 GENERAL VERRILLI I do want shyshy
24 JUSTICE BREYER That shyshy that is Judge Dyk
25 in shyshy in Bilski in the Federal circuit 4 people sort of
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1 picked it up maybe 5 didnt pick it up Would you say
2 a few words about it
3 GENERAL VERRILLI Sure About shyshy let me go
4 to Bilski there in that I do think while shyshy while
5 certainly the Court held that the term process got a
6 natural construction which could include business
7 methods it seems to me that thats not all the Court
8 said in Bilski The Court also said that it was
9 historically and traditionally quite rare that business
10 methods were patent eligible
11 It also said that shyshy that the shyshy that courts
12 and the PTO examiners should use the abstract ideas
13 exception to 101 to police the appropriate boundary
14 It also said that the
15 machineshyorshytransformation test that the United States
16 advocated remained a useful tool And of course that
17 directs to you seeing whether there is a technology
18 application
19 And of course the holding in Bilski was
20 that the shyshy the method for hedging risk was ineligible
21 because it was an abstract idea and I cant imagine
22 that if in Bilski the shyshy the claim had been exactly the
23 same but had added use a computer to carry out some of
24 these standard random analysis functions that are
25 claimed by the patent that you would have found it to
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1 be patent eligible
2 And I shyshy I would submit for the Court that
3 the key point here I think is that now given where
4 the Court shyshy what the Court has held in Bilski given
5 what its held in Mayo the abstract ideas exception is
6 really the only tool left to deal with what I shyshy what I
7 think I fairly read Bilski as saying is a significant
8 problem the proliferation of patents of business
9 methods
10 JUSTICE KENNEDY Is there an example that
11 you can give us of a shyshy what we can call a business
12 process that is patentable a process that doesnt
13 involve improving the workings of a computer
14 GENERAL VERRILLI I shyshy I think its going
15 to be difficult for me to do that I think for
16 example if you had a business method a process for
17 additional security pointshyofshysale credit card
18 transactions using particular encryption technology
19 that might well be patent eligible Its a technology
20 that it makes conduct of business more efficient or
21 effective
22 But there is a technological link here and
23 we do think thats critical to our shyshy to our point of
24 view with respect to the case And I shyshy and I do think
25 remember that when we say something is not patent
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1 eligible were not saying they cant do it Were
2 saying they cant monopolize it
3 And the concern in a situation like this one
4 is that if this is patent eligible its hard to see
5 why for example the first person who came up with a
6 frequent flier program wouldnt have been able to claim
7 a patent there because after all thats a business
8 method for improving customer loyalty implemented on a
9 computer
10 CHIEF JUSTICE ROBERTS General I shyshy you
11 mentioned a while ago the need for greater clarity and
12 certainty in this area And Im just wondering in your
13 brief youve got a nonshyexhaustive of factors to
14 consider and there are 6 different ones And Im just
15 doubtful that thats going to bring about greater
16 clarity and certainty
17 GENERAL VERRILLI I take shyshy I take the
18 point Mr Chief Justice but I think the key is that
19 they are all directed to answering the question of
20 whether the innovation that is claimed and is an
21 innovation in either A the improvement of a computers
22 functioning or B the use of computer technology to
23 improve the functioning of another technological
24 process and a case like Diehr would be in the latter
25 category
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1 And so I do think that thats the key
2 benchmark Thats the baseline Thats the test that
3 we do think can be applied clearly and consistently by
4 the courts or the PTO And it avoids the risk of things
5 like frequent flier programs or the Oakland As money
6 ball methods for evaluating the contributions in
7 individual baseball players make or any one of a host of
8 other things that our intuitions tell us just dont
9 belong in the patent system
10 Thats the shyshy drawing that line keeps them
11 out not drawing that line lets them in And with all
12 due respect I dont think that the novelty and
13 nonobviousness filters that 102 and 103 really deal with
14 that problem effectively because when you get to
15 nonobviousness in 103 for example youll be asking a
16 different question
17 If you take the frequent flier program you
18 would say well is this innovation in building consumer
19 loyalty something that would have been obvious to
20 somebody who runs an airline Its totally divorced
21 from the question of technology at that point and
22 therefore I dont think youre going to get the screen
23 that you need to get in order for the patent system to
24 be confined to its traditional and appropriate scope
25 If there are no further questions thank
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1 you
2 JUSTICE GINSBURG I have a question about
3 how do you identify an abstract concept The shyshy a
4 natural phenomenon a mathematical formula those are
5 easy to identify but there has been some confusion on
6 what qualifies as an abstract concept
7 GENERAL VERRILLI We would define
8 abstract shyshy an abstract concept as a claim that is not
9 directed to a concrete innovation in technology
10 science or the industrial arts So its the shyshy its
11 abstract in the sense that it is not a concrete
12 innovation in the traditional realm of patent law
13 Thank you
14 CHIEF JUSTICE ROBERTS Thank you General
15 Mr Phillips you have four minutes
16 remaining
17 REBUTTAL ARGUMENT OF CARTER G PHILLIPS
18 ON BEHALF OF THE PETITIONERS
19 MR PHILLIPS Thank you Mr Chief Justice
20 Id just like to make a few points
21 First of all with respect to the question
22 you asked which is looking at 159 et cetera all I can
23 tell you is that if you look at claim 33 it talks about
24 matched orders the matched orders that are described in
25 286 and 287 and then makes specific reference to 159
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1 and that flow chart thats there And its all designed
2 as a package Its only one element of the shyshy of the
3 invention but it is a central element and its an easy
4 one to understand And it goes well beyond simply the
5 notion of hedge shyshy hedge against settlement risk and do
6 it by a computer
7 JUSTICE SOTOMAYOR Your adversary says that
8 his shyshy the appendix to his brief are the only patents at
9 issue that the flow charts are not at issue in this
10 case
11 MR PHILLIPS Theres no basis for that
12 statement Your Honor There shyshy remember this went off
13 on a very truncated litigation process So theres shyshy
14 you know we shyshy we got cut off at the beginning of it
15 Theres been no construction of the shyshy of the claims
16 and shyshy and obviously these are specifications that go
17 to how you interpret the claim
18 JUSTICE SOTOMAYOR If we were to say that
19 there are no business patents shyshy
20 MR PHILLIPS Yes
21 JUSTICE SOTOMAYOR shyshy would your patent
22 survive at all
23 MR PHILLIPS No I dont shyshy I dont
24 believe so I think theres no question And you
25 know General Verrilli could not have been any plainer
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1 in his statement of how he wants to interpret the
2 abstract idea concept
3 JUSTICE SOTOMAYOR Yes he wants to say no
4 business patents
5 MR PHILLIPS No business shyshy just another
6 way of saying no business methods And you know the
7 Court rejected that And it seems to me extraordinary
8 to say Congress didnt reject no business methods in
9 101 but were going to do shyshy were going to manipulate
10 the judicial exception to accomplish precisely that same
11 thing It seems to me thats wholly inappropriate
12 Justice Ginsburg you asked my shyshy my friend
13 here you know whats his test He didnt answer that
14 question youll notice because he doesnt have an
15 answer His basic argument is whatever you do just
16 kill this patent
17 And if I were in his shoes I suppose Id
18 take that same position I think whats absolutely
19 clear is that the test ought to be one that is
20 structured as a very coarse filter not the kind of
21 filter that hes pushing for where it changes over time
22 I mean I thought his shyshy I thought his response to one
23 of the questions about eshymail and word processing that
24 Justice Sotomayor asked is over time it would change
25 Well thats exactly what 102 and 103 are for That is
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1 not the purpose of shyshy of Section 101
2 And then he uses the example of encryption
3 I guarantee you if we were arguing about encryption in
4 this case he would say to me that thats an abstract
5 principle because encryption is a concept thats been
6 around since time immemorial George Washington used
7 it Everybody has used encryption
8 And a question again thats not the
9 solution to these problems The question is how did we
10 go about doing it And we go beyond the basics of
11 simply saying use a computer and thats what we ask
12 this Court to focus on and to evaluate
13 As to the frequent flier program its
14 pretty clear to me that even though it was a novel idea
15 in some sense the concept itself would have been viewed
16 in shyshy in the KSR fashion as quite obvious as a means of
17 improving customer loyalty
18 There are solutions here Giving us 101
19 pass doesnt create a monopoly It just gets us to the
20 102 and 103 inquiries that are at the heart of what the
21 patent laws shyshy and 112 that are at the heart of what the
22 patent laws ought to be dealing with
23 If there are no further questions Your
24 Honor thank you
25 CHIEF JUSTICE ROBERTS Thank you counsel
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1 The case is submitted
2 (Whereupon at 1105 am the case in the
3 aboveshyentitled matter was submitted)
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
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58
A add 714 1023 algorithm 3320 41 automatically
As 525 3621 387 algorithms apply 72425 111
am 115 32 416 3013 3310 2019 281213 automobile 389
572 added 302 Alice 13 34 2822 3814 available 99
abacus 61213 4923 363 3717 4217 avenues 4124
710 1018 additional 5017 3822 4117 applying 4213 avoids 524
1325 3614 3617
address 4121 4317 4511
Alices 271 2919 3678
approach 226 395 4513 B
ability 1514 addressed 435 allow 94 472 B 121 29 4413
able 1511 167 addressing 181 allows 97 242 appropriate 5122
1919 516 adds 4623 amazing 2514 81516 1514 back 1621
aboveshyentitled adhere 437 amici 3825 453 4913 1922 2512
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absolutely 125 241 210 4414 Archimedes 3991222
1215 159 adjusting 3611 analysis 424 281122 3811 4025
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abstract 4267 adjustment 417 4924 argue 2518 Bank 17 35
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721 8218 administered 1716 argument 114 bars 43
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accept 102 adversary 547 APPEARAN arrows 315 beginning 163
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account 55 618 affect 4225 appendix 1910 aside 1422 157 behalf 11719
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accounts 823 agent 52 3021 548 278 5322 214 38 2616
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actual 4020 AL 18 523 attention 3813 better 1610 albeit 923 applies 31418 Attorney 2021 216 2819
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3322 brightshyline 409 2313 37 71 4338 5519 beyond 115 4012 5317 checks 618 5614
1312 4623 bring 5115 case 3412 46 Chief 339 clearly 211 251 544 5610 broad 248 116 1524 261217 3024 523
Bilski 313 46 broader 225 2022 213 31812 378 client 311416 415 1722 browsing 228 2211 2313 371416 386 close 2822 2224 2329 builder 2811 2625 311424 421414 4410 CLS 17 35 262020 271 building 5218 3314 36620 441116 5110 1120 2816 2999 built 2324 426816 5118 531419 coarse 247 3935 4125 business 168 451822 461 5625 5520 427 4322 1749 203 461422 5024 chits 611 code 1213 142 447 452 2124 222122 5124 5410 chronological 1916171720 461821 4825 2311 29613 564 5712 1512 2725 4018 49481922 32132323 cases 244 2816 chronologically coffee 1211 5047 3322525 4011 423 colleagues 116
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briefs 1524 4923 1620 2619 class 59 13911 1479 1618 CARTER 117 checkbook 617 clear 1015 118 1421 15710
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1517 165 confess 1111 coterminous 4121 5324 181719 196 configured 383 2321 customer 518 describes 425 19814 206 confined 5224 cotton 914 444 5617 2918 3211 2025 211016 confirmed 2912 4711 487 cut 5414 3913 2117 2410 confusion 434 counsel 4411 description
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disclosure 328 413 302021 4220 figure 1146 discuss 164 economy 1516 ESQ 1171921 excerpted 323 311222 3917 discussion 299 effective 1223 236913 exhausted 1813 file 406 dispose 2625 5021 essence 211 exist 420 131 filed 4214 dispute 325 effectively 5214 essential 1224 existence 1119 fill 2818 disputed 3120 efficacy 1224 3425 175 filled 293
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1 different
2 MR PHILLIPS shyshy thats the line were
3 asking the Court to draw here
4 JUSTICE KAGAN Well how are you saying the
5 how Because I thought that your computers shyshy that your
6 patents really did just say do this on a computer as
7 opposed to saying anything substantive about how to do
8 it on a computer
9 MR PHILLIPS I would urge the Court to
10 look at Joint Appendix 159 285shy286 where it goes
11 through the flow charts This is shyshy and this is just a
12 specific example of the method by which you stop a
13 transaction and it goes through a varied series of
14 detailed steps and what the computer has to do in order
15 to do that It doesnt actually obviously put in the
16 code but thats what the PTO says dont do Dont put
17 in the code because nobody understands code so shyshy but
18 put in the functions and we know shyshy and we know that
19 someone skilled in the art will be able to put in the
20 code And if they arent if they cant do that then
21 its not enabled and thats a 112 problem
22 To go back Justice Breyer to your
23 question So on the one hand youve got a problem that
24 it seems to me Congress to some extent has said is okay
25 and weve got a solution and that solutions playing
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1 through On the other hand if this Court were to say
2 much more categorically either that theres no such
3 thing as business method patents or adopt the Solicitor
4 Generals interpretation which is to say that there
5 cannot be software unless the software somehow actually
6 improves the computer as opposed to software improving
7 every other device or any other mechanism that might be
8 out there
9 What we know is that this would inherently
10 declare and in one fell swoop hundreds of thousands of
11 patents invalid and the consequences of that it seems
12 to me are utterly unknowable And before the Court goes
13 down that path I would think it would think long and
14 hard about whether isnt that a judgment that Congress
15 ought to make And It seems to me in that sense youre
16 essentially where the Court was in Chakrabarty where
17 everybody was saying youve got to act in one way or the
18 other or the world comes to an end and the courts have
19 said well apply 101 directly
20 JUSTICE KENNEDY If we say that theres no
21 software patentability and agree with the Attorney
22 General do you lose in this case
23 MR PHILLIPS Well it would be very hard
24 for me to see how that shyshy how shyshy how I can get around
25 that particular problem because the computer is the
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1 essence of it so shyshy and a portion of it is clearly the
2 software So I think if you say there is no such thing
3 as software patentability I do lose in this case yes
4 Your Honor As do a whole lot of other people
5 JUSTICE KENNEDY Is there any common ground
6 between you and the government shyshy maybe a better
7 question to ask the government shyshy a common ground
8 between you and the government on something in the
9 software area thats patentable other than making the
10 computer itself work You understand the government to
11 say no software patents
12 MR PHILLIPS Thats the way I interpret
13 the governments shyshy the governments brief
14 JUSTICE BREYER It was like shyshy theres a
15 Bloomberg brief out here that was on this that said
16 no you can shyshy you can patent computer software when
17 its an improvement in the computer when its an
18 improvement in software when its an improvement in a
19 technology that is developed out of computers like
20 robotics when it is an improvement in a machine or
21 technology but you cannot improve it where it is simply
22 an improvement in an activity that is engaged in
23 primarily through mental processes But what they mean
24 by that is business finance and similar arts
25 Thats shyshy I mean thats shyshy it wasnt quite what shyshy I
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1 know Thats what I want to know what you dont agree
2 with about that because its a little more refined than
3 you suggested
4 MR PHILLIPS I read the Solicitor
5 Generals brief as broader than the Bloomberg brief
6 in shyshy in terms of the approach And IBMs argument is
7 if you knock out software patents you eliminate web
8 browsing word processing cellphones eshymail Those
9 are all activities that I dont think fall within the
10 meaning of the shyshy the meaning of the governments theory
11 of the case
12 JUSTICE BREYER But Im asking you shyshy Im
13 asking you what about this one that I just mentioned
14 You see I went through those five steps shyshy
15 MR PHILLIPS Right
16 JUSTICE BREYER shyshy and four of them you
17 could patent and the fifth one you cant
18 MR PHILLIPS Right But I shyshy and I guess
19 my answer to that is thats nowhere in the statute and
20 it doesnt seem to me to reflect an abstract idea Its
21 a shyshy its a line you draw that takes out business method
22 patents If the Court wants to eliminate business
23 method patents fine But you just said no to that in
24 Bilski two three terms ago
25 Now to be sure give the Solicitor General
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1 credit he comes here and says to you We didnt like
2 the result in Bilski we want you to say dont use
3 process in order to get there which is a statutory
4 interpretation come up with an extraordinarily
5 complicated way of looking at the exception and use that
6 to get to the exact same result
7 JUSTICE SOTOMAYOR Well youre doing a
8 very good job of proving shyshy
9 JUSTICE GINSBURG In Bilski Justice Breyer
10 did try to say that there wasnt that shyshy a whole lot of
11 distance between the four who thought business methods
12 were not patentable But he shyshy he also said something
13 else in shyshy in the other case Mayo Justice Scalia
14 asked you the question about doesnt that go to novelty
15 but didnt Justice Breyer say in Mayo that novelty can
16 be relevant to patent shyshy to patent eligibility He said
17 theres shyshy theres an overlap
18 MR PHILLIPS Well he said theres an
19 overlap Here in this context I think basically the
20 Respondents theory would mean that they are completely
21 coterminous And I dont think thats what the Court
22 meant And also we know from Diehr that theres got to
23 be at least some significant limitations on the extent
24 to which novelty has to be built into 101 That is the
25 province of 102 and 103 And as I said Congress
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1 modified the system of adjudication to create an
2 administrative mechanism that allows you to get to 102
3 and 103 And at least in context its important to
4 realize there have been 11 cases since that was created
5 9 of the 11 have been knocked down on 102 or 103 grounds
6 and not on 101 grounds And it seems to me thats the
7 answer to this problem is leave 101 as the coarse
8 filter If on its face it states these kinds of broad
9 abstract principles fundamental truths and even if it
10 says use a computer those should be struck down
11 JUSTICE SOTOMAYOR Which of the shyshy which of
12 the opinions below captures your position most
13 accurately
14 MR PHILLIPS I would guess it would be
15 Judge Moores opinion below that would capture ours most
16 correctly
17 JUSTICE SOTOMAYOR And if we were to think
18 your method claim is ineligible do you agree that your
19 systems and shyshy your medium and system claims fail as
20 well Do they rise and fall together
21 MR PHILLIPS No No I dont believe they
22 do rise and fall together I mean I think you could shyshy
23 if you wanted to interpret our medium claim shyshy I mean
24 our shyshy our method claims in a shyshy in particularly
25 abstract way I think you could still say that the
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1 system claims which clearly are shyshy are how to create a
2 computer system and how to implement it using that
3 method would be a much more concrete version of that in
4 a way that would take it out of 101 That said I
5 obviously believe that all of our claims satisfy 101
6 and should go on to the next stage
7 JUSTICE KAGAN Can I give you a
8 hypothetical Mr Phillips and you tell me how its
9 different or the same Lets say you know 30 years
10 somebody took a look around the world and said a lot of
11 people seem to order products by mail They get the
12 catalogues in the mail and then they send back their
13 return forms And lets say that one of the founders of
14 the Internet said wouldnt this be an amazing system
15 we could actually do this by computer and they had
16 patented that Is that the same
17 MR PHILLIPS I dont know if its the
18 same but I would shyshy I would argue that it could very
19 well be a patentable subject matter because shyshy but it
20 depends on how the claims play out
21 JUSTICE KAGAN No but exactly I mean
22 the claim would have said something along the lines of
23 you know theres this process by which people order
24 products and we want to do it over the Internet we want
25 to do it electronically and we will use a computer to
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1 do that to essentially take the process of mail order
2 catalogues and make it electronic
3 MR PHILLIPS I could certainly shyshy I think
4 I could write a claim shyshy a set of claims that I believe
5 would satisfy 101 And shyshy and to the extent that
6 youd shyshy that youd think those are no different than
7 the ones I have here then my argument is simply I think
8 I satisfy 101 with the claims we have before us Your
9 Honor
10 If there are no further questions then Id
11 like to reserve the rest of my time
12 CHIEF JUSTICE ROBERTS Thank you
13 Mr Phillips
14 Mr Perry
15 ORAL ARGUMENT OF MARK A PERRY
16 ON BEHALF OF THE RESPONDENTS
17 MR PERRY Mr Chief Justice and may it
18 please the Court
19 That path between Scylla and Charybdis was
20 charted in Bilski and Mayo Bilski holds that a
21 fundamental economic principle is an abstract idea and
22 Mayo holds that running such a principle on a computer
23 is quote not a patentable application of that
24 principle Those two propositions are sufficient to
25 dispose of this case
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1 If Bilski and Mayo stand Alices patents
2 fail Therefore Mr Phillips and his friends are
3 asking this Court to change the standard even though
4 this Court has had three unanimous decisions in the last
5 four terms establishing what the Court called a myriad
6 a wellshyestablished standard
7 On the abstract idea Justice Ginsburg you
8 asked Mr Phillips whats the difference between hedging
9 and this claim There is no difference This is
10 hedging It is hedging against credit default rather
11 than price fluctuation but it is simply hedging
12 And Mr Phillips stood up for 26 minutes and
13 never once referred to the patent Lets look at what
14 the inventor the soshycalled inventor said about this
15 invention This is at JA 293 to 94 in the
16 specification
17 This claim has simply two steps Its very
18 simple First debiting and crediting on a realtime
19 basis the relevant shadow records and second by
20 periodically affecting corresponding payment
21 instructions Those are direct quotes Debit credit
22 and pay Your Honor you cant get much more simple
23 than that
24 Mr Phillips suggests well we have
25 multilateral transactions global things chronological
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1 time zones and so forth None of those are claimed
2 Your Honor Those are all recited in specification
3 The claims read on a single transaction involving two
4 parties
5 JUSTICE BREYER Can I ask you at some
6 point not necessarily this second to say in my shyshy this
7 is just shyshy you know you have an opinion for a court
8 Different judges can have different interpretations
9 All youre getting is mine okay
10 But I think its pretty easy to say that
11 Archimedes cant just go to a boat builder and say
12 apply my idea All right Everybody agrees with that
13 But now we try to take that word apply and give
14 content to it
15 And what I suspect in my opinion Mayo did
16 and Bilski and the other cases is sketch an outer shell
17 of the content hoping that the experts you and the
18 other lawyers and the shyshy the circuit court could fill
19 in a little better than we had done the content of that
20 shell
21 So so far youre saying well this is
22 close enough to Archimedes saying apply it that we
23 neednt go further
24 Now will you at some point in the next few
25 minutes give me your impression of if it were necessary
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1 to go further what would the right words or example be
2 MR PERRY Your Honor as shyshy Justice
3 Breyer as to abstract ideas the PTO has filled in that
4 shell by listing economic concepts legal concepts
5 financial concepts teaching concepts dating and
6 interpersonal relationships and generally how business
7 should be conducted as examples of those things that are
8 likely abstract which of course all follow directly
9 from Bilski and the discussion this Court had in Bilski
10 And this patent shyshy these patents fall squarely within
11 that
12 Congress in the AIA confirmed that
13 reading Congress in the CBM method said business
14 methods that are subject to special scrutiny shyshy that is
15 dubious patents shyshy include methods and corresponding
16 apparatus which is what we have here that pertain to
17 data processing in the financial services industry and
18 do not offer a technological solution That describes
19 Alices patents to a letter Your Honor So that we
20 have shyshy
21 JUSTICE SOTOMAYOR What do you think is a
22 technological solution
23 MR PERRY Your Honor shyshy
24 JUSTICE SOTOMAYOR How could they if at
25 all written their patents to shyshy to make shyshy to make
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1 their software eligible What would shyshy what do they
2 need shyshy would have needed to have added
3 MR PERRY Justice Sotomayor they have no
4 software first Theyve never written software
5 Theyve never programmed a computer So thats a
6 nonexistent set
7 Second there are many technological
8 solutions to trading and settlement problems For
9 example data compression These shyshy these trading
10 platforms involve the movement of very large quantities
11 of data around the world The physical pipes that is
12 the fiber optic cables and data lines are limited
13 There are very sophisticated algorithms for both
14 security and speed to move data through the transmission
15 lines in novel and useful ways that could well be
16 patented
17 Nothing like that is claimed here To come
18 back to where I started if you look for example at
19 Claim 65 in the 510 patent as Mr Phillips reads it
20 it literally reads on a twoshyparty escrow to sell a
21 house so long as the escrow agent is typing this stuff
22 into the HUDshy1 using a computer That has nothing to do
23 with multilevel shyshy
24 CHIEF JUSTICE ROBERTS Well thats a
25 little more complicated He referred us to Joint
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1 Appendix Page 159 which is not a change in how
2 computers work But it is shyshy constitutes the
3 instructions about how to use the computer and where it
4 needs to be affected And just looking at it it looks
5 pretty complicated There are a lot of arrows and
6 they shyshy you know different things that go shyshy
7 (Laughter)
8 CHIEF JUSTICE ROBERTS Well but I mean
9 you know it shyshy in different directions And I
10 understand him to say that in each of those places
11 thats where the computer is needed
12 MR PERRY Mr Chief Justice Figure 16 has
13 nothing to do with the invention asserted against my
14 client in this case There are two inventions in this
15 patent One invention involving multilateral contract
16 formation is not asserted against my client And all of
17 these drawings pertain to that The only drawings that
18 pertain to the asserted claims are 25 and 33 to 37 And
19 that was established below and its established in this
20 Court And Mr Phillips has never disputed it
21 So the claim hes pointed the Court shyshy the
22 figure hes pointed the Court to has nothing to do with
23 the invention Its for a different invention that is
24 not at issue in this case
25 Remember there are hundreds and hundreds of
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1 pages of these patents They all pertain to the other
2 invention Thats why in the back of our red brief we
3 excerpted the very little bit that actually pertains to
4 this You sort of tack on patent shyshy the tack on claim
5 that Mr Phillips is asserting here Its 4 columns
6 Its less than five pages in the printed appendix that
7 actually pertains to this invention And it contains no
8 disclosure whatever
9 Justice Scalia to your question about how
10 the computer does it Of course a patent that
11 describes sufficiently how a computer does a new and
12 useful thing whether its data compression or any other
13 technological solution to a business problem a social
14 problem or a technological problem would be within the
15 realm of the shyshy of the patent laws That is what the
16 patent laws have always been for
17 This is not such a patent And the reason
18 for that is this is a preshyBilski set of patents These
19 were prosecuted under the old State Street test where
20 all the applicant had to claim was a result
21 JUSTICE KENNEDY Would you give me shyshy
22 again you already did it once shyshy an example of a
23 business process patent shyshy of a business process idea
24 and invention that is patentable
25 MR PERRY Your Honor there are many
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1 examples One would be a technological solution to a
2 business problem So that for example shyshy Ill give a
3 different example There are many applications today
4 The Court may be familiar with streaming video to watch
5 video on your computer
6 It is not possible to get enough data
7 through existing lines in its raw format The data has
8 to be manipulated in order to see live video So if you
9 want to watch TV on your phone for example
10 Those algorithms those inventions are
11 undoubtedly technological And if they are used in a
12 trading platform or a hedging system or something else
13 that wouldnt disable them And this is what the Diehr
14 case shyshy
15 JUSTICE KENNEDY Well I shyshy I shyshy in my
16 language Ive called that mechanical rather than
17 process Can you give me an example of process
18 MR PERRY Yes Your Honor The process in
19 that example would be a computer running the particular
20 data compression algorithm
21 JUSTICE KENNEDY But thats how to make
22 a shyshy thats how to make a machine work better
23 MR PERRY Yes Your Honor
24 JUSTICE KENNEDY Im asking you Is there
25 any business process any business activity that is
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1 susceptible to a patent a pure patent innovations that
2 deserve patents
3 MR PERRY Your Honor again a
4 technological solution to a business problem could well
5 be whether its a method or a process is equivalent
6 Again Congress said method in a corresponding shyshy
7 JUSTICE KENNEDY Can you give me an
8 example
9 MR PERRY I thought the data compression
10 example was a good one Ill try an encryption
11 technology Many of these trading platforms you know
12 dealing with securities and money would require some
13 sort of security devices You could have a process for
14 securely transmitting data would be another computer
15 implemented technological solution to a business
16 problem Again nothing like that claimed here
17 JUSTICE SOTOMAYOR How about eshymail and
18 just word processing programs
19 MR PERRY Your Honor a program shyshy let me
20 try it this way to both of your questions In our view
21 if what is claimed as the inventive contribution under
22 Mayo shyshy in other words if we have an abstract idea as
23 we do here and what is claimed is the inventive
24 contribution for Step 2 is the computer then the
25 computer must be essential to that operation and
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1 represent an advancement in computer science or other
2 technology And we know thats not met here Justice
3 Sotomayor because shyshy
4 JUSTICE SOTOMAYOR So youre saying no to
5 eshymail and word processing
6 MR PERRY Your Honor I think at a
7 point shyshy
8 JUSTICE SOTOMAYOR They certainly have
9 functionality and shyshy and improvement of functionality
10 for the user
11 MR PERRY At a point in time in the past
12 I think both of those would have been technological
13 advances that were patentable
14 JUSTICE SOTOMAYOR How
15 MR PERRY Today shyshy because they would have
16 provided a technological solution to a then unmet
17 problem Today reciting and do it on a word processor
18 is no different than and do it on a typewriter or shyshy and
19 do it on a calculator
20 The inventive contribution component which
21 uses specifically the language of conventional and
22 routine and well understood will evolve with
23 technology Thats why its different than the abstract
24 idea component
25 And here we know that these patents dont
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1 claim anything that was not conventional well
2 understood and routine We went through that in great
3 detail and Alice has never disputed a word of it They
4 just say youre not supposed to do that analysis even
5 though the Court 9shy0 in Mayo said we should
6 And in this case its very important to
7 look at what Alices own experts said on the subject
8 This is not our expert This is Alices expert And
9 this is at Page 1327shy28 of the Joint Appendix It is
10 possible to do the business methods of maintaining
11 accounts adjusting accounts and providing an
12 instruction without a computer or other hardware
13 And then Justice Breyer directly to your
14 abacus If someone had thought of this invention
15 soshycalled invention 100 years ago they might have
16 implemented it in a nonelectronic manner using various
17 precomputing tools such as an abacus or handwritten
18 ledgers
19 We know from Benson the Courts seminal
20 computer implementation case that if you can do it by
21 head and hand then the computer doesnt add anything
22 inventive within the meaning of the 101 exception That
23 is the holding of Benson And the Court reiterated that
24 in Mayo
25 Flook said exactly the same thing If you
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1 can do it with pencil and paper then the computer is
2 not offering anything that the patent laws are or should
3 be concerned with
4 It is only where the method will not work
5 without a computer which is not these claims and where
6 the computer itself is doing something that the patent
7 law is willing to protect
8 CHIEF JUSTICE ROBERTS What if shyshy what if
9 you can do it without a computer but its going to
10 take you know 20 people a hundred years In other
11 words theoretically you can replicate what the
12 computer does shyshy
13 MR PERRY Two answers
14 CHIEF JUSTICE ROBERTS shyshy but its
15 impractical without looking to do it on the computer
16 MR PERRY Mr Chief Justice first these
17 claims literally read as Alice reads them on a single
18 transaction between two parties so its not 20 people
19 for a hundred years Its one person sitting in a room
20 so thats not a problem
21 Second if what is being claimed is the
22 necessary speed or efficiency or data crunching
23 capabilities if you will of a computer then it would
24 have to be claimed and theres nothing claimed here
25 All that is claimed shyshy and my friend is going to stand
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1 up on rebuttal and tell you all that the expert said
2 well what is claimed is a computer but its just a
3 computer It just says a computer configured too It
4 doesnt say that the computer actually has to shyshy
5 JUSTICE BREYER Yeah but the trouble with
6 that particular test is as I think partly the Chief
7 Justice said how long et cetera and then add to that
8 though you could do it without a computer what happens
9 at the end of the line is the automobile engine goes off
10 or it begins to sputter or it turns left
11 You see its possible to take Archimedes shyshy
12 shyshy you know I use that example purposely to call
13 attention to the problem You can take those things
14 and youre not just saying apply it and youre not even
15 just saying shyshy you are saying use the computer but at
16 the end of the road something physical in the world
17 changes and everybody would say now thats shyshy that
18 will falls within I mean probably I mean my
19 hesitation shows Im looking for the right words
20 MR PERRY Justice Breyer your point is
21 the reason that it is equally fallacious to suggest on
22 the one hand as Alice and IBM does that simply
23 reciting a computer is a magic key that gets you through
24 101 and you never have to any other inquiry and what
25 some of folks the amici on the other side say which
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1 is that computers or software are never eligible Both
2 of those things have to be wrong because what the Court
3 said in Bilski was future innovation is too uncertain
4 We are not going to do that as a Court And the Court
5 laid out an approach using abstract ideas in Bilski and
6 inventive contribution in Mayo that is flexible enough
7 to take into account that innovation and to deal with
8 particular claims in context which is why at the end
9 of the day we have to come back to these patents and
10 decide which shyshy
11 JUSTICE KAGAN Mr Perry before we get
12 back to these matters you said to Justice Scalia if a
13 patent sufficiently describes how a computer will
14 implement an idea then its patentable So how
15 sufficiently does one have to describe it What do we
16 want a judge to do at this threshold level in terms of
17 trying to figure out whether the description is
18 sufficient to get you past it
19 MR PERRY If I can answer in two steps
20 Justice Kagan First in the negative What the
21 applicant or patentee must do shyshy must not do is simply
22 describe the desired result That would take us back to
23 State Street That would simply say I claim a magic
24 box that buys high and sells low or vice versa I
25 suppose I claim a magic box for investing Thats what
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1 these patents do
2 Then to put it in the affirmative and in the
3 language of Mayo the claim has to recite something
4 significantly more something significantly more than
5 the abstract idea itself That would be a contextual
6 analysis based on the claims and specifications and file
7 history and we know that some devices some methods
8 some programming will pass that
9 It is not going to be a brightshyline rule and
10 thats one of the tugshyofshywar issues that this Court and
11 the Federal Circuit have been having in these cases
12 The Federal Circuit wants brightshyline rules All
13 computers are in or all computers are out
14 This Court has been more contextual This
15 Court has been more nuanced This Court has looked at
16 things in a more robust way
17 JUSTICE KAGAN Youre not suggesting that
18 specific code is necessary
19 MR PERRY No Your Honor I think the shyshy
20 actual description of the programming is a 112 problem
21 I agree with that A 112 issue That is the realm of
22 the written description requirement What is a 101
23 problem is it is on the applicant to do more than simply
24 describe the results simply say A magic box that does
25 intermediate settlement And we can tie that back to
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1 this particular prosecution the 510 patent which is
2 the method patent
3 The examiner rejected it Under Section
4 101 the examiner said this is an abstract idea You
5 cant have this patent And the only change that this
6 applicant made was to add in the adjusting step
7 electronic adjustment It put in one word
8 electronic adjustment And under State Street which
9 is what this patent is prosecuted under that was
10 enough because the result of adjusting run through a
11 computer is enough
12 Under current law that cant be enough
13 That just cant get a patent over the line because this
14 Court said in Mayo and I got to quote this language
15 Simply implementing a fundamental principle on a
16 physical machine namely a computer is not a patentable
17 application of that principle Thats all that Alice
18 has done
19 These are preshyBilski patents They never
20 should have been issued General Verrilli will stand up
21 and address that point And certainly under current
22 law shyshy one point on the AIA Congress did not send all
23 this to the administrative process Congress created
24 two avenues the courts and the PTO to use the
25 standards Essentially it ratified Bilski and Mayo and
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1 said we agree with what you all are doing at the
2 Supreme Court and the existing standards are good enough
3 for us This is a judicial problem And that is a good
4 reason The abstract shyshy
5 JUSTICE GINSBURG The Federal Circuit in
6 this case split in many ways and it had our decisions
7 to deal with You said given Bilski and Mayo this is
8 an easy case What is the instruction that escaped a
9 good number of judges on the Federal Circuit How would
10 you state the rule
11 MR PERRY Your Honor I think theres a
12 significant element to the Federal Circuit that
13 disagrees with Mayo and has been resistant in applying
14 it Chief Judge shyshy former Chief Judge Michelle filed a
15 brief in this Court essentially saying Mayo is a
16 lifeshysciences case You should limit it to that because
17 if you apply it to everything else then these patents
18 are no good
19 Mayo we submit is a technologyshyneutral
20 industryshyneutral exceptionshyneutral framework that can
21 be used to answer all of these questions This is not
22 the death of software patents The software industry is
23 all before this Court saying this is fine with us
24 Every company in the United States practically except
25 for IBM is saying go ahead This will not affect
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1 software patents
2 Justice Ginsburg this Courts precedents
3 are clear They are unanimous They just need to be
4 applied To suggest that there is confusion that needs
5 to be addressed by retreating beating a retreat from
6 recent unanimous decisions would simply reward
7 intransigence difficulty refusal to adhere to what are
8 clear precedents because shyshy
9 JUSTICE KAGAN Should we be concerned
10 Mr Perry that there are old patents that in fact could
11 meet the test that you set forth but wont because they
12 were written in a different time and so used much more
13 general language
14 MR PERRY Your Honor the applicant or the
15 patent holder would have the opportunity to institute a
16 reexamination proceeding or some sort of administration
17 process to address that issue
18 And second it should be noted this is a
19 very small problem There are 2 million outstanding
20 patents in the United States In the last four fiscal
21 years there were 22000 infringement litigations
22 instituted but since Bilski there have only been 57
23 district court decisions on Section 101 issues There
24 have only been 12 Federal Circuit decisions total on
25 computer implementation
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1 We are talking about a group of patents
2 Justice Kagan thats way out at the tail end of
3 distribution Most patents never have a 101 challenge
4 This is not an issue with cotton gins and other things
5 This is a problem for the most marginal
6 most dubious most skeptical patents the ones that this
7 Court in Bilski shyshy and remember what Bilskis holding
8 is The majority said they are processes but it did
9 not say they are eligible
10 Thank you Mr Chief Justice
11 CHIEF JUSTICE ROBERTS Thank you counsel
12 General Verrilli
13 ORAL ARGUMENT OF DONALD B VERRILLI JR
14 ON BEHALF OF THE UNITED STATES AS AMICUS
15 CURIAE SUPPORTING RESPONDENTS
16 GENERAL VERRILLI Mr Chief Justice and
17 may it please the Court
18 An abstract idea does not become
19 patentshyeligible merely by tacking on an instruction to
20 use a computer to carry it out A computer makes a
21 difference under Section 101 when it imposes a
22 meaningful limit on the patent claim That occurs when
23 the claim is directed at improvement in computing
24 technology or an innovation that uses computing
25 technology to improve other technological functions
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1 Thats the test that we believe is most faithful to this
2 Courts precedents in Bilski and Mayo It keeps patents
3 within their traditional and appropriate domain and it
4 is capable of being administered consistently by Courts
5 and by PTO examiners
6 JUSTICE GINSBURG How do you answer the
7 argument that your view would extinguish businessshymethod
8 patents and make all software ineligible for patent
9 protection
10 GENERAL VERRILLI Yeah with shyshy let me
11 address software patents first because that I think is
12 obviously a significant question And its just not
13 correct to say that our approach would make software
14 patenting ineligible Any software patent that improves
15 the functioning of the computer technology is eligible
16 Any software patent that improves shyshy that is used to
17 improve another technology is eligible For example
18 the patent in the shyshy in the Diehr case is one in
19 which shyshy
20 JUSTICE SOTOMAYOR Why do we need to reach
21 this in that shyshy reach software patents at all in this
22 case
23 GENERAL VERRILLI Well shyshy
24 JUSTICE SOTOMAYOR Whats the necessity for
25 us to announce a general rule with respect to software
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1 There is no software being patented in this case
2 GENERAL VERRILLI Well I shyshy
3 JUSTICE SOTOMAYOR Theres a systems
4 GENERAL VERRILLI Well I shyshy I think shyshy
5 well they shyshy they shyshy theres a process being and shyshy and
6 one can think of software patents as process patents
7 And I think thats why my friends on the other side are
8 saying the sky is falling because they shyshy they are
9 interpreting what were saying about that when a
10 computer makes shyshy when a computers involvement makes
11 something eligible under 101 its calling those into
12 question and it doesnt
13 JUSTICE SOTOMAYOR Do you think we have to
14 reach the patentability of software to answer this case
15 GENERAL VERRILLI Well I think you can shyshy
16 I think the answer to that question is no not
17 necessarily You can decide it by saying that shyshy that
18 Bilski answers the question whether this is an abstract
19 idea because this form of hedging is really no
20 different than the form of hedging as a conceptual
21 matter at issue in Bilski And then Mayo answers the
22 question of whether the use of a computer in this case
23 adds enough to the abstract idea beyond conventional
24 steps because here all we have after all is just
25 conventional use of computing technology no computer
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1 innovation such that you dont qualify under 101 You
2 could take that approach
3 But it is important to the United States
4 that we shyshy and to our patent examiners that we get some
5 clarity if we can I think the clarity could come from
6 the text that I propose which I want to reiterate shyshy
7 JUSTICE SOTOMAYOR Well shyshy
8 JUSTICE BREYER Could shyshy could shyshy could you
9 go on with that because you were just getting to the
10 point where I think you say a computer improvement that
11 in fact leads to an improvement in harvesting cotton is
12 an improvement through a computer of technology so it
13 qualifies
14 But then I think you were going to say or I
15 got this also from the brief a computer improvement
16 that leads to an improvement in the methods of selling
17 bonds over the telephone is not an improvement in
18 technology reached by the computer Am I right about
19 the distinction youre making
20 GENERAL VERRILLI I dont think theres a
21 yes or no answer to that question
22 JUSTICE BREYER What is your view Yeah
23 what is shyshy how do we deal with just that problem
24 GENERAL VERRILLI If there is a genuine
25 innovation in the functioning of the computer shyshy
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1 JUSTICE BREYER Yes
2 GENERAL VERRILLI shyshy such that business
3 processes shyshy
4 JUSTICE BREYER Weve got that Yes yes
5 We got the computer But then it doesnt improve the
6 computer but rather it improves through the computer
7 the harvesting of cotton
8 Now youve got it in what you said was your
9 second category which is an improvement through the
10 computer of a technology And I thought in your brief
11 you were distinguishing an improvement through the
12 computer of a human activity that is not a technology
13 and in particular to pick an example of that
14 something in finance or something in business
15 Now am I right about the distinction youre
16 making
17 GENERAL VERRILLI Yeah that shyshy
18 JUSTICE BREYER If Im not right what is
19 the distinction
20 GENERAL VERRILLI That is generally the
21 line were drawing Frankly shyshy
22 JUSTICE BREYER And how is that justified
23 GENERAL VERRILLI I do want shyshy
24 JUSTICE BREYER That shyshy that is Judge Dyk
25 in shyshy in Bilski in the Federal circuit 4 people sort of
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1 picked it up maybe 5 didnt pick it up Would you say
2 a few words about it
3 GENERAL VERRILLI Sure About shyshy let me go
4 to Bilski there in that I do think while shyshy while
5 certainly the Court held that the term process got a
6 natural construction which could include business
7 methods it seems to me that thats not all the Court
8 said in Bilski The Court also said that it was
9 historically and traditionally quite rare that business
10 methods were patent eligible
11 It also said that shyshy that the shyshy that courts
12 and the PTO examiners should use the abstract ideas
13 exception to 101 to police the appropriate boundary
14 It also said that the
15 machineshyorshytransformation test that the United States
16 advocated remained a useful tool And of course that
17 directs to you seeing whether there is a technology
18 application
19 And of course the holding in Bilski was
20 that the shyshy the method for hedging risk was ineligible
21 because it was an abstract idea and I cant imagine
22 that if in Bilski the shyshy the claim had been exactly the
23 same but had added use a computer to carry out some of
24 these standard random analysis functions that are
25 claimed by the patent that you would have found it to
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1 be patent eligible
2 And I shyshy I would submit for the Court that
3 the key point here I think is that now given where
4 the Court shyshy what the Court has held in Bilski given
5 what its held in Mayo the abstract ideas exception is
6 really the only tool left to deal with what I shyshy what I
7 think I fairly read Bilski as saying is a significant
8 problem the proliferation of patents of business
9 methods
10 JUSTICE KENNEDY Is there an example that
11 you can give us of a shyshy what we can call a business
12 process that is patentable a process that doesnt
13 involve improving the workings of a computer
14 GENERAL VERRILLI I shyshy I think its going
15 to be difficult for me to do that I think for
16 example if you had a business method a process for
17 additional security pointshyofshysale credit card
18 transactions using particular encryption technology
19 that might well be patent eligible Its a technology
20 that it makes conduct of business more efficient or
21 effective
22 But there is a technological link here and
23 we do think thats critical to our shyshy to our point of
24 view with respect to the case And I shyshy and I do think
25 remember that when we say something is not patent
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1 eligible were not saying they cant do it Were
2 saying they cant monopolize it
3 And the concern in a situation like this one
4 is that if this is patent eligible its hard to see
5 why for example the first person who came up with a
6 frequent flier program wouldnt have been able to claim
7 a patent there because after all thats a business
8 method for improving customer loyalty implemented on a
9 computer
10 CHIEF JUSTICE ROBERTS General I shyshy you
11 mentioned a while ago the need for greater clarity and
12 certainty in this area And Im just wondering in your
13 brief youve got a nonshyexhaustive of factors to
14 consider and there are 6 different ones And Im just
15 doubtful that thats going to bring about greater
16 clarity and certainty
17 GENERAL VERRILLI I take shyshy I take the
18 point Mr Chief Justice but I think the key is that
19 they are all directed to answering the question of
20 whether the innovation that is claimed and is an
21 innovation in either A the improvement of a computers
22 functioning or B the use of computer technology to
23 improve the functioning of another technological
24 process and a case like Diehr would be in the latter
25 category
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1 And so I do think that thats the key
2 benchmark Thats the baseline Thats the test that
3 we do think can be applied clearly and consistently by
4 the courts or the PTO And it avoids the risk of things
5 like frequent flier programs or the Oakland As money
6 ball methods for evaluating the contributions in
7 individual baseball players make or any one of a host of
8 other things that our intuitions tell us just dont
9 belong in the patent system
10 Thats the shyshy drawing that line keeps them
11 out not drawing that line lets them in And with all
12 due respect I dont think that the novelty and
13 nonobviousness filters that 102 and 103 really deal with
14 that problem effectively because when you get to
15 nonobviousness in 103 for example youll be asking a
16 different question
17 If you take the frequent flier program you
18 would say well is this innovation in building consumer
19 loyalty something that would have been obvious to
20 somebody who runs an airline Its totally divorced
21 from the question of technology at that point and
22 therefore I dont think youre going to get the screen
23 that you need to get in order for the patent system to
24 be confined to its traditional and appropriate scope
25 If there are no further questions thank
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1 you
2 JUSTICE GINSBURG I have a question about
3 how do you identify an abstract concept The shyshy a
4 natural phenomenon a mathematical formula those are
5 easy to identify but there has been some confusion on
6 what qualifies as an abstract concept
7 GENERAL VERRILLI We would define
8 abstract shyshy an abstract concept as a claim that is not
9 directed to a concrete innovation in technology
10 science or the industrial arts So its the shyshy its
11 abstract in the sense that it is not a concrete
12 innovation in the traditional realm of patent law
13 Thank you
14 CHIEF JUSTICE ROBERTS Thank you General
15 Mr Phillips you have four minutes
16 remaining
17 REBUTTAL ARGUMENT OF CARTER G PHILLIPS
18 ON BEHALF OF THE PETITIONERS
19 MR PHILLIPS Thank you Mr Chief Justice
20 Id just like to make a few points
21 First of all with respect to the question
22 you asked which is looking at 159 et cetera all I can
23 tell you is that if you look at claim 33 it talks about
24 matched orders the matched orders that are described in
25 286 and 287 and then makes specific reference to 159
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1 and that flow chart thats there And its all designed
2 as a package Its only one element of the shyshy of the
3 invention but it is a central element and its an easy
4 one to understand And it goes well beyond simply the
5 notion of hedge shyshy hedge against settlement risk and do
6 it by a computer
7 JUSTICE SOTOMAYOR Your adversary says that
8 his shyshy the appendix to his brief are the only patents at
9 issue that the flow charts are not at issue in this
10 case
11 MR PHILLIPS Theres no basis for that
12 statement Your Honor There shyshy remember this went off
13 on a very truncated litigation process So theres shyshy
14 you know we shyshy we got cut off at the beginning of it
15 Theres been no construction of the shyshy of the claims
16 and shyshy and obviously these are specifications that go
17 to how you interpret the claim
18 JUSTICE SOTOMAYOR If we were to say that
19 there are no business patents shyshy
20 MR PHILLIPS Yes
21 JUSTICE SOTOMAYOR shyshy would your patent
22 survive at all
23 MR PHILLIPS No I dont shyshy I dont
24 believe so I think theres no question And you
25 know General Verrilli could not have been any plainer
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1 in his statement of how he wants to interpret the
2 abstract idea concept
3 JUSTICE SOTOMAYOR Yes he wants to say no
4 business patents
5 MR PHILLIPS No business shyshy just another
6 way of saying no business methods And you know the
7 Court rejected that And it seems to me extraordinary
8 to say Congress didnt reject no business methods in
9 101 but were going to do shyshy were going to manipulate
10 the judicial exception to accomplish precisely that same
11 thing It seems to me thats wholly inappropriate
12 Justice Ginsburg you asked my shyshy my friend
13 here you know whats his test He didnt answer that
14 question youll notice because he doesnt have an
15 answer His basic argument is whatever you do just
16 kill this patent
17 And if I were in his shoes I suppose Id
18 take that same position I think whats absolutely
19 clear is that the test ought to be one that is
20 structured as a very coarse filter not the kind of
21 filter that hes pushing for where it changes over time
22 I mean I thought his shyshy I thought his response to one
23 of the questions about eshymail and word processing that
24 Justice Sotomayor asked is over time it would change
25 Well thats exactly what 102 and 103 are for That is
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1 not the purpose of shyshy of Section 101
2 And then he uses the example of encryption
3 I guarantee you if we were arguing about encryption in
4 this case he would say to me that thats an abstract
5 principle because encryption is a concept thats been
6 around since time immemorial George Washington used
7 it Everybody has used encryption
8 And a question again thats not the
9 solution to these problems The question is how did we
10 go about doing it And we go beyond the basics of
11 simply saying use a computer and thats what we ask
12 this Court to focus on and to evaluate
13 As to the frequent flier program its
14 pretty clear to me that even though it was a novel idea
15 in some sense the concept itself would have been viewed
16 in shyshy in the KSR fashion as quite obvious as a means of
17 improving customer loyalty
18 There are solutions here Giving us 101
19 pass doesnt create a monopoly It just gets us to the
20 102 and 103 inquiries that are at the heart of what the
21 patent laws shyshy and 112 that are at the heart of what the
22 patent laws ought to be dealing with
23 If there are no further questions Your
24 Honor thank you
25 CHIEF JUSTICE ROBERTS Thank you counsel
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1 The case is submitted
2 (Whereupon at 1105 am the case in the
3 aboveshyentitled matter was submitted)
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
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58
A add 714 1023 algorithm 3320 41 automatically
As 525 3621 387 algorithms apply 72425 111
am 115 32 416 3013 3310 2019 281213 automobile 389
572 added 302 Alice 13 34 2822 3814 available 99
abacus 61213 4923 363 3717 4217 avenues 4124
710 1018 additional 5017 3822 4117 applying 4213 avoids 524
1325 3614 3617
address 4121 4317 4511
Alices 271 2919 3678
approach 226 395 4513 B
ability 1514 addressed 435 allow 94 472 B 121 29 4413
able 1511 167 addressing 181 allows 97 242 appropriate 5122
1919 516 adds 4623 amazing 2514 81516 1514 back 1621
aboveshyentitled adhere 437 amici 3825 453 4913 1922 2512
113 573 adjudication amicus 123 5224 3018 322
absolutely 125 241 210 4414 Archimedes 3991222
1215 159 adjusting 3611 analysis 424 281122 3811 4025
5518 41610 364 406 area 219 5112 ball 526
abstract 4267 adjustment 417 4924 argue 2518 Bank 17 35
48 6682023 418 analyze 1416 arguing 563 banks 95
721 8218 administered 1716 argument 114 bars 43
141920 1522 454 announce 4525 225812 33 baseball 527
165 181618 administration answer 119 37 41 144 based 423 406
2220 24925 4316 2219 247 18323 226 baseline 522
2621 277 administrative 3919 4221 26715 4413 basic 413 5515
2938 3422 171218 187 456 461416 457 5317 basically 1821
3523 395 242 4123 4721 551315 5515 2319
405 414 424 adopt 203 answering 5119 arguments basics 5610
4418 461823 adopted 31317 answers 3713 1415 basis 132 1512
491221 505 advancement 461821 arms 1625 1516 2719
53368811 351 anyway 1810 arrangements 5411
552 564 advances 3513 apparatus 2916 131 beating 435
accept 102 adversary 547 APPEARAN arrows 315 beginning 163
accomplish advice 1715 116 art 1919 5414
5510 advocated 4916 appears 820 arts 2124 5310 begins 3810
account 55 618 affect 4225 appendix 1910 aside 1422 157 behalf 11719
397 affirmative 402 311 326 369 asked 2314 122 24710
accounts 823 agent 52 3021 548 278 5322 214 38 2616
9356 3611 ago 318 2224 applicant 3220 551224 4414 5318
3611 3615 5111 3921 4023 asking 193 believe 1316
accurately 2413 agree 920 2021 416 4314 221213 273 1416 2421
acknowledges 221 2418 application 3324 5215 255 264 451
1121 4021 421 2623 4117 aspect 517 5424
act 99 2017 agrees 2812 4918 asserted 3113 belong 529
activities 229 ahead 4225 applications 311618 benchmark 522
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1 through On the other hand if this Court were to say
2 much more categorically either that theres no such
3 thing as business method patents or adopt the Solicitor
4 Generals interpretation which is to say that there
5 cannot be software unless the software somehow actually
6 improves the computer as opposed to software improving
7 every other device or any other mechanism that might be
8 out there
9 What we know is that this would inherently
10 declare and in one fell swoop hundreds of thousands of
11 patents invalid and the consequences of that it seems
12 to me are utterly unknowable And before the Court goes
13 down that path I would think it would think long and
14 hard about whether isnt that a judgment that Congress
15 ought to make And It seems to me in that sense youre
16 essentially where the Court was in Chakrabarty where
17 everybody was saying youve got to act in one way or the
18 other or the world comes to an end and the courts have
19 said well apply 101 directly
20 JUSTICE KENNEDY If we say that theres no
21 software patentability and agree with the Attorney
22 General do you lose in this case
23 MR PHILLIPS Well it would be very hard
24 for me to see how that shyshy how shyshy how I can get around
25 that particular problem because the computer is the
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1 essence of it so shyshy and a portion of it is clearly the
2 software So I think if you say there is no such thing
3 as software patentability I do lose in this case yes
4 Your Honor As do a whole lot of other people
5 JUSTICE KENNEDY Is there any common ground
6 between you and the government shyshy maybe a better
7 question to ask the government shyshy a common ground
8 between you and the government on something in the
9 software area thats patentable other than making the
10 computer itself work You understand the government to
11 say no software patents
12 MR PHILLIPS Thats the way I interpret
13 the governments shyshy the governments brief
14 JUSTICE BREYER It was like shyshy theres a
15 Bloomberg brief out here that was on this that said
16 no you can shyshy you can patent computer software when
17 its an improvement in the computer when its an
18 improvement in software when its an improvement in a
19 technology that is developed out of computers like
20 robotics when it is an improvement in a machine or
21 technology but you cannot improve it where it is simply
22 an improvement in an activity that is engaged in
23 primarily through mental processes But what they mean
24 by that is business finance and similar arts
25 Thats shyshy I mean thats shyshy it wasnt quite what shyshy I
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1 know Thats what I want to know what you dont agree
2 with about that because its a little more refined than
3 you suggested
4 MR PHILLIPS I read the Solicitor
5 Generals brief as broader than the Bloomberg brief
6 in shyshy in terms of the approach And IBMs argument is
7 if you knock out software patents you eliminate web
8 browsing word processing cellphones eshymail Those
9 are all activities that I dont think fall within the
10 meaning of the shyshy the meaning of the governments theory
11 of the case
12 JUSTICE BREYER But Im asking you shyshy Im
13 asking you what about this one that I just mentioned
14 You see I went through those five steps shyshy
15 MR PHILLIPS Right
16 JUSTICE BREYER shyshy and four of them you
17 could patent and the fifth one you cant
18 MR PHILLIPS Right But I shyshy and I guess
19 my answer to that is thats nowhere in the statute and
20 it doesnt seem to me to reflect an abstract idea Its
21 a shyshy its a line you draw that takes out business method
22 patents If the Court wants to eliminate business
23 method patents fine But you just said no to that in
24 Bilski two three terms ago
25 Now to be sure give the Solicitor General
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1 credit he comes here and says to you We didnt like
2 the result in Bilski we want you to say dont use
3 process in order to get there which is a statutory
4 interpretation come up with an extraordinarily
5 complicated way of looking at the exception and use that
6 to get to the exact same result
7 JUSTICE SOTOMAYOR Well youre doing a
8 very good job of proving shyshy
9 JUSTICE GINSBURG In Bilski Justice Breyer
10 did try to say that there wasnt that shyshy a whole lot of
11 distance between the four who thought business methods
12 were not patentable But he shyshy he also said something
13 else in shyshy in the other case Mayo Justice Scalia
14 asked you the question about doesnt that go to novelty
15 but didnt Justice Breyer say in Mayo that novelty can
16 be relevant to patent shyshy to patent eligibility He said
17 theres shyshy theres an overlap
18 MR PHILLIPS Well he said theres an
19 overlap Here in this context I think basically the
20 Respondents theory would mean that they are completely
21 coterminous And I dont think thats what the Court
22 meant And also we know from Diehr that theres got to
23 be at least some significant limitations on the extent
24 to which novelty has to be built into 101 That is the
25 province of 102 and 103 And as I said Congress
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1 modified the system of adjudication to create an
2 administrative mechanism that allows you to get to 102
3 and 103 And at least in context its important to
4 realize there have been 11 cases since that was created
5 9 of the 11 have been knocked down on 102 or 103 grounds
6 and not on 101 grounds And it seems to me thats the
7 answer to this problem is leave 101 as the coarse
8 filter If on its face it states these kinds of broad
9 abstract principles fundamental truths and even if it
10 says use a computer those should be struck down
11 JUSTICE SOTOMAYOR Which of the shyshy which of
12 the opinions below captures your position most
13 accurately
14 MR PHILLIPS I would guess it would be
15 Judge Moores opinion below that would capture ours most
16 correctly
17 JUSTICE SOTOMAYOR And if we were to think
18 your method claim is ineligible do you agree that your
19 systems and shyshy your medium and system claims fail as
20 well Do they rise and fall together
21 MR PHILLIPS No No I dont believe they
22 do rise and fall together I mean I think you could shyshy
23 if you wanted to interpret our medium claim shyshy I mean
24 our shyshy our method claims in a shyshy in particularly
25 abstract way I think you could still say that the
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1 system claims which clearly are shyshy are how to create a
2 computer system and how to implement it using that
3 method would be a much more concrete version of that in
4 a way that would take it out of 101 That said I
5 obviously believe that all of our claims satisfy 101
6 and should go on to the next stage
7 JUSTICE KAGAN Can I give you a
8 hypothetical Mr Phillips and you tell me how its
9 different or the same Lets say you know 30 years
10 somebody took a look around the world and said a lot of
11 people seem to order products by mail They get the
12 catalogues in the mail and then they send back their
13 return forms And lets say that one of the founders of
14 the Internet said wouldnt this be an amazing system
15 we could actually do this by computer and they had
16 patented that Is that the same
17 MR PHILLIPS I dont know if its the
18 same but I would shyshy I would argue that it could very
19 well be a patentable subject matter because shyshy but it
20 depends on how the claims play out
21 JUSTICE KAGAN No but exactly I mean
22 the claim would have said something along the lines of
23 you know theres this process by which people order
24 products and we want to do it over the Internet we want
25 to do it electronically and we will use a computer to
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1 do that to essentially take the process of mail order
2 catalogues and make it electronic
3 MR PHILLIPS I could certainly shyshy I think
4 I could write a claim shyshy a set of claims that I believe
5 would satisfy 101 And shyshy and to the extent that
6 youd shyshy that youd think those are no different than
7 the ones I have here then my argument is simply I think
8 I satisfy 101 with the claims we have before us Your
9 Honor
10 If there are no further questions then Id
11 like to reserve the rest of my time
12 CHIEF JUSTICE ROBERTS Thank you
13 Mr Phillips
14 Mr Perry
15 ORAL ARGUMENT OF MARK A PERRY
16 ON BEHALF OF THE RESPONDENTS
17 MR PERRY Mr Chief Justice and may it
18 please the Court
19 That path between Scylla and Charybdis was
20 charted in Bilski and Mayo Bilski holds that a
21 fundamental economic principle is an abstract idea and
22 Mayo holds that running such a principle on a computer
23 is quote not a patentable application of that
24 principle Those two propositions are sufficient to
25 dispose of this case
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1 If Bilski and Mayo stand Alices patents
2 fail Therefore Mr Phillips and his friends are
3 asking this Court to change the standard even though
4 this Court has had three unanimous decisions in the last
5 four terms establishing what the Court called a myriad
6 a wellshyestablished standard
7 On the abstract idea Justice Ginsburg you
8 asked Mr Phillips whats the difference between hedging
9 and this claim There is no difference This is
10 hedging It is hedging against credit default rather
11 than price fluctuation but it is simply hedging
12 And Mr Phillips stood up for 26 minutes and
13 never once referred to the patent Lets look at what
14 the inventor the soshycalled inventor said about this
15 invention This is at JA 293 to 94 in the
16 specification
17 This claim has simply two steps Its very
18 simple First debiting and crediting on a realtime
19 basis the relevant shadow records and second by
20 periodically affecting corresponding payment
21 instructions Those are direct quotes Debit credit
22 and pay Your Honor you cant get much more simple
23 than that
24 Mr Phillips suggests well we have
25 multilateral transactions global things chronological
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1 time zones and so forth None of those are claimed
2 Your Honor Those are all recited in specification
3 The claims read on a single transaction involving two
4 parties
5 JUSTICE BREYER Can I ask you at some
6 point not necessarily this second to say in my shyshy this
7 is just shyshy you know you have an opinion for a court
8 Different judges can have different interpretations
9 All youre getting is mine okay
10 But I think its pretty easy to say that
11 Archimedes cant just go to a boat builder and say
12 apply my idea All right Everybody agrees with that
13 But now we try to take that word apply and give
14 content to it
15 And what I suspect in my opinion Mayo did
16 and Bilski and the other cases is sketch an outer shell
17 of the content hoping that the experts you and the
18 other lawyers and the shyshy the circuit court could fill
19 in a little better than we had done the content of that
20 shell
21 So so far youre saying well this is
22 close enough to Archimedes saying apply it that we
23 neednt go further
24 Now will you at some point in the next few
25 minutes give me your impression of if it were necessary
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1 to go further what would the right words or example be
2 MR PERRY Your Honor as shyshy Justice
3 Breyer as to abstract ideas the PTO has filled in that
4 shell by listing economic concepts legal concepts
5 financial concepts teaching concepts dating and
6 interpersonal relationships and generally how business
7 should be conducted as examples of those things that are
8 likely abstract which of course all follow directly
9 from Bilski and the discussion this Court had in Bilski
10 And this patent shyshy these patents fall squarely within
11 that
12 Congress in the AIA confirmed that
13 reading Congress in the CBM method said business
14 methods that are subject to special scrutiny shyshy that is
15 dubious patents shyshy include methods and corresponding
16 apparatus which is what we have here that pertain to
17 data processing in the financial services industry and
18 do not offer a technological solution That describes
19 Alices patents to a letter Your Honor So that we
20 have shyshy
21 JUSTICE SOTOMAYOR What do you think is a
22 technological solution
23 MR PERRY Your Honor shyshy
24 JUSTICE SOTOMAYOR How could they if at
25 all written their patents to shyshy to make shyshy to make
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1 their software eligible What would shyshy what do they
2 need shyshy would have needed to have added
3 MR PERRY Justice Sotomayor they have no
4 software first Theyve never written software
5 Theyve never programmed a computer So thats a
6 nonexistent set
7 Second there are many technological
8 solutions to trading and settlement problems For
9 example data compression These shyshy these trading
10 platforms involve the movement of very large quantities
11 of data around the world The physical pipes that is
12 the fiber optic cables and data lines are limited
13 There are very sophisticated algorithms for both
14 security and speed to move data through the transmission
15 lines in novel and useful ways that could well be
16 patented
17 Nothing like that is claimed here To come
18 back to where I started if you look for example at
19 Claim 65 in the 510 patent as Mr Phillips reads it
20 it literally reads on a twoshyparty escrow to sell a
21 house so long as the escrow agent is typing this stuff
22 into the HUDshy1 using a computer That has nothing to do
23 with multilevel shyshy
24 CHIEF JUSTICE ROBERTS Well thats a
25 little more complicated He referred us to Joint
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1 Appendix Page 159 which is not a change in how
2 computers work But it is shyshy constitutes the
3 instructions about how to use the computer and where it
4 needs to be affected And just looking at it it looks
5 pretty complicated There are a lot of arrows and
6 they shyshy you know different things that go shyshy
7 (Laughter)
8 CHIEF JUSTICE ROBERTS Well but I mean
9 you know it shyshy in different directions And I
10 understand him to say that in each of those places
11 thats where the computer is needed
12 MR PERRY Mr Chief Justice Figure 16 has
13 nothing to do with the invention asserted against my
14 client in this case There are two inventions in this
15 patent One invention involving multilateral contract
16 formation is not asserted against my client And all of
17 these drawings pertain to that The only drawings that
18 pertain to the asserted claims are 25 and 33 to 37 And
19 that was established below and its established in this
20 Court And Mr Phillips has never disputed it
21 So the claim hes pointed the Court shyshy the
22 figure hes pointed the Court to has nothing to do with
23 the invention Its for a different invention that is
24 not at issue in this case
25 Remember there are hundreds and hundreds of
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1 pages of these patents They all pertain to the other
2 invention Thats why in the back of our red brief we
3 excerpted the very little bit that actually pertains to
4 this You sort of tack on patent shyshy the tack on claim
5 that Mr Phillips is asserting here Its 4 columns
6 Its less than five pages in the printed appendix that
7 actually pertains to this invention And it contains no
8 disclosure whatever
9 Justice Scalia to your question about how
10 the computer does it Of course a patent that
11 describes sufficiently how a computer does a new and
12 useful thing whether its data compression or any other
13 technological solution to a business problem a social
14 problem or a technological problem would be within the
15 realm of the shyshy of the patent laws That is what the
16 patent laws have always been for
17 This is not such a patent And the reason
18 for that is this is a preshyBilski set of patents These
19 were prosecuted under the old State Street test where
20 all the applicant had to claim was a result
21 JUSTICE KENNEDY Would you give me shyshy
22 again you already did it once shyshy an example of a
23 business process patent shyshy of a business process idea
24 and invention that is patentable
25 MR PERRY Your Honor there are many
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1 examples One would be a technological solution to a
2 business problem So that for example shyshy Ill give a
3 different example There are many applications today
4 The Court may be familiar with streaming video to watch
5 video on your computer
6 It is not possible to get enough data
7 through existing lines in its raw format The data has
8 to be manipulated in order to see live video So if you
9 want to watch TV on your phone for example
10 Those algorithms those inventions are
11 undoubtedly technological And if they are used in a
12 trading platform or a hedging system or something else
13 that wouldnt disable them And this is what the Diehr
14 case shyshy
15 JUSTICE KENNEDY Well I shyshy I shyshy in my
16 language Ive called that mechanical rather than
17 process Can you give me an example of process
18 MR PERRY Yes Your Honor The process in
19 that example would be a computer running the particular
20 data compression algorithm
21 JUSTICE KENNEDY But thats how to make
22 a shyshy thats how to make a machine work better
23 MR PERRY Yes Your Honor
24 JUSTICE KENNEDY Im asking you Is there
25 any business process any business activity that is
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1 susceptible to a patent a pure patent innovations that
2 deserve patents
3 MR PERRY Your Honor again a
4 technological solution to a business problem could well
5 be whether its a method or a process is equivalent
6 Again Congress said method in a corresponding shyshy
7 JUSTICE KENNEDY Can you give me an
8 example
9 MR PERRY I thought the data compression
10 example was a good one Ill try an encryption
11 technology Many of these trading platforms you know
12 dealing with securities and money would require some
13 sort of security devices You could have a process for
14 securely transmitting data would be another computer
15 implemented technological solution to a business
16 problem Again nothing like that claimed here
17 JUSTICE SOTOMAYOR How about eshymail and
18 just word processing programs
19 MR PERRY Your Honor a program shyshy let me
20 try it this way to both of your questions In our view
21 if what is claimed as the inventive contribution under
22 Mayo shyshy in other words if we have an abstract idea as
23 we do here and what is claimed is the inventive
24 contribution for Step 2 is the computer then the
25 computer must be essential to that operation and
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1 represent an advancement in computer science or other
2 technology And we know thats not met here Justice
3 Sotomayor because shyshy
4 JUSTICE SOTOMAYOR So youre saying no to
5 eshymail and word processing
6 MR PERRY Your Honor I think at a
7 point shyshy
8 JUSTICE SOTOMAYOR They certainly have
9 functionality and shyshy and improvement of functionality
10 for the user
11 MR PERRY At a point in time in the past
12 I think both of those would have been technological
13 advances that were patentable
14 JUSTICE SOTOMAYOR How
15 MR PERRY Today shyshy because they would have
16 provided a technological solution to a then unmet
17 problem Today reciting and do it on a word processor
18 is no different than and do it on a typewriter or shyshy and
19 do it on a calculator
20 The inventive contribution component which
21 uses specifically the language of conventional and
22 routine and well understood will evolve with
23 technology Thats why its different than the abstract
24 idea component
25 And here we know that these patents dont
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1 claim anything that was not conventional well
2 understood and routine We went through that in great
3 detail and Alice has never disputed a word of it They
4 just say youre not supposed to do that analysis even
5 though the Court 9shy0 in Mayo said we should
6 And in this case its very important to
7 look at what Alices own experts said on the subject
8 This is not our expert This is Alices expert And
9 this is at Page 1327shy28 of the Joint Appendix It is
10 possible to do the business methods of maintaining
11 accounts adjusting accounts and providing an
12 instruction without a computer or other hardware
13 And then Justice Breyer directly to your
14 abacus If someone had thought of this invention
15 soshycalled invention 100 years ago they might have
16 implemented it in a nonelectronic manner using various
17 precomputing tools such as an abacus or handwritten
18 ledgers
19 We know from Benson the Courts seminal
20 computer implementation case that if you can do it by
21 head and hand then the computer doesnt add anything
22 inventive within the meaning of the 101 exception That
23 is the holding of Benson And the Court reiterated that
24 in Mayo
25 Flook said exactly the same thing If you
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1 can do it with pencil and paper then the computer is
2 not offering anything that the patent laws are or should
3 be concerned with
4 It is only where the method will not work
5 without a computer which is not these claims and where
6 the computer itself is doing something that the patent
7 law is willing to protect
8 CHIEF JUSTICE ROBERTS What if shyshy what if
9 you can do it without a computer but its going to
10 take you know 20 people a hundred years In other
11 words theoretically you can replicate what the
12 computer does shyshy
13 MR PERRY Two answers
14 CHIEF JUSTICE ROBERTS shyshy but its
15 impractical without looking to do it on the computer
16 MR PERRY Mr Chief Justice first these
17 claims literally read as Alice reads them on a single
18 transaction between two parties so its not 20 people
19 for a hundred years Its one person sitting in a room
20 so thats not a problem
21 Second if what is being claimed is the
22 necessary speed or efficiency or data crunching
23 capabilities if you will of a computer then it would
24 have to be claimed and theres nothing claimed here
25 All that is claimed shyshy and my friend is going to stand
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1 up on rebuttal and tell you all that the expert said
2 well what is claimed is a computer but its just a
3 computer It just says a computer configured too It
4 doesnt say that the computer actually has to shyshy
5 JUSTICE BREYER Yeah but the trouble with
6 that particular test is as I think partly the Chief
7 Justice said how long et cetera and then add to that
8 though you could do it without a computer what happens
9 at the end of the line is the automobile engine goes off
10 or it begins to sputter or it turns left
11 You see its possible to take Archimedes shyshy
12 shyshy you know I use that example purposely to call
13 attention to the problem You can take those things
14 and youre not just saying apply it and youre not even
15 just saying shyshy you are saying use the computer but at
16 the end of the road something physical in the world
17 changes and everybody would say now thats shyshy that
18 will falls within I mean probably I mean my
19 hesitation shows Im looking for the right words
20 MR PERRY Justice Breyer your point is
21 the reason that it is equally fallacious to suggest on
22 the one hand as Alice and IBM does that simply
23 reciting a computer is a magic key that gets you through
24 101 and you never have to any other inquiry and what
25 some of folks the amici on the other side say which
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1 is that computers or software are never eligible Both
2 of those things have to be wrong because what the Court
3 said in Bilski was future innovation is too uncertain
4 We are not going to do that as a Court And the Court
5 laid out an approach using abstract ideas in Bilski and
6 inventive contribution in Mayo that is flexible enough
7 to take into account that innovation and to deal with
8 particular claims in context which is why at the end
9 of the day we have to come back to these patents and
10 decide which shyshy
11 JUSTICE KAGAN Mr Perry before we get
12 back to these matters you said to Justice Scalia if a
13 patent sufficiently describes how a computer will
14 implement an idea then its patentable So how
15 sufficiently does one have to describe it What do we
16 want a judge to do at this threshold level in terms of
17 trying to figure out whether the description is
18 sufficient to get you past it
19 MR PERRY If I can answer in two steps
20 Justice Kagan First in the negative What the
21 applicant or patentee must do shyshy must not do is simply
22 describe the desired result That would take us back to
23 State Street That would simply say I claim a magic
24 box that buys high and sells low or vice versa I
25 suppose I claim a magic box for investing Thats what
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1 these patents do
2 Then to put it in the affirmative and in the
3 language of Mayo the claim has to recite something
4 significantly more something significantly more than
5 the abstract idea itself That would be a contextual
6 analysis based on the claims and specifications and file
7 history and we know that some devices some methods
8 some programming will pass that
9 It is not going to be a brightshyline rule and
10 thats one of the tugshyofshywar issues that this Court and
11 the Federal Circuit have been having in these cases
12 The Federal Circuit wants brightshyline rules All
13 computers are in or all computers are out
14 This Court has been more contextual This
15 Court has been more nuanced This Court has looked at
16 things in a more robust way
17 JUSTICE KAGAN Youre not suggesting that
18 specific code is necessary
19 MR PERRY No Your Honor I think the shyshy
20 actual description of the programming is a 112 problem
21 I agree with that A 112 issue That is the realm of
22 the written description requirement What is a 101
23 problem is it is on the applicant to do more than simply
24 describe the results simply say A magic box that does
25 intermediate settlement And we can tie that back to
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1 this particular prosecution the 510 patent which is
2 the method patent
3 The examiner rejected it Under Section
4 101 the examiner said this is an abstract idea You
5 cant have this patent And the only change that this
6 applicant made was to add in the adjusting step
7 electronic adjustment It put in one word
8 electronic adjustment And under State Street which
9 is what this patent is prosecuted under that was
10 enough because the result of adjusting run through a
11 computer is enough
12 Under current law that cant be enough
13 That just cant get a patent over the line because this
14 Court said in Mayo and I got to quote this language
15 Simply implementing a fundamental principle on a
16 physical machine namely a computer is not a patentable
17 application of that principle Thats all that Alice
18 has done
19 These are preshyBilski patents They never
20 should have been issued General Verrilli will stand up
21 and address that point And certainly under current
22 law shyshy one point on the AIA Congress did not send all
23 this to the administrative process Congress created
24 two avenues the courts and the PTO to use the
25 standards Essentially it ratified Bilski and Mayo and
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1 said we agree with what you all are doing at the
2 Supreme Court and the existing standards are good enough
3 for us This is a judicial problem And that is a good
4 reason The abstract shyshy
5 JUSTICE GINSBURG The Federal Circuit in
6 this case split in many ways and it had our decisions
7 to deal with You said given Bilski and Mayo this is
8 an easy case What is the instruction that escaped a
9 good number of judges on the Federal Circuit How would
10 you state the rule
11 MR PERRY Your Honor I think theres a
12 significant element to the Federal Circuit that
13 disagrees with Mayo and has been resistant in applying
14 it Chief Judge shyshy former Chief Judge Michelle filed a
15 brief in this Court essentially saying Mayo is a
16 lifeshysciences case You should limit it to that because
17 if you apply it to everything else then these patents
18 are no good
19 Mayo we submit is a technologyshyneutral
20 industryshyneutral exceptionshyneutral framework that can
21 be used to answer all of these questions This is not
22 the death of software patents The software industry is
23 all before this Court saying this is fine with us
24 Every company in the United States practically except
25 for IBM is saying go ahead This will not affect
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1 software patents
2 Justice Ginsburg this Courts precedents
3 are clear They are unanimous They just need to be
4 applied To suggest that there is confusion that needs
5 to be addressed by retreating beating a retreat from
6 recent unanimous decisions would simply reward
7 intransigence difficulty refusal to adhere to what are
8 clear precedents because shyshy
9 JUSTICE KAGAN Should we be concerned
10 Mr Perry that there are old patents that in fact could
11 meet the test that you set forth but wont because they
12 were written in a different time and so used much more
13 general language
14 MR PERRY Your Honor the applicant or the
15 patent holder would have the opportunity to institute a
16 reexamination proceeding or some sort of administration
17 process to address that issue
18 And second it should be noted this is a
19 very small problem There are 2 million outstanding
20 patents in the United States In the last four fiscal
21 years there were 22000 infringement litigations
22 instituted but since Bilski there have only been 57
23 district court decisions on Section 101 issues There
24 have only been 12 Federal Circuit decisions total on
25 computer implementation
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1 We are talking about a group of patents
2 Justice Kagan thats way out at the tail end of
3 distribution Most patents never have a 101 challenge
4 This is not an issue with cotton gins and other things
5 This is a problem for the most marginal
6 most dubious most skeptical patents the ones that this
7 Court in Bilski shyshy and remember what Bilskis holding
8 is The majority said they are processes but it did
9 not say they are eligible
10 Thank you Mr Chief Justice
11 CHIEF JUSTICE ROBERTS Thank you counsel
12 General Verrilli
13 ORAL ARGUMENT OF DONALD B VERRILLI JR
14 ON BEHALF OF THE UNITED STATES AS AMICUS
15 CURIAE SUPPORTING RESPONDENTS
16 GENERAL VERRILLI Mr Chief Justice and
17 may it please the Court
18 An abstract idea does not become
19 patentshyeligible merely by tacking on an instruction to
20 use a computer to carry it out A computer makes a
21 difference under Section 101 when it imposes a
22 meaningful limit on the patent claim That occurs when
23 the claim is directed at improvement in computing
24 technology or an innovation that uses computing
25 technology to improve other technological functions
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1 Thats the test that we believe is most faithful to this
2 Courts precedents in Bilski and Mayo It keeps patents
3 within their traditional and appropriate domain and it
4 is capable of being administered consistently by Courts
5 and by PTO examiners
6 JUSTICE GINSBURG How do you answer the
7 argument that your view would extinguish businessshymethod
8 patents and make all software ineligible for patent
9 protection
10 GENERAL VERRILLI Yeah with shyshy let me
11 address software patents first because that I think is
12 obviously a significant question And its just not
13 correct to say that our approach would make software
14 patenting ineligible Any software patent that improves
15 the functioning of the computer technology is eligible
16 Any software patent that improves shyshy that is used to
17 improve another technology is eligible For example
18 the patent in the shyshy in the Diehr case is one in
19 which shyshy
20 JUSTICE SOTOMAYOR Why do we need to reach
21 this in that shyshy reach software patents at all in this
22 case
23 GENERAL VERRILLI Well shyshy
24 JUSTICE SOTOMAYOR Whats the necessity for
25 us to announce a general rule with respect to software
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1 There is no software being patented in this case
2 GENERAL VERRILLI Well I shyshy
3 JUSTICE SOTOMAYOR Theres a systems
4 GENERAL VERRILLI Well I shyshy I think shyshy
5 well they shyshy they shyshy theres a process being and shyshy and
6 one can think of software patents as process patents
7 And I think thats why my friends on the other side are
8 saying the sky is falling because they shyshy they are
9 interpreting what were saying about that when a
10 computer makes shyshy when a computers involvement makes
11 something eligible under 101 its calling those into
12 question and it doesnt
13 JUSTICE SOTOMAYOR Do you think we have to
14 reach the patentability of software to answer this case
15 GENERAL VERRILLI Well I think you can shyshy
16 I think the answer to that question is no not
17 necessarily You can decide it by saying that shyshy that
18 Bilski answers the question whether this is an abstract
19 idea because this form of hedging is really no
20 different than the form of hedging as a conceptual
21 matter at issue in Bilski And then Mayo answers the
22 question of whether the use of a computer in this case
23 adds enough to the abstract idea beyond conventional
24 steps because here all we have after all is just
25 conventional use of computing technology no computer
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1 innovation such that you dont qualify under 101 You
2 could take that approach
3 But it is important to the United States
4 that we shyshy and to our patent examiners that we get some
5 clarity if we can I think the clarity could come from
6 the text that I propose which I want to reiterate shyshy
7 JUSTICE SOTOMAYOR Well shyshy
8 JUSTICE BREYER Could shyshy could shyshy could you
9 go on with that because you were just getting to the
10 point where I think you say a computer improvement that
11 in fact leads to an improvement in harvesting cotton is
12 an improvement through a computer of technology so it
13 qualifies
14 But then I think you were going to say or I
15 got this also from the brief a computer improvement
16 that leads to an improvement in the methods of selling
17 bonds over the telephone is not an improvement in
18 technology reached by the computer Am I right about
19 the distinction youre making
20 GENERAL VERRILLI I dont think theres a
21 yes or no answer to that question
22 JUSTICE BREYER What is your view Yeah
23 what is shyshy how do we deal with just that problem
24 GENERAL VERRILLI If there is a genuine
25 innovation in the functioning of the computer shyshy
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1 JUSTICE BREYER Yes
2 GENERAL VERRILLI shyshy such that business
3 processes shyshy
4 JUSTICE BREYER Weve got that Yes yes
5 We got the computer But then it doesnt improve the
6 computer but rather it improves through the computer
7 the harvesting of cotton
8 Now youve got it in what you said was your
9 second category which is an improvement through the
10 computer of a technology And I thought in your brief
11 you were distinguishing an improvement through the
12 computer of a human activity that is not a technology
13 and in particular to pick an example of that
14 something in finance or something in business
15 Now am I right about the distinction youre
16 making
17 GENERAL VERRILLI Yeah that shyshy
18 JUSTICE BREYER If Im not right what is
19 the distinction
20 GENERAL VERRILLI That is generally the
21 line were drawing Frankly shyshy
22 JUSTICE BREYER And how is that justified
23 GENERAL VERRILLI I do want shyshy
24 JUSTICE BREYER That shyshy that is Judge Dyk
25 in shyshy in Bilski in the Federal circuit 4 people sort of
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1 picked it up maybe 5 didnt pick it up Would you say
2 a few words about it
3 GENERAL VERRILLI Sure About shyshy let me go
4 to Bilski there in that I do think while shyshy while
5 certainly the Court held that the term process got a
6 natural construction which could include business
7 methods it seems to me that thats not all the Court
8 said in Bilski The Court also said that it was
9 historically and traditionally quite rare that business
10 methods were patent eligible
11 It also said that shyshy that the shyshy that courts
12 and the PTO examiners should use the abstract ideas
13 exception to 101 to police the appropriate boundary
14 It also said that the
15 machineshyorshytransformation test that the United States
16 advocated remained a useful tool And of course that
17 directs to you seeing whether there is a technology
18 application
19 And of course the holding in Bilski was
20 that the shyshy the method for hedging risk was ineligible
21 because it was an abstract idea and I cant imagine
22 that if in Bilski the shyshy the claim had been exactly the
23 same but had added use a computer to carry out some of
24 these standard random analysis functions that are
25 claimed by the patent that you would have found it to
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1 be patent eligible
2 And I shyshy I would submit for the Court that
3 the key point here I think is that now given where
4 the Court shyshy what the Court has held in Bilski given
5 what its held in Mayo the abstract ideas exception is
6 really the only tool left to deal with what I shyshy what I
7 think I fairly read Bilski as saying is a significant
8 problem the proliferation of patents of business
9 methods
10 JUSTICE KENNEDY Is there an example that
11 you can give us of a shyshy what we can call a business
12 process that is patentable a process that doesnt
13 involve improving the workings of a computer
14 GENERAL VERRILLI I shyshy I think its going
15 to be difficult for me to do that I think for
16 example if you had a business method a process for
17 additional security pointshyofshysale credit card
18 transactions using particular encryption technology
19 that might well be patent eligible Its a technology
20 that it makes conduct of business more efficient or
21 effective
22 But there is a technological link here and
23 we do think thats critical to our shyshy to our point of
24 view with respect to the case And I shyshy and I do think
25 remember that when we say something is not patent
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1 eligible were not saying they cant do it Were
2 saying they cant monopolize it
3 And the concern in a situation like this one
4 is that if this is patent eligible its hard to see
5 why for example the first person who came up with a
6 frequent flier program wouldnt have been able to claim
7 a patent there because after all thats a business
8 method for improving customer loyalty implemented on a
9 computer
10 CHIEF JUSTICE ROBERTS General I shyshy you
11 mentioned a while ago the need for greater clarity and
12 certainty in this area And Im just wondering in your
13 brief youve got a nonshyexhaustive of factors to
14 consider and there are 6 different ones And Im just
15 doubtful that thats going to bring about greater
16 clarity and certainty
17 GENERAL VERRILLI I take shyshy I take the
18 point Mr Chief Justice but I think the key is that
19 they are all directed to answering the question of
20 whether the innovation that is claimed and is an
21 innovation in either A the improvement of a computers
22 functioning or B the use of computer technology to
23 improve the functioning of another technological
24 process and a case like Diehr would be in the latter
25 category
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1 And so I do think that thats the key
2 benchmark Thats the baseline Thats the test that
3 we do think can be applied clearly and consistently by
4 the courts or the PTO And it avoids the risk of things
5 like frequent flier programs or the Oakland As money
6 ball methods for evaluating the contributions in
7 individual baseball players make or any one of a host of
8 other things that our intuitions tell us just dont
9 belong in the patent system
10 Thats the shyshy drawing that line keeps them
11 out not drawing that line lets them in And with all
12 due respect I dont think that the novelty and
13 nonobviousness filters that 102 and 103 really deal with
14 that problem effectively because when you get to
15 nonobviousness in 103 for example youll be asking a
16 different question
17 If you take the frequent flier program you
18 would say well is this innovation in building consumer
19 loyalty something that would have been obvious to
20 somebody who runs an airline Its totally divorced
21 from the question of technology at that point and
22 therefore I dont think youre going to get the screen
23 that you need to get in order for the patent system to
24 be confined to its traditional and appropriate scope
25 If there are no further questions thank
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1 you
2 JUSTICE GINSBURG I have a question about
3 how do you identify an abstract concept The shyshy a
4 natural phenomenon a mathematical formula those are
5 easy to identify but there has been some confusion on
6 what qualifies as an abstract concept
7 GENERAL VERRILLI We would define
8 abstract shyshy an abstract concept as a claim that is not
9 directed to a concrete innovation in technology
10 science or the industrial arts So its the shyshy its
11 abstract in the sense that it is not a concrete
12 innovation in the traditional realm of patent law
13 Thank you
14 CHIEF JUSTICE ROBERTS Thank you General
15 Mr Phillips you have four minutes
16 remaining
17 REBUTTAL ARGUMENT OF CARTER G PHILLIPS
18 ON BEHALF OF THE PETITIONERS
19 MR PHILLIPS Thank you Mr Chief Justice
20 Id just like to make a few points
21 First of all with respect to the question
22 you asked which is looking at 159 et cetera all I can
23 tell you is that if you look at claim 33 it talks about
24 matched orders the matched orders that are described in
25 286 and 287 and then makes specific reference to 159
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1 and that flow chart thats there And its all designed
2 as a package Its only one element of the shyshy of the
3 invention but it is a central element and its an easy
4 one to understand And it goes well beyond simply the
5 notion of hedge shyshy hedge against settlement risk and do
6 it by a computer
7 JUSTICE SOTOMAYOR Your adversary says that
8 his shyshy the appendix to his brief are the only patents at
9 issue that the flow charts are not at issue in this
10 case
11 MR PHILLIPS Theres no basis for that
12 statement Your Honor There shyshy remember this went off
13 on a very truncated litigation process So theres shyshy
14 you know we shyshy we got cut off at the beginning of it
15 Theres been no construction of the shyshy of the claims
16 and shyshy and obviously these are specifications that go
17 to how you interpret the claim
18 JUSTICE SOTOMAYOR If we were to say that
19 there are no business patents shyshy
20 MR PHILLIPS Yes
21 JUSTICE SOTOMAYOR shyshy would your patent
22 survive at all
23 MR PHILLIPS No I dont shyshy I dont
24 believe so I think theres no question And you
25 know General Verrilli could not have been any plainer
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1 in his statement of how he wants to interpret the
2 abstract idea concept
3 JUSTICE SOTOMAYOR Yes he wants to say no
4 business patents
5 MR PHILLIPS No business shyshy just another
6 way of saying no business methods And you know the
7 Court rejected that And it seems to me extraordinary
8 to say Congress didnt reject no business methods in
9 101 but were going to do shyshy were going to manipulate
10 the judicial exception to accomplish precisely that same
11 thing It seems to me thats wholly inappropriate
12 Justice Ginsburg you asked my shyshy my friend
13 here you know whats his test He didnt answer that
14 question youll notice because he doesnt have an
15 answer His basic argument is whatever you do just
16 kill this patent
17 And if I were in his shoes I suppose Id
18 take that same position I think whats absolutely
19 clear is that the test ought to be one that is
20 structured as a very coarse filter not the kind of
21 filter that hes pushing for where it changes over time
22 I mean I thought his shyshy I thought his response to one
23 of the questions about eshymail and word processing that
24 Justice Sotomayor asked is over time it would change
25 Well thats exactly what 102 and 103 are for That is
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1 not the purpose of shyshy of Section 101
2 And then he uses the example of encryption
3 I guarantee you if we were arguing about encryption in
4 this case he would say to me that thats an abstract
5 principle because encryption is a concept thats been
6 around since time immemorial George Washington used
7 it Everybody has used encryption
8 And a question again thats not the
9 solution to these problems The question is how did we
10 go about doing it And we go beyond the basics of
11 simply saying use a computer and thats what we ask
12 this Court to focus on and to evaluate
13 As to the frequent flier program its
14 pretty clear to me that even though it was a novel idea
15 in some sense the concept itself would have been viewed
16 in shyshy in the KSR fashion as quite obvious as a means of
17 improving customer loyalty
18 There are solutions here Giving us 101
19 pass doesnt create a monopoly It just gets us to the
20 102 and 103 inquiries that are at the heart of what the
21 patent laws shyshy and 112 that are at the heart of what the
22 patent laws ought to be dealing with
23 If there are no further questions Your
24 Honor thank you
25 CHIEF JUSTICE ROBERTS Thank you counsel
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1 The case is submitted
2 (Whereupon at 1105 am the case in the
3 aboveshyentitled matter was submitted)
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
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25
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58
A add 714 1023 algorithm 3320 41 automatically
As 525 3621 387 algorithms apply 72425 111
am 115 32 416 3013 3310 2019 281213 automobile 389
572 added 302 Alice 13 34 2822 3814 available 99
abacus 61213 4923 363 3717 4217 avenues 4124
710 1018 additional 5017 3822 4117 applying 4213 avoids 524
1325 3614 3617
address 4121 4317 4511
Alices 271 2919 3678
approach 226 395 4513 B
ability 1514 addressed 435 allow 94 472 B 121 29 4413
able 1511 167 addressing 181 allows 97 242 appropriate 5122
1919 516 adds 4623 amazing 2514 81516 1514 back 1621
aboveshyentitled adhere 437 amici 3825 453 4913 1922 2512
113 573 adjudication amicus 123 5224 3018 322
absolutely 125 241 210 4414 Archimedes 3991222
1215 159 adjusting 3611 analysis 424 281122 3811 4025
5518 41610 364 406 area 219 5112 ball 526
abstract 4267 adjustment 417 4924 argue 2518 Bank 17 35
48 6682023 418 analyze 1416 arguing 563 banks 95
721 8218 administered 1716 argument 114 bars 43
141920 1522 454 announce 4525 225812 33 baseball 527
165 181618 administration answer 119 37 41 144 based 423 406
2220 24925 4316 2219 247 18323 226 baseline 522
2621 277 administrative 3919 4221 26715 4413 basic 413 5515
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405 414 424 adopt 203 answering 5119 arguments basics 5610
4418 461823 adopted 31317 answers 3713 1415 basis 132 1512
491221 505 advancement 461821 arms 1625 1516 2719
53368811 351 anyway 1810 arrangements 5411
552 564 advances 3513 apparatus 2916 131 beating 435
accept 102 adversary 547 APPEARAN arrows 315 beginning 163
accomplish advice 1715 116 art 1919 5414
5510 advocated 4916 appears 820 arts 2124 5310 begins 3810
account 55 618 affect 4225 appendix 1910 aside 1422 157 behalf 11719
397 affirmative 402 311 326 369 asked 2314 122 24710
accounts 823 agent 52 3021 548 278 5322 214 38 2616
9356 3611 ago 318 2224 applicant 3220 551224 4414 5318
3611 3615 5111 3921 4023 asking 193 believe 1316
accurately 2413 agree 920 2021 416 4314 221213 273 1416 2421
acknowledges 221 2418 application 3324 5215 255 264 451
1121 4021 421 2623 4117 aspect 517 5424
act 99 2017 agrees 2812 4918 asserted 3113 belong 529
activities 229 ahead 4225 applications 311618 benchmark 522
activity 2122 AIA 2912 4122 333 asserting 325 Benson 361923
3325 4812 airline 5220 applied 434 attaching 124 best 161124
actual 4020 AL 18 523 attention 3813 better 1610 albeit 923 applies 31418 Attorney 2021 216 2819
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3322 brightshyline 409 2313 37 71 4338 5519 beyond 115 4012 5317 checks 618 5614
1312 4623 bring 5115 case 3412 46 Chief 339 clearly 211 251 544 5610 broad 248 116 1524 261217 3024 523
Bilski 313 46 broader 225 2022 213 31812 378 client 311416 415 1722 browsing 228 2211 2313 371416 386 close 2822 2224 2329 builder 2811 2625 311424 421414 4410 CLS 17 35 262020 271 building 5218 3314 36620 441116 5110 1120 2816 2999 built 2324 426816 5118 531419 coarse 247 3935 4125 business 168 451822 461 5625 5520 427 4322 1749 203 461422 5024 chits 611 code 1213 142 447 452 2124 222122 5124 5410 chronological 1916171720 461821 4825 2311 29613 564 5712 1512 2725 4018 49481922 32132323 cases 244 2816 chronologically coffee 1211 5047 3322525 4011 423 colleagues 116
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2115 225 554568 category 489 circumstances 475 boat 2811 businessshymeth 5125 318 1515 comes 1318 bonds 4717 457 CBM 2913 claim 416 2418 2018 231 bothering 118 buy 183 cellphones 228 2423 2522 coming 923 bound 1521 buys 3924 central 95 543 264 27917 common 31120 boundary 4913 certain 1216 3019 3121 2157 bounds 1521 C certainly 518 32420 361 company 4224 box 392425 C 21 31 263 358 392325 403 competition
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brief 211315 carefully 1725 chart 541 283 3118 516 621 710 2255 322 caricature 718 charted 2620 37517 398 71325 9113 4215 4715 72020 1417 charts 1911 406 5415 91824 1035 4810 5113 1716 549 clarity 4755 10725 1116 548 carry 4420 Charybdis 511116 124102024
briefs 1524 4923 1620 2619 class 59 13911 1479 1618 CARTER 117 checkbook 617 clear 1015 118 1421 15710
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1517 165 confess 1111 coterminous 4121 5324 181719 196 configured 383 2321 customer 518 describes 425 19814 206 confined 5224 cotton 914 444 5617 2918 3211 2025 211016 confirmed 2912 4711 487 cut 5414 3913 2117 2410 confusion 434 counsel 4411 description
D2521525 535 5625 3917 402022 D 312622 30522 Congress 178 countries 137 deserve 342 DC 1101719 31311 3210 1725 1856 course 719 designed 720
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910 399442020 4515 454 523 2618 27345 dicta 923 1012 deal 42023 46102225 constitutes 312 28718 299 Diehr 2322
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dealing 4175013 51922 contains 327 40141515 2789 4421 1119 135546 5611 content 281417 4114 42215 different 421 151216 3412 computers 2819 4223 4323 79 919 1377 56224610 5121 context 2319 44717 4957 191 259 266
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1112 391522 253 53911 corresponding curiae 123 211 144 1520 4024conduct 5020 2720 2915 4415 disagree 513
described 717conducted 297 346 current 4112 disagrees 4213
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disclosure 328 413 302021 4220 figure 1146 discuss 164 economy 1516 ESQ 1171921 excerpted 323 311222 3917 discussion 299 effective 1223 236913 exhausted 1813 file 406 dispose 2625 5021 essence 211 exist 420 131 filed 4214 dispute 325 effectively 5214 essential 1224 existence 1119 fill 2818 disputed 3120 efficacy 1224 3425 175 filled 293
363 1517 essentially 2016 existing 337 filter 248 5520 distance 2311 efficiency 3722 261 4125 422 5521 distinction 415 efficient 5020 4215 exists 42 filters 5213
4719 481519 either 202 established expert 3688 finance 2124 distinguishing 5121 311919 381 4814
4811 electronic 262 establishing expertise 1210 financial 1225 distribution 4178 275 experts 2817 29517
443 electronically et 18 387 5322 367 fine 103 2223 district 4323 2525 evaluate 97 extent 1924 4223 divorced 5220 element 811 5612 2323 265 finished 133 doing 91315 4212 5423 evaluating 526 extinguish 457 first 1111 2718
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four 1720 182 48172023 5599 3312 461920 1016 123 18912 2216 493 5014 gold 6101114 4920 138 14610 2311 275 511017 537 134 held 46 495 141120 164 4320 5315 5314 5425 good 611 167 5045 181618 2220
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functionality 277 425 432 group 1210 home 510 immemorial 3599 456 532 441 Honor 1814 566
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future 393 316 4225 hard 201423 3719 imposes 4421 479 493 514 hundreds 2010 impractical
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48911 5121 410 53 issue 316 1010 31812 329 141919 5520 improvements International 3124 4021 3221 331521 kinds 248
324 17 35 4317 444 3324 34717 King 6924 improves 206 Internet 2514 4621 5499 3524814 1016 1124
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4321 invalid 2011 judicially 317 laid 395 inherently 209 invented 107 Justice 122 33 K language 322 initial 1123 1425 3919 45 57 Kagan 14313 1112 3316 innovation 393 invention 714 51415 6168 142124 152 3521 403
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innovations 32724 3614 1123 1228 keep 1018 111 law 377 4112 341 3615 543 12141720 keeping 613 4122 5312
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1 essence of it so shyshy and a portion of it is clearly the
2 software So I think if you say there is no such thing
3 as software patentability I do lose in this case yes
4 Your Honor As do a whole lot of other people
5 JUSTICE KENNEDY Is there any common ground
6 between you and the government shyshy maybe a better
7 question to ask the government shyshy a common ground
8 between you and the government on something in the
9 software area thats patentable other than making the
10 computer itself work You understand the government to
11 say no software patents
12 MR PHILLIPS Thats the way I interpret
13 the governments shyshy the governments brief
14 JUSTICE BREYER It was like shyshy theres a
15 Bloomberg brief out here that was on this that said
16 no you can shyshy you can patent computer software when
17 its an improvement in the computer when its an
18 improvement in software when its an improvement in a
19 technology that is developed out of computers like
20 robotics when it is an improvement in a machine or
21 technology but you cannot improve it where it is simply
22 an improvement in an activity that is engaged in
23 primarily through mental processes But what they mean
24 by that is business finance and similar arts
25 Thats shyshy I mean thats shyshy it wasnt quite what shyshy I
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1 know Thats what I want to know what you dont agree
2 with about that because its a little more refined than
3 you suggested
4 MR PHILLIPS I read the Solicitor
5 Generals brief as broader than the Bloomberg brief
6 in shyshy in terms of the approach And IBMs argument is
7 if you knock out software patents you eliminate web
8 browsing word processing cellphones eshymail Those
9 are all activities that I dont think fall within the
10 meaning of the shyshy the meaning of the governments theory
11 of the case
12 JUSTICE BREYER But Im asking you shyshy Im
13 asking you what about this one that I just mentioned
14 You see I went through those five steps shyshy
15 MR PHILLIPS Right
16 JUSTICE BREYER shyshy and four of them you
17 could patent and the fifth one you cant
18 MR PHILLIPS Right But I shyshy and I guess
19 my answer to that is thats nowhere in the statute and
20 it doesnt seem to me to reflect an abstract idea Its
21 a shyshy its a line you draw that takes out business method
22 patents If the Court wants to eliminate business
23 method patents fine But you just said no to that in
24 Bilski two three terms ago
25 Now to be sure give the Solicitor General
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1 credit he comes here and says to you We didnt like
2 the result in Bilski we want you to say dont use
3 process in order to get there which is a statutory
4 interpretation come up with an extraordinarily
5 complicated way of looking at the exception and use that
6 to get to the exact same result
7 JUSTICE SOTOMAYOR Well youre doing a
8 very good job of proving shyshy
9 JUSTICE GINSBURG In Bilski Justice Breyer
10 did try to say that there wasnt that shyshy a whole lot of
11 distance between the four who thought business methods
12 were not patentable But he shyshy he also said something
13 else in shyshy in the other case Mayo Justice Scalia
14 asked you the question about doesnt that go to novelty
15 but didnt Justice Breyer say in Mayo that novelty can
16 be relevant to patent shyshy to patent eligibility He said
17 theres shyshy theres an overlap
18 MR PHILLIPS Well he said theres an
19 overlap Here in this context I think basically the
20 Respondents theory would mean that they are completely
21 coterminous And I dont think thats what the Court
22 meant And also we know from Diehr that theres got to
23 be at least some significant limitations on the extent
24 to which novelty has to be built into 101 That is the
25 province of 102 and 103 And as I said Congress
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1 modified the system of adjudication to create an
2 administrative mechanism that allows you to get to 102
3 and 103 And at least in context its important to
4 realize there have been 11 cases since that was created
5 9 of the 11 have been knocked down on 102 or 103 grounds
6 and not on 101 grounds And it seems to me thats the
7 answer to this problem is leave 101 as the coarse
8 filter If on its face it states these kinds of broad
9 abstract principles fundamental truths and even if it
10 says use a computer those should be struck down
11 JUSTICE SOTOMAYOR Which of the shyshy which of
12 the opinions below captures your position most
13 accurately
14 MR PHILLIPS I would guess it would be
15 Judge Moores opinion below that would capture ours most
16 correctly
17 JUSTICE SOTOMAYOR And if we were to think
18 your method claim is ineligible do you agree that your
19 systems and shyshy your medium and system claims fail as
20 well Do they rise and fall together
21 MR PHILLIPS No No I dont believe they
22 do rise and fall together I mean I think you could shyshy
23 if you wanted to interpret our medium claim shyshy I mean
24 our shyshy our method claims in a shyshy in particularly
25 abstract way I think you could still say that the
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1 system claims which clearly are shyshy are how to create a
2 computer system and how to implement it using that
3 method would be a much more concrete version of that in
4 a way that would take it out of 101 That said I
5 obviously believe that all of our claims satisfy 101
6 and should go on to the next stage
7 JUSTICE KAGAN Can I give you a
8 hypothetical Mr Phillips and you tell me how its
9 different or the same Lets say you know 30 years
10 somebody took a look around the world and said a lot of
11 people seem to order products by mail They get the
12 catalogues in the mail and then they send back their
13 return forms And lets say that one of the founders of
14 the Internet said wouldnt this be an amazing system
15 we could actually do this by computer and they had
16 patented that Is that the same
17 MR PHILLIPS I dont know if its the
18 same but I would shyshy I would argue that it could very
19 well be a patentable subject matter because shyshy but it
20 depends on how the claims play out
21 JUSTICE KAGAN No but exactly I mean
22 the claim would have said something along the lines of
23 you know theres this process by which people order
24 products and we want to do it over the Internet we want
25 to do it electronically and we will use a computer to
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1 do that to essentially take the process of mail order
2 catalogues and make it electronic
3 MR PHILLIPS I could certainly shyshy I think
4 I could write a claim shyshy a set of claims that I believe
5 would satisfy 101 And shyshy and to the extent that
6 youd shyshy that youd think those are no different than
7 the ones I have here then my argument is simply I think
8 I satisfy 101 with the claims we have before us Your
9 Honor
10 If there are no further questions then Id
11 like to reserve the rest of my time
12 CHIEF JUSTICE ROBERTS Thank you
13 Mr Phillips
14 Mr Perry
15 ORAL ARGUMENT OF MARK A PERRY
16 ON BEHALF OF THE RESPONDENTS
17 MR PERRY Mr Chief Justice and may it
18 please the Court
19 That path between Scylla and Charybdis was
20 charted in Bilski and Mayo Bilski holds that a
21 fundamental economic principle is an abstract idea and
22 Mayo holds that running such a principle on a computer
23 is quote not a patentable application of that
24 principle Those two propositions are sufficient to
25 dispose of this case
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1 If Bilski and Mayo stand Alices patents
2 fail Therefore Mr Phillips and his friends are
3 asking this Court to change the standard even though
4 this Court has had three unanimous decisions in the last
5 four terms establishing what the Court called a myriad
6 a wellshyestablished standard
7 On the abstract idea Justice Ginsburg you
8 asked Mr Phillips whats the difference between hedging
9 and this claim There is no difference This is
10 hedging It is hedging against credit default rather
11 than price fluctuation but it is simply hedging
12 And Mr Phillips stood up for 26 minutes and
13 never once referred to the patent Lets look at what
14 the inventor the soshycalled inventor said about this
15 invention This is at JA 293 to 94 in the
16 specification
17 This claim has simply two steps Its very
18 simple First debiting and crediting on a realtime
19 basis the relevant shadow records and second by
20 periodically affecting corresponding payment
21 instructions Those are direct quotes Debit credit
22 and pay Your Honor you cant get much more simple
23 than that
24 Mr Phillips suggests well we have
25 multilateral transactions global things chronological
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1 time zones and so forth None of those are claimed
2 Your Honor Those are all recited in specification
3 The claims read on a single transaction involving two
4 parties
5 JUSTICE BREYER Can I ask you at some
6 point not necessarily this second to say in my shyshy this
7 is just shyshy you know you have an opinion for a court
8 Different judges can have different interpretations
9 All youre getting is mine okay
10 But I think its pretty easy to say that
11 Archimedes cant just go to a boat builder and say
12 apply my idea All right Everybody agrees with that
13 But now we try to take that word apply and give
14 content to it
15 And what I suspect in my opinion Mayo did
16 and Bilski and the other cases is sketch an outer shell
17 of the content hoping that the experts you and the
18 other lawyers and the shyshy the circuit court could fill
19 in a little better than we had done the content of that
20 shell
21 So so far youre saying well this is
22 close enough to Archimedes saying apply it that we
23 neednt go further
24 Now will you at some point in the next few
25 minutes give me your impression of if it were necessary
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1 to go further what would the right words or example be
2 MR PERRY Your Honor as shyshy Justice
3 Breyer as to abstract ideas the PTO has filled in that
4 shell by listing economic concepts legal concepts
5 financial concepts teaching concepts dating and
6 interpersonal relationships and generally how business
7 should be conducted as examples of those things that are
8 likely abstract which of course all follow directly
9 from Bilski and the discussion this Court had in Bilski
10 And this patent shyshy these patents fall squarely within
11 that
12 Congress in the AIA confirmed that
13 reading Congress in the CBM method said business
14 methods that are subject to special scrutiny shyshy that is
15 dubious patents shyshy include methods and corresponding
16 apparatus which is what we have here that pertain to
17 data processing in the financial services industry and
18 do not offer a technological solution That describes
19 Alices patents to a letter Your Honor So that we
20 have shyshy
21 JUSTICE SOTOMAYOR What do you think is a
22 technological solution
23 MR PERRY Your Honor shyshy
24 JUSTICE SOTOMAYOR How could they if at
25 all written their patents to shyshy to make shyshy to make
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1 their software eligible What would shyshy what do they
2 need shyshy would have needed to have added
3 MR PERRY Justice Sotomayor they have no
4 software first Theyve never written software
5 Theyve never programmed a computer So thats a
6 nonexistent set
7 Second there are many technological
8 solutions to trading and settlement problems For
9 example data compression These shyshy these trading
10 platforms involve the movement of very large quantities
11 of data around the world The physical pipes that is
12 the fiber optic cables and data lines are limited
13 There are very sophisticated algorithms for both
14 security and speed to move data through the transmission
15 lines in novel and useful ways that could well be
16 patented
17 Nothing like that is claimed here To come
18 back to where I started if you look for example at
19 Claim 65 in the 510 patent as Mr Phillips reads it
20 it literally reads on a twoshyparty escrow to sell a
21 house so long as the escrow agent is typing this stuff
22 into the HUDshy1 using a computer That has nothing to do
23 with multilevel shyshy
24 CHIEF JUSTICE ROBERTS Well thats a
25 little more complicated He referred us to Joint
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1 Appendix Page 159 which is not a change in how
2 computers work But it is shyshy constitutes the
3 instructions about how to use the computer and where it
4 needs to be affected And just looking at it it looks
5 pretty complicated There are a lot of arrows and
6 they shyshy you know different things that go shyshy
7 (Laughter)
8 CHIEF JUSTICE ROBERTS Well but I mean
9 you know it shyshy in different directions And I
10 understand him to say that in each of those places
11 thats where the computer is needed
12 MR PERRY Mr Chief Justice Figure 16 has
13 nothing to do with the invention asserted against my
14 client in this case There are two inventions in this
15 patent One invention involving multilateral contract
16 formation is not asserted against my client And all of
17 these drawings pertain to that The only drawings that
18 pertain to the asserted claims are 25 and 33 to 37 And
19 that was established below and its established in this
20 Court And Mr Phillips has never disputed it
21 So the claim hes pointed the Court shyshy the
22 figure hes pointed the Court to has nothing to do with
23 the invention Its for a different invention that is
24 not at issue in this case
25 Remember there are hundreds and hundreds of
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1 pages of these patents They all pertain to the other
2 invention Thats why in the back of our red brief we
3 excerpted the very little bit that actually pertains to
4 this You sort of tack on patent shyshy the tack on claim
5 that Mr Phillips is asserting here Its 4 columns
6 Its less than five pages in the printed appendix that
7 actually pertains to this invention And it contains no
8 disclosure whatever
9 Justice Scalia to your question about how
10 the computer does it Of course a patent that
11 describes sufficiently how a computer does a new and
12 useful thing whether its data compression or any other
13 technological solution to a business problem a social
14 problem or a technological problem would be within the
15 realm of the shyshy of the patent laws That is what the
16 patent laws have always been for
17 This is not such a patent And the reason
18 for that is this is a preshyBilski set of patents These
19 were prosecuted under the old State Street test where
20 all the applicant had to claim was a result
21 JUSTICE KENNEDY Would you give me shyshy
22 again you already did it once shyshy an example of a
23 business process patent shyshy of a business process idea
24 and invention that is patentable
25 MR PERRY Your Honor there are many
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1 examples One would be a technological solution to a
2 business problem So that for example shyshy Ill give a
3 different example There are many applications today
4 The Court may be familiar with streaming video to watch
5 video on your computer
6 It is not possible to get enough data
7 through existing lines in its raw format The data has
8 to be manipulated in order to see live video So if you
9 want to watch TV on your phone for example
10 Those algorithms those inventions are
11 undoubtedly technological And if they are used in a
12 trading platform or a hedging system or something else
13 that wouldnt disable them And this is what the Diehr
14 case shyshy
15 JUSTICE KENNEDY Well I shyshy I shyshy in my
16 language Ive called that mechanical rather than
17 process Can you give me an example of process
18 MR PERRY Yes Your Honor The process in
19 that example would be a computer running the particular
20 data compression algorithm
21 JUSTICE KENNEDY But thats how to make
22 a shyshy thats how to make a machine work better
23 MR PERRY Yes Your Honor
24 JUSTICE KENNEDY Im asking you Is there
25 any business process any business activity that is
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1 susceptible to a patent a pure patent innovations that
2 deserve patents
3 MR PERRY Your Honor again a
4 technological solution to a business problem could well
5 be whether its a method or a process is equivalent
6 Again Congress said method in a corresponding shyshy
7 JUSTICE KENNEDY Can you give me an
8 example
9 MR PERRY I thought the data compression
10 example was a good one Ill try an encryption
11 technology Many of these trading platforms you know
12 dealing with securities and money would require some
13 sort of security devices You could have a process for
14 securely transmitting data would be another computer
15 implemented technological solution to a business
16 problem Again nothing like that claimed here
17 JUSTICE SOTOMAYOR How about eshymail and
18 just word processing programs
19 MR PERRY Your Honor a program shyshy let me
20 try it this way to both of your questions In our view
21 if what is claimed as the inventive contribution under
22 Mayo shyshy in other words if we have an abstract idea as
23 we do here and what is claimed is the inventive
24 contribution for Step 2 is the computer then the
25 computer must be essential to that operation and
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1 represent an advancement in computer science or other
2 technology And we know thats not met here Justice
3 Sotomayor because shyshy
4 JUSTICE SOTOMAYOR So youre saying no to
5 eshymail and word processing
6 MR PERRY Your Honor I think at a
7 point shyshy
8 JUSTICE SOTOMAYOR They certainly have
9 functionality and shyshy and improvement of functionality
10 for the user
11 MR PERRY At a point in time in the past
12 I think both of those would have been technological
13 advances that were patentable
14 JUSTICE SOTOMAYOR How
15 MR PERRY Today shyshy because they would have
16 provided a technological solution to a then unmet
17 problem Today reciting and do it on a word processor
18 is no different than and do it on a typewriter or shyshy and
19 do it on a calculator
20 The inventive contribution component which
21 uses specifically the language of conventional and
22 routine and well understood will evolve with
23 technology Thats why its different than the abstract
24 idea component
25 And here we know that these patents dont
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1 claim anything that was not conventional well
2 understood and routine We went through that in great
3 detail and Alice has never disputed a word of it They
4 just say youre not supposed to do that analysis even
5 though the Court 9shy0 in Mayo said we should
6 And in this case its very important to
7 look at what Alices own experts said on the subject
8 This is not our expert This is Alices expert And
9 this is at Page 1327shy28 of the Joint Appendix It is
10 possible to do the business methods of maintaining
11 accounts adjusting accounts and providing an
12 instruction without a computer or other hardware
13 And then Justice Breyer directly to your
14 abacus If someone had thought of this invention
15 soshycalled invention 100 years ago they might have
16 implemented it in a nonelectronic manner using various
17 precomputing tools such as an abacus or handwritten
18 ledgers
19 We know from Benson the Courts seminal
20 computer implementation case that if you can do it by
21 head and hand then the computer doesnt add anything
22 inventive within the meaning of the 101 exception That
23 is the holding of Benson And the Court reiterated that
24 in Mayo
25 Flook said exactly the same thing If you
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1 can do it with pencil and paper then the computer is
2 not offering anything that the patent laws are or should
3 be concerned with
4 It is only where the method will not work
5 without a computer which is not these claims and where
6 the computer itself is doing something that the patent
7 law is willing to protect
8 CHIEF JUSTICE ROBERTS What if shyshy what if
9 you can do it without a computer but its going to
10 take you know 20 people a hundred years In other
11 words theoretically you can replicate what the
12 computer does shyshy
13 MR PERRY Two answers
14 CHIEF JUSTICE ROBERTS shyshy but its
15 impractical without looking to do it on the computer
16 MR PERRY Mr Chief Justice first these
17 claims literally read as Alice reads them on a single
18 transaction between two parties so its not 20 people
19 for a hundred years Its one person sitting in a room
20 so thats not a problem
21 Second if what is being claimed is the
22 necessary speed or efficiency or data crunching
23 capabilities if you will of a computer then it would
24 have to be claimed and theres nothing claimed here
25 All that is claimed shyshy and my friend is going to stand
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1 up on rebuttal and tell you all that the expert said
2 well what is claimed is a computer but its just a
3 computer It just says a computer configured too It
4 doesnt say that the computer actually has to shyshy
5 JUSTICE BREYER Yeah but the trouble with
6 that particular test is as I think partly the Chief
7 Justice said how long et cetera and then add to that
8 though you could do it without a computer what happens
9 at the end of the line is the automobile engine goes off
10 or it begins to sputter or it turns left
11 You see its possible to take Archimedes shyshy
12 shyshy you know I use that example purposely to call
13 attention to the problem You can take those things
14 and youre not just saying apply it and youre not even
15 just saying shyshy you are saying use the computer but at
16 the end of the road something physical in the world
17 changes and everybody would say now thats shyshy that
18 will falls within I mean probably I mean my
19 hesitation shows Im looking for the right words
20 MR PERRY Justice Breyer your point is
21 the reason that it is equally fallacious to suggest on
22 the one hand as Alice and IBM does that simply
23 reciting a computer is a magic key that gets you through
24 101 and you never have to any other inquiry and what
25 some of folks the amici on the other side say which
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1 is that computers or software are never eligible Both
2 of those things have to be wrong because what the Court
3 said in Bilski was future innovation is too uncertain
4 We are not going to do that as a Court And the Court
5 laid out an approach using abstract ideas in Bilski and
6 inventive contribution in Mayo that is flexible enough
7 to take into account that innovation and to deal with
8 particular claims in context which is why at the end
9 of the day we have to come back to these patents and
10 decide which shyshy
11 JUSTICE KAGAN Mr Perry before we get
12 back to these matters you said to Justice Scalia if a
13 patent sufficiently describes how a computer will
14 implement an idea then its patentable So how
15 sufficiently does one have to describe it What do we
16 want a judge to do at this threshold level in terms of
17 trying to figure out whether the description is
18 sufficient to get you past it
19 MR PERRY If I can answer in two steps
20 Justice Kagan First in the negative What the
21 applicant or patentee must do shyshy must not do is simply
22 describe the desired result That would take us back to
23 State Street That would simply say I claim a magic
24 box that buys high and sells low or vice versa I
25 suppose I claim a magic box for investing Thats what
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1 these patents do
2 Then to put it in the affirmative and in the
3 language of Mayo the claim has to recite something
4 significantly more something significantly more than
5 the abstract idea itself That would be a contextual
6 analysis based on the claims and specifications and file
7 history and we know that some devices some methods
8 some programming will pass that
9 It is not going to be a brightshyline rule and
10 thats one of the tugshyofshywar issues that this Court and
11 the Federal Circuit have been having in these cases
12 The Federal Circuit wants brightshyline rules All
13 computers are in or all computers are out
14 This Court has been more contextual This
15 Court has been more nuanced This Court has looked at
16 things in a more robust way
17 JUSTICE KAGAN Youre not suggesting that
18 specific code is necessary
19 MR PERRY No Your Honor I think the shyshy
20 actual description of the programming is a 112 problem
21 I agree with that A 112 issue That is the realm of
22 the written description requirement What is a 101
23 problem is it is on the applicant to do more than simply
24 describe the results simply say A magic box that does
25 intermediate settlement And we can tie that back to
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1 this particular prosecution the 510 patent which is
2 the method patent
3 The examiner rejected it Under Section
4 101 the examiner said this is an abstract idea You
5 cant have this patent And the only change that this
6 applicant made was to add in the adjusting step
7 electronic adjustment It put in one word
8 electronic adjustment And under State Street which
9 is what this patent is prosecuted under that was
10 enough because the result of adjusting run through a
11 computer is enough
12 Under current law that cant be enough
13 That just cant get a patent over the line because this
14 Court said in Mayo and I got to quote this language
15 Simply implementing a fundamental principle on a
16 physical machine namely a computer is not a patentable
17 application of that principle Thats all that Alice
18 has done
19 These are preshyBilski patents They never
20 should have been issued General Verrilli will stand up
21 and address that point And certainly under current
22 law shyshy one point on the AIA Congress did not send all
23 this to the administrative process Congress created
24 two avenues the courts and the PTO to use the
25 standards Essentially it ratified Bilski and Mayo and
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1 said we agree with what you all are doing at the
2 Supreme Court and the existing standards are good enough
3 for us This is a judicial problem And that is a good
4 reason The abstract shyshy
5 JUSTICE GINSBURG The Federal Circuit in
6 this case split in many ways and it had our decisions
7 to deal with You said given Bilski and Mayo this is
8 an easy case What is the instruction that escaped a
9 good number of judges on the Federal Circuit How would
10 you state the rule
11 MR PERRY Your Honor I think theres a
12 significant element to the Federal Circuit that
13 disagrees with Mayo and has been resistant in applying
14 it Chief Judge shyshy former Chief Judge Michelle filed a
15 brief in this Court essentially saying Mayo is a
16 lifeshysciences case You should limit it to that because
17 if you apply it to everything else then these patents
18 are no good
19 Mayo we submit is a technologyshyneutral
20 industryshyneutral exceptionshyneutral framework that can
21 be used to answer all of these questions This is not
22 the death of software patents The software industry is
23 all before this Court saying this is fine with us
24 Every company in the United States practically except
25 for IBM is saying go ahead This will not affect
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1 software patents
2 Justice Ginsburg this Courts precedents
3 are clear They are unanimous They just need to be
4 applied To suggest that there is confusion that needs
5 to be addressed by retreating beating a retreat from
6 recent unanimous decisions would simply reward
7 intransigence difficulty refusal to adhere to what are
8 clear precedents because shyshy
9 JUSTICE KAGAN Should we be concerned
10 Mr Perry that there are old patents that in fact could
11 meet the test that you set forth but wont because they
12 were written in a different time and so used much more
13 general language
14 MR PERRY Your Honor the applicant or the
15 patent holder would have the opportunity to institute a
16 reexamination proceeding or some sort of administration
17 process to address that issue
18 And second it should be noted this is a
19 very small problem There are 2 million outstanding
20 patents in the United States In the last four fiscal
21 years there were 22000 infringement litigations
22 instituted but since Bilski there have only been 57
23 district court decisions on Section 101 issues There
24 have only been 12 Federal Circuit decisions total on
25 computer implementation
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1 We are talking about a group of patents
2 Justice Kagan thats way out at the tail end of
3 distribution Most patents never have a 101 challenge
4 This is not an issue with cotton gins and other things
5 This is a problem for the most marginal
6 most dubious most skeptical patents the ones that this
7 Court in Bilski shyshy and remember what Bilskis holding
8 is The majority said they are processes but it did
9 not say they are eligible
10 Thank you Mr Chief Justice
11 CHIEF JUSTICE ROBERTS Thank you counsel
12 General Verrilli
13 ORAL ARGUMENT OF DONALD B VERRILLI JR
14 ON BEHALF OF THE UNITED STATES AS AMICUS
15 CURIAE SUPPORTING RESPONDENTS
16 GENERAL VERRILLI Mr Chief Justice and
17 may it please the Court
18 An abstract idea does not become
19 patentshyeligible merely by tacking on an instruction to
20 use a computer to carry it out A computer makes a
21 difference under Section 101 when it imposes a
22 meaningful limit on the patent claim That occurs when
23 the claim is directed at improvement in computing
24 technology or an innovation that uses computing
25 technology to improve other technological functions
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1 Thats the test that we believe is most faithful to this
2 Courts precedents in Bilski and Mayo It keeps patents
3 within their traditional and appropriate domain and it
4 is capable of being administered consistently by Courts
5 and by PTO examiners
6 JUSTICE GINSBURG How do you answer the
7 argument that your view would extinguish businessshymethod
8 patents and make all software ineligible for patent
9 protection
10 GENERAL VERRILLI Yeah with shyshy let me
11 address software patents first because that I think is
12 obviously a significant question And its just not
13 correct to say that our approach would make software
14 patenting ineligible Any software patent that improves
15 the functioning of the computer technology is eligible
16 Any software patent that improves shyshy that is used to
17 improve another technology is eligible For example
18 the patent in the shyshy in the Diehr case is one in
19 which shyshy
20 JUSTICE SOTOMAYOR Why do we need to reach
21 this in that shyshy reach software patents at all in this
22 case
23 GENERAL VERRILLI Well shyshy
24 JUSTICE SOTOMAYOR Whats the necessity for
25 us to announce a general rule with respect to software
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1 There is no software being patented in this case
2 GENERAL VERRILLI Well I shyshy
3 JUSTICE SOTOMAYOR Theres a systems
4 GENERAL VERRILLI Well I shyshy I think shyshy
5 well they shyshy they shyshy theres a process being and shyshy and
6 one can think of software patents as process patents
7 And I think thats why my friends on the other side are
8 saying the sky is falling because they shyshy they are
9 interpreting what were saying about that when a
10 computer makes shyshy when a computers involvement makes
11 something eligible under 101 its calling those into
12 question and it doesnt
13 JUSTICE SOTOMAYOR Do you think we have to
14 reach the patentability of software to answer this case
15 GENERAL VERRILLI Well I think you can shyshy
16 I think the answer to that question is no not
17 necessarily You can decide it by saying that shyshy that
18 Bilski answers the question whether this is an abstract
19 idea because this form of hedging is really no
20 different than the form of hedging as a conceptual
21 matter at issue in Bilski And then Mayo answers the
22 question of whether the use of a computer in this case
23 adds enough to the abstract idea beyond conventional
24 steps because here all we have after all is just
25 conventional use of computing technology no computer
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1 innovation such that you dont qualify under 101 You
2 could take that approach
3 But it is important to the United States
4 that we shyshy and to our patent examiners that we get some
5 clarity if we can I think the clarity could come from
6 the text that I propose which I want to reiterate shyshy
7 JUSTICE SOTOMAYOR Well shyshy
8 JUSTICE BREYER Could shyshy could shyshy could you
9 go on with that because you were just getting to the
10 point where I think you say a computer improvement that
11 in fact leads to an improvement in harvesting cotton is
12 an improvement through a computer of technology so it
13 qualifies
14 But then I think you were going to say or I
15 got this also from the brief a computer improvement
16 that leads to an improvement in the methods of selling
17 bonds over the telephone is not an improvement in
18 technology reached by the computer Am I right about
19 the distinction youre making
20 GENERAL VERRILLI I dont think theres a
21 yes or no answer to that question
22 JUSTICE BREYER What is your view Yeah
23 what is shyshy how do we deal with just that problem
24 GENERAL VERRILLI If there is a genuine
25 innovation in the functioning of the computer shyshy
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1 JUSTICE BREYER Yes
2 GENERAL VERRILLI shyshy such that business
3 processes shyshy
4 JUSTICE BREYER Weve got that Yes yes
5 We got the computer But then it doesnt improve the
6 computer but rather it improves through the computer
7 the harvesting of cotton
8 Now youve got it in what you said was your
9 second category which is an improvement through the
10 computer of a technology And I thought in your brief
11 you were distinguishing an improvement through the
12 computer of a human activity that is not a technology
13 and in particular to pick an example of that
14 something in finance or something in business
15 Now am I right about the distinction youre
16 making
17 GENERAL VERRILLI Yeah that shyshy
18 JUSTICE BREYER If Im not right what is
19 the distinction
20 GENERAL VERRILLI That is generally the
21 line were drawing Frankly shyshy
22 JUSTICE BREYER And how is that justified
23 GENERAL VERRILLI I do want shyshy
24 JUSTICE BREYER That shyshy that is Judge Dyk
25 in shyshy in Bilski in the Federal circuit 4 people sort of
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1 picked it up maybe 5 didnt pick it up Would you say
2 a few words about it
3 GENERAL VERRILLI Sure About shyshy let me go
4 to Bilski there in that I do think while shyshy while
5 certainly the Court held that the term process got a
6 natural construction which could include business
7 methods it seems to me that thats not all the Court
8 said in Bilski The Court also said that it was
9 historically and traditionally quite rare that business
10 methods were patent eligible
11 It also said that shyshy that the shyshy that courts
12 and the PTO examiners should use the abstract ideas
13 exception to 101 to police the appropriate boundary
14 It also said that the
15 machineshyorshytransformation test that the United States
16 advocated remained a useful tool And of course that
17 directs to you seeing whether there is a technology
18 application
19 And of course the holding in Bilski was
20 that the shyshy the method for hedging risk was ineligible
21 because it was an abstract idea and I cant imagine
22 that if in Bilski the shyshy the claim had been exactly the
23 same but had added use a computer to carry out some of
24 these standard random analysis functions that are
25 claimed by the patent that you would have found it to
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1 be patent eligible
2 And I shyshy I would submit for the Court that
3 the key point here I think is that now given where
4 the Court shyshy what the Court has held in Bilski given
5 what its held in Mayo the abstract ideas exception is
6 really the only tool left to deal with what I shyshy what I
7 think I fairly read Bilski as saying is a significant
8 problem the proliferation of patents of business
9 methods
10 JUSTICE KENNEDY Is there an example that
11 you can give us of a shyshy what we can call a business
12 process that is patentable a process that doesnt
13 involve improving the workings of a computer
14 GENERAL VERRILLI I shyshy I think its going
15 to be difficult for me to do that I think for
16 example if you had a business method a process for
17 additional security pointshyofshysale credit card
18 transactions using particular encryption technology
19 that might well be patent eligible Its a technology
20 that it makes conduct of business more efficient or
21 effective
22 But there is a technological link here and
23 we do think thats critical to our shyshy to our point of
24 view with respect to the case And I shyshy and I do think
25 remember that when we say something is not patent
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1 eligible were not saying they cant do it Were
2 saying they cant monopolize it
3 And the concern in a situation like this one
4 is that if this is patent eligible its hard to see
5 why for example the first person who came up with a
6 frequent flier program wouldnt have been able to claim
7 a patent there because after all thats a business
8 method for improving customer loyalty implemented on a
9 computer
10 CHIEF JUSTICE ROBERTS General I shyshy you
11 mentioned a while ago the need for greater clarity and
12 certainty in this area And Im just wondering in your
13 brief youve got a nonshyexhaustive of factors to
14 consider and there are 6 different ones And Im just
15 doubtful that thats going to bring about greater
16 clarity and certainty
17 GENERAL VERRILLI I take shyshy I take the
18 point Mr Chief Justice but I think the key is that
19 they are all directed to answering the question of
20 whether the innovation that is claimed and is an
21 innovation in either A the improvement of a computers
22 functioning or B the use of computer technology to
23 improve the functioning of another technological
24 process and a case like Diehr would be in the latter
25 category
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1 And so I do think that thats the key
2 benchmark Thats the baseline Thats the test that
3 we do think can be applied clearly and consistently by
4 the courts or the PTO And it avoids the risk of things
5 like frequent flier programs or the Oakland As money
6 ball methods for evaluating the contributions in
7 individual baseball players make or any one of a host of
8 other things that our intuitions tell us just dont
9 belong in the patent system
10 Thats the shyshy drawing that line keeps them
11 out not drawing that line lets them in And with all
12 due respect I dont think that the novelty and
13 nonobviousness filters that 102 and 103 really deal with
14 that problem effectively because when you get to
15 nonobviousness in 103 for example youll be asking a
16 different question
17 If you take the frequent flier program you
18 would say well is this innovation in building consumer
19 loyalty something that would have been obvious to
20 somebody who runs an airline Its totally divorced
21 from the question of technology at that point and
22 therefore I dont think youre going to get the screen
23 that you need to get in order for the patent system to
24 be confined to its traditional and appropriate scope
25 If there are no further questions thank
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1 you
2 JUSTICE GINSBURG I have a question about
3 how do you identify an abstract concept The shyshy a
4 natural phenomenon a mathematical formula those are
5 easy to identify but there has been some confusion on
6 what qualifies as an abstract concept
7 GENERAL VERRILLI We would define
8 abstract shyshy an abstract concept as a claim that is not
9 directed to a concrete innovation in technology
10 science or the industrial arts So its the shyshy its
11 abstract in the sense that it is not a concrete
12 innovation in the traditional realm of patent law
13 Thank you
14 CHIEF JUSTICE ROBERTS Thank you General
15 Mr Phillips you have four minutes
16 remaining
17 REBUTTAL ARGUMENT OF CARTER G PHILLIPS
18 ON BEHALF OF THE PETITIONERS
19 MR PHILLIPS Thank you Mr Chief Justice
20 Id just like to make a few points
21 First of all with respect to the question
22 you asked which is looking at 159 et cetera all I can
23 tell you is that if you look at claim 33 it talks about
24 matched orders the matched orders that are described in
25 286 and 287 and then makes specific reference to 159
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1 and that flow chart thats there And its all designed
2 as a package Its only one element of the shyshy of the
3 invention but it is a central element and its an easy
4 one to understand And it goes well beyond simply the
5 notion of hedge shyshy hedge against settlement risk and do
6 it by a computer
7 JUSTICE SOTOMAYOR Your adversary says that
8 his shyshy the appendix to his brief are the only patents at
9 issue that the flow charts are not at issue in this
10 case
11 MR PHILLIPS Theres no basis for that
12 statement Your Honor There shyshy remember this went off
13 on a very truncated litigation process So theres shyshy
14 you know we shyshy we got cut off at the beginning of it
15 Theres been no construction of the shyshy of the claims
16 and shyshy and obviously these are specifications that go
17 to how you interpret the claim
18 JUSTICE SOTOMAYOR If we were to say that
19 there are no business patents shyshy
20 MR PHILLIPS Yes
21 JUSTICE SOTOMAYOR shyshy would your patent
22 survive at all
23 MR PHILLIPS No I dont shyshy I dont
24 believe so I think theres no question And you
25 know General Verrilli could not have been any plainer
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1 in his statement of how he wants to interpret the
2 abstract idea concept
3 JUSTICE SOTOMAYOR Yes he wants to say no
4 business patents
5 MR PHILLIPS No business shyshy just another
6 way of saying no business methods And you know the
7 Court rejected that And it seems to me extraordinary
8 to say Congress didnt reject no business methods in
9 101 but were going to do shyshy were going to manipulate
10 the judicial exception to accomplish precisely that same
11 thing It seems to me thats wholly inappropriate
12 Justice Ginsburg you asked my shyshy my friend
13 here you know whats his test He didnt answer that
14 question youll notice because he doesnt have an
15 answer His basic argument is whatever you do just
16 kill this patent
17 And if I were in his shoes I suppose Id
18 take that same position I think whats absolutely
19 clear is that the test ought to be one that is
20 structured as a very coarse filter not the kind of
21 filter that hes pushing for where it changes over time
22 I mean I thought his shyshy I thought his response to one
23 of the questions about eshymail and word processing that
24 Justice Sotomayor asked is over time it would change
25 Well thats exactly what 102 and 103 are for That is
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1 not the purpose of shyshy of Section 101
2 And then he uses the example of encryption
3 I guarantee you if we were arguing about encryption in
4 this case he would say to me that thats an abstract
5 principle because encryption is a concept thats been
6 around since time immemorial George Washington used
7 it Everybody has used encryption
8 And a question again thats not the
9 solution to these problems The question is how did we
10 go about doing it And we go beyond the basics of
11 simply saying use a computer and thats what we ask
12 this Court to focus on and to evaluate
13 As to the frequent flier program its
14 pretty clear to me that even though it was a novel idea
15 in some sense the concept itself would have been viewed
16 in shyshy in the KSR fashion as quite obvious as a means of
17 improving customer loyalty
18 There are solutions here Giving us 101
19 pass doesnt create a monopoly It just gets us to the
20 102 and 103 inquiries that are at the heart of what the
21 patent laws shyshy and 112 that are at the heart of what the
22 patent laws ought to be dealing with
23 If there are no further questions Your
24 Honor thank you
25 CHIEF JUSTICE ROBERTS Thank you counsel
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1 The case is submitted
2 (Whereupon at 1105 am the case in the
3 aboveshyentitled matter was submitted)
4
5
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8
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58
A add 714 1023 algorithm 3320 41 automatically
As 525 3621 387 algorithms apply 72425 111
am 115 32 416 3013 3310 2019 281213 automobile 389
572 added 302 Alice 13 34 2822 3814 available 99
abacus 61213 4923 363 3717 4217 avenues 4124
710 1018 additional 5017 3822 4117 applying 4213 avoids 524
1325 3614 3617
address 4121 4317 4511
Alices 271 2919 3678
approach 226 395 4513 B
ability 1514 addressed 435 allow 94 472 B 121 29 4413
able 1511 167 addressing 181 allows 97 242 appropriate 5122
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821 228 2813 3418 35517 363 417 5523
words 713 291 3422 3711 3819 492
work 51719 1124 2110 312 3322 374
workings 5013 world 2018
2510 3011 3816
wouldnt 414 415 2514 3313 516
write 264 writers 132325 written 617
1716 2925 304 4022
1 1004 115 32 100 3615 101 3121522
414 65 1715 18267 2019 2324 2467 2545 2658 3622 3824 4022 414 4323 44321 4611 471 4913 559 56118
102 1717 187 2325 2425 5213 5525 5620
103 1717 187 2325 2435 521315 5525 5620
11 2445 1105 572 112 1921 4020
4021 5621 12 4324 13shy298 15 34
3 3 24 30 259 31 111 33 3118 5323 37 3118
4 4 325 4825 42 1524 1618 44 211
5 5 491 510 3019 411 53 214 57 4322
6 6 5114 65 3019
7
8
9 9 245 9shy0 365
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1 know Thats what I want to know what you dont agree
2 with about that because its a little more refined than
3 you suggested
4 MR PHILLIPS I read the Solicitor
5 Generals brief as broader than the Bloomberg brief
6 in shyshy in terms of the approach And IBMs argument is
7 if you knock out software patents you eliminate web
8 browsing word processing cellphones eshymail Those
9 are all activities that I dont think fall within the
10 meaning of the shyshy the meaning of the governments theory
11 of the case
12 JUSTICE BREYER But Im asking you shyshy Im
13 asking you what about this one that I just mentioned
14 You see I went through those five steps shyshy
15 MR PHILLIPS Right
16 JUSTICE BREYER shyshy and four of them you
17 could patent and the fifth one you cant
18 MR PHILLIPS Right But I shyshy and I guess
19 my answer to that is thats nowhere in the statute and
20 it doesnt seem to me to reflect an abstract idea Its
21 a shyshy its a line you draw that takes out business method
22 patents If the Court wants to eliminate business
23 method patents fine But you just said no to that in
24 Bilski two three terms ago
25 Now to be sure give the Solicitor General
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1 credit he comes here and says to you We didnt like
2 the result in Bilski we want you to say dont use
3 process in order to get there which is a statutory
4 interpretation come up with an extraordinarily
5 complicated way of looking at the exception and use that
6 to get to the exact same result
7 JUSTICE SOTOMAYOR Well youre doing a
8 very good job of proving shyshy
9 JUSTICE GINSBURG In Bilski Justice Breyer
10 did try to say that there wasnt that shyshy a whole lot of
11 distance between the four who thought business methods
12 were not patentable But he shyshy he also said something
13 else in shyshy in the other case Mayo Justice Scalia
14 asked you the question about doesnt that go to novelty
15 but didnt Justice Breyer say in Mayo that novelty can
16 be relevant to patent shyshy to patent eligibility He said
17 theres shyshy theres an overlap
18 MR PHILLIPS Well he said theres an
19 overlap Here in this context I think basically the
20 Respondents theory would mean that they are completely
21 coterminous And I dont think thats what the Court
22 meant And also we know from Diehr that theres got to
23 be at least some significant limitations on the extent
24 to which novelty has to be built into 101 That is the
25 province of 102 and 103 And as I said Congress
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1 modified the system of adjudication to create an
2 administrative mechanism that allows you to get to 102
3 and 103 And at least in context its important to
4 realize there have been 11 cases since that was created
5 9 of the 11 have been knocked down on 102 or 103 grounds
6 and not on 101 grounds And it seems to me thats the
7 answer to this problem is leave 101 as the coarse
8 filter If on its face it states these kinds of broad
9 abstract principles fundamental truths and even if it
10 says use a computer those should be struck down
11 JUSTICE SOTOMAYOR Which of the shyshy which of
12 the opinions below captures your position most
13 accurately
14 MR PHILLIPS I would guess it would be
15 Judge Moores opinion below that would capture ours most
16 correctly
17 JUSTICE SOTOMAYOR And if we were to think
18 your method claim is ineligible do you agree that your
19 systems and shyshy your medium and system claims fail as
20 well Do they rise and fall together
21 MR PHILLIPS No No I dont believe they
22 do rise and fall together I mean I think you could shyshy
23 if you wanted to interpret our medium claim shyshy I mean
24 our shyshy our method claims in a shyshy in particularly
25 abstract way I think you could still say that the
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1 system claims which clearly are shyshy are how to create a
2 computer system and how to implement it using that
3 method would be a much more concrete version of that in
4 a way that would take it out of 101 That said I
5 obviously believe that all of our claims satisfy 101
6 and should go on to the next stage
7 JUSTICE KAGAN Can I give you a
8 hypothetical Mr Phillips and you tell me how its
9 different or the same Lets say you know 30 years
10 somebody took a look around the world and said a lot of
11 people seem to order products by mail They get the
12 catalogues in the mail and then they send back their
13 return forms And lets say that one of the founders of
14 the Internet said wouldnt this be an amazing system
15 we could actually do this by computer and they had
16 patented that Is that the same
17 MR PHILLIPS I dont know if its the
18 same but I would shyshy I would argue that it could very
19 well be a patentable subject matter because shyshy but it
20 depends on how the claims play out
21 JUSTICE KAGAN No but exactly I mean
22 the claim would have said something along the lines of
23 you know theres this process by which people order
24 products and we want to do it over the Internet we want
25 to do it electronically and we will use a computer to
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1 do that to essentially take the process of mail order
2 catalogues and make it electronic
3 MR PHILLIPS I could certainly shyshy I think
4 I could write a claim shyshy a set of claims that I believe
5 would satisfy 101 And shyshy and to the extent that
6 youd shyshy that youd think those are no different than
7 the ones I have here then my argument is simply I think
8 I satisfy 101 with the claims we have before us Your
9 Honor
10 If there are no further questions then Id
11 like to reserve the rest of my time
12 CHIEF JUSTICE ROBERTS Thank you
13 Mr Phillips
14 Mr Perry
15 ORAL ARGUMENT OF MARK A PERRY
16 ON BEHALF OF THE RESPONDENTS
17 MR PERRY Mr Chief Justice and may it
18 please the Court
19 That path between Scylla and Charybdis was
20 charted in Bilski and Mayo Bilski holds that a
21 fundamental economic principle is an abstract idea and
22 Mayo holds that running such a principle on a computer
23 is quote not a patentable application of that
24 principle Those two propositions are sufficient to
25 dispose of this case
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1 If Bilski and Mayo stand Alices patents
2 fail Therefore Mr Phillips and his friends are
3 asking this Court to change the standard even though
4 this Court has had three unanimous decisions in the last
5 four terms establishing what the Court called a myriad
6 a wellshyestablished standard
7 On the abstract idea Justice Ginsburg you
8 asked Mr Phillips whats the difference between hedging
9 and this claim There is no difference This is
10 hedging It is hedging against credit default rather
11 than price fluctuation but it is simply hedging
12 And Mr Phillips stood up for 26 minutes and
13 never once referred to the patent Lets look at what
14 the inventor the soshycalled inventor said about this
15 invention This is at JA 293 to 94 in the
16 specification
17 This claim has simply two steps Its very
18 simple First debiting and crediting on a realtime
19 basis the relevant shadow records and second by
20 periodically affecting corresponding payment
21 instructions Those are direct quotes Debit credit
22 and pay Your Honor you cant get much more simple
23 than that
24 Mr Phillips suggests well we have
25 multilateral transactions global things chronological
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1 time zones and so forth None of those are claimed
2 Your Honor Those are all recited in specification
3 The claims read on a single transaction involving two
4 parties
5 JUSTICE BREYER Can I ask you at some
6 point not necessarily this second to say in my shyshy this
7 is just shyshy you know you have an opinion for a court
8 Different judges can have different interpretations
9 All youre getting is mine okay
10 But I think its pretty easy to say that
11 Archimedes cant just go to a boat builder and say
12 apply my idea All right Everybody agrees with that
13 But now we try to take that word apply and give
14 content to it
15 And what I suspect in my opinion Mayo did
16 and Bilski and the other cases is sketch an outer shell
17 of the content hoping that the experts you and the
18 other lawyers and the shyshy the circuit court could fill
19 in a little better than we had done the content of that
20 shell
21 So so far youre saying well this is
22 close enough to Archimedes saying apply it that we
23 neednt go further
24 Now will you at some point in the next few
25 minutes give me your impression of if it were necessary
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1 to go further what would the right words or example be
2 MR PERRY Your Honor as shyshy Justice
3 Breyer as to abstract ideas the PTO has filled in that
4 shell by listing economic concepts legal concepts
5 financial concepts teaching concepts dating and
6 interpersonal relationships and generally how business
7 should be conducted as examples of those things that are
8 likely abstract which of course all follow directly
9 from Bilski and the discussion this Court had in Bilski
10 And this patent shyshy these patents fall squarely within
11 that
12 Congress in the AIA confirmed that
13 reading Congress in the CBM method said business
14 methods that are subject to special scrutiny shyshy that is
15 dubious patents shyshy include methods and corresponding
16 apparatus which is what we have here that pertain to
17 data processing in the financial services industry and
18 do not offer a technological solution That describes
19 Alices patents to a letter Your Honor So that we
20 have shyshy
21 JUSTICE SOTOMAYOR What do you think is a
22 technological solution
23 MR PERRY Your Honor shyshy
24 JUSTICE SOTOMAYOR How could they if at
25 all written their patents to shyshy to make shyshy to make
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1 their software eligible What would shyshy what do they
2 need shyshy would have needed to have added
3 MR PERRY Justice Sotomayor they have no
4 software first Theyve never written software
5 Theyve never programmed a computer So thats a
6 nonexistent set
7 Second there are many technological
8 solutions to trading and settlement problems For
9 example data compression These shyshy these trading
10 platforms involve the movement of very large quantities
11 of data around the world The physical pipes that is
12 the fiber optic cables and data lines are limited
13 There are very sophisticated algorithms for both
14 security and speed to move data through the transmission
15 lines in novel and useful ways that could well be
16 patented
17 Nothing like that is claimed here To come
18 back to where I started if you look for example at
19 Claim 65 in the 510 patent as Mr Phillips reads it
20 it literally reads on a twoshyparty escrow to sell a
21 house so long as the escrow agent is typing this stuff
22 into the HUDshy1 using a computer That has nothing to do
23 with multilevel shyshy
24 CHIEF JUSTICE ROBERTS Well thats a
25 little more complicated He referred us to Joint
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1 Appendix Page 159 which is not a change in how
2 computers work But it is shyshy constitutes the
3 instructions about how to use the computer and where it
4 needs to be affected And just looking at it it looks
5 pretty complicated There are a lot of arrows and
6 they shyshy you know different things that go shyshy
7 (Laughter)
8 CHIEF JUSTICE ROBERTS Well but I mean
9 you know it shyshy in different directions And I
10 understand him to say that in each of those places
11 thats where the computer is needed
12 MR PERRY Mr Chief Justice Figure 16 has
13 nothing to do with the invention asserted against my
14 client in this case There are two inventions in this
15 patent One invention involving multilateral contract
16 formation is not asserted against my client And all of
17 these drawings pertain to that The only drawings that
18 pertain to the asserted claims are 25 and 33 to 37 And
19 that was established below and its established in this
20 Court And Mr Phillips has never disputed it
21 So the claim hes pointed the Court shyshy the
22 figure hes pointed the Court to has nothing to do with
23 the invention Its for a different invention that is
24 not at issue in this case
25 Remember there are hundreds and hundreds of
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1 pages of these patents They all pertain to the other
2 invention Thats why in the back of our red brief we
3 excerpted the very little bit that actually pertains to
4 this You sort of tack on patent shyshy the tack on claim
5 that Mr Phillips is asserting here Its 4 columns
6 Its less than five pages in the printed appendix that
7 actually pertains to this invention And it contains no
8 disclosure whatever
9 Justice Scalia to your question about how
10 the computer does it Of course a patent that
11 describes sufficiently how a computer does a new and
12 useful thing whether its data compression or any other
13 technological solution to a business problem a social
14 problem or a technological problem would be within the
15 realm of the shyshy of the patent laws That is what the
16 patent laws have always been for
17 This is not such a patent And the reason
18 for that is this is a preshyBilski set of patents These
19 were prosecuted under the old State Street test where
20 all the applicant had to claim was a result
21 JUSTICE KENNEDY Would you give me shyshy
22 again you already did it once shyshy an example of a
23 business process patent shyshy of a business process idea
24 and invention that is patentable
25 MR PERRY Your Honor there are many
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1 examples One would be a technological solution to a
2 business problem So that for example shyshy Ill give a
3 different example There are many applications today
4 The Court may be familiar with streaming video to watch
5 video on your computer
6 It is not possible to get enough data
7 through existing lines in its raw format The data has
8 to be manipulated in order to see live video So if you
9 want to watch TV on your phone for example
10 Those algorithms those inventions are
11 undoubtedly technological And if they are used in a
12 trading platform or a hedging system or something else
13 that wouldnt disable them And this is what the Diehr
14 case shyshy
15 JUSTICE KENNEDY Well I shyshy I shyshy in my
16 language Ive called that mechanical rather than
17 process Can you give me an example of process
18 MR PERRY Yes Your Honor The process in
19 that example would be a computer running the particular
20 data compression algorithm
21 JUSTICE KENNEDY But thats how to make
22 a shyshy thats how to make a machine work better
23 MR PERRY Yes Your Honor
24 JUSTICE KENNEDY Im asking you Is there
25 any business process any business activity that is
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1 susceptible to a patent a pure patent innovations that
2 deserve patents
3 MR PERRY Your Honor again a
4 technological solution to a business problem could well
5 be whether its a method or a process is equivalent
6 Again Congress said method in a corresponding shyshy
7 JUSTICE KENNEDY Can you give me an
8 example
9 MR PERRY I thought the data compression
10 example was a good one Ill try an encryption
11 technology Many of these trading platforms you know
12 dealing with securities and money would require some
13 sort of security devices You could have a process for
14 securely transmitting data would be another computer
15 implemented technological solution to a business
16 problem Again nothing like that claimed here
17 JUSTICE SOTOMAYOR How about eshymail and
18 just word processing programs
19 MR PERRY Your Honor a program shyshy let me
20 try it this way to both of your questions In our view
21 if what is claimed as the inventive contribution under
22 Mayo shyshy in other words if we have an abstract idea as
23 we do here and what is claimed is the inventive
24 contribution for Step 2 is the computer then the
25 computer must be essential to that operation and
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1 represent an advancement in computer science or other
2 technology And we know thats not met here Justice
3 Sotomayor because shyshy
4 JUSTICE SOTOMAYOR So youre saying no to
5 eshymail and word processing
6 MR PERRY Your Honor I think at a
7 point shyshy
8 JUSTICE SOTOMAYOR They certainly have
9 functionality and shyshy and improvement of functionality
10 for the user
11 MR PERRY At a point in time in the past
12 I think both of those would have been technological
13 advances that were patentable
14 JUSTICE SOTOMAYOR How
15 MR PERRY Today shyshy because they would have
16 provided a technological solution to a then unmet
17 problem Today reciting and do it on a word processor
18 is no different than and do it on a typewriter or shyshy and
19 do it on a calculator
20 The inventive contribution component which
21 uses specifically the language of conventional and
22 routine and well understood will evolve with
23 technology Thats why its different than the abstract
24 idea component
25 And here we know that these patents dont
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1 claim anything that was not conventional well
2 understood and routine We went through that in great
3 detail and Alice has never disputed a word of it They
4 just say youre not supposed to do that analysis even
5 though the Court 9shy0 in Mayo said we should
6 And in this case its very important to
7 look at what Alices own experts said on the subject
8 This is not our expert This is Alices expert And
9 this is at Page 1327shy28 of the Joint Appendix It is
10 possible to do the business methods of maintaining
11 accounts adjusting accounts and providing an
12 instruction without a computer or other hardware
13 And then Justice Breyer directly to your
14 abacus If someone had thought of this invention
15 soshycalled invention 100 years ago they might have
16 implemented it in a nonelectronic manner using various
17 precomputing tools such as an abacus or handwritten
18 ledgers
19 We know from Benson the Courts seminal
20 computer implementation case that if you can do it by
21 head and hand then the computer doesnt add anything
22 inventive within the meaning of the 101 exception That
23 is the holding of Benson And the Court reiterated that
24 in Mayo
25 Flook said exactly the same thing If you
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1 can do it with pencil and paper then the computer is
2 not offering anything that the patent laws are or should
3 be concerned with
4 It is only where the method will not work
5 without a computer which is not these claims and where
6 the computer itself is doing something that the patent
7 law is willing to protect
8 CHIEF JUSTICE ROBERTS What if shyshy what if
9 you can do it without a computer but its going to
10 take you know 20 people a hundred years In other
11 words theoretically you can replicate what the
12 computer does shyshy
13 MR PERRY Two answers
14 CHIEF JUSTICE ROBERTS shyshy but its
15 impractical without looking to do it on the computer
16 MR PERRY Mr Chief Justice first these
17 claims literally read as Alice reads them on a single
18 transaction between two parties so its not 20 people
19 for a hundred years Its one person sitting in a room
20 so thats not a problem
21 Second if what is being claimed is the
22 necessary speed or efficiency or data crunching
23 capabilities if you will of a computer then it would
24 have to be claimed and theres nothing claimed here
25 All that is claimed shyshy and my friend is going to stand
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1 up on rebuttal and tell you all that the expert said
2 well what is claimed is a computer but its just a
3 computer It just says a computer configured too It
4 doesnt say that the computer actually has to shyshy
5 JUSTICE BREYER Yeah but the trouble with
6 that particular test is as I think partly the Chief
7 Justice said how long et cetera and then add to that
8 though you could do it without a computer what happens
9 at the end of the line is the automobile engine goes off
10 or it begins to sputter or it turns left
11 You see its possible to take Archimedes shyshy
12 shyshy you know I use that example purposely to call
13 attention to the problem You can take those things
14 and youre not just saying apply it and youre not even
15 just saying shyshy you are saying use the computer but at
16 the end of the road something physical in the world
17 changes and everybody would say now thats shyshy that
18 will falls within I mean probably I mean my
19 hesitation shows Im looking for the right words
20 MR PERRY Justice Breyer your point is
21 the reason that it is equally fallacious to suggest on
22 the one hand as Alice and IBM does that simply
23 reciting a computer is a magic key that gets you through
24 101 and you never have to any other inquiry and what
25 some of folks the amici on the other side say which
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1 is that computers or software are never eligible Both
2 of those things have to be wrong because what the Court
3 said in Bilski was future innovation is too uncertain
4 We are not going to do that as a Court And the Court
5 laid out an approach using abstract ideas in Bilski and
6 inventive contribution in Mayo that is flexible enough
7 to take into account that innovation and to deal with
8 particular claims in context which is why at the end
9 of the day we have to come back to these patents and
10 decide which shyshy
11 JUSTICE KAGAN Mr Perry before we get
12 back to these matters you said to Justice Scalia if a
13 patent sufficiently describes how a computer will
14 implement an idea then its patentable So how
15 sufficiently does one have to describe it What do we
16 want a judge to do at this threshold level in terms of
17 trying to figure out whether the description is
18 sufficient to get you past it
19 MR PERRY If I can answer in two steps
20 Justice Kagan First in the negative What the
21 applicant or patentee must do shyshy must not do is simply
22 describe the desired result That would take us back to
23 State Street That would simply say I claim a magic
24 box that buys high and sells low or vice versa I
25 suppose I claim a magic box for investing Thats what
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1 these patents do
2 Then to put it in the affirmative and in the
3 language of Mayo the claim has to recite something
4 significantly more something significantly more than
5 the abstract idea itself That would be a contextual
6 analysis based on the claims and specifications and file
7 history and we know that some devices some methods
8 some programming will pass that
9 It is not going to be a brightshyline rule and
10 thats one of the tugshyofshywar issues that this Court and
11 the Federal Circuit have been having in these cases
12 The Federal Circuit wants brightshyline rules All
13 computers are in or all computers are out
14 This Court has been more contextual This
15 Court has been more nuanced This Court has looked at
16 things in a more robust way
17 JUSTICE KAGAN Youre not suggesting that
18 specific code is necessary
19 MR PERRY No Your Honor I think the shyshy
20 actual description of the programming is a 112 problem
21 I agree with that A 112 issue That is the realm of
22 the written description requirement What is a 101
23 problem is it is on the applicant to do more than simply
24 describe the results simply say A magic box that does
25 intermediate settlement And we can tie that back to
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1 this particular prosecution the 510 patent which is
2 the method patent
3 The examiner rejected it Under Section
4 101 the examiner said this is an abstract idea You
5 cant have this patent And the only change that this
6 applicant made was to add in the adjusting step
7 electronic adjustment It put in one word
8 electronic adjustment And under State Street which
9 is what this patent is prosecuted under that was
10 enough because the result of adjusting run through a
11 computer is enough
12 Under current law that cant be enough
13 That just cant get a patent over the line because this
14 Court said in Mayo and I got to quote this language
15 Simply implementing a fundamental principle on a
16 physical machine namely a computer is not a patentable
17 application of that principle Thats all that Alice
18 has done
19 These are preshyBilski patents They never
20 should have been issued General Verrilli will stand up
21 and address that point And certainly under current
22 law shyshy one point on the AIA Congress did not send all
23 this to the administrative process Congress created
24 two avenues the courts and the PTO to use the
25 standards Essentially it ratified Bilski and Mayo and
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1 said we agree with what you all are doing at the
2 Supreme Court and the existing standards are good enough
3 for us This is a judicial problem And that is a good
4 reason The abstract shyshy
5 JUSTICE GINSBURG The Federal Circuit in
6 this case split in many ways and it had our decisions
7 to deal with You said given Bilski and Mayo this is
8 an easy case What is the instruction that escaped a
9 good number of judges on the Federal Circuit How would
10 you state the rule
11 MR PERRY Your Honor I think theres a
12 significant element to the Federal Circuit that
13 disagrees with Mayo and has been resistant in applying
14 it Chief Judge shyshy former Chief Judge Michelle filed a
15 brief in this Court essentially saying Mayo is a
16 lifeshysciences case You should limit it to that because
17 if you apply it to everything else then these patents
18 are no good
19 Mayo we submit is a technologyshyneutral
20 industryshyneutral exceptionshyneutral framework that can
21 be used to answer all of these questions This is not
22 the death of software patents The software industry is
23 all before this Court saying this is fine with us
24 Every company in the United States practically except
25 for IBM is saying go ahead This will not affect
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1 software patents
2 Justice Ginsburg this Courts precedents
3 are clear They are unanimous They just need to be
4 applied To suggest that there is confusion that needs
5 to be addressed by retreating beating a retreat from
6 recent unanimous decisions would simply reward
7 intransigence difficulty refusal to adhere to what are
8 clear precedents because shyshy
9 JUSTICE KAGAN Should we be concerned
10 Mr Perry that there are old patents that in fact could
11 meet the test that you set forth but wont because they
12 were written in a different time and so used much more
13 general language
14 MR PERRY Your Honor the applicant or the
15 patent holder would have the opportunity to institute a
16 reexamination proceeding or some sort of administration
17 process to address that issue
18 And second it should be noted this is a
19 very small problem There are 2 million outstanding
20 patents in the United States In the last four fiscal
21 years there were 22000 infringement litigations
22 instituted but since Bilski there have only been 57
23 district court decisions on Section 101 issues There
24 have only been 12 Federal Circuit decisions total on
25 computer implementation
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1 We are talking about a group of patents
2 Justice Kagan thats way out at the tail end of
3 distribution Most patents never have a 101 challenge
4 This is not an issue with cotton gins and other things
5 This is a problem for the most marginal
6 most dubious most skeptical patents the ones that this
7 Court in Bilski shyshy and remember what Bilskis holding
8 is The majority said they are processes but it did
9 not say they are eligible
10 Thank you Mr Chief Justice
11 CHIEF JUSTICE ROBERTS Thank you counsel
12 General Verrilli
13 ORAL ARGUMENT OF DONALD B VERRILLI JR
14 ON BEHALF OF THE UNITED STATES AS AMICUS
15 CURIAE SUPPORTING RESPONDENTS
16 GENERAL VERRILLI Mr Chief Justice and
17 may it please the Court
18 An abstract idea does not become
19 patentshyeligible merely by tacking on an instruction to
20 use a computer to carry it out A computer makes a
21 difference under Section 101 when it imposes a
22 meaningful limit on the patent claim That occurs when
23 the claim is directed at improvement in computing
24 technology or an innovation that uses computing
25 technology to improve other technological functions
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1 Thats the test that we believe is most faithful to this
2 Courts precedents in Bilski and Mayo It keeps patents
3 within their traditional and appropriate domain and it
4 is capable of being administered consistently by Courts
5 and by PTO examiners
6 JUSTICE GINSBURG How do you answer the
7 argument that your view would extinguish businessshymethod
8 patents and make all software ineligible for patent
9 protection
10 GENERAL VERRILLI Yeah with shyshy let me
11 address software patents first because that I think is
12 obviously a significant question And its just not
13 correct to say that our approach would make software
14 patenting ineligible Any software patent that improves
15 the functioning of the computer technology is eligible
16 Any software patent that improves shyshy that is used to
17 improve another technology is eligible For example
18 the patent in the shyshy in the Diehr case is one in
19 which shyshy
20 JUSTICE SOTOMAYOR Why do we need to reach
21 this in that shyshy reach software patents at all in this
22 case
23 GENERAL VERRILLI Well shyshy
24 JUSTICE SOTOMAYOR Whats the necessity for
25 us to announce a general rule with respect to software
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1 There is no software being patented in this case
2 GENERAL VERRILLI Well I shyshy
3 JUSTICE SOTOMAYOR Theres a systems
4 GENERAL VERRILLI Well I shyshy I think shyshy
5 well they shyshy they shyshy theres a process being and shyshy and
6 one can think of software patents as process patents
7 And I think thats why my friends on the other side are
8 saying the sky is falling because they shyshy they are
9 interpreting what were saying about that when a
10 computer makes shyshy when a computers involvement makes
11 something eligible under 101 its calling those into
12 question and it doesnt
13 JUSTICE SOTOMAYOR Do you think we have to
14 reach the patentability of software to answer this case
15 GENERAL VERRILLI Well I think you can shyshy
16 I think the answer to that question is no not
17 necessarily You can decide it by saying that shyshy that
18 Bilski answers the question whether this is an abstract
19 idea because this form of hedging is really no
20 different than the form of hedging as a conceptual
21 matter at issue in Bilski And then Mayo answers the
22 question of whether the use of a computer in this case
23 adds enough to the abstract idea beyond conventional
24 steps because here all we have after all is just
25 conventional use of computing technology no computer
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1 innovation such that you dont qualify under 101 You
2 could take that approach
3 But it is important to the United States
4 that we shyshy and to our patent examiners that we get some
5 clarity if we can I think the clarity could come from
6 the text that I propose which I want to reiterate shyshy
7 JUSTICE SOTOMAYOR Well shyshy
8 JUSTICE BREYER Could shyshy could shyshy could you
9 go on with that because you were just getting to the
10 point where I think you say a computer improvement that
11 in fact leads to an improvement in harvesting cotton is
12 an improvement through a computer of technology so it
13 qualifies
14 But then I think you were going to say or I
15 got this also from the brief a computer improvement
16 that leads to an improvement in the methods of selling
17 bonds over the telephone is not an improvement in
18 technology reached by the computer Am I right about
19 the distinction youre making
20 GENERAL VERRILLI I dont think theres a
21 yes or no answer to that question
22 JUSTICE BREYER What is your view Yeah
23 what is shyshy how do we deal with just that problem
24 GENERAL VERRILLI If there is a genuine
25 innovation in the functioning of the computer shyshy
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1 JUSTICE BREYER Yes
2 GENERAL VERRILLI shyshy such that business
3 processes shyshy
4 JUSTICE BREYER Weve got that Yes yes
5 We got the computer But then it doesnt improve the
6 computer but rather it improves through the computer
7 the harvesting of cotton
8 Now youve got it in what you said was your
9 second category which is an improvement through the
10 computer of a technology And I thought in your brief
11 you were distinguishing an improvement through the
12 computer of a human activity that is not a technology
13 and in particular to pick an example of that
14 something in finance or something in business
15 Now am I right about the distinction youre
16 making
17 GENERAL VERRILLI Yeah that shyshy
18 JUSTICE BREYER If Im not right what is
19 the distinction
20 GENERAL VERRILLI That is generally the
21 line were drawing Frankly shyshy
22 JUSTICE BREYER And how is that justified
23 GENERAL VERRILLI I do want shyshy
24 JUSTICE BREYER That shyshy that is Judge Dyk
25 in shyshy in Bilski in the Federal circuit 4 people sort of
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1 picked it up maybe 5 didnt pick it up Would you say
2 a few words about it
3 GENERAL VERRILLI Sure About shyshy let me go
4 to Bilski there in that I do think while shyshy while
5 certainly the Court held that the term process got a
6 natural construction which could include business
7 methods it seems to me that thats not all the Court
8 said in Bilski The Court also said that it was
9 historically and traditionally quite rare that business
10 methods were patent eligible
11 It also said that shyshy that the shyshy that courts
12 and the PTO examiners should use the abstract ideas
13 exception to 101 to police the appropriate boundary
14 It also said that the
15 machineshyorshytransformation test that the United States
16 advocated remained a useful tool And of course that
17 directs to you seeing whether there is a technology
18 application
19 And of course the holding in Bilski was
20 that the shyshy the method for hedging risk was ineligible
21 because it was an abstract idea and I cant imagine
22 that if in Bilski the shyshy the claim had been exactly the
23 same but had added use a computer to carry out some of
24 these standard random analysis functions that are
25 claimed by the patent that you would have found it to
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1 be patent eligible
2 And I shyshy I would submit for the Court that
3 the key point here I think is that now given where
4 the Court shyshy what the Court has held in Bilski given
5 what its held in Mayo the abstract ideas exception is
6 really the only tool left to deal with what I shyshy what I
7 think I fairly read Bilski as saying is a significant
8 problem the proliferation of patents of business
9 methods
10 JUSTICE KENNEDY Is there an example that
11 you can give us of a shyshy what we can call a business
12 process that is patentable a process that doesnt
13 involve improving the workings of a computer
14 GENERAL VERRILLI I shyshy I think its going
15 to be difficult for me to do that I think for
16 example if you had a business method a process for
17 additional security pointshyofshysale credit card
18 transactions using particular encryption technology
19 that might well be patent eligible Its a technology
20 that it makes conduct of business more efficient or
21 effective
22 But there is a technological link here and
23 we do think thats critical to our shyshy to our point of
24 view with respect to the case And I shyshy and I do think
25 remember that when we say something is not patent
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1 eligible were not saying they cant do it Were
2 saying they cant monopolize it
3 And the concern in a situation like this one
4 is that if this is patent eligible its hard to see
5 why for example the first person who came up with a
6 frequent flier program wouldnt have been able to claim
7 a patent there because after all thats a business
8 method for improving customer loyalty implemented on a
9 computer
10 CHIEF JUSTICE ROBERTS General I shyshy you
11 mentioned a while ago the need for greater clarity and
12 certainty in this area And Im just wondering in your
13 brief youve got a nonshyexhaustive of factors to
14 consider and there are 6 different ones And Im just
15 doubtful that thats going to bring about greater
16 clarity and certainty
17 GENERAL VERRILLI I take shyshy I take the
18 point Mr Chief Justice but I think the key is that
19 they are all directed to answering the question of
20 whether the innovation that is claimed and is an
21 innovation in either A the improvement of a computers
22 functioning or B the use of computer technology to
23 improve the functioning of another technological
24 process and a case like Diehr would be in the latter
25 category
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1 And so I do think that thats the key
2 benchmark Thats the baseline Thats the test that
3 we do think can be applied clearly and consistently by
4 the courts or the PTO And it avoids the risk of things
5 like frequent flier programs or the Oakland As money
6 ball methods for evaluating the contributions in
7 individual baseball players make or any one of a host of
8 other things that our intuitions tell us just dont
9 belong in the patent system
10 Thats the shyshy drawing that line keeps them
11 out not drawing that line lets them in And with all
12 due respect I dont think that the novelty and
13 nonobviousness filters that 102 and 103 really deal with
14 that problem effectively because when you get to
15 nonobviousness in 103 for example youll be asking a
16 different question
17 If you take the frequent flier program you
18 would say well is this innovation in building consumer
19 loyalty something that would have been obvious to
20 somebody who runs an airline Its totally divorced
21 from the question of technology at that point and
22 therefore I dont think youre going to get the screen
23 that you need to get in order for the patent system to
24 be confined to its traditional and appropriate scope
25 If there are no further questions thank
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1 you
2 JUSTICE GINSBURG I have a question about
3 how do you identify an abstract concept The shyshy a
4 natural phenomenon a mathematical formula those are
5 easy to identify but there has been some confusion on
6 what qualifies as an abstract concept
7 GENERAL VERRILLI We would define
8 abstract shyshy an abstract concept as a claim that is not
9 directed to a concrete innovation in technology
10 science or the industrial arts So its the shyshy its
11 abstract in the sense that it is not a concrete
12 innovation in the traditional realm of patent law
13 Thank you
14 CHIEF JUSTICE ROBERTS Thank you General
15 Mr Phillips you have four minutes
16 remaining
17 REBUTTAL ARGUMENT OF CARTER G PHILLIPS
18 ON BEHALF OF THE PETITIONERS
19 MR PHILLIPS Thank you Mr Chief Justice
20 Id just like to make a few points
21 First of all with respect to the question
22 you asked which is looking at 159 et cetera all I can
23 tell you is that if you look at claim 33 it talks about
24 matched orders the matched orders that are described in
25 286 and 287 and then makes specific reference to 159
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54
1 and that flow chart thats there And its all designed
2 as a package Its only one element of the shyshy of the
3 invention but it is a central element and its an easy
4 one to understand And it goes well beyond simply the
5 notion of hedge shyshy hedge against settlement risk and do
6 it by a computer
7 JUSTICE SOTOMAYOR Your adversary says that
8 his shyshy the appendix to his brief are the only patents at
9 issue that the flow charts are not at issue in this
10 case
11 MR PHILLIPS Theres no basis for that
12 statement Your Honor There shyshy remember this went off
13 on a very truncated litigation process So theres shyshy
14 you know we shyshy we got cut off at the beginning of it
15 Theres been no construction of the shyshy of the claims
16 and shyshy and obviously these are specifications that go
17 to how you interpret the claim
18 JUSTICE SOTOMAYOR If we were to say that
19 there are no business patents shyshy
20 MR PHILLIPS Yes
21 JUSTICE SOTOMAYOR shyshy would your patent
22 survive at all
23 MR PHILLIPS No I dont shyshy I dont
24 believe so I think theres no question And you
25 know General Verrilli could not have been any plainer
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1 in his statement of how he wants to interpret the
2 abstract idea concept
3 JUSTICE SOTOMAYOR Yes he wants to say no
4 business patents
5 MR PHILLIPS No business shyshy just another
6 way of saying no business methods And you know the
7 Court rejected that And it seems to me extraordinary
8 to say Congress didnt reject no business methods in
9 101 but were going to do shyshy were going to manipulate
10 the judicial exception to accomplish precisely that same
11 thing It seems to me thats wholly inappropriate
12 Justice Ginsburg you asked my shyshy my friend
13 here you know whats his test He didnt answer that
14 question youll notice because he doesnt have an
15 answer His basic argument is whatever you do just
16 kill this patent
17 And if I were in his shoes I suppose Id
18 take that same position I think whats absolutely
19 clear is that the test ought to be one that is
20 structured as a very coarse filter not the kind of
21 filter that hes pushing for where it changes over time
22 I mean I thought his shyshy I thought his response to one
23 of the questions about eshymail and word processing that
24 Justice Sotomayor asked is over time it would change
25 Well thats exactly what 102 and 103 are for That is
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1 not the purpose of shyshy of Section 101
2 And then he uses the example of encryption
3 I guarantee you if we were arguing about encryption in
4 this case he would say to me that thats an abstract
5 principle because encryption is a concept thats been
6 around since time immemorial George Washington used
7 it Everybody has used encryption
8 And a question again thats not the
9 solution to these problems The question is how did we
10 go about doing it And we go beyond the basics of
11 simply saying use a computer and thats what we ask
12 this Court to focus on and to evaluate
13 As to the frequent flier program its
14 pretty clear to me that even though it was a novel idea
15 in some sense the concept itself would have been viewed
16 in shyshy in the KSR fashion as quite obvious as a means of
17 improving customer loyalty
18 There are solutions here Giving us 101
19 pass doesnt create a monopoly It just gets us to the
20 102 and 103 inquiries that are at the heart of what the
21 patent laws shyshy and 112 that are at the heart of what the
22 patent laws ought to be dealing with
23 If there are no further questions Your
24 Honor thank you
25 CHIEF JUSTICE ROBERTS Thank you counsel
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1 The case is submitted
2 (Whereupon at 1105 am the case in the
3 aboveshyentitled matter was submitted)
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
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58
A add 714 1023 algorithm 3320 41 automatically
As 525 3621 387 algorithms apply 72425 111
am 115 32 416 3013 3310 2019 281213 automobile 389
572 added 302 Alice 13 34 2822 3814 available 99
abacus 61213 4923 363 3717 4217 avenues 4124
710 1018 additional 5017 3822 4117 applying 4213 avoids 524
1325 3614 3617
address 4121 4317 4511
Alices 271 2919 3678
approach 226 395 4513 B
ability 1514 addressed 435 allow 94 472 B 121 29 4413
able 1511 167 addressing 181 allows 97 242 appropriate 5122
1919 516 adds 4623 amazing 2514 81516 1514 back 1621
aboveshyentitled adhere 437 amici 3825 453 4913 1922 2512
113 573 adjudication amicus 123 5224 3018 322
absolutely 125 241 210 4414 Archimedes 3991222
1215 159 adjusting 3611 analysis 424 281122 3811 4025
5518 41610 364 406 area 219 5112 ball 526
abstract 4267 adjustment 417 4924 argue 2518 Bank 17 35
48 6682023 418 analyze 1416 arguing 563 banks 95
721 8218 administered 1716 argument 114 bars 43
141920 1522 454 announce 4525 225812 33 baseball 527
165 181618 administration answer 119 37 41 144 based 423 406
2220 24925 4316 2219 247 18323 226 baseline 522
2621 277 administrative 3919 4221 26715 4413 basic 413 5515
2938 3422 171218 187 456 461416 457 5317 basically 1821
3523 395 242 4123 4721 551315 5515 2319
405 414 424 adopt 203 answering 5119 arguments basics 5610
4418 461823 adopted 31317 answers 3713 1415 basis 132 1512
491221 505 advancement 461821 arms 1625 1516 2719
53368811 351 anyway 1810 arrangements 5411
552 564 advances 3513 apparatus 2916 131 beating 435
accept 102 adversary 547 APPEARAN arrows 315 beginning 163
accomplish advice 1715 116 art 1919 5414
5510 advocated 4916 appears 820 arts 2124 5310 begins 3810
account 55 618 affect 4225 appendix 1910 aside 1422 157 behalf 11719
397 affirmative 402 311 326 369 asked 2314 122 24710
accounts 823 agent 52 3021 548 278 5322 214 38 2616
9356 3611 ago 318 2224 applicant 3220 551224 4414 5318
3611 3615 5111 3921 4023 asking 193 believe 1316
accurately 2413 agree 920 2021 416 4314 221213 273 1416 2421
acknowledges 221 2418 application 3324 5215 255 264 451
1121 4021 421 2623 4117 aspect 517 5424
act 99 2017 agrees 2812 4918 asserted 3113 belong 529
activities 229 ahead 4225 applications 311618 benchmark 522
activity 2122 AIA 2912 4122 333 asserting 325 Benson 361923
3325 4812 airline 5220 applied 434 attaching 124 best 161124
actual 4020 AL 18 523 attention 3813 better 1610 albeit 923 applies 31418 Attorney 2021 216 2819
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3322 brightshyline 409 2313 37 71 4338 5519 beyond 115 4012 5317 checks 618 5614
1312 4623 bring 5115 case 3412 46 Chief 339 clearly 211 251 544 5610 broad 248 116 1524 261217 3024 523
Bilski 313 46 broader 225 2022 213 31812 378 client 311416 415 1722 browsing 228 2211 2313 371416 386 close 2822 2224 2329 builder 2811 2625 311424 421414 4410 CLS 17 35 262020 271 building 5218 3314 36620 441116 5110 1120 2816 2999 built 2324 426816 5118 531419 coarse 247 3935 4125 business 168 451822 461 5625 5520 427 4322 1749 203 461422 5024 chits 611 code 1213 142 447 452 2124 222122 5124 5410 chronological 1916171720 461821 4825 2311 29613 564 5712 1512 2725 4018 49481922 32132323 cases 244 2816 chronologically coffee 1211 5047 3322525 4011 423 colleagues 116
Bilskis 447 34415 3610 catalogues 2512 circuit 2818 college 58 bit 323 48214 4969 262 401112 425 columns 325 blocks 54 508111620 categorically 42912 4324 come 108 234 Bloomberg 517 5419 202 4825 3017 399
2115 225 554568 category 489 circumstances 475 boat 2811 businessshymeth 5125 318 1515 comes 1318 bonds 4717 457 CBM 2913 claim 416 2418 2018 231 bothering 118 buy 183 cellphones 228 2423 2522 coming 923 bound 1521 buys 3924 central 95 543 264 27917 common 31120 boundary 4913 certain 1216 3019 3121 2157 bounds 1521 C certainly 518 32420 361 company 4224 box 392425 C 21 31 263 358 392325 403 competition
4024 cables 3012 4121 495 442223 4922 161011 Breyer 66823 calculator 3519 certainty 5112 516 53823 completely 921
74691923 call 3812 5011 5116 5417 1422 2320 85810 1012 called 721 275 cetera 387 claimed 41014 complex 126 1021 1523 3316 5322 281 3017 complicated 161418 171 calling 4611 Chakrabarty 34162123 1225 235 1922 2114 capabilities 2016 3721242425 3025 315 221216 239 3723 challenge 443 382 4925 component 2315 285 capable 141 change 186 5120 352024 293 3613 454 273 311 415 claims 1416 compression 38520 478 capture 2415 5524 171616 2419 309 3212 4722 4814 captures 2412 changes 3817 2424 2515 3320 349 48182224 card 5017 5521 2520 2648 computer 422
brief 211315 carefully 1725 chart 541 283 3118 516 621 710 2255 322 caricature 718 charted 2620 37517 398 71325 9113 4215 4715 72020 1417 charts 1911 406 5415 91824 1035 4810 5113 1716 549 clarity 4755 10725 1116 548 carry 4420 Charybdis 511116 124102024
briefs 1524 4923 1620 2619 class 59 13911 1479 1618 CARTER 117 checkbook 617 clear 1015 118 1421 15710
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1517 165 confess 1111 coterminous 4121 5324 181719 196 configured 383 2321 customer 518 describes 425 19814 206 confined 5224 cotton 914 444 5617 2918 3211 2025 211016 confirmed 2912 4711 487 cut 5414 3913 2117 2410 confusion 434 counsel 4411 description
D2521525 535 5625 3917 402022 D 312622 30522 Congress 178 countries 137 deserve 342 DC 1101719 31311 3210 1725 1856 course 719 designed 720
1223211 33519 1924 2014 1613 298 812 541 data 2917 309 34142425 2325 291213 3210 491619 desired 3922
30111214 351 361220 346 412223 court 1114 detail 363 3212 3367 3621 37156 558 3101317 detailed 1914 3320 34914 379121523 consequences 922 145 developed 2119 3722382334815 2011 1720 1939 device 207
dating 2953823 3913 consider 5114 2011216 devices 3413 day 612 813 411116 4325 consistently 2222 2321 407
910 399442020 4515 454 523 2618 27345 dicta 923 1012 deal 42023 46102225 constitutes 312 28718 299 Diehr 2322
172 187 397 4710121518 construction 31202122 3313 4518 427 47234725 48566 496 5415 334 36523 5124 506 5213481012 4923 consumer 5218 39244 4010 difference 921
dealing 4175013 51922 contains 327 40141515 2789 4421 1119 135546 5611 content 281417 4114 42215 different 421 151216 3412 computers 2819 4223 4323 79 919 1377 56224610 5121 context 2319 44717 4957 191 259 266
deals 814computers 243 398 498 50244 2888 3169 death 42221616 195 contextual 405 557 5612 3123 333 Debit 27212119 312 4014 Courts 3619 351823 4312 debiting 2718391 401313 contract 3115 432 452 4620 5114 decade 176computing contribution courts 2018 5216 decide 3910442324 4625 342124 3520 4124 454 difficult 817
4617concept 413 396 4911 524 159 5015 decision 161810 1419 contributions create 96 1712 difficulties 420
1811522 53368 526 241 251 difficulty 437 decisions 274552 56515 conventional 5619 direct 2721
426 43623 concepts 2944 3521 361 created 186 directed 4423 43242955 462325 244 4123 5119 539
declare 2010conceptual converting 141 creates 93 directions 319 default 27104620 copyrighted creation 518 directly 31415 define 537concern 513 1315 credit 231 322 2019 Departmentconcerned 373 Corporation 13 271021 5017 298 3613
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1112 391522 253 53911 corresponding curiae 123 211 144 1520 4024conduct 5020 2720 2915 4415 disagree 513
described 717conducted 297 346 current 4112 disagrees 4213
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disclosure 328 413 302021 4220 figure 1146 discuss 164 economy 1516 ESQ 1171921 excerpted 323 311222 3917 discussion 299 effective 1223 236913 exhausted 1813 file 406 dispose 2625 5021 essence 211 exist 420 131 filed 4214 dispute 325 effectively 5214 essential 1224 existence 1119 fill 2818 disputed 3120 efficacy 1224 3425 175 filled 293
363 1517 essentially 2016 existing 337 filter 248 5520 distance 2311 efficiency 3722 261 4125 422 5521 distinction 415 efficient 5020 4215 exists 42 filters 5213
4719 481519 either 202 established expert 3688 finance 2124 distinguishing 5121 311919 381 4814
4811 electronic 262 establishing expertise 1210 financial 1225 distribution 4178 275 experts 2817 29517
443 electronically et 18 387 5322 367 fine 103 2223 district 4323 2525 evaluate 97 extent 1924 4223 divorced 5220 element 811 5612 2323 265 finished 133 doing 91315 4212 5423 evaluating 526 extinguish 457 first 1111 2718
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economic 2621 fell 2010equivalent 345 4913 505 found 1525 294 fiber 3012escaped 428 5510 4925
economics 413 fifth 2217escrow 52 exceptionshyneu founders 2513
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four 1720 182 48172023 5599 3312 461920 1016 123 18912 2216 493 5014 gold 6101114 4920 138 14610 2311 275 511017 537 134 held 46 495 141120 164 4320 5315 5314 5425 good 611 167 5045 181618 2220
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functionality 277 425 432 group 1210 home 510 immemorial 3599 456 532 441 Honor 1814 566
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future 393 316 4225 hard 201423 3719 imposes 4421 479 493 514 hundreds 2010 impractical
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317 5317 1312 191013 4711 487 258 2825 gather 1325 2012 389 head 3621 improve 2121 general 121 544 hear 33 I 4425 4517
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48911 5121 410 53 issue 316 1010 31812 329 141919 5520 improvements International 3124 4021 3221 331521 kinds 248
324 17 35 4317 444 3324 34717 King 6924 improves 206 Internet 2514 4621 5499 3524814 1016 1124
451416 486 2524 issued 4120 3613 37814 knock 227 improving 206 interpersonal issues 4010 3716 3857 knocked 245
5013 518 296 4323 3820 391112 know 4611 53 5617 interpret 2112 3920 4017 54 109 141
inappropriate 2423 5417 J 425 4329 162212124 5511 551 JA 2715 442101116 17347 1918
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4220 interrelated 4824 5531224 541425 556 ineligible 2418 127 judges 288 429 5625 5513
45814 4920 intransigence judgment 2014 Justices 1720 KSR 5616 inference 185 437 judicial 1712 182 infringement intuitions 528 423 5510 justified 4822 L
4321 invalid 2011 judicially 317 laid 395 inherently 209 invented 107 Justice 122 33 K language 322 initial 1123 1425 3919 45 57 Kagan 14313 1112 3316 innovation 393 invention 714 51415 6168 142124 152 3521 403
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innovations 32724 3614 1123 1228 keep 1018 111 law 377 4112 341 3615 543 12141720 keeping 613 4122 5312
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instructions involve 3010 21514 2212 33152124 ledgers 3618 2721 313 5013 2216 23799 347 5010 left 3810 506
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level 920 3916 M 452 4621 4716 49710 needs 314 434 liberal 1715 machine 915 505 509 526 556 negative 3920 lifeshysciences 2120 3322 mean 69 716 558 never 1615
4216 4116 913 105 Michelle 4214 2713 3045 limit 4216 machineshyorshytr 1213 1310 midst 813 3120 363
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1 credit he comes here and says to you We didnt like
2 the result in Bilski we want you to say dont use
3 process in order to get there which is a statutory
4 interpretation come up with an extraordinarily
5 complicated way of looking at the exception and use that
6 to get to the exact same result
7 JUSTICE SOTOMAYOR Well youre doing a
8 very good job of proving shyshy
9 JUSTICE GINSBURG In Bilski Justice Breyer
10 did try to say that there wasnt that shyshy a whole lot of
11 distance between the four who thought business methods
12 were not patentable But he shyshy he also said something
13 else in shyshy in the other case Mayo Justice Scalia
14 asked you the question about doesnt that go to novelty
15 but didnt Justice Breyer say in Mayo that novelty can
16 be relevant to patent shyshy to patent eligibility He said
17 theres shyshy theres an overlap
18 MR PHILLIPS Well he said theres an
19 overlap Here in this context I think basically the
20 Respondents theory would mean that they are completely
21 coterminous And I dont think thats what the Court
22 meant And also we know from Diehr that theres got to
23 be at least some significant limitations on the extent
24 to which novelty has to be built into 101 That is the
25 province of 102 and 103 And as I said Congress
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1 modified the system of adjudication to create an
2 administrative mechanism that allows you to get to 102
3 and 103 And at least in context its important to
4 realize there have been 11 cases since that was created
5 9 of the 11 have been knocked down on 102 or 103 grounds
6 and not on 101 grounds And it seems to me thats the
7 answer to this problem is leave 101 as the coarse
8 filter If on its face it states these kinds of broad
9 abstract principles fundamental truths and even if it
10 says use a computer those should be struck down
11 JUSTICE SOTOMAYOR Which of the shyshy which of
12 the opinions below captures your position most
13 accurately
14 MR PHILLIPS I would guess it would be
15 Judge Moores opinion below that would capture ours most
16 correctly
17 JUSTICE SOTOMAYOR And if we were to think
18 your method claim is ineligible do you agree that your
19 systems and shyshy your medium and system claims fail as
20 well Do they rise and fall together
21 MR PHILLIPS No No I dont believe they
22 do rise and fall together I mean I think you could shyshy
23 if you wanted to interpret our medium claim shyshy I mean
24 our shyshy our method claims in a shyshy in particularly
25 abstract way I think you could still say that the
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1 system claims which clearly are shyshy are how to create a
2 computer system and how to implement it using that
3 method would be a much more concrete version of that in
4 a way that would take it out of 101 That said I
5 obviously believe that all of our claims satisfy 101
6 and should go on to the next stage
7 JUSTICE KAGAN Can I give you a
8 hypothetical Mr Phillips and you tell me how its
9 different or the same Lets say you know 30 years
10 somebody took a look around the world and said a lot of
11 people seem to order products by mail They get the
12 catalogues in the mail and then they send back their
13 return forms And lets say that one of the founders of
14 the Internet said wouldnt this be an amazing system
15 we could actually do this by computer and they had
16 patented that Is that the same
17 MR PHILLIPS I dont know if its the
18 same but I would shyshy I would argue that it could very
19 well be a patentable subject matter because shyshy but it
20 depends on how the claims play out
21 JUSTICE KAGAN No but exactly I mean
22 the claim would have said something along the lines of
23 you know theres this process by which people order
24 products and we want to do it over the Internet we want
25 to do it electronically and we will use a computer to
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1 do that to essentially take the process of mail order
2 catalogues and make it electronic
3 MR PHILLIPS I could certainly shyshy I think
4 I could write a claim shyshy a set of claims that I believe
5 would satisfy 101 And shyshy and to the extent that
6 youd shyshy that youd think those are no different than
7 the ones I have here then my argument is simply I think
8 I satisfy 101 with the claims we have before us Your
9 Honor
10 If there are no further questions then Id
11 like to reserve the rest of my time
12 CHIEF JUSTICE ROBERTS Thank you
13 Mr Phillips
14 Mr Perry
15 ORAL ARGUMENT OF MARK A PERRY
16 ON BEHALF OF THE RESPONDENTS
17 MR PERRY Mr Chief Justice and may it
18 please the Court
19 That path between Scylla and Charybdis was
20 charted in Bilski and Mayo Bilski holds that a
21 fundamental economic principle is an abstract idea and
22 Mayo holds that running such a principle on a computer
23 is quote not a patentable application of that
24 principle Those two propositions are sufficient to
25 dispose of this case
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1 If Bilski and Mayo stand Alices patents
2 fail Therefore Mr Phillips and his friends are
3 asking this Court to change the standard even though
4 this Court has had three unanimous decisions in the last
5 four terms establishing what the Court called a myriad
6 a wellshyestablished standard
7 On the abstract idea Justice Ginsburg you
8 asked Mr Phillips whats the difference between hedging
9 and this claim There is no difference This is
10 hedging It is hedging against credit default rather
11 than price fluctuation but it is simply hedging
12 And Mr Phillips stood up for 26 minutes and
13 never once referred to the patent Lets look at what
14 the inventor the soshycalled inventor said about this
15 invention This is at JA 293 to 94 in the
16 specification
17 This claim has simply two steps Its very
18 simple First debiting and crediting on a realtime
19 basis the relevant shadow records and second by
20 periodically affecting corresponding payment
21 instructions Those are direct quotes Debit credit
22 and pay Your Honor you cant get much more simple
23 than that
24 Mr Phillips suggests well we have
25 multilateral transactions global things chronological
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1 time zones and so forth None of those are claimed
2 Your Honor Those are all recited in specification
3 The claims read on a single transaction involving two
4 parties
5 JUSTICE BREYER Can I ask you at some
6 point not necessarily this second to say in my shyshy this
7 is just shyshy you know you have an opinion for a court
8 Different judges can have different interpretations
9 All youre getting is mine okay
10 But I think its pretty easy to say that
11 Archimedes cant just go to a boat builder and say
12 apply my idea All right Everybody agrees with that
13 But now we try to take that word apply and give
14 content to it
15 And what I suspect in my opinion Mayo did
16 and Bilski and the other cases is sketch an outer shell
17 of the content hoping that the experts you and the
18 other lawyers and the shyshy the circuit court could fill
19 in a little better than we had done the content of that
20 shell
21 So so far youre saying well this is
22 close enough to Archimedes saying apply it that we
23 neednt go further
24 Now will you at some point in the next few
25 minutes give me your impression of if it were necessary
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1 to go further what would the right words or example be
2 MR PERRY Your Honor as shyshy Justice
3 Breyer as to abstract ideas the PTO has filled in that
4 shell by listing economic concepts legal concepts
5 financial concepts teaching concepts dating and
6 interpersonal relationships and generally how business
7 should be conducted as examples of those things that are
8 likely abstract which of course all follow directly
9 from Bilski and the discussion this Court had in Bilski
10 And this patent shyshy these patents fall squarely within
11 that
12 Congress in the AIA confirmed that
13 reading Congress in the CBM method said business
14 methods that are subject to special scrutiny shyshy that is
15 dubious patents shyshy include methods and corresponding
16 apparatus which is what we have here that pertain to
17 data processing in the financial services industry and
18 do not offer a technological solution That describes
19 Alices patents to a letter Your Honor So that we
20 have shyshy
21 JUSTICE SOTOMAYOR What do you think is a
22 technological solution
23 MR PERRY Your Honor shyshy
24 JUSTICE SOTOMAYOR How could they if at
25 all written their patents to shyshy to make shyshy to make
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1 their software eligible What would shyshy what do they
2 need shyshy would have needed to have added
3 MR PERRY Justice Sotomayor they have no
4 software first Theyve never written software
5 Theyve never programmed a computer So thats a
6 nonexistent set
7 Second there are many technological
8 solutions to trading and settlement problems For
9 example data compression These shyshy these trading
10 platforms involve the movement of very large quantities
11 of data around the world The physical pipes that is
12 the fiber optic cables and data lines are limited
13 There are very sophisticated algorithms for both
14 security and speed to move data through the transmission
15 lines in novel and useful ways that could well be
16 patented
17 Nothing like that is claimed here To come
18 back to where I started if you look for example at
19 Claim 65 in the 510 patent as Mr Phillips reads it
20 it literally reads on a twoshyparty escrow to sell a
21 house so long as the escrow agent is typing this stuff
22 into the HUDshy1 using a computer That has nothing to do
23 with multilevel shyshy
24 CHIEF JUSTICE ROBERTS Well thats a
25 little more complicated He referred us to Joint
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1 Appendix Page 159 which is not a change in how
2 computers work But it is shyshy constitutes the
3 instructions about how to use the computer and where it
4 needs to be affected And just looking at it it looks
5 pretty complicated There are a lot of arrows and
6 they shyshy you know different things that go shyshy
7 (Laughter)
8 CHIEF JUSTICE ROBERTS Well but I mean
9 you know it shyshy in different directions And I
10 understand him to say that in each of those places
11 thats where the computer is needed
12 MR PERRY Mr Chief Justice Figure 16 has
13 nothing to do with the invention asserted against my
14 client in this case There are two inventions in this
15 patent One invention involving multilateral contract
16 formation is not asserted against my client And all of
17 these drawings pertain to that The only drawings that
18 pertain to the asserted claims are 25 and 33 to 37 And
19 that was established below and its established in this
20 Court And Mr Phillips has never disputed it
21 So the claim hes pointed the Court shyshy the
22 figure hes pointed the Court to has nothing to do with
23 the invention Its for a different invention that is
24 not at issue in this case
25 Remember there are hundreds and hundreds of
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1 pages of these patents They all pertain to the other
2 invention Thats why in the back of our red brief we
3 excerpted the very little bit that actually pertains to
4 this You sort of tack on patent shyshy the tack on claim
5 that Mr Phillips is asserting here Its 4 columns
6 Its less than five pages in the printed appendix that
7 actually pertains to this invention And it contains no
8 disclosure whatever
9 Justice Scalia to your question about how
10 the computer does it Of course a patent that
11 describes sufficiently how a computer does a new and
12 useful thing whether its data compression or any other
13 technological solution to a business problem a social
14 problem or a technological problem would be within the
15 realm of the shyshy of the patent laws That is what the
16 patent laws have always been for
17 This is not such a patent And the reason
18 for that is this is a preshyBilski set of patents These
19 were prosecuted under the old State Street test where
20 all the applicant had to claim was a result
21 JUSTICE KENNEDY Would you give me shyshy
22 again you already did it once shyshy an example of a
23 business process patent shyshy of a business process idea
24 and invention that is patentable
25 MR PERRY Your Honor there are many
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1 examples One would be a technological solution to a
2 business problem So that for example shyshy Ill give a
3 different example There are many applications today
4 The Court may be familiar with streaming video to watch
5 video on your computer
6 It is not possible to get enough data
7 through existing lines in its raw format The data has
8 to be manipulated in order to see live video So if you
9 want to watch TV on your phone for example
10 Those algorithms those inventions are
11 undoubtedly technological And if they are used in a
12 trading platform or a hedging system or something else
13 that wouldnt disable them And this is what the Diehr
14 case shyshy
15 JUSTICE KENNEDY Well I shyshy I shyshy in my
16 language Ive called that mechanical rather than
17 process Can you give me an example of process
18 MR PERRY Yes Your Honor The process in
19 that example would be a computer running the particular
20 data compression algorithm
21 JUSTICE KENNEDY But thats how to make
22 a shyshy thats how to make a machine work better
23 MR PERRY Yes Your Honor
24 JUSTICE KENNEDY Im asking you Is there
25 any business process any business activity that is
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1 susceptible to a patent a pure patent innovations that
2 deserve patents
3 MR PERRY Your Honor again a
4 technological solution to a business problem could well
5 be whether its a method or a process is equivalent
6 Again Congress said method in a corresponding shyshy
7 JUSTICE KENNEDY Can you give me an
8 example
9 MR PERRY I thought the data compression
10 example was a good one Ill try an encryption
11 technology Many of these trading platforms you know
12 dealing with securities and money would require some
13 sort of security devices You could have a process for
14 securely transmitting data would be another computer
15 implemented technological solution to a business
16 problem Again nothing like that claimed here
17 JUSTICE SOTOMAYOR How about eshymail and
18 just word processing programs
19 MR PERRY Your Honor a program shyshy let me
20 try it this way to both of your questions In our view
21 if what is claimed as the inventive contribution under
22 Mayo shyshy in other words if we have an abstract idea as
23 we do here and what is claimed is the inventive
24 contribution for Step 2 is the computer then the
25 computer must be essential to that operation and
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1 represent an advancement in computer science or other
2 technology And we know thats not met here Justice
3 Sotomayor because shyshy
4 JUSTICE SOTOMAYOR So youre saying no to
5 eshymail and word processing
6 MR PERRY Your Honor I think at a
7 point shyshy
8 JUSTICE SOTOMAYOR They certainly have
9 functionality and shyshy and improvement of functionality
10 for the user
11 MR PERRY At a point in time in the past
12 I think both of those would have been technological
13 advances that were patentable
14 JUSTICE SOTOMAYOR How
15 MR PERRY Today shyshy because they would have
16 provided a technological solution to a then unmet
17 problem Today reciting and do it on a word processor
18 is no different than and do it on a typewriter or shyshy and
19 do it on a calculator
20 The inventive contribution component which
21 uses specifically the language of conventional and
22 routine and well understood will evolve with
23 technology Thats why its different than the abstract
24 idea component
25 And here we know that these patents dont
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1 claim anything that was not conventional well
2 understood and routine We went through that in great
3 detail and Alice has never disputed a word of it They
4 just say youre not supposed to do that analysis even
5 though the Court 9shy0 in Mayo said we should
6 And in this case its very important to
7 look at what Alices own experts said on the subject
8 This is not our expert This is Alices expert And
9 this is at Page 1327shy28 of the Joint Appendix It is
10 possible to do the business methods of maintaining
11 accounts adjusting accounts and providing an
12 instruction without a computer or other hardware
13 And then Justice Breyer directly to your
14 abacus If someone had thought of this invention
15 soshycalled invention 100 years ago they might have
16 implemented it in a nonelectronic manner using various
17 precomputing tools such as an abacus or handwritten
18 ledgers
19 We know from Benson the Courts seminal
20 computer implementation case that if you can do it by
21 head and hand then the computer doesnt add anything
22 inventive within the meaning of the 101 exception That
23 is the holding of Benson And the Court reiterated that
24 in Mayo
25 Flook said exactly the same thing If you
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1 can do it with pencil and paper then the computer is
2 not offering anything that the patent laws are or should
3 be concerned with
4 It is only where the method will not work
5 without a computer which is not these claims and where
6 the computer itself is doing something that the patent
7 law is willing to protect
8 CHIEF JUSTICE ROBERTS What if shyshy what if
9 you can do it without a computer but its going to
10 take you know 20 people a hundred years In other
11 words theoretically you can replicate what the
12 computer does shyshy
13 MR PERRY Two answers
14 CHIEF JUSTICE ROBERTS shyshy but its
15 impractical without looking to do it on the computer
16 MR PERRY Mr Chief Justice first these
17 claims literally read as Alice reads them on a single
18 transaction between two parties so its not 20 people
19 for a hundred years Its one person sitting in a room
20 so thats not a problem
21 Second if what is being claimed is the
22 necessary speed or efficiency or data crunching
23 capabilities if you will of a computer then it would
24 have to be claimed and theres nothing claimed here
25 All that is claimed shyshy and my friend is going to stand
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1 up on rebuttal and tell you all that the expert said
2 well what is claimed is a computer but its just a
3 computer It just says a computer configured too It
4 doesnt say that the computer actually has to shyshy
5 JUSTICE BREYER Yeah but the trouble with
6 that particular test is as I think partly the Chief
7 Justice said how long et cetera and then add to that
8 though you could do it without a computer what happens
9 at the end of the line is the automobile engine goes off
10 or it begins to sputter or it turns left
11 You see its possible to take Archimedes shyshy
12 shyshy you know I use that example purposely to call
13 attention to the problem You can take those things
14 and youre not just saying apply it and youre not even
15 just saying shyshy you are saying use the computer but at
16 the end of the road something physical in the world
17 changes and everybody would say now thats shyshy that
18 will falls within I mean probably I mean my
19 hesitation shows Im looking for the right words
20 MR PERRY Justice Breyer your point is
21 the reason that it is equally fallacious to suggest on
22 the one hand as Alice and IBM does that simply
23 reciting a computer is a magic key that gets you through
24 101 and you never have to any other inquiry and what
25 some of folks the amici on the other side say which
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1 is that computers or software are never eligible Both
2 of those things have to be wrong because what the Court
3 said in Bilski was future innovation is too uncertain
4 We are not going to do that as a Court And the Court
5 laid out an approach using abstract ideas in Bilski and
6 inventive contribution in Mayo that is flexible enough
7 to take into account that innovation and to deal with
8 particular claims in context which is why at the end
9 of the day we have to come back to these patents and
10 decide which shyshy
11 JUSTICE KAGAN Mr Perry before we get
12 back to these matters you said to Justice Scalia if a
13 patent sufficiently describes how a computer will
14 implement an idea then its patentable So how
15 sufficiently does one have to describe it What do we
16 want a judge to do at this threshold level in terms of
17 trying to figure out whether the description is
18 sufficient to get you past it
19 MR PERRY If I can answer in two steps
20 Justice Kagan First in the negative What the
21 applicant or patentee must do shyshy must not do is simply
22 describe the desired result That would take us back to
23 State Street That would simply say I claim a magic
24 box that buys high and sells low or vice versa I
25 suppose I claim a magic box for investing Thats what
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1 these patents do
2 Then to put it in the affirmative and in the
3 language of Mayo the claim has to recite something
4 significantly more something significantly more than
5 the abstract idea itself That would be a contextual
6 analysis based on the claims and specifications and file
7 history and we know that some devices some methods
8 some programming will pass that
9 It is not going to be a brightshyline rule and
10 thats one of the tugshyofshywar issues that this Court and
11 the Federal Circuit have been having in these cases
12 The Federal Circuit wants brightshyline rules All
13 computers are in or all computers are out
14 This Court has been more contextual This
15 Court has been more nuanced This Court has looked at
16 things in a more robust way
17 JUSTICE KAGAN Youre not suggesting that
18 specific code is necessary
19 MR PERRY No Your Honor I think the shyshy
20 actual description of the programming is a 112 problem
21 I agree with that A 112 issue That is the realm of
22 the written description requirement What is a 101
23 problem is it is on the applicant to do more than simply
24 describe the results simply say A magic box that does
25 intermediate settlement And we can tie that back to
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1 this particular prosecution the 510 patent which is
2 the method patent
3 The examiner rejected it Under Section
4 101 the examiner said this is an abstract idea You
5 cant have this patent And the only change that this
6 applicant made was to add in the adjusting step
7 electronic adjustment It put in one word
8 electronic adjustment And under State Street which
9 is what this patent is prosecuted under that was
10 enough because the result of adjusting run through a
11 computer is enough
12 Under current law that cant be enough
13 That just cant get a patent over the line because this
14 Court said in Mayo and I got to quote this language
15 Simply implementing a fundamental principle on a
16 physical machine namely a computer is not a patentable
17 application of that principle Thats all that Alice
18 has done
19 These are preshyBilski patents They never
20 should have been issued General Verrilli will stand up
21 and address that point And certainly under current
22 law shyshy one point on the AIA Congress did not send all
23 this to the administrative process Congress created
24 two avenues the courts and the PTO to use the
25 standards Essentially it ratified Bilski and Mayo and
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1 said we agree with what you all are doing at the
2 Supreme Court and the existing standards are good enough
3 for us This is a judicial problem And that is a good
4 reason The abstract shyshy
5 JUSTICE GINSBURG The Federal Circuit in
6 this case split in many ways and it had our decisions
7 to deal with You said given Bilski and Mayo this is
8 an easy case What is the instruction that escaped a
9 good number of judges on the Federal Circuit How would
10 you state the rule
11 MR PERRY Your Honor I think theres a
12 significant element to the Federal Circuit that
13 disagrees with Mayo and has been resistant in applying
14 it Chief Judge shyshy former Chief Judge Michelle filed a
15 brief in this Court essentially saying Mayo is a
16 lifeshysciences case You should limit it to that because
17 if you apply it to everything else then these patents
18 are no good
19 Mayo we submit is a technologyshyneutral
20 industryshyneutral exceptionshyneutral framework that can
21 be used to answer all of these questions This is not
22 the death of software patents The software industry is
23 all before this Court saying this is fine with us
24 Every company in the United States practically except
25 for IBM is saying go ahead This will not affect
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1 software patents
2 Justice Ginsburg this Courts precedents
3 are clear They are unanimous They just need to be
4 applied To suggest that there is confusion that needs
5 to be addressed by retreating beating a retreat from
6 recent unanimous decisions would simply reward
7 intransigence difficulty refusal to adhere to what are
8 clear precedents because shyshy
9 JUSTICE KAGAN Should we be concerned
10 Mr Perry that there are old patents that in fact could
11 meet the test that you set forth but wont because they
12 were written in a different time and so used much more
13 general language
14 MR PERRY Your Honor the applicant or the
15 patent holder would have the opportunity to institute a
16 reexamination proceeding or some sort of administration
17 process to address that issue
18 And second it should be noted this is a
19 very small problem There are 2 million outstanding
20 patents in the United States In the last four fiscal
21 years there were 22000 infringement litigations
22 instituted but since Bilski there have only been 57
23 district court decisions on Section 101 issues There
24 have only been 12 Federal Circuit decisions total on
25 computer implementation
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1 We are talking about a group of patents
2 Justice Kagan thats way out at the tail end of
3 distribution Most patents never have a 101 challenge
4 This is not an issue with cotton gins and other things
5 This is a problem for the most marginal
6 most dubious most skeptical patents the ones that this
7 Court in Bilski shyshy and remember what Bilskis holding
8 is The majority said they are processes but it did
9 not say they are eligible
10 Thank you Mr Chief Justice
11 CHIEF JUSTICE ROBERTS Thank you counsel
12 General Verrilli
13 ORAL ARGUMENT OF DONALD B VERRILLI JR
14 ON BEHALF OF THE UNITED STATES AS AMICUS
15 CURIAE SUPPORTING RESPONDENTS
16 GENERAL VERRILLI Mr Chief Justice and
17 may it please the Court
18 An abstract idea does not become
19 patentshyeligible merely by tacking on an instruction to
20 use a computer to carry it out A computer makes a
21 difference under Section 101 when it imposes a
22 meaningful limit on the patent claim That occurs when
23 the claim is directed at improvement in computing
24 technology or an innovation that uses computing
25 technology to improve other technological functions
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1 Thats the test that we believe is most faithful to this
2 Courts precedents in Bilski and Mayo It keeps patents
3 within their traditional and appropriate domain and it
4 is capable of being administered consistently by Courts
5 and by PTO examiners
6 JUSTICE GINSBURG How do you answer the
7 argument that your view would extinguish businessshymethod
8 patents and make all software ineligible for patent
9 protection
10 GENERAL VERRILLI Yeah with shyshy let me
11 address software patents first because that I think is
12 obviously a significant question And its just not
13 correct to say that our approach would make software
14 patenting ineligible Any software patent that improves
15 the functioning of the computer technology is eligible
16 Any software patent that improves shyshy that is used to
17 improve another technology is eligible For example
18 the patent in the shyshy in the Diehr case is one in
19 which shyshy
20 JUSTICE SOTOMAYOR Why do we need to reach
21 this in that shyshy reach software patents at all in this
22 case
23 GENERAL VERRILLI Well shyshy
24 JUSTICE SOTOMAYOR Whats the necessity for
25 us to announce a general rule with respect to software
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1 There is no software being patented in this case
2 GENERAL VERRILLI Well I shyshy
3 JUSTICE SOTOMAYOR Theres a systems
4 GENERAL VERRILLI Well I shyshy I think shyshy
5 well they shyshy they shyshy theres a process being and shyshy and
6 one can think of software patents as process patents
7 And I think thats why my friends on the other side are
8 saying the sky is falling because they shyshy they are
9 interpreting what were saying about that when a
10 computer makes shyshy when a computers involvement makes
11 something eligible under 101 its calling those into
12 question and it doesnt
13 JUSTICE SOTOMAYOR Do you think we have to
14 reach the patentability of software to answer this case
15 GENERAL VERRILLI Well I think you can shyshy
16 I think the answer to that question is no not
17 necessarily You can decide it by saying that shyshy that
18 Bilski answers the question whether this is an abstract
19 idea because this form of hedging is really no
20 different than the form of hedging as a conceptual
21 matter at issue in Bilski And then Mayo answers the
22 question of whether the use of a computer in this case
23 adds enough to the abstract idea beyond conventional
24 steps because here all we have after all is just
25 conventional use of computing technology no computer
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1 innovation such that you dont qualify under 101 You
2 could take that approach
3 But it is important to the United States
4 that we shyshy and to our patent examiners that we get some
5 clarity if we can I think the clarity could come from
6 the text that I propose which I want to reiterate shyshy
7 JUSTICE SOTOMAYOR Well shyshy
8 JUSTICE BREYER Could shyshy could shyshy could you
9 go on with that because you were just getting to the
10 point where I think you say a computer improvement that
11 in fact leads to an improvement in harvesting cotton is
12 an improvement through a computer of technology so it
13 qualifies
14 But then I think you were going to say or I
15 got this also from the brief a computer improvement
16 that leads to an improvement in the methods of selling
17 bonds over the telephone is not an improvement in
18 technology reached by the computer Am I right about
19 the distinction youre making
20 GENERAL VERRILLI I dont think theres a
21 yes or no answer to that question
22 JUSTICE BREYER What is your view Yeah
23 what is shyshy how do we deal with just that problem
24 GENERAL VERRILLI If there is a genuine
25 innovation in the functioning of the computer shyshy
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1 JUSTICE BREYER Yes
2 GENERAL VERRILLI shyshy such that business
3 processes shyshy
4 JUSTICE BREYER Weve got that Yes yes
5 We got the computer But then it doesnt improve the
6 computer but rather it improves through the computer
7 the harvesting of cotton
8 Now youve got it in what you said was your
9 second category which is an improvement through the
10 computer of a technology And I thought in your brief
11 you were distinguishing an improvement through the
12 computer of a human activity that is not a technology
13 and in particular to pick an example of that
14 something in finance or something in business
15 Now am I right about the distinction youre
16 making
17 GENERAL VERRILLI Yeah that shyshy
18 JUSTICE BREYER If Im not right what is
19 the distinction
20 GENERAL VERRILLI That is generally the
21 line were drawing Frankly shyshy
22 JUSTICE BREYER And how is that justified
23 GENERAL VERRILLI I do want shyshy
24 JUSTICE BREYER That shyshy that is Judge Dyk
25 in shyshy in Bilski in the Federal circuit 4 people sort of
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1 picked it up maybe 5 didnt pick it up Would you say
2 a few words about it
3 GENERAL VERRILLI Sure About shyshy let me go
4 to Bilski there in that I do think while shyshy while
5 certainly the Court held that the term process got a
6 natural construction which could include business
7 methods it seems to me that thats not all the Court
8 said in Bilski The Court also said that it was
9 historically and traditionally quite rare that business
10 methods were patent eligible
11 It also said that shyshy that the shyshy that courts
12 and the PTO examiners should use the abstract ideas
13 exception to 101 to police the appropriate boundary
14 It also said that the
15 machineshyorshytransformation test that the United States
16 advocated remained a useful tool And of course that
17 directs to you seeing whether there is a technology
18 application
19 And of course the holding in Bilski was
20 that the shyshy the method for hedging risk was ineligible
21 because it was an abstract idea and I cant imagine
22 that if in Bilski the shyshy the claim had been exactly the
23 same but had added use a computer to carry out some of
24 these standard random analysis functions that are
25 claimed by the patent that you would have found it to
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1 be patent eligible
2 And I shyshy I would submit for the Court that
3 the key point here I think is that now given where
4 the Court shyshy what the Court has held in Bilski given
5 what its held in Mayo the abstract ideas exception is
6 really the only tool left to deal with what I shyshy what I
7 think I fairly read Bilski as saying is a significant
8 problem the proliferation of patents of business
9 methods
10 JUSTICE KENNEDY Is there an example that
11 you can give us of a shyshy what we can call a business
12 process that is patentable a process that doesnt
13 involve improving the workings of a computer
14 GENERAL VERRILLI I shyshy I think its going
15 to be difficult for me to do that I think for
16 example if you had a business method a process for
17 additional security pointshyofshysale credit card
18 transactions using particular encryption technology
19 that might well be patent eligible Its a technology
20 that it makes conduct of business more efficient or
21 effective
22 But there is a technological link here and
23 we do think thats critical to our shyshy to our point of
24 view with respect to the case And I shyshy and I do think
25 remember that when we say something is not patent
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1 eligible were not saying they cant do it Were
2 saying they cant monopolize it
3 And the concern in a situation like this one
4 is that if this is patent eligible its hard to see
5 why for example the first person who came up with a
6 frequent flier program wouldnt have been able to claim
7 a patent there because after all thats a business
8 method for improving customer loyalty implemented on a
9 computer
10 CHIEF JUSTICE ROBERTS General I shyshy you
11 mentioned a while ago the need for greater clarity and
12 certainty in this area And Im just wondering in your
13 brief youve got a nonshyexhaustive of factors to
14 consider and there are 6 different ones And Im just
15 doubtful that thats going to bring about greater
16 clarity and certainty
17 GENERAL VERRILLI I take shyshy I take the
18 point Mr Chief Justice but I think the key is that
19 they are all directed to answering the question of
20 whether the innovation that is claimed and is an
21 innovation in either A the improvement of a computers
22 functioning or B the use of computer technology to
23 improve the functioning of another technological
24 process and a case like Diehr would be in the latter
25 category
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1 And so I do think that thats the key
2 benchmark Thats the baseline Thats the test that
3 we do think can be applied clearly and consistently by
4 the courts or the PTO And it avoids the risk of things
5 like frequent flier programs or the Oakland As money
6 ball methods for evaluating the contributions in
7 individual baseball players make or any one of a host of
8 other things that our intuitions tell us just dont
9 belong in the patent system
10 Thats the shyshy drawing that line keeps them
11 out not drawing that line lets them in And with all
12 due respect I dont think that the novelty and
13 nonobviousness filters that 102 and 103 really deal with
14 that problem effectively because when you get to
15 nonobviousness in 103 for example youll be asking a
16 different question
17 If you take the frequent flier program you
18 would say well is this innovation in building consumer
19 loyalty something that would have been obvious to
20 somebody who runs an airline Its totally divorced
21 from the question of technology at that point and
22 therefore I dont think youre going to get the screen
23 that you need to get in order for the patent system to
24 be confined to its traditional and appropriate scope
25 If there are no further questions thank
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1 you
2 JUSTICE GINSBURG I have a question about
3 how do you identify an abstract concept The shyshy a
4 natural phenomenon a mathematical formula those are
5 easy to identify but there has been some confusion on
6 what qualifies as an abstract concept
7 GENERAL VERRILLI We would define
8 abstract shyshy an abstract concept as a claim that is not
9 directed to a concrete innovation in technology
10 science or the industrial arts So its the shyshy its
11 abstract in the sense that it is not a concrete
12 innovation in the traditional realm of patent law
13 Thank you
14 CHIEF JUSTICE ROBERTS Thank you General
15 Mr Phillips you have four minutes
16 remaining
17 REBUTTAL ARGUMENT OF CARTER G PHILLIPS
18 ON BEHALF OF THE PETITIONERS
19 MR PHILLIPS Thank you Mr Chief Justice
20 Id just like to make a few points
21 First of all with respect to the question
22 you asked which is looking at 159 et cetera all I can
23 tell you is that if you look at claim 33 it talks about
24 matched orders the matched orders that are described in
25 286 and 287 and then makes specific reference to 159
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1 and that flow chart thats there And its all designed
2 as a package Its only one element of the shyshy of the
3 invention but it is a central element and its an easy
4 one to understand And it goes well beyond simply the
5 notion of hedge shyshy hedge against settlement risk and do
6 it by a computer
7 JUSTICE SOTOMAYOR Your adversary says that
8 his shyshy the appendix to his brief are the only patents at
9 issue that the flow charts are not at issue in this
10 case
11 MR PHILLIPS Theres no basis for that
12 statement Your Honor There shyshy remember this went off
13 on a very truncated litigation process So theres shyshy
14 you know we shyshy we got cut off at the beginning of it
15 Theres been no construction of the shyshy of the claims
16 and shyshy and obviously these are specifications that go
17 to how you interpret the claim
18 JUSTICE SOTOMAYOR If we were to say that
19 there are no business patents shyshy
20 MR PHILLIPS Yes
21 JUSTICE SOTOMAYOR shyshy would your patent
22 survive at all
23 MR PHILLIPS No I dont shyshy I dont
24 believe so I think theres no question And you
25 know General Verrilli could not have been any plainer
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1 in his statement of how he wants to interpret the
2 abstract idea concept
3 JUSTICE SOTOMAYOR Yes he wants to say no
4 business patents
5 MR PHILLIPS No business shyshy just another
6 way of saying no business methods And you know the
7 Court rejected that And it seems to me extraordinary
8 to say Congress didnt reject no business methods in
9 101 but were going to do shyshy were going to manipulate
10 the judicial exception to accomplish precisely that same
11 thing It seems to me thats wholly inappropriate
12 Justice Ginsburg you asked my shyshy my friend
13 here you know whats his test He didnt answer that
14 question youll notice because he doesnt have an
15 answer His basic argument is whatever you do just
16 kill this patent
17 And if I were in his shoes I suppose Id
18 take that same position I think whats absolutely
19 clear is that the test ought to be one that is
20 structured as a very coarse filter not the kind of
21 filter that hes pushing for where it changes over time
22 I mean I thought his shyshy I thought his response to one
23 of the questions about eshymail and word processing that
24 Justice Sotomayor asked is over time it would change
25 Well thats exactly what 102 and 103 are for That is
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1 not the purpose of shyshy of Section 101
2 And then he uses the example of encryption
3 I guarantee you if we were arguing about encryption in
4 this case he would say to me that thats an abstract
5 principle because encryption is a concept thats been
6 around since time immemorial George Washington used
7 it Everybody has used encryption
8 And a question again thats not the
9 solution to these problems The question is how did we
10 go about doing it And we go beyond the basics of
11 simply saying use a computer and thats what we ask
12 this Court to focus on and to evaluate
13 As to the frequent flier program its
14 pretty clear to me that even though it was a novel idea
15 in some sense the concept itself would have been viewed
16 in shyshy in the KSR fashion as quite obvious as a means of
17 improving customer loyalty
18 There are solutions here Giving us 101
19 pass doesnt create a monopoly It just gets us to the
20 102 and 103 inquiries that are at the heart of what the
21 patent laws shyshy and 112 that are at the heart of what the
22 patent laws ought to be dealing with
23 If there are no further questions Your
24 Honor thank you
25 CHIEF JUSTICE ROBERTS Thank you counsel
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1 The case is submitted
2 (Whereupon at 1105 am the case in the
3 aboveshyentitled matter was submitted)
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
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25
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58
A add 714 1023 algorithm 3320 41 automatically
As 525 3621 387 algorithms apply 72425 111
am 115 32 416 3013 3310 2019 281213 automobile 389
572 added 302 Alice 13 34 2822 3814 available 99
abacus 61213 4923 363 3717 4217 avenues 4124
710 1018 additional 5017 3822 4117 applying 4213 avoids 524
1325 3614 3617
address 4121 4317 4511
Alices 271 2919 3678
approach 226 395 4513 B
ability 1514 addressed 435 allow 94 472 B 121 29 4413
able 1511 167 addressing 181 allows 97 242 appropriate 5122
1919 516 adds 4623 amazing 2514 81516 1514 back 1621
aboveshyentitled adhere 437 amici 3825 453 4913 1922 2512
113 573 adjudication amicus 123 5224 3018 322
absolutely 125 241 210 4414 Archimedes 3991222
1215 159 adjusting 3611 analysis 424 281122 3811 4025
5518 41610 364 406 area 219 5112 ball 526
abstract 4267 adjustment 417 4924 argue 2518 Bank 17 35
48 6682023 418 analyze 1416 arguing 563 banks 95
721 8218 administered 1716 argument 114 bars 43
141920 1522 454 announce 4525 225812 33 baseball 527
165 181618 administration answer 119 37 41 144 based 423 406
2220 24925 4316 2219 247 18323 226 baseline 522
2621 277 administrative 3919 4221 26715 4413 basic 413 5515
2938 3422 171218 187 456 461416 457 5317 basically 1821
3523 395 242 4123 4721 551315 5515 2319
405 414 424 adopt 203 answering 5119 arguments basics 5610
4418 461823 adopted 31317 answers 3713 1415 basis 132 1512
491221 505 advancement 461821 arms 1625 1516 2719
53368811 351 anyway 1810 arrangements 5411
552 564 advances 3513 apparatus 2916 131 beating 435
accept 102 adversary 547 APPEARAN arrows 315 beginning 163
accomplish advice 1715 116 art 1919 5414
5510 advocated 4916 appears 820 arts 2124 5310 begins 3810
account 55 618 affect 4225 appendix 1910 aside 1422 157 behalf 11719
397 affirmative 402 311 326 369 asked 2314 122 24710
accounts 823 agent 52 3021 548 278 5322 214 38 2616
9356 3611 ago 318 2224 applicant 3220 551224 4414 5318
3611 3615 5111 3921 4023 asking 193 believe 1316
accurately 2413 agree 920 2021 416 4314 221213 273 1416 2421
acknowledges 221 2418 application 3324 5215 255 264 451
1121 4021 421 2623 4117 aspect 517 5424
act 99 2017 agrees 2812 4918 asserted 3113 belong 529
activities 229 ahead 4225 applications 311618 benchmark 522
activity 2122 AIA 2912 4122 333 asserting 325 Benson 361923
3325 4812 airline 5220 applied 434 attaching 124 best 161124
actual 4020 AL 18 523 attention 3813 better 1610 albeit 923 applies 31418 Attorney 2021 216 2819
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59
3322 brightshyline 409 2313 37 71 4338 5519 beyond 115 4012 5317 checks 618 5614
1312 4623 bring 5115 case 3412 46 Chief 339 clearly 211 251 544 5610 broad 248 116 1524 261217 3024 523
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1 modified the system of adjudication to create an
2 administrative mechanism that allows you to get to 102
3 and 103 And at least in context its important to
4 realize there have been 11 cases since that was created
5 9 of the 11 have been knocked down on 102 or 103 grounds
6 and not on 101 grounds And it seems to me thats the
7 answer to this problem is leave 101 as the coarse
8 filter If on its face it states these kinds of broad
9 abstract principles fundamental truths and even if it
10 says use a computer those should be struck down
11 JUSTICE SOTOMAYOR Which of the shyshy which of
12 the opinions below captures your position most
13 accurately
14 MR PHILLIPS I would guess it would be
15 Judge Moores opinion below that would capture ours most
16 correctly
17 JUSTICE SOTOMAYOR And if we were to think
18 your method claim is ineligible do you agree that your
19 systems and shyshy your medium and system claims fail as
20 well Do they rise and fall together
21 MR PHILLIPS No No I dont believe they
22 do rise and fall together I mean I think you could shyshy
23 if you wanted to interpret our medium claim shyshy I mean
24 our shyshy our method claims in a shyshy in particularly
25 abstract way I think you could still say that the
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1 system claims which clearly are shyshy are how to create a
2 computer system and how to implement it using that
3 method would be a much more concrete version of that in
4 a way that would take it out of 101 That said I
5 obviously believe that all of our claims satisfy 101
6 and should go on to the next stage
7 JUSTICE KAGAN Can I give you a
8 hypothetical Mr Phillips and you tell me how its
9 different or the same Lets say you know 30 years
10 somebody took a look around the world and said a lot of
11 people seem to order products by mail They get the
12 catalogues in the mail and then they send back their
13 return forms And lets say that one of the founders of
14 the Internet said wouldnt this be an amazing system
15 we could actually do this by computer and they had
16 patented that Is that the same
17 MR PHILLIPS I dont know if its the
18 same but I would shyshy I would argue that it could very
19 well be a patentable subject matter because shyshy but it
20 depends on how the claims play out
21 JUSTICE KAGAN No but exactly I mean
22 the claim would have said something along the lines of
23 you know theres this process by which people order
24 products and we want to do it over the Internet we want
25 to do it electronically and we will use a computer to
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1 do that to essentially take the process of mail order
2 catalogues and make it electronic
3 MR PHILLIPS I could certainly shyshy I think
4 I could write a claim shyshy a set of claims that I believe
5 would satisfy 101 And shyshy and to the extent that
6 youd shyshy that youd think those are no different than
7 the ones I have here then my argument is simply I think
8 I satisfy 101 with the claims we have before us Your
9 Honor
10 If there are no further questions then Id
11 like to reserve the rest of my time
12 CHIEF JUSTICE ROBERTS Thank you
13 Mr Phillips
14 Mr Perry
15 ORAL ARGUMENT OF MARK A PERRY
16 ON BEHALF OF THE RESPONDENTS
17 MR PERRY Mr Chief Justice and may it
18 please the Court
19 That path between Scylla and Charybdis was
20 charted in Bilski and Mayo Bilski holds that a
21 fundamental economic principle is an abstract idea and
22 Mayo holds that running such a principle on a computer
23 is quote not a patentable application of that
24 principle Those two propositions are sufficient to
25 dispose of this case
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1 If Bilski and Mayo stand Alices patents
2 fail Therefore Mr Phillips and his friends are
3 asking this Court to change the standard even though
4 this Court has had three unanimous decisions in the last
5 four terms establishing what the Court called a myriad
6 a wellshyestablished standard
7 On the abstract idea Justice Ginsburg you
8 asked Mr Phillips whats the difference between hedging
9 and this claim There is no difference This is
10 hedging It is hedging against credit default rather
11 than price fluctuation but it is simply hedging
12 And Mr Phillips stood up for 26 minutes and
13 never once referred to the patent Lets look at what
14 the inventor the soshycalled inventor said about this
15 invention This is at JA 293 to 94 in the
16 specification
17 This claim has simply two steps Its very
18 simple First debiting and crediting on a realtime
19 basis the relevant shadow records and second by
20 periodically affecting corresponding payment
21 instructions Those are direct quotes Debit credit
22 and pay Your Honor you cant get much more simple
23 than that
24 Mr Phillips suggests well we have
25 multilateral transactions global things chronological
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1 time zones and so forth None of those are claimed
2 Your Honor Those are all recited in specification
3 The claims read on a single transaction involving two
4 parties
5 JUSTICE BREYER Can I ask you at some
6 point not necessarily this second to say in my shyshy this
7 is just shyshy you know you have an opinion for a court
8 Different judges can have different interpretations
9 All youre getting is mine okay
10 But I think its pretty easy to say that
11 Archimedes cant just go to a boat builder and say
12 apply my idea All right Everybody agrees with that
13 But now we try to take that word apply and give
14 content to it
15 And what I suspect in my opinion Mayo did
16 and Bilski and the other cases is sketch an outer shell
17 of the content hoping that the experts you and the
18 other lawyers and the shyshy the circuit court could fill
19 in a little better than we had done the content of that
20 shell
21 So so far youre saying well this is
22 close enough to Archimedes saying apply it that we
23 neednt go further
24 Now will you at some point in the next few
25 minutes give me your impression of if it were necessary
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1 to go further what would the right words or example be
2 MR PERRY Your Honor as shyshy Justice
3 Breyer as to abstract ideas the PTO has filled in that
4 shell by listing economic concepts legal concepts
5 financial concepts teaching concepts dating and
6 interpersonal relationships and generally how business
7 should be conducted as examples of those things that are
8 likely abstract which of course all follow directly
9 from Bilski and the discussion this Court had in Bilski
10 And this patent shyshy these patents fall squarely within
11 that
12 Congress in the AIA confirmed that
13 reading Congress in the CBM method said business
14 methods that are subject to special scrutiny shyshy that is
15 dubious patents shyshy include methods and corresponding
16 apparatus which is what we have here that pertain to
17 data processing in the financial services industry and
18 do not offer a technological solution That describes
19 Alices patents to a letter Your Honor So that we
20 have shyshy
21 JUSTICE SOTOMAYOR What do you think is a
22 technological solution
23 MR PERRY Your Honor shyshy
24 JUSTICE SOTOMAYOR How could they if at
25 all written their patents to shyshy to make shyshy to make
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1 their software eligible What would shyshy what do they
2 need shyshy would have needed to have added
3 MR PERRY Justice Sotomayor they have no
4 software first Theyve never written software
5 Theyve never programmed a computer So thats a
6 nonexistent set
7 Second there are many technological
8 solutions to trading and settlement problems For
9 example data compression These shyshy these trading
10 platforms involve the movement of very large quantities
11 of data around the world The physical pipes that is
12 the fiber optic cables and data lines are limited
13 There are very sophisticated algorithms for both
14 security and speed to move data through the transmission
15 lines in novel and useful ways that could well be
16 patented
17 Nothing like that is claimed here To come
18 back to where I started if you look for example at
19 Claim 65 in the 510 patent as Mr Phillips reads it
20 it literally reads on a twoshyparty escrow to sell a
21 house so long as the escrow agent is typing this stuff
22 into the HUDshy1 using a computer That has nothing to do
23 with multilevel shyshy
24 CHIEF JUSTICE ROBERTS Well thats a
25 little more complicated He referred us to Joint
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1 Appendix Page 159 which is not a change in how
2 computers work But it is shyshy constitutes the
3 instructions about how to use the computer and where it
4 needs to be affected And just looking at it it looks
5 pretty complicated There are a lot of arrows and
6 they shyshy you know different things that go shyshy
7 (Laughter)
8 CHIEF JUSTICE ROBERTS Well but I mean
9 you know it shyshy in different directions And I
10 understand him to say that in each of those places
11 thats where the computer is needed
12 MR PERRY Mr Chief Justice Figure 16 has
13 nothing to do with the invention asserted against my
14 client in this case There are two inventions in this
15 patent One invention involving multilateral contract
16 formation is not asserted against my client And all of
17 these drawings pertain to that The only drawings that
18 pertain to the asserted claims are 25 and 33 to 37 And
19 that was established below and its established in this
20 Court And Mr Phillips has never disputed it
21 So the claim hes pointed the Court shyshy the
22 figure hes pointed the Court to has nothing to do with
23 the invention Its for a different invention that is
24 not at issue in this case
25 Remember there are hundreds and hundreds of
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1 pages of these patents They all pertain to the other
2 invention Thats why in the back of our red brief we
3 excerpted the very little bit that actually pertains to
4 this You sort of tack on patent shyshy the tack on claim
5 that Mr Phillips is asserting here Its 4 columns
6 Its less than five pages in the printed appendix that
7 actually pertains to this invention And it contains no
8 disclosure whatever
9 Justice Scalia to your question about how
10 the computer does it Of course a patent that
11 describes sufficiently how a computer does a new and
12 useful thing whether its data compression or any other
13 technological solution to a business problem a social
14 problem or a technological problem would be within the
15 realm of the shyshy of the patent laws That is what the
16 patent laws have always been for
17 This is not such a patent And the reason
18 for that is this is a preshyBilski set of patents These
19 were prosecuted under the old State Street test where
20 all the applicant had to claim was a result
21 JUSTICE KENNEDY Would you give me shyshy
22 again you already did it once shyshy an example of a
23 business process patent shyshy of a business process idea
24 and invention that is patentable
25 MR PERRY Your Honor there are many
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1 examples One would be a technological solution to a
2 business problem So that for example shyshy Ill give a
3 different example There are many applications today
4 The Court may be familiar with streaming video to watch
5 video on your computer
6 It is not possible to get enough data
7 through existing lines in its raw format The data has
8 to be manipulated in order to see live video So if you
9 want to watch TV on your phone for example
10 Those algorithms those inventions are
11 undoubtedly technological And if they are used in a
12 trading platform or a hedging system or something else
13 that wouldnt disable them And this is what the Diehr
14 case shyshy
15 JUSTICE KENNEDY Well I shyshy I shyshy in my
16 language Ive called that mechanical rather than
17 process Can you give me an example of process
18 MR PERRY Yes Your Honor The process in
19 that example would be a computer running the particular
20 data compression algorithm
21 JUSTICE KENNEDY But thats how to make
22 a shyshy thats how to make a machine work better
23 MR PERRY Yes Your Honor
24 JUSTICE KENNEDY Im asking you Is there
25 any business process any business activity that is
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1 susceptible to a patent a pure patent innovations that
2 deserve patents
3 MR PERRY Your Honor again a
4 technological solution to a business problem could well
5 be whether its a method or a process is equivalent
6 Again Congress said method in a corresponding shyshy
7 JUSTICE KENNEDY Can you give me an
8 example
9 MR PERRY I thought the data compression
10 example was a good one Ill try an encryption
11 technology Many of these trading platforms you know
12 dealing with securities and money would require some
13 sort of security devices You could have a process for
14 securely transmitting data would be another computer
15 implemented technological solution to a business
16 problem Again nothing like that claimed here
17 JUSTICE SOTOMAYOR How about eshymail and
18 just word processing programs
19 MR PERRY Your Honor a program shyshy let me
20 try it this way to both of your questions In our view
21 if what is claimed as the inventive contribution under
22 Mayo shyshy in other words if we have an abstract idea as
23 we do here and what is claimed is the inventive
24 contribution for Step 2 is the computer then the
25 computer must be essential to that operation and
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1 represent an advancement in computer science or other
2 technology And we know thats not met here Justice
3 Sotomayor because shyshy
4 JUSTICE SOTOMAYOR So youre saying no to
5 eshymail and word processing
6 MR PERRY Your Honor I think at a
7 point shyshy
8 JUSTICE SOTOMAYOR They certainly have
9 functionality and shyshy and improvement of functionality
10 for the user
11 MR PERRY At a point in time in the past
12 I think both of those would have been technological
13 advances that were patentable
14 JUSTICE SOTOMAYOR How
15 MR PERRY Today shyshy because they would have
16 provided a technological solution to a then unmet
17 problem Today reciting and do it on a word processor
18 is no different than and do it on a typewriter or shyshy and
19 do it on a calculator
20 The inventive contribution component which
21 uses specifically the language of conventional and
22 routine and well understood will evolve with
23 technology Thats why its different than the abstract
24 idea component
25 And here we know that these patents dont
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1 claim anything that was not conventional well
2 understood and routine We went through that in great
3 detail and Alice has never disputed a word of it They
4 just say youre not supposed to do that analysis even
5 though the Court 9shy0 in Mayo said we should
6 And in this case its very important to
7 look at what Alices own experts said on the subject
8 This is not our expert This is Alices expert And
9 this is at Page 1327shy28 of the Joint Appendix It is
10 possible to do the business methods of maintaining
11 accounts adjusting accounts and providing an
12 instruction without a computer or other hardware
13 And then Justice Breyer directly to your
14 abacus If someone had thought of this invention
15 soshycalled invention 100 years ago they might have
16 implemented it in a nonelectronic manner using various
17 precomputing tools such as an abacus or handwritten
18 ledgers
19 We know from Benson the Courts seminal
20 computer implementation case that if you can do it by
21 head and hand then the computer doesnt add anything
22 inventive within the meaning of the 101 exception That
23 is the holding of Benson And the Court reiterated that
24 in Mayo
25 Flook said exactly the same thing If you
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1 can do it with pencil and paper then the computer is
2 not offering anything that the patent laws are or should
3 be concerned with
4 It is only where the method will not work
5 without a computer which is not these claims and where
6 the computer itself is doing something that the patent
7 law is willing to protect
8 CHIEF JUSTICE ROBERTS What if shyshy what if
9 you can do it without a computer but its going to
10 take you know 20 people a hundred years In other
11 words theoretically you can replicate what the
12 computer does shyshy
13 MR PERRY Two answers
14 CHIEF JUSTICE ROBERTS shyshy but its
15 impractical without looking to do it on the computer
16 MR PERRY Mr Chief Justice first these
17 claims literally read as Alice reads them on a single
18 transaction between two parties so its not 20 people
19 for a hundred years Its one person sitting in a room
20 so thats not a problem
21 Second if what is being claimed is the
22 necessary speed or efficiency or data crunching
23 capabilities if you will of a computer then it would
24 have to be claimed and theres nothing claimed here
25 All that is claimed shyshy and my friend is going to stand
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1 up on rebuttal and tell you all that the expert said
2 well what is claimed is a computer but its just a
3 computer It just says a computer configured too It
4 doesnt say that the computer actually has to shyshy
5 JUSTICE BREYER Yeah but the trouble with
6 that particular test is as I think partly the Chief
7 Justice said how long et cetera and then add to that
8 though you could do it without a computer what happens
9 at the end of the line is the automobile engine goes off
10 or it begins to sputter or it turns left
11 You see its possible to take Archimedes shyshy
12 shyshy you know I use that example purposely to call
13 attention to the problem You can take those things
14 and youre not just saying apply it and youre not even
15 just saying shyshy you are saying use the computer but at
16 the end of the road something physical in the world
17 changes and everybody would say now thats shyshy that
18 will falls within I mean probably I mean my
19 hesitation shows Im looking for the right words
20 MR PERRY Justice Breyer your point is
21 the reason that it is equally fallacious to suggest on
22 the one hand as Alice and IBM does that simply
23 reciting a computer is a magic key that gets you through
24 101 and you never have to any other inquiry and what
25 some of folks the amici on the other side say which
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1 is that computers or software are never eligible Both
2 of those things have to be wrong because what the Court
3 said in Bilski was future innovation is too uncertain
4 We are not going to do that as a Court And the Court
5 laid out an approach using abstract ideas in Bilski and
6 inventive contribution in Mayo that is flexible enough
7 to take into account that innovation and to deal with
8 particular claims in context which is why at the end
9 of the day we have to come back to these patents and
10 decide which shyshy
11 JUSTICE KAGAN Mr Perry before we get
12 back to these matters you said to Justice Scalia if a
13 patent sufficiently describes how a computer will
14 implement an idea then its patentable So how
15 sufficiently does one have to describe it What do we
16 want a judge to do at this threshold level in terms of
17 trying to figure out whether the description is
18 sufficient to get you past it
19 MR PERRY If I can answer in two steps
20 Justice Kagan First in the negative What the
21 applicant or patentee must do shyshy must not do is simply
22 describe the desired result That would take us back to
23 State Street That would simply say I claim a magic
24 box that buys high and sells low or vice versa I
25 suppose I claim a magic box for investing Thats what
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1 these patents do
2 Then to put it in the affirmative and in the
3 language of Mayo the claim has to recite something
4 significantly more something significantly more than
5 the abstract idea itself That would be a contextual
6 analysis based on the claims and specifications and file
7 history and we know that some devices some methods
8 some programming will pass that
9 It is not going to be a brightshyline rule and
10 thats one of the tugshyofshywar issues that this Court and
11 the Federal Circuit have been having in these cases
12 The Federal Circuit wants brightshyline rules All
13 computers are in or all computers are out
14 This Court has been more contextual This
15 Court has been more nuanced This Court has looked at
16 things in a more robust way
17 JUSTICE KAGAN Youre not suggesting that
18 specific code is necessary
19 MR PERRY No Your Honor I think the shyshy
20 actual description of the programming is a 112 problem
21 I agree with that A 112 issue That is the realm of
22 the written description requirement What is a 101
23 problem is it is on the applicant to do more than simply
24 describe the results simply say A magic box that does
25 intermediate settlement And we can tie that back to
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1 this particular prosecution the 510 patent which is
2 the method patent
3 The examiner rejected it Under Section
4 101 the examiner said this is an abstract idea You
5 cant have this patent And the only change that this
6 applicant made was to add in the adjusting step
7 electronic adjustment It put in one word
8 electronic adjustment And under State Street which
9 is what this patent is prosecuted under that was
10 enough because the result of adjusting run through a
11 computer is enough
12 Under current law that cant be enough
13 That just cant get a patent over the line because this
14 Court said in Mayo and I got to quote this language
15 Simply implementing a fundamental principle on a
16 physical machine namely a computer is not a patentable
17 application of that principle Thats all that Alice
18 has done
19 These are preshyBilski patents They never
20 should have been issued General Verrilli will stand up
21 and address that point And certainly under current
22 law shyshy one point on the AIA Congress did not send all
23 this to the administrative process Congress created
24 two avenues the courts and the PTO to use the
25 standards Essentially it ratified Bilski and Mayo and
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1 said we agree with what you all are doing at the
2 Supreme Court and the existing standards are good enough
3 for us This is a judicial problem And that is a good
4 reason The abstract shyshy
5 JUSTICE GINSBURG The Federal Circuit in
6 this case split in many ways and it had our decisions
7 to deal with You said given Bilski and Mayo this is
8 an easy case What is the instruction that escaped a
9 good number of judges on the Federal Circuit How would
10 you state the rule
11 MR PERRY Your Honor I think theres a
12 significant element to the Federal Circuit that
13 disagrees with Mayo and has been resistant in applying
14 it Chief Judge shyshy former Chief Judge Michelle filed a
15 brief in this Court essentially saying Mayo is a
16 lifeshysciences case You should limit it to that because
17 if you apply it to everything else then these patents
18 are no good
19 Mayo we submit is a technologyshyneutral
20 industryshyneutral exceptionshyneutral framework that can
21 be used to answer all of these questions This is not
22 the death of software patents The software industry is
23 all before this Court saying this is fine with us
24 Every company in the United States practically except
25 for IBM is saying go ahead This will not affect
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1 software patents
2 Justice Ginsburg this Courts precedents
3 are clear They are unanimous They just need to be
4 applied To suggest that there is confusion that needs
5 to be addressed by retreating beating a retreat from
6 recent unanimous decisions would simply reward
7 intransigence difficulty refusal to adhere to what are
8 clear precedents because shyshy
9 JUSTICE KAGAN Should we be concerned
10 Mr Perry that there are old patents that in fact could
11 meet the test that you set forth but wont because they
12 were written in a different time and so used much more
13 general language
14 MR PERRY Your Honor the applicant or the
15 patent holder would have the opportunity to institute a
16 reexamination proceeding or some sort of administration
17 process to address that issue
18 And second it should be noted this is a
19 very small problem There are 2 million outstanding
20 patents in the United States In the last four fiscal
21 years there were 22000 infringement litigations
22 instituted but since Bilski there have only been 57
23 district court decisions on Section 101 issues There
24 have only been 12 Federal Circuit decisions total on
25 computer implementation
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1 We are talking about a group of patents
2 Justice Kagan thats way out at the tail end of
3 distribution Most patents never have a 101 challenge
4 This is not an issue with cotton gins and other things
5 This is a problem for the most marginal
6 most dubious most skeptical patents the ones that this
7 Court in Bilski shyshy and remember what Bilskis holding
8 is The majority said they are processes but it did
9 not say they are eligible
10 Thank you Mr Chief Justice
11 CHIEF JUSTICE ROBERTS Thank you counsel
12 General Verrilli
13 ORAL ARGUMENT OF DONALD B VERRILLI JR
14 ON BEHALF OF THE UNITED STATES AS AMICUS
15 CURIAE SUPPORTING RESPONDENTS
16 GENERAL VERRILLI Mr Chief Justice and
17 may it please the Court
18 An abstract idea does not become
19 patentshyeligible merely by tacking on an instruction to
20 use a computer to carry it out A computer makes a
21 difference under Section 101 when it imposes a
22 meaningful limit on the patent claim That occurs when
23 the claim is directed at improvement in computing
24 technology or an innovation that uses computing
25 technology to improve other technological functions
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1 Thats the test that we believe is most faithful to this
2 Courts precedents in Bilski and Mayo It keeps patents
3 within their traditional and appropriate domain and it
4 is capable of being administered consistently by Courts
5 and by PTO examiners
6 JUSTICE GINSBURG How do you answer the
7 argument that your view would extinguish businessshymethod
8 patents and make all software ineligible for patent
9 protection
10 GENERAL VERRILLI Yeah with shyshy let me
11 address software patents first because that I think is
12 obviously a significant question And its just not
13 correct to say that our approach would make software
14 patenting ineligible Any software patent that improves
15 the functioning of the computer technology is eligible
16 Any software patent that improves shyshy that is used to
17 improve another technology is eligible For example
18 the patent in the shyshy in the Diehr case is one in
19 which shyshy
20 JUSTICE SOTOMAYOR Why do we need to reach
21 this in that shyshy reach software patents at all in this
22 case
23 GENERAL VERRILLI Well shyshy
24 JUSTICE SOTOMAYOR Whats the necessity for
25 us to announce a general rule with respect to software
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1 There is no software being patented in this case
2 GENERAL VERRILLI Well I shyshy
3 JUSTICE SOTOMAYOR Theres a systems
4 GENERAL VERRILLI Well I shyshy I think shyshy
5 well they shyshy they shyshy theres a process being and shyshy and
6 one can think of software patents as process patents
7 And I think thats why my friends on the other side are
8 saying the sky is falling because they shyshy they are
9 interpreting what were saying about that when a
10 computer makes shyshy when a computers involvement makes
11 something eligible under 101 its calling those into
12 question and it doesnt
13 JUSTICE SOTOMAYOR Do you think we have to
14 reach the patentability of software to answer this case
15 GENERAL VERRILLI Well I think you can shyshy
16 I think the answer to that question is no not
17 necessarily You can decide it by saying that shyshy that
18 Bilski answers the question whether this is an abstract
19 idea because this form of hedging is really no
20 different than the form of hedging as a conceptual
21 matter at issue in Bilski And then Mayo answers the
22 question of whether the use of a computer in this case
23 adds enough to the abstract idea beyond conventional
24 steps because here all we have after all is just
25 conventional use of computing technology no computer
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1 innovation such that you dont qualify under 101 You
2 could take that approach
3 But it is important to the United States
4 that we shyshy and to our patent examiners that we get some
5 clarity if we can I think the clarity could come from
6 the text that I propose which I want to reiterate shyshy
7 JUSTICE SOTOMAYOR Well shyshy
8 JUSTICE BREYER Could shyshy could shyshy could you
9 go on with that because you were just getting to the
10 point where I think you say a computer improvement that
11 in fact leads to an improvement in harvesting cotton is
12 an improvement through a computer of technology so it
13 qualifies
14 But then I think you were going to say or I
15 got this also from the brief a computer improvement
16 that leads to an improvement in the methods of selling
17 bonds over the telephone is not an improvement in
18 technology reached by the computer Am I right about
19 the distinction youre making
20 GENERAL VERRILLI I dont think theres a
21 yes or no answer to that question
22 JUSTICE BREYER What is your view Yeah
23 what is shyshy how do we deal with just that problem
24 GENERAL VERRILLI If there is a genuine
25 innovation in the functioning of the computer shyshy
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1 JUSTICE BREYER Yes
2 GENERAL VERRILLI shyshy such that business
3 processes shyshy
4 JUSTICE BREYER Weve got that Yes yes
5 We got the computer But then it doesnt improve the
6 computer but rather it improves through the computer
7 the harvesting of cotton
8 Now youve got it in what you said was your
9 second category which is an improvement through the
10 computer of a technology And I thought in your brief
11 you were distinguishing an improvement through the
12 computer of a human activity that is not a technology
13 and in particular to pick an example of that
14 something in finance or something in business
15 Now am I right about the distinction youre
16 making
17 GENERAL VERRILLI Yeah that shyshy
18 JUSTICE BREYER If Im not right what is
19 the distinction
20 GENERAL VERRILLI That is generally the
21 line were drawing Frankly shyshy
22 JUSTICE BREYER And how is that justified
23 GENERAL VERRILLI I do want shyshy
24 JUSTICE BREYER That shyshy that is Judge Dyk
25 in shyshy in Bilski in the Federal circuit 4 people sort of
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1 picked it up maybe 5 didnt pick it up Would you say
2 a few words about it
3 GENERAL VERRILLI Sure About shyshy let me go
4 to Bilski there in that I do think while shyshy while
5 certainly the Court held that the term process got a
6 natural construction which could include business
7 methods it seems to me that thats not all the Court
8 said in Bilski The Court also said that it was
9 historically and traditionally quite rare that business
10 methods were patent eligible
11 It also said that shyshy that the shyshy that courts
12 and the PTO examiners should use the abstract ideas
13 exception to 101 to police the appropriate boundary
14 It also said that the
15 machineshyorshytransformation test that the United States
16 advocated remained a useful tool And of course that
17 directs to you seeing whether there is a technology
18 application
19 And of course the holding in Bilski was
20 that the shyshy the method for hedging risk was ineligible
21 because it was an abstract idea and I cant imagine
22 that if in Bilski the shyshy the claim had been exactly the
23 same but had added use a computer to carry out some of
24 these standard random analysis functions that are
25 claimed by the patent that you would have found it to
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1 be patent eligible
2 And I shyshy I would submit for the Court that
3 the key point here I think is that now given where
4 the Court shyshy what the Court has held in Bilski given
5 what its held in Mayo the abstract ideas exception is
6 really the only tool left to deal with what I shyshy what I
7 think I fairly read Bilski as saying is a significant
8 problem the proliferation of patents of business
9 methods
10 JUSTICE KENNEDY Is there an example that
11 you can give us of a shyshy what we can call a business
12 process that is patentable a process that doesnt
13 involve improving the workings of a computer
14 GENERAL VERRILLI I shyshy I think its going
15 to be difficult for me to do that I think for
16 example if you had a business method a process for
17 additional security pointshyofshysale credit card
18 transactions using particular encryption technology
19 that might well be patent eligible Its a technology
20 that it makes conduct of business more efficient or
21 effective
22 But there is a technological link here and
23 we do think thats critical to our shyshy to our point of
24 view with respect to the case And I shyshy and I do think
25 remember that when we say something is not patent
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1 eligible were not saying they cant do it Were
2 saying they cant monopolize it
3 And the concern in a situation like this one
4 is that if this is patent eligible its hard to see
5 why for example the first person who came up with a
6 frequent flier program wouldnt have been able to claim
7 a patent there because after all thats a business
8 method for improving customer loyalty implemented on a
9 computer
10 CHIEF JUSTICE ROBERTS General I shyshy you
11 mentioned a while ago the need for greater clarity and
12 certainty in this area And Im just wondering in your
13 brief youve got a nonshyexhaustive of factors to
14 consider and there are 6 different ones And Im just
15 doubtful that thats going to bring about greater
16 clarity and certainty
17 GENERAL VERRILLI I take shyshy I take the
18 point Mr Chief Justice but I think the key is that
19 they are all directed to answering the question of
20 whether the innovation that is claimed and is an
21 innovation in either A the improvement of a computers
22 functioning or B the use of computer technology to
23 improve the functioning of another technological
24 process and a case like Diehr would be in the latter
25 category
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1 And so I do think that thats the key
2 benchmark Thats the baseline Thats the test that
3 we do think can be applied clearly and consistently by
4 the courts or the PTO And it avoids the risk of things
5 like frequent flier programs or the Oakland As money
6 ball methods for evaluating the contributions in
7 individual baseball players make or any one of a host of
8 other things that our intuitions tell us just dont
9 belong in the patent system
10 Thats the shyshy drawing that line keeps them
11 out not drawing that line lets them in And with all
12 due respect I dont think that the novelty and
13 nonobviousness filters that 102 and 103 really deal with
14 that problem effectively because when you get to
15 nonobviousness in 103 for example youll be asking a
16 different question
17 If you take the frequent flier program you
18 would say well is this innovation in building consumer
19 loyalty something that would have been obvious to
20 somebody who runs an airline Its totally divorced
21 from the question of technology at that point and
22 therefore I dont think youre going to get the screen
23 that you need to get in order for the patent system to
24 be confined to its traditional and appropriate scope
25 If there are no further questions thank
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1 you
2 JUSTICE GINSBURG I have a question about
3 how do you identify an abstract concept The shyshy a
4 natural phenomenon a mathematical formula those are
5 easy to identify but there has been some confusion on
6 what qualifies as an abstract concept
7 GENERAL VERRILLI We would define
8 abstract shyshy an abstract concept as a claim that is not
9 directed to a concrete innovation in technology
10 science or the industrial arts So its the shyshy its
11 abstract in the sense that it is not a concrete
12 innovation in the traditional realm of patent law
13 Thank you
14 CHIEF JUSTICE ROBERTS Thank you General
15 Mr Phillips you have four minutes
16 remaining
17 REBUTTAL ARGUMENT OF CARTER G PHILLIPS
18 ON BEHALF OF THE PETITIONERS
19 MR PHILLIPS Thank you Mr Chief Justice
20 Id just like to make a few points
21 First of all with respect to the question
22 you asked which is looking at 159 et cetera all I can
23 tell you is that if you look at claim 33 it talks about
24 matched orders the matched orders that are described in
25 286 and 287 and then makes specific reference to 159
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1 and that flow chart thats there And its all designed
2 as a package Its only one element of the shyshy of the
3 invention but it is a central element and its an easy
4 one to understand And it goes well beyond simply the
5 notion of hedge shyshy hedge against settlement risk and do
6 it by a computer
7 JUSTICE SOTOMAYOR Your adversary says that
8 his shyshy the appendix to his brief are the only patents at
9 issue that the flow charts are not at issue in this
10 case
11 MR PHILLIPS Theres no basis for that
12 statement Your Honor There shyshy remember this went off
13 on a very truncated litigation process So theres shyshy
14 you know we shyshy we got cut off at the beginning of it
15 Theres been no construction of the shyshy of the claims
16 and shyshy and obviously these are specifications that go
17 to how you interpret the claim
18 JUSTICE SOTOMAYOR If we were to say that
19 there are no business patents shyshy
20 MR PHILLIPS Yes
21 JUSTICE SOTOMAYOR shyshy would your patent
22 survive at all
23 MR PHILLIPS No I dont shyshy I dont
24 believe so I think theres no question And you
25 know General Verrilli could not have been any plainer
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1 in his statement of how he wants to interpret the
2 abstract idea concept
3 JUSTICE SOTOMAYOR Yes he wants to say no
4 business patents
5 MR PHILLIPS No business shyshy just another
6 way of saying no business methods And you know the
7 Court rejected that And it seems to me extraordinary
8 to say Congress didnt reject no business methods in
9 101 but were going to do shyshy were going to manipulate
10 the judicial exception to accomplish precisely that same
11 thing It seems to me thats wholly inappropriate
12 Justice Ginsburg you asked my shyshy my friend
13 here you know whats his test He didnt answer that
14 question youll notice because he doesnt have an
15 answer His basic argument is whatever you do just
16 kill this patent
17 And if I were in his shoes I suppose Id
18 take that same position I think whats absolutely
19 clear is that the test ought to be one that is
20 structured as a very coarse filter not the kind of
21 filter that hes pushing for where it changes over time
22 I mean I thought his shyshy I thought his response to one
23 of the questions about eshymail and word processing that
24 Justice Sotomayor asked is over time it would change
25 Well thats exactly what 102 and 103 are for That is
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1 not the purpose of shyshy of Section 101
2 And then he uses the example of encryption
3 I guarantee you if we were arguing about encryption in
4 this case he would say to me that thats an abstract
5 principle because encryption is a concept thats been
6 around since time immemorial George Washington used
7 it Everybody has used encryption
8 And a question again thats not the
9 solution to these problems The question is how did we
10 go about doing it And we go beyond the basics of
11 simply saying use a computer and thats what we ask
12 this Court to focus on and to evaluate
13 As to the frequent flier program its
14 pretty clear to me that even though it was a novel idea
15 in some sense the concept itself would have been viewed
16 in shyshy in the KSR fashion as quite obvious as a means of
17 improving customer loyalty
18 There are solutions here Giving us 101
19 pass doesnt create a monopoly It just gets us to the
20 102 and 103 inquiries that are at the heart of what the
21 patent laws shyshy and 112 that are at the heart of what the
22 patent laws ought to be dealing with
23 If there are no further questions Your
24 Honor thank you
25 CHIEF JUSTICE ROBERTS Thank you counsel
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1 The case is submitted
2 (Whereupon at 1105 am the case in the
3 aboveshyentitled matter was submitted)
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
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58
A add 714 1023 algorithm 3320 41 automatically
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disclosure 328 413 302021 4220 figure 1146 discuss 164 economy 1516 ESQ 1171921 excerpted 323 311222 3917 discussion 299 effective 1223 236913 exhausted 1813 file 406 dispose 2625 5021 essence 211 exist 420 131 filed 4214 dispute 325 effectively 5214 essential 1224 existence 1119 fill 2818 disputed 3120 efficacy 1224 3425 175 filled 293
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problems 419 411 4114 3025 reward 436 173 308 569 protect 377 quotes 2721 refined 222 right 63 8479
proceeding protection 459 reflect 2220 1020 1214 4316 provided 1324 R refusal 437 14723 155
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processing 228 417 reads 301920 repeat 319 5314 5625 2917 3418 putting 1421 3717 replicate 3711 robotics 2120 355 5523 156 real 1615 represent 351 robust 4016
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508 5514 5689 3823 rest 2611 satisfying 43 Prometheus questions 2610 recognized 317 result 2326 saw 617
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147891012 sees 613 164 2121 solvency 72124 3923 418 141424 194 segments 169 267 271117 1016 1117 4210 197 2017 sell 3020 3822 392123 somebody 95 statement 5412 282122 354 selling 4716 402324 4115 1022 2510 551 38141515 sells 3924 436 544 5220 states 111423 42152325 seminal 3619 5611 sophisticated 210 169 248 468917 507 send 2512 simultaneously 3013 4224 4320 5112 556 4122 421 815 136 sorry 67 819 4414 473 5611 sense 151920 1512 sort 324 3413 4915
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science 351 306 3218 small 4319 sounds 820 77121315 5310 4311 soshycalled 2714 speak 31522 81111 1019
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286 307 settler 53 2055621 specifically 424 stored 610 3721 4318 shadow 55 93 212391116 3521 streaming 334 489 96 2719 2118 227 specification Street 3219
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3014 3413 4512 507 solution 1120 stage 174 256 2519 2914 5017 significantly 112122 1711 stand 271 3725 367
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146 2624 39722 472 5511 1024 111 ultimately 56 3918 511717 5217 things 1112 Trademark unanimous 274
sufficiently 5518 167 2725 1321 4336 3211 391315 takes 2221 297 316 trading 3089 uncertain 393
suggest 720 talking 519 3813 392 3312 3411 understand 925 172 441 4016 444 traditional 453 2110 3110 3821 434 talks 5323 5248 5224 5312 544
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211 4415 211921 3411 4211 4511 transmission 4224 4320 suppose 12812 35223 4424 464671315 3014 4414 473
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various 3616 3420 4016 4312 1327shy28 369 94 2715 vary 1420 442 556 wrong 392 159 1910 311 Verrilli 121 29 ways 717 3015 wrote 1213 532225
4120 441213 4416 451023
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2 2 3424 4319 20 371018 2014 111 22000 4321 25 3118 26 27 2712
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wellshyestablished 276
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285shy286 1910 286 5325 287 5325
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5 5 491 510 3019 411 53 214 57 4322
6 6 5114 65 3019
7
8
9 9 245 9shy0 365
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1 system claims which clearly are shyshy are how to create a
2 computer system and how to implement it using that
3 method would be a much more concrete version of that in
4 a way that would take it out of 101 That said I
5 obviously believe that all of our claims satisfy 101
6 and should go on to the next stage
7 JUSTICE KAGAN Can I give you a
8 hypothetical Mr Phillips and you tell me how its
9 different or the same Lets say you know 30 years
10 somebody took a look around the world and said a lot of
11 people seem to order products by mail They get the
12 catalogues in the mail and then they send back their
13 return forms And lets say that one of the founders of
14 the Internet said wouldnt this be an amazing system
15 we could actually do this by computer and they had
16 patented that Is that the same
17 MR PHILLIPS I dont know if its the
18 same but I would shyshy I would argue that it could very
19 well be a patentable subject matter because shyshy but it
20 depends on how the claims play out
21 JUSTICE KAGAN No but exactly I mean
22 the claim would have said something along the lines of
23 you know theres this process by which people order
24 products and we want to do it over the Internet we want
25 to do it electronically and we will use a computer to
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1 do that to essentially take the process of mail order
2 catalogues and make it electronic
3 MR PHILLIPS I could certainly shyshy I think
4 I could write a claim shyshy a set of claims that I believe
5 would satisfy 101 And shyshy and to the extent that
6 youd shyshy that youd think those are no different than
7 the ones I have here then my argument is simply I think
8 I satisfy 101 with the claims we have before us Your
9 Honor
10 If there are no further questions then Id
11 like to reserve the rest of my time
12 CHIEF JUSTICE ROBERTS Thank you
13 Mr Phillips
14 Mr Perry
15 ORAL ARGUMENT OF MARK A PERRY
16 ON BEHALF OF THE RESPONDENTS
17 MR PERRY Mr Chief Justice and may it
18 please the Court
19 That path between Scylla and Charybdis was
20 charted in Bilski and Mayo Bilski holds that a
21 fundamental economic principle is an abstract idea and
22 Mayo holds that running such a principle on a computer
23 is quote not a patentable application of that
24 principle Those two propositions are sufficient to
25 dispose of this case
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1 If Bilski and Mayo stand Alices patents
2 fail Therefore Mr Phillips and his friends are
3 asking this Court to change the standard even though
4 this Court has had three unanimous decisions in the last
5 four terms establishing what the Court called a myriad
6 a wellshyestablished standard
7 On the abstract idea Justice Ginsburg you
8 asked Mr Phillips whats the difference between hedging
9 and this claim There is no difference This is
10 hedging It is hedging against credit default rather
11 than price fluctuation but it is simply hedging
12 And Mr Phillips stood up for 26 minutes and
13 never once referred to the patent Lets look at what
14 the inventor the soshycalled inventor said about this
15 invention This is at JA 293 to 94 in the
16 specification
17 This claim has simply two steps Its very
18 simple First debiting and crediting on a realtime
19 basis the relevant shadow records and second by
20 periodically affecting corresponding payment
21 instructions Those are direct quotes Debit credit
22 and pay Your Honor you cant get much more simple
23 than that
24 Mr Phillips suggests well we have
25 multilateral transactions global things chronological
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1 time zones and so forth None of those are claimed
2 Your Honor Those are all recited in specification
3 The claims read on a single transaction involving two
4 parties
5 JUSTICE BREYER Can I ask you at some
6 point not necessarily this second to say in my shyshy this
7 is just shyshy you know you have an opinion for a court
8 Different judges can have different interpretations
9 All youre getting is mine okay
10 But I think its pretty easy to say that
11 Archimedes cant just go to a boat builder and say
12 apply my idea All right Everybody agrees with that
13 But now we try to take that word apply and give
14 content to it
15 And what I suspect in my opinion Mayo did
16 and Bilski and the other cases is sketch an outer shell
17 of the content hoping that the experts you and the
18 other lawyers and the shyshy the circuit court could fill
19 in a little better than we had done the content of that
20 shell
21 So so far youre saying well this is
22 close enough to Archimedes saying apply it that we
23 neednt go further
24 Now will you at some point in the next few
25 minutes give me your impression of if it were necessary
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1 to go further what would the right words or example be
2 MR PERRY Your Honor as shyshy Justice
3 Breyer as to abstract ideas the PTO has filled in that
4 shell by listing economic concepts legal concepts
5 financial concepts teaching concepts dating and
6 interpersonal relationships and generally how business
7 should be conducted as examples of those things that are
8 likely abstract which of course all follow directly
9 from Bilski and the discussion this Court had in Bilski
10 And this patent shyshy these patents fall squarely within
11 that
12 Congress in the AIA confirmed that
13 reading Congress in the CBM method said business
14 methods that are subject to special scrutiny shyshy that is
15 dubious patents shyshy include methods and corresponding
16 apparatus which is what we have here that pertain to
17 data processing in the financial services industry and
18 do not offer a technological solution That describes
19 Alices patents to a letter Your Honor So that we
20 have shyshy
21 JUSTICE SOTOMAYOR What do you think is a
22 technological solution
23 MR PERRY Your Honor shyshy
24 JUSTICE SOTOMAYOR How could they if at
25 all written their patents to shyshy to make shyshy to make
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1 their software eligible What would shyshy what do they
2 need shyshy would have needed to have added
3 MR PERRY Justice Sotomayor they have no
4 software first Theyve never written software
5 Theyve never programmed a computer So thats a
6 nonexistent set
7 Second there are many technological
8 solutions to trading and settlement problems For
9 example data compression These shyshy these trading
10 platforms involve the movement of very large quantities
11 of data around the world The physical pipes that is
12 the fiber optic cables and data lines are limited
13 There are very sophisticated algorithms for both
14 security and speed to move data through the transmission
15 lines in novel and useful ways that could well be
16 patented
17 Nothing like that is claimed here To come
18 back to where I started if you look for example at
19 Claim 65 in the 510 patent as Mr Phillips reads it
20 it literally reads on a twoshyparty escrow to sell a
21 house so long as the escrow agent is typing this stuff
22 into the HUDshy1 using a computer That has nothing to do
23 with multilevel shyshy
24 CHIEF JUSTICE ROBERTS Well thats a
25 little more complicated He referred us to Joint
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1 Appendix Page 159 which is not a change in how
2 computers work But it is shyshy constitutes the
3 instructions about how to use the computer and where it
4 needs to be affected And just looking at it it looks
5 pretty complicated There are a lot of arrows and
6 they shyshy you know different things that go shyshy
7 (Laughter)
8 CHIEF JUSTICE ROBERTS Well but I mean
9 you know it shyshy in different directions And I
10 understand him to say that in each of those places
11 thats where the computer is needed
12 MR PERRY Mr Chief Justice Figure 16 has
13 nothing to do with the invention asserted against my
14 client in this case There are two inventions in this
15 patent One invention involving multilateral contract
16 formation is not asserted against my client And all of
17 these drawings pertain to that The only drawings that
18 pertain to the asserted claims are 25 and 33 to 37 And
19 that was established below and its established in this
20 Court And Mr Phillips has never disputed it
21 So the claim hes pointed the Court shyshy the
22 figure hes pointed the Court to has nothing to do with
23 the invention Its for a different invention that is
24 not at issue in this case
25 Remember there are hundreds and hundreds of
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1 pages of these patents They all pertain to the other
2 invention Thats why in the back of our red brief we
3 excerpted the very little bit that actually pertains to
4 this You sort of tack on patent shyshy the tack on claim
5 that Mr Phillips is asserting here Its 4 columns
6 Its less than five pages in the printed appendix that
7 actually pertains to this invention And it contains no
8 disclosure whatever
9 Justice Scalia to your question about how
10 the computer does it Of course a patent that
11 describes sufficiently how a computer does a new and
12 useful thing whether its data compression or any other
13 technological solution to a business problem a social
14 problem or a technological problem would be within the
15 realm of the shyshy of the patent laws That is what the
16 patent laws have always been for
17 This is not such a patent And the reason
18 for that is this is a preshyBilski set of patents These
19 were prosecuted under the old State Street test where
20 all the applicant had to claim was a result
21 JUSTICE KENNEDY Would you give me shyshy
22 again you already did it once shyshy an example of a
23 business process patent shyshy of a business process idea
24 and invention that is patentable
25 MR PERRY Your Honor there are many
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1 examples One would be a technological solution to a
2 business problem So that for example shyshy Ill give a
3 different example There are many applications today
4 The Court may be familiar with streaming video to watch
5 video on your computer
6 It is not possible to get enough data
7 through existing lines in its raw format The data has
8 to be manipulated in order to see live video So if you
9 want to watch TV on your phone for example
10 Those algorithms those inventions are
11 undoubtedly technological And if they are used in a
12 trading platform or a hedging system or something else
13 that wouldnt disable them And this is what the Diehr
14 case shyshy
15 JUSTICE KENNEDY Well I shyshy I shyshy in my
16 language Ive called that mechanical rather than
17 process Can you give me an example of process
18 MR PERRY Yes Your Honor The process in
19 that example would be a computer running the particular
20 data compression algorithm
21 JUSTICE KENNEDY But thats how to make
22 a shyshy thats how to make a machine work better
23 MR PERRY Yes Your Honor
24 JUSTICE KENNEDY Im asking you Is there
25 any business process any business activity that is
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1 susceptible to a patent a pure patent innovations that
2 deserve patents
3 MR PERRY Your Honor again a
4 technological solution to a business problem could well
5 be whether its a method or a process is equivalent
6 Again Congress said method in a corresponding shyshy
7 JUSTICE KENNEDY Can you give me an
8 example
9 MR PERRY I thought the data compression
10 example was a good one Ill try an encryption
11 technology Many of these trading platforms you know
12 dealing with securities and money would require some
13 sort of security devices You could have a process for
14 securely transmitting data would be another computer
15 implemented technological solution to a business
16 problem Again nothing like that claimed here
17 JUSTICE SOTOMAYOR How about eshymail and
18 just word processing programs
19 MR PERRY Your Honor a program shyshy let me
20 try it this way to both of your questions In our view
21 if what is claimed as the inventive contribution under
22 Mayo shyshy in other words if we have an abstract idea as
23 we do here and what is claimed is the inventive
24 contribution for Step 2 is the computer then the
25 computer must be essential to that operation and
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1 represent an advancement in computer science or other
2 technology And we know thats not met here Justice
3 Sotomayor because shyshy
4 JUSTICE SOTOMAYOR So youre saying no to
5 eshymail and word processing
6 MR PERRY Your Honor I think at a
7 point shyshy
8 JUSTICE SOTOMAYOR They certainly have
9 functionality and shyshy and improvement of functionality
10 for the user
11 MR PERRY At a point in time in the past
12 I think both of those would have been technological
13 advances that were patentable
14 JUSTICE SOTOMAYOR How
15 MR PERRY Today shyshy because they would have
16 provided a technological solution to a then unmet
17 problem Today reciting and do it on a word processor
18 is no different than and do it on a typewriter or shyshy and
19 do it on a calculator
20 The inventive contribution component which
21 uses specifically the language of conventional and
22 routine and well understood will evolve with
23 technology Thats why its different than the abstract
24 idea component
25 And here we know that these patents dont
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1 claim anything that was not conventional well
2 understood and routine We went through that in great
3 detail and Alice has never disputed a word of it They
4 just say youre not supposed to do that analysis even
5 though the Court 9shy0 in Mayo said we should
6 And in this case its very important to
7 look at what Alices own experts said on the subject
8 This is not our expert This is Alices expert And
9 this is at Page 1327shy28 of the Joint Appendix It is
10 possible to do the business methods of maintaining
11 accounts adjusting accounts and providing an
12 instruction without a computer or other hardware
13 And then Justice Breyer directly to your
14 abacus If someone had thought of this invention
15 soshycalled invention 100 years ago they might have
16 implemented it in a nonelectronic manner using various
17 precomputing tools such as an abacus or handwritten
18 ledgers
19 We know from Benson the Courts seminal
20 computer implementation case that if you can do it by
21 head and hand then the computer doesnt add anything
22 inventive within the meaning of the 101 exception That
23 is the holding of Benson And the Court reiterated that
24 in Mayo
25 Flook said exactly the same thing If you
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1 can do it with pencil and paper then the computer is
2 not offering anything that the patent laws are or should
3 be concerned with
4 It is only where the method will not work
5 without a computer which is not these claims and where
6 the computer itself is doing something that the patent
7 law is willing to protect
8 CHIEF JUSTICE ROBERTS What if shyshy what if
9 you can do it without a computer but its going to
10 take you know 20 people a hundred years In other
11 words theoretically you can replicate what the
12 computer does shyshy
13 MR PERRY Two answers
14 CHIEF JUSTICE ROBERTS shyshy but its
15 impractical without looking to do it on the computer
16 MR PERRY Mr Chief Justice first these
17 claims literally read as Alice reads them on a single
18 transaction between two parties so its not 20 people
19 for a hundred years Its one person sitting in a room
20 so thats not a problem
21 Second if what is being claimed is the
22 necessary speed or efficiency or data crunching
23 capabilities if you will of a computer then it would
24 have to be claimed and theres nothing claimed here
25 All that is claimed shyshy and my friend is going to stand
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1 up on rebuttal and tell you all that the expert said
2 well what is claimed is a computer but its just a
3 computer It just says a computer configured too It
4 doesnt say that the computer actually has to shyshy
5 JUSTICE BREYER Yeah but the trouble with
6 that particular test is as I think partly the Chief
7 Justice said how long et cetera and then add to that
8 though you could do it without a computer what happens
9 at the end of the line is the automobile engine goes off
10 or it begins to sputter or it turns left
11 You see its possible to take Archimedes shyshy
12 shyshy you know I use that example purposely to call
13 attention to the problem You can take those things
14 and youre not just saying apply it and youre not even
15 just saying shyshy you are saying use the computer but at
16 the end of the road something physical in the world
17 changes and everybody would say now thats shyshy that
18 will falls within I mean probably I mean my
19 hesitation shows Im looking for the right words
20 MR PERRY Justice Breyer your point is
21 the reason that it is equally fallacious to suggest on
22 the one hand as Alice and IBM does that simply
23 reciting a computer is a magic key that gets you through
24 101 and you never have to any other inquiry and what
25 some of folks the amici on the other side say which
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1 is that computers or software are never eligible Both
2 of those things have to be wrong because what the Court
3 said in Bilski was future innovation is too uncertain
4 We are not going to do that as a Court And the Court
5 laid out an approach using abstract ideas in Bilski and
6 inventive contribution in Mayo that is flexible enough
7 to take into account that innovation and to deal with
8 particular claims in context which is why at the end
9 of the day we have to come back to these patents and
10 decide which shyshy
11 JUSTICE KAGAN Mr Perry before we get
12 back to these matters you said to Justice Scalia if a
13 patent sufficiently describes how a computer will
14 implement an idea then its patentable So how
15 sufficiently does one have to describe it What do we
16 want a judge to do at this threshold level in terms of
17 trying to figure out whether the description is
18 sufficient to get you past it
19 MR PERRY If I can answer in two steps
20 Justice Kagan First in the negative What the
21 applicant or patentee must do shyshy must not do is simply
22 describe the desired result That would take us back to
23 State Street That would simply say I claim a magic
24 box that buys high and sells low or vice versa I
25 suppose I claim a magic box for investing Thats what
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1 these patents do
2 Then to put it in the affirmative and in the
3 language of Mayo the claim has to recite something
4 significantly more something significantly more than
5 the abstract idea itself That would be a contextual
6 analysis based on the claims and specifications and file
7 history and we know that some devices some methods
8 some programming will pass that
9 It is not going to be a brightshyline rule and
10 thats one of the tugshyofshywar issues that this Court and
11 the Federal Circuit have been having in these cases
12 The Federal Circuit wants brightshyline rules All
13 computers are in or all computers are out
14 This Court has been more contextual This
15 Court has been more nuanced This Court has looked at
16 things in a more robust way
17 JUSTICE KAGAN Youre not suggesting that
18 specific code is necessary
19 MR PERRY No Your Honor I think the shyshy
20 actual description of the programming is a 112 problem
21 I agree with that A 112 issue That is the realm of
22 the written description requirement What is a 101
23 problem is it is on the applicant to do more than simply
24 describe the results simply say A magic box that does
25 intermediate settlement And we can tie that back to
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1 this particular prosecution the 510 patent which is
2 the method patent
3 The examiner rejected it Under Section
4 101 the examiner said this is an abstract idea You
5 cant have this patent And the only change that this
6 applicant made was to add in the adjusting step
7 electronic adjustment It put in one word
8 electronic adjustment And under State Street which
9 is what this patent is prosecuted under that was
10 enough because the result of adjusting run through a
11 computer is enough
12 Under current law that cant be enough
13 That just cant get a patent over the line because this
14 Court said in Mayo and I got to quote this language
15 Simply implementing a fundamental principle on a
16 physical machine namely a computer is not a patentable
17 application of that principle Thats all that Alice
18 has done
19 These are preshyBilski patents They never
20 should have been issued General Verrilli will stand up
21 and address that point And certainly under current
22 law shyshy one point on the AIA Congress did not send all
23 this to the administrative process Congress created
24 two avenues the courts and the PTO to use the
25 standards Essentially it ratified Bilski and Mayo and
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1 said we agree with what you all are doing at the
2 Supreme Court and the existing standards are good enough
3 for us This is a judicial problem And that is a good
4 reason The abstract shyshy
5 JUSTICE GINSBURG The Federal Circuit in
6 this case split in many ways and it had our decisions
7 to deal with You said given Bilski and Mayo this is
8 an easy case What is the instruction that escaped a
9 good number of judges on the Federal Circuit How would
10 you state the rule
11 MR PERRY Your Honor I think theres a
12 significant element to the Federal Circuit that
13 disagrees with Mayo and has been resistant in applying
14 it Chief Judge shyshy former Chief Judge Michelle filed a
15 brief in this Court essentially saying Mayo is a
16 lifeshysciences case You should limit it to that because
17 if you apply it to everything else then these patents
18 are no good
19 Mayo we submit is a technologyshyneutral
20 industryshyneutral exceptionshyneutral framework that can
21 be used to answer all of these questions This is not
22 the death of software patents The software industry is
23 all before this Court saying this is fine with us
24 Every company in the United States practically except
25 for IBM is saying go ahead This will not affect
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1 software patents
2 Justice Ginsburg this Courts precedents
3 are clear They are unanimous They just need to be
4 applied To suggest that there is confusion that needs
5 to be addressed by retreating beating a retreat from
6 recent unanimous decisions would simply reward
7 intransigence difficulty refusal to adhere to what are
8 clear precedents because shyshy
9 JUSTICE KAGAN Should we be concerned
10 Mr Perry that there are old patents that in fact could
11 meet the test that you set forth but wont because they
12 were written in a different time and so used much more
13 general language
14 MR PERRY Your Honor the applicant or the
15 patent holder would have the opportunity to institute a
16 reexamination proceeding or some sort of administration
17 process to address that issue
18 And second it should be noted this is a
19 very small problem There are 2 million outstanding
20 patents in the United States In the last four fiscal
21 years there were 22000 infringement litigations
22 instituted but since Bilski there have only been 57
23 district court decisions on Section 101 issues There
24 have only been 12 Federal Circuit decisions total on
25 computer implementation
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1 We are talking about a group of patents
2 Justice Kagan thats way out at the tail end of
3 distribution Most patents never have a 101 challenge
4 This is not an issue with cotton gins and other things
5 This is a problem for the most marginal
6 most dubious most skeptical patents the ones that this
7 Court in Bilski shyshy and remember what Bilskis holding
8 is The majority said they are processes but it did
9 not say they are eligible
10 Thank you Mr Chief Justice
11 CHIEF JUSTICE ROBERTS Thank you counsel
12 General Verrilli
13 ORAL ARGUMENT OF DONALD B VERRILLI JR
14 ON BEHALF OF THE UNITED STATES AS AMICUS
15 CURIAE SUPPORTING RESPONDENTS
16 GENERAL VERRILLI Mr Chief Justice and
17 may it please the Court
18 An abstract idea does not become
19 patentshyeligible merely by tacking on an instruction to
20 use a computer to carry it out A computer makes a
21 difference under Section 101 when it imposes a
22 meaningful limit on the patent claim That occurs when
23 the claim is directed at improvement in computing
24 technology or an innovation that uses computing
25 technology to improve other technological functions
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1 Thats the test that we believe is most faithful to this
2 Courts precedents in Bilski and Mayo It keeps patents
3 within their traditional and appropriate domain and it
4 is capable of being administered consistently by Courts
5 and by PTO examiners
6 JUSTICE GINSBURG How do you answer the
7 argument that your view would extinguish businessshymethod
8 patents and make all software ineligible for patent
9 protection
10 GENERAL VERRILLI Yeah with shyshy let me
11 address software patents first because that I think is
12 obviously a significant question And its just not
13 correct to say that our approach would make software
14 patenting ineligible Any software patent that improves
15 the functioning of the computer technology is eligible
16 Any software patent that improves shyshy that is used to
17 improve another technology is eligible For example
18 the patent in the shyshy in the Diehr case is one in
19 which shyshy
20 JUSTICE SOTOMAYOR Why do we need to reach
21 this in that shyshy reach software patents at all in this
22 case
23 GENERAL VERRILLI Well shyshy
24 JUSTICE SOTOMAYOR Whats the necessity for
25 us to announce a general rule with respect to software
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1 There is no software being patented in this case
2 GENERAL VERRILLI Well I shyshy
3 JUSTICE SOTOMAYOR Theres a systems
4 GENERAL VERRILLI Well I shyshy I think shyshy
5 well they shyshy they shyshy theres a process being and shyshy and
6 one can think of software patents as process patents
7 And I think thats why my friends on the other side are
8 saying the sky is falling because they shyshy they are
9 interpreting what were saying about that when a
10 computer makes shyshy when a computers involvement makes
11 something eligible under 101 its calling those into
12 question and it doesnt
13 JUSTICE SOTOMAYOR Do you think we have to
14 reach the patentability of software to answer this case
15 GENERAL VERRILLI Well I think you can shyshy
16 I think the answer to that question is no not
17 necessarily You can decide it by saying that shyshy that
18 Bilski answers the question whether this is an abstract
19 idea because this form of hedging is really no
20 different than the form of hedging as a conceptual
21 matter at issue in Bilski And then Mayo answers the
22 question of whether the use of a computer in this case
23 adds enough to the abstract idea beyond conventional
24 steps because here all we have after all is just
25 conventional use of computing technology no computer
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1 innovation such that you dont qualify under 101 You
2 could take that approach
3 But it is important to the United States
4 that we shyshy and to our patent examiners that we get some
5 clarity if we can I think the clarity could come from
6 the text that I propose which I want to reiterate shyshy
7 JUSTICE SOTOMAYOR Well shyshy
8 JUSTICE BREYER Could shyshy could shyshy could you
9 go on with that because you were just getting to the
10 point where I think you say a computer improvement that
11 in fact leads to an improvement in harvesting cotton is
12 an improvement through a computer of technology so it
13 qualifies
14 But then I think you were going to say or I
15 got this also from the brief a computer improvement
16 that leads to an improvement in the methods of selling
17 bonds over the telephone is not an improvement in
18 technology reached by the computer Am I right about
19 the distinction youre making
20 GENERAL VERRILLI I dont think theres a
21 yes or no answer to that question
22 JUSTICE BREYER What is your view Yeah
23 what is shyshy how do we deal with just that problem
24 GENERAL VERRILLI If there is a genuine
25 innovation in the functioning of the computer shyshy
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1 JUSTICE BREYER Yes
2 GENERAL VERRILLI shyshy such that business
3 processes shyshy
4 JUSTICE BREYER Weve got that Yes yes
5 We got the computer But then it doesnt improve the
6 computer but rather it improves through the computer
7 the harvesting of cotton
8 Now youve got it in what you said was your
9 second category which is an improvement through the
10 computer of a technology And I thought in your brief
11 you were distinguishing an improvement through the
12 computer of a human activity that is not a technology
13 and in particular to pick an example of that
14 something in finance or something in business
15 Now am I right about the distinction youre
16 making
17 GENERAL VERRILLI Yeah that shyshy
18 JUSTICE BREYER If Im not right what is
19 the distinction
20 GENERAL VERRILLI That is generally the
21 line were drawing Frankly shyshy
22 JUSTICE BREYER And how is that justified
23 GENERAL VERRILLI I do want shyshy
24 JUSTICE BREYER That shyshy that is Judge Dyk
25 in shyshy in Bilski in the Federal circuit 4 people sort of
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1 picked it up maybe 5 didnt pick it up Would you say
2 a few words about it
3 GENERAL VERRILLI Sure About shyshy let me go
4 to Bilski there in that I do think while shyshy while
5 certainly the Court held that the term process got a
6 natural construction which could include business
7 methods it seems to me that thats not all the Court
8 said in Bilski The Court also said that it was
9 historically and traditionally quite rare that business
10 methods were patent eligible
11 It also said that shyshy that the shyshy that courts
12 and the PTO examiners should use the abstract ideas
13 exception to 101 to police the appropriate boundary
14 It also said that the
15 machineshyorshytransformation test that the United States
16 advocated remained a useful tool And of course that
17 directs to you seeing whether there is a technology
18 application
19 And of course the holding in Bilski was
20 that the shyshy the method for hedging risk was ineligible
21 because it was an abstract idea and I cant imagine
22 that if in Bilski the shyshy the claim had been exactly the
23 same but had added use a computer to carry out some of
24 these standard random analysis functions that are
25 claimed by the patent that you would have found it to
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1 be patent eligible
2 And I shyshy I would submit for the Court that
3 the key point here I think is that now given where
4 the Court shyshy what the Court has held in Bilski given
5 what its held in Mayo the abstract ideas exception is
6 really the only tool left to deal with what I shyshy what I
7 think I fairly read Bilski as saying is a significant
8 problem the proliferation of patents of business
9 methods
10 JUSTICE KENNEDY Is there an example that
11 you can give us of a shyshy what we can call a business
12 process that is patentable a process that doesnt
13 involve improving the workings of a computer
14 GENERAL VERRILLI I shyshy I think its going
15 to be difficult for me to do that I think for
16 example if you had a business method a process for
17 additional security pointshyofshysale credit card
18 transactions using particular encryption technology
19 that might well be patent eligible Its a technology
20 that it makes conduct of business more efficient or
21 effective
22 But there is a technological link here and
23 we do think thats critical to our shyshy to our point of
24 view with respect to the case And I shyshy and I do think
25 remember that when we say something is not patent
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1 eligible were not saying they cant do it Were
2 saying they cant monopolize it
3 And the concern in a situation like this one
4 is that if this is patent eligible its hard to see
5 why for example the first person who came up with a
6 frequent flier program wouldnt have been able to claim
7 a patent there because after all thats a business
8 method for improving customer loyalty implemented on a
9 computer
10 CHIEF JUSTICE ROBERTS General I shyshy you
11 mentioned a while ago the need for greater clarity and
12 certainty in this area And Im just wondering in your
13 brief youve got a nonshyexhaustive of factors to
14 consider and there are 6 different ones And Im just
15 doubtful that thats going to bring about greater
16 clarity and certainty
17 GENERAL VERRILLI I take shyshy I take the
18 point Mr Chief Justice but I think the key is that
19 they are all directed to answering the question of
20 whether the innovation that is claimed and is an
21 innovation in either A the improvement of a computers
22 functioning or B the use of computer technology to
23 improve the functioning of another technological
24 process and a case like Diehr would be in the latter
25 category
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1 And so I do think that thats the key
2 benchmark Thats the baseline Thats the test that
3 we do think can be applied clearly and consistently by
4 the courts or the PTO And it avoids the risk of things
5 like frequent flier programs or the Oakland As money
6 ball methods for evaluating the contributions in
7 individual baseball players make or any one of a host of
8 other things that our intuitions tell us just dont
9 belong in the patent system
10 Thats the shyshy drawing that line keeps them
11 out not drawing that line lets them in And with all
12 due respect I dont think that the novelty and
13 nonobviousness filters that 102 and 103 really deal with
14 that problem effectively because when you get to
15 nonobviousness in 103 for example youll be asking a
16 different question
17 If you take the frequent flier program you
18 would say well is this innovation in building consumer
19 loyalty something that would have been obvious to
20 somebody who runs an airline Its totally divorced
21 from the question of technology at that point and
22 therefore I dont think youre going to get the screen
23 that you need to get in order for the patent system to
24 be confined to its traditional and appropriate scope
25 If there are no further questions thank
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1 you
2 JUSTICE GINSBURG I have a question about
3 how do you identify an abstract concept The shyshy a
4 natural phenomenon a mathematical formula those are
5 easy to identify but there has been some confusion on
6 what qualifies as an abstract concept
7 GENERAL VERRILLI We would define
8 abstract shyshy an abstract concept as a claim that is not
9 directed to a concrete innovation in technology
10 science or the industrial arts So its the shyshy its
11 abstract in the sense that it is not a concrete
12 innovation in the traditional realm of patent law
13 Thank you
14 CHIEF JUSTICE ROBERTS Thank you General
15 Mr Phillips you have four minutes
16 remaining
17 REBUTTAL ARGUMENT OF CARTER G PHILLIPS
18 ON BEHALF OF THE PETITIONERS
19 MR PHILLIPS Thank you Mr Chief Justice
20 Id just like to make a few points
21 First of all with respect to the question
22 you asked which is looking at 159 et cetera all I can
23 tell you is that if you look at claim 33 it talks about
24 matched orders the matched orders that are described in
25 286 and 287 and then makes specific reference to 159
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1 and that flow chart thats there And its all designed
2 as a package Its only one element of the shyshy of the
3 invention but it is a central element and its an easy
4 one to understand And it goes well beyond simply the
5 notion of hedge shyshy hedge against settlement risk and do
6 it by a computer
7 JUSTICE SOTOMAYOR Your adversary says that
8 his shyshy the appendix to his brief are the only patents at
9 issue that the flow charts are not at issue in this
10 case
11 MR PHILLIPS Theres no basis for that
12 statement Your Honor There shyshy remember this went off
13 on a very truncated litigation process So theres shyshy
14 you know we shyshy we got cut off at the beginning of it
15 Theres been no construction of the shyshy of the claims
16 and shyshy and obviously these are specifications that go
17 to how you interpret the claim
18 JUSTICE SOTOMAYOR If we were to say that
19 there are no business patents shyshy
20 MR PHILLIPS Yes
21 JUSTICE SOTOMAYOR shyshy would your patent
22 survive at all
23 MR PHILLIPS No I dont shyshy I dont
24 believe so I think theres no question And you
25 know General Verrilli could not have been any plainer
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1 in his statement of how he wants to interpret the
2 abstract idea concept
3 JUSTICE SOTOMAYOR Yes he wants to say no
4 business patents
5 MR PHILLIPS No business shyshy just another
6 way of saying no business methods And you know the
7 Court rejected that And it seems to me extraordinary
8 to say Congress didnt reject no business methods in
9 101 but were going to do shyshy were going to manipulate
10 the judicial exception to accomplish precisely that same
11 thing It seems to me thats wholly inappropriate
12 Justice Ginsburg you asked my shyshy my friend
13 here you know whats his test He didnt answer that
14 question youll notice because he doesnt have an
15 answer His basic argument is whatever you do just
16 kill this patent
17 And if I were in his shoes I suppose Id
18 take that same position I think whats absolutely
19 clear is that the test ought to be one that is
20 structured as a very coarse filter not the kind of
21 filter that hes pushing for where it changes over time
22 I mean I thought his shyshy I thought his response to one
23 of the questions about eshymail and word processing that
24 Justice Sotomayor asked is over time it would change
25 Well thats exactly what 102 and 103 are for That is
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1 not the purpose of shyshy of Section 101
2 And then he uses the example of encryption
3 I guarantee you if we were arguing about encryption in
4 this case he would say to me that thats an abstract
5 principle because encryption is a concept thats been
6 around since time immemorial George Washington used
7 it Everybody has used encryption
8 And a question again thats not the
9 solution to these problems The question is how did we
10 go about doing it And we go beyond the basics of
11 simply saying use a computer and thats what we ask
12 this Court to focus on and to evaluate
13 As to the frequent flier program its
14 pretty clear to me that even though it was a novel idea
15 in some sense the concept itself would have been viewed
16 in shyshy in the KSR fashion as quite obvious as a means of
17 improving customer loyalty
18 There are solutions here Giving us 101
19 pass doesnt create a monopoly It just gets us to the
20 102 and 103 inquiries that are at the heart of what the
21 patent laws shyshy and 112 that are at the heart of what the
22 patent laws ought to be dealing with
23 If there are no further questions Your
24 Honor thank you
25 CHIEF JUSTICE ROBERTS Thank you counsel
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1 The case is submitted
2 (Whereupon at 1105 am the case in the
3 aboveshyentitled matter was submitted)
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
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25
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58
A add 714 1023 algorithm 3320 41 automatically
As 525 3621 387 algorithms apply 72425 111
am 115 32 416 3013 3310 2019 281213 automobile 389
572 added 302 Alice 13 34 2822 3814 available 99
abacus 61213 4923 363 3717 4217 avenues 4124
710 1018 additional 5017 3822 4117 applying 4213 avoids 524
1325 3614 3617
address 4121 4317 4511
Alices 271 2919 3678
approach 226 395 4513 B
ability 1514 addressed 435 allow 94 472 B 121 29 4413
able 1511 167 addressing 181 allows 97 242 appropriate 5122
1919 516 adds 4623 amazing 2514 81516 1514 back 1621
aboveshyentitled adhere 437 amici 3825 453 4913 1922 2512
113 573 adjudication amicus 123 5224 3018 322
absolutely 125 241 210 4414 Archimedes 3991222
1215 159 adjusting 3611 analysis 424 281122 3811 4025
5518 41610 364 406 area 219 5112 ball 526
abstract 4267 adjustment 417 4924 argue 2518 Bank 17 35
48 6682023 418 analyze 1416 arguing 563 banks 95
721 8218 administered 1716 argument 114 bars 43
141920 1522 454 announce 4525 225812 33 baseball 527
165 181618 administration answer 119 37 41 144 based 423 406
2220 24925 4316 2219 247 18323 226 baseline 522
2621 277 administrative 3919 4221 26715 4413 basic 413 5515
2938 3422 171218 187 456 461416 457 5317 basically 1821
3523 395 242 4123 4721 551315 5515 2319
405 414 424 adopt 203 answering 5119 arguments basics 5610
4418 461823 adopted 31317 answers 3713 1415 basis 132 1512
491221 505 advancement 461821 arms 1625 1516 2719
53368811 351 anyway 1810 arrangements 5411
552 564 advances 3513 apparatus 2916 131 beating 435
accept 102 adversary 547 APPEARAN arrows 315 beginning 163
accomplish advice 1715 116 art 1919 5414
5510 advocated 4916 appears 820 arts 2124 5310 begins 3810
account 55 618 affect 4225 appendix 1910 aside 1422 157 behalf 11719
397 affirmative 402 311 326 369 asked 2314 122 24710
accounts 823 agent 52 3021 548 278 5322 214 38 2616
9356 3611 ago 318 2224 applicant 3220 551224 4414 5318
3611 3615 5111 3921 4023 asking 193 believe 1316
accurately 2413 agree 920 2021 416 4314 221213 273 1416 2421
acknowledges 221 2418 application 3324 5215 255 264 451
1121 4021 421 2623 4117 aspect 517 5424
act 99 2017 agrees 2812 4918 asserted 3113 belong 529
activities 229 ahead 4225 applications 311618 benchmark 522
activity 2122 AIA 2912 4122 333 asserting 325 Benson 361923
3325 4812 airline 5220 applied 434 attaching 124 best 161124
actual 4020 AL 18 523 attention 3813 better 1610 albeit 923 applies 31418 Attorney 2021 216 2819
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59
3322 brightshyline 409 2313 37 71 4338 5519 beyond 115 4012 5317 checks 618 5614
1312 4623 bring 5115 case 3412 46 Chief 339 clearly 211 251 544 5610 broad 248 116 1524 261217 3024 523
Bilski 313 46 broader 225 2022 213 31812 378 client 311416 415 1722 browsing 228 2211 2313 371416 386 close 2822 2224 2329 builder 2811 2625 311424 421414 4410 CLS 17 35 262020 271 building 5218 3314 36620 441116 5110 1120 2816 2999 built 2324 426816 5118 531419 coarse 247 3935 4125 business 168 451822 461 5625 5520 427 4322 1749 203 461422 5024 chits 611 code 1213 142 447 452 2124 222122 5124 5410 chronological 1916171720 461821 4825 2311 29613 564 5712 1512 2725 4018 49481922 32132323 cases 244 2816 chronologically coffee 1211 5047 3322525 4011 423 colleagues 116
Bilskis 447 34415 3610 catalogues 2512 circuit 2818 college 58 bit 323 48214 4969 262 401112 425 columns 325 blocks 54 508111620 categorically 42912 4324 come 108 234 Bloomberg 517 5419 202 4825 3017 399
2115 225 554568 category 489 circumstances 475 boat 2811 businessshymeth 5125 318 1515 comes 1318 bonds 4717 457 CBM 2913 claim 416 2418 2018 231 bothering 118 buy 183 cellphones 228 2423 2522 coming 923 bound 1521 buys 3924 central 95 543 264 27917 common 31120 boundary 4913 certain 1216 3019 3121 2157 bounds 1521 C certainly 518 32420 361 company 4224 box 392425 C 21 31 263 358 392325 403 competition
4024 cables 3012 4121 495 442223 4922 161011 Breyer 66823 calculator 3519 certainty 5112 516 53823 completely 921
74691923 call 3812 5011 5116 5417 1422 2320 85810 1012 called 721 275 cetera 387 claimed 41014 complex 126 1021 1523 3316 5322 281 3017 complicated 161418 171 calling 4611 Chakrabarty 34162123 1225 235 1922 2114 capabilities 2016 3721242425 3025 315 221216 239 3723 challenge 443 382 4925 component 2315 285 capable 141 change 186 5120 352024 293 3613 454 273 311 415 claims 1416 compression 38520 478 capture 2415 5524 171616 2419 309 3212 4722 4814 captures 2412 changes 3817 2424 2515 3320 349 48182224 card 5017 5521 2520 2648 computer 422
brief 211315 carefully 1725 chart 541 283 3118 516 621 710 2255 322 caricature 718 charted 2620 37517 398 71325 9113 4215 4715 72020 1417 charts 1911 406 5415 91824 1035 4810 5113 1716 549 clarity 4755 10725 1116 548 carry 4420 Charybdis 511116 124102024
briefs 1524 4923 1620 2619 class 59 13911 1479 1618 CARTER 117 checkbook 617 clear 1015 118 1421 15710
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1517 165 confess 1111 coterminous 4121 5324 181719 196 configured 383 2321 customer 518 describes 425 19814 206 confined 5224 cotton 914 444 5617 2918 3211 2025 211016 confirmed 2912 4711 487 cut 5414 3913 2117 2410 confusion 434 counsel 4411 description
D2521525 535 5625 3917 402022 D 312622 30522 Congress 178 countries 137 deserve 342 DC 1101719 31311 3210 1725 1856 course 719 designed 720
1223211 33519 1924 2014 1613 298 812 541 data 2917 309 34142425 2325 291213 3210 491619 desired 3922
30111214 351 361220 346 412223 court 1114 detail 363 3212 3367 3621 37156 558 3101317 detailed 1914 3320 34914 379121523 consequences 922 145 developed 2119 3722382334815 2011 1720 1939 device 207
dating 2953823 3913 consider 5114 2011216 devices 3413 day 612 813 411116 4325 consistently 2222 2321 407
910 399442020 4515 454 523 2618 27345 dicta 923 1012 deal 42023 46102225 constitutes 312 28718 299 Diehr 2322
172 187 397 4710121518 construction 31202122 3313 4518 427 47234725 48566 496 5415 334 36523 5124 506 5213481012 4923 consumer 5218 39244 4010 difference 921
dealing 4175013 51922 contains 327 40141515 2789 4421 1119 135546 5611 content 281417 4114 42215 different 421 151216 3412 computers 2819 4223 4323 79 919 1377 56224610 5121 context 2319 44717 4957 191 259 266
deals 814computers 243 398 498 50244 2888 3169 death 42221616 195 contextual 405 557 5612 3123 333 Debit 27212119 312 4014 Courts 3619 351823 4312 debiting 2718391 401313 contract 3115 432 452 4620 5114 decade 176computing contribution courts 2018 5216 decide 3910442324 4625 342124 3520 4124 454 difficult 817
4617concept 413 396 4911 524 159 5015 decision 161810 1419 contributions create 96 1712 difficulties 420
1811522 53368 526 241 251 difficulty 437 decisions 274552 56515 conventional 5619 direct 2721
426 43623 concepts 2944 3521 361 created 186 directed 4423 43242955 462325 244 4123 5119 539
declare 2010conceptual converting 141 creates 93 directions 319 default 27104620 copyrighted creation 518 directly 31415 define 537concern 513 1315 credit 231 322 2019 Departmentconcerned 373 Corporation 13 271021 5017 298 3613
122439 34 crediting 2718 directs 4917 depends 2520concerns 93 correct 4513 critical 5023 disable 3313 describe 58concrete 1118 correctly 2416 crunching 3722 disaggregate
1112 391522 253 53911 corresponding curiae 123 211 144 1520 4024conduct 5020 2720 2915 4415 disagree 513
described 717conducted 297 346 current 4112 disagrees 4213
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disclosure 328 413 302021 4220 figure 1146 discuss 164 economy 1516 ESQ 1171921 excerpted 323 311222 3917 discussion 299 effective 1223 236913 exhausted 1813 file 406 dispose 2625 5021 essence 211 exist 420 131 filed 4214 dispute 325 effectively 5214 essential 1224 existence 1119 fill 2818 disputed 3120 efficacy 1224 3425 175 filled 293
363 1517 essentially 2016 existing 337 filter 248 5520 distance 2311 efficiency 3722 261 4125 422 5521 distinction 415 efficient 5020 4215 exists 42 filters 5213
4719 481519 either 202 established expert 3688 finance 2124 distinguishing 5121 311919 381 4814
4811 electronic 262 establishing expertise 1210 financial 1225 distribution 4178 275 experts 2817 29517
443 electronically et 18 387 5322 367 fine 103 2223 district 4323 2525 evaluate 97 extent 1924 4223 divorced 5220 element 811 5612 2323 265 finished 133 doing 91315 4212 5423 evaluating 526 extinguish 457 first 1111 2718
148 182224 elevator 625 everybody 2017 extraordinarily 304 3716 237 376 421 712 2812 3817 234 3920 4511 5610 eligibility 2316 567 extraordinary 515 5321
domain 453 eligible 301 evolve 3522 557 fiscal 4320 DONALD 121 391 449 exact 236 five 18912
F29 4413 451517 4611 exactly 411 2214 326 face 248doubtful 5115 4910 50119 1012 1820 flexible 396 fact 515 617 draw 193 2221 5114 2521 3625 flier 516 525
1523 4310drawing 4821 eliminate 418 4922 5525 5217 5613 4711521011 22722 exaggerated 83 Flook 3625
factors 5113drawings 3117 embedded 1418 exaggeration flow 1911 541 fail 2419 272 3117 employ 75 1017 549 fairly 511 507 dubious 2915 enabled 1921 examiner 4134 fluctuation faithful 451446 encourages examiners 455 2711 fall 925 229 due 5212 132222 474 4912 focus 1013
242022 2910 Dyk 4824 encryption example 1912 5612 fallacious 38213410 5018 291 30918 folks 3825
E falling 468562357 3222 33239 follow 1714 E 21 311 falls 3818engaged 2122 331719 348 298 eshymail 228 familiar 334engine 389 3410 3812 form 461920
3417 355 far 2821engineering 59 4517 4813 format 337 5523 fashion 5616ensure 812 98 501016 515 formation 3116
earlier 822 faster 166enter 95 5215 562 former 4214 early 417 Federal 4011entire 186 examples 83 forms 2513 easy 511 1113 4012 4259 environment 297 331 formula 534
2810 428 4212 43241118 exception 317 forth 281 4311 535 543 4825equally 3821 42 235 3622 forward 1121
economic 2621 fell 2010equivalent 345 4913 505 found 1525 294 fiber 3012escaped 428 5510 4925
economics 413 fifth 2217escrow 52 exceptionshyneu founders 2513
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four 1720 182 48172023 5599 3312 461920 1016 123 18912 2216 493 5014 gold 6101114 4920 138 14610 2311 275 511017 537 134 held 46 495 141120 164 4320 5315 5314 5425 good 611 167 5045 181618 2220
framework Generals 204 238 3410 help 135 2621 277 4220 225 4223918 helpful 1525 2812 3223
Frankly 4821 generally 296 government hesitation 3819 3422 3524 frequent 516 4820 2167810 hey 139 3914 405
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1 do that to essentially take the process of mail order
2 catalogues and make it electronic
3 MR PHILLIPS I could certainly shyshy I think
4 I could write a claim shyshy a set of claims that I believe
5 would satisfy 101 And shyshy and to the extent that
6 youd shyshy that youd think those are no different than
7 the ones I have here then my argument is simply I think
8 I satisfy 101 with the claims we have before us Your
9 Honor
10 If there are no further questions then Id
11 like to reserve the rest of my time
12 CHIEF JUSTICE ROBERTS Thank you
13 Mr Phillips
14 Mr Perry
15 ORAL ARGUMENT OF MARK A PERRY
16 ON BEHALF OF THE RESPONDENTS
17 MR PERRY Mr Chief Justice and may it
18 please the Court
19 That path between Scylla and Charybdis was
20 charted in Bilski and Mayo Bilski holds that a
21 fundamental economic principle is an abstract idea and
22 Mayo holds that running such a principle on a computer
23 is quote not a patentable application of that
24 principle Those two propositions are sufficient to
25 dispose of this case
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1 If Bilski and Mayo stand Alices patents
2 fail Therefore Mr Phillips and his friends are
3 asking this Court to change the standard even though
4 this Court has had three unanimous decisions in the last
5 four terms establishing what the Court called a myriad
6 a wellshyestablished standard
7 On the abstract idea Justice Ginsburg you
8 asked Mr Phillips whats the difference between hedging
9 and this claim There is no difference This is
10 hedging It is hedging against credit default rather
11 than price fluctuation but it is simply hedging
12 And Mr Phillips stood up for 26 minutes and
13 never once referred to the patent Lets look at what
14 the inventor the soshycalled inventor said about this
15 invention This is at JA 293 to 94 in the
16 specification
17 This claim has simply two steps Its very
18 simple First debiting and crediting on a realtime
19 basis the relevant shadow records and second by
20 periodically affecting corresponding payment
21 instructions Those are direct quotes Debit credit
22 and pay Your Honor you cant get much more simple
23 than that
24 Mr Phillips suggests well we have
25 multilateral transactions global things chronological
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1 time zones and so forth None of those are claimed
2 Your Honor Those are all recited in specification
3 The claims read on a single transaction involving two
4 parties
5 JUSTICE BREYER Can I ask you at some
6 point not necessarily this second to say in my shyshy this
7 is just shyshy you know you have an opinion for a court
8 Different judges can have different interpretations
9 All youre getting is mine okay
10 But I think its pretty easy to say that
11 Archimedes cant just go to a boat builder and say
12 apply my idea All right Everybody agrees with that
13 But now we try to take that word apply and give
14 content to it
15 And what I suspect in my opinion Mayo did
16 and Bilski and the other cases is sketch an outer shell
17 of the content hoping that the experts you and the
18 other lawyers and the shyshy the circuit court could fill
19 in a little better than we had done the content of that
20 shell
21 So so far youre saying well this is
22 close enough to Archimedes saying apply it that we
23 neednt go further
24 Now will you at some point in the next few
25 minutes give me your impression of if it were necessary
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1 to go further what would the right words or example be
2 MR PERRY Your Honor as shyshy Justice
3 Breyer as to abstract ideas the PTO has filled in that
4 shell by listing economic concepts legal concepts
5 financial concepts teaching concepts dating and
6 interpersonal relationships and generally how business
7 should be conducted as examples of those things that are
8 likely abstract which of course all follow directly
9 from Bilski and the discussion this Court had in Bilski
10 And this patent shyshy these patents fall squarely within
11 that
12 Congress in the AIA confirmed that
13 reading Congress in the CBM method said business
14 methods that are subject to special scrutiny shyshy that is
15 dubious patents shyshy include methods and corresponding
16 apparatus which is what we have here that pertain to
17 data processing in the financial services industry and
18 do not offer a technological solution That describes
19 Alices patents to a letter Your Honor So that we
20 have shyshy
21 JUSTICE SOTOMAYOR What do you think is a
22 technological solution
23 MR PERRY Your Honor shyshy
24 JUSTICE SOTOMAYOR How could they if at
25 all written their patents to shyshy to make shyshy to make
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1 their software eligible What would shyshy what do they
2 need shyshy would have needed to have added
3 MR PERRY Justice Sotomayor they have no
4 software first Theyve never written software
5 Theyve never programmed a computer So thats a
6 nonexistent set
7 Second there are many technological
8 solutions to trading and settlement problems For
9 example data compression These shyshy these trading
10 platforms involve the movement of very large quantities
11 of data around the world The physical pipes that is
12 the fiber optic cables and data lines are limited
13 There are very sophisticated algorithms for both
14 security and speed to move data through the transmission
15 lines in novel and useful ways that could well be
16 patented
17 Nothing like that is claimed here To come
18 back to where I started if you look for example at
19 Claim 65 in the 510 patent as Mr Phillips reads it
20 it literally reads on a twoshyparty escrow to sell a
21 house so long as the escrow agent is typing this stuff
22 into the HUDshy1 using a computer That has nothing to do
23 with multilevel shyshy
24 CHIEF JUSTICE ROBERTS Well thats a
25 little more complicated He referred us to Joint
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1 Appendix Page 159 which is not a change in how
2 computers work But it is shyshy constitutes the
3 instructions about how to use the computer and where it
4 needs to be affected And just looking at it it looks
5 pretty complicated There are a lot of arrows and
6 they shyshy you know different things that go shyshy
7 (Laughter)
8 CHIEF JUSTICE ROBERTS Well but I mean
9 you know it shyshy in different directions And I
10 understand him to say that in each of those places
11 thats where the computer is needed
12 MR PERRY Mr Chief Justice Figure 16 has
13 nothing to do with the invention asserted against my
14 client in this case There are two inventions in this
15 patent One invention involving multilateral contract
16 formation is not asserted against my client And all of
17 these drawings pertain to that The only drawings that
18 pertain to the asserted claims are 25 and 33 to 37 And
19 that was established below and its established in this
20 Court And Mr Phillips has never disputed it
21 So the claim hes pointed the Court shyshy the
22 figure hes pointed the Court to has nothing to do with
23 the invention Its for a different invention that is
24 not at issue in this case
25 Remember there are hundreds and hundreds of
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1 pages of these patents They all pertain to the other
2 invention Thats why in the back of our red brief we
3 excerpted the very little bit that actually pertains to
4 this You sort of tack on patent shyshy the tack on claim
5 that Mr Phillips is asserting here Its 4 columns
6 Its less than five pages in the printed appendix that
7 actually pertains to this invention And it contains no
8 disclosure whatever
9 Justice Scalia to your question about how
10 the computer does it Of course a patent that
11 describes sufficiently how a computer does a new and
12 useful thing whether its data compression or any other
13 technological solution to a business problem a social
14 problem or a technological problem would be within the
15 realm of the shyshy of the patent laws That is what the
16 patent laws have always been for
17 This is not such a patent And the reason
18 for that is this is a preshyBilski set of patents These
19 were prosecuted under the old State Street test where
20 all the applicant had to claim was a result
21 JUSTICE KENNEDY Would you give me shyshy
22 again you already did it once shyshy an example of a
23 business process patent shyshy of a business process idea
24 and invention that is patentable
25 MR PERRY Your Honor there are many
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1 examples One would be a technological solution to a
2 business problem So that for example shyshy Ill give a
3 different example There are many applications today
4 The Court may be familiar with streaming video to watch
5 video on your computer
6 It is not possible to get enough data
7 through existing lines in its raw format The data has
8 to be manipulated in order to see live video So if you
9 want to watch TV on your phone for example
10 Those algorithms those inventions are
11 undoubtedly technological And if they are used in a
12 trading platform or a hedging system or something else
13 that wouldnt disable them And this is what the Diehr
14 case shyshy
15 JUSTICE KENNEDY Well I shyshy I shyshy in my
16 language Ive called that mechanical rather than
17 process Can you give me an example of process
18 MR PERRY Yes Your Honor The process in
19 that example would be a computer running the particular
20 data compression algorithm
21 JUSTICE KENNEDY But thats how to make
22 a shyshy thats how to make a machine work better
23 MR PERRY Yes Your Honor
24 JUSTICE KENNEDY Im asking you Is there
25 any business process any business activity that is
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1 susceptible to a patent a pure patent innovations that
2 deserve patents
3 MR PERRY Your Honor again a
4 technological solution to a business problem could well
5 be whether its a method or a process is equivalent
6 Again Congress said method in a corresponding shyshy
7 JUSTICE KENNEDY Can you give me an
8 example
9 MR PERRY I thought the data compression
10 example was a good one Ill try an encryption
11 technology Many of these trading platforms you know
12 dealing with securities and money would require some
13 sort of security devices You could have a process for
14 securely transmitting data would be another computer
15 implemented technological solution to a business
16 problem Again nothing like that claimed here
17 JUSTICE SOTOMAYOR How about eshymail and
18 just word processing programs
19 MR PERRY Your Honor a program shyshy let me
20 try it this way to both of your questions In our view
21 if what is claimed as the inventive contribution under
22 Mayo shyshy in other words if we have an abstract idea as
23 we do here and what is claimed is the inventive
24 contribution for Step 2 is the computer then the
25 computer must be essential to that operation and
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1 represent an advancement in computer science or other
2 technology And we know thats not met here Justice
3 Sotomayor because shyshy
4 JUSTICE SOTOMAYOR So youre saying no to
5 eshymail and word processing
6 MR PERRY Your Honor I think at a
7 point shyshy
8 JUSTICE SOTOMAYOR They certainly have
9 functionality and shyshy and improvement of functionality
10 for the user
11 MR PERRY At a point in time in the past
12 I think both of those would have been technological
13 advances that were patentable
14 JUSTICE SOTOMAYOR How
15 MR PERRY Today shyshy because they would have
16 provided a technological solution to a then unmet
17 problem Today reciting and do it on a word processor
18 is no different than and do it on a typewriter or shyshy and
19 do it on a calculator
20 The inventive contribution component which
21 uses specifically the language of conventional and
22 routine and well understood will evolve with
23 technology Thats why its different than the abstract
24 idea component
25 And here we know that these patents dont
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1 claim anything that was not conventional well
2 understood and routine We went through that in great
3 detail and Alice has never disputed a word of it They
4 just say youre not supposed to do that analysis even
5 though the Court 9shy0 in Mayo said we should
6 And in this case its very important to
7 look at what Alices own experts said on the subject
8 This is not our expert This is Alices expert And
9 this is at Page 1327shy28 of the Joint Appendix It is
10 possible to do the business methods of maintaining
11 accounts adjusting accounts and providing an
12 instruction without a computer or other hardware
13 And then Justice Breyer directly to your
14 abacus If someone had thought of this invention
15 soshycalled invention 100 years ago they might have
16 implemented it in a nonelectronic manner using various
17 precomputing tools such as an abacus or handwritten
18 ledgers
19 We know from Benson the Courts seminal
20 computer implementation case that if you can do it by
21 head and hand then the computer doesnt add anything
22 inventive within the meaning of the 101 exception That
23 is the holding of Benson And the Court reiterated that
24 in Mayo
25 Flook said exactly the same thing If you
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1 can do it with pencil and paper then the computer is
2 not offering anything that the patent laws are or should
3 be concerned with
4 It is only where the method will not work
5 without a computer which is not these claims and where
6 the computer itself is doing something that the patent
7 law is willing to protect
8 CHIEF JUSTICE ROBERTS What if shyshy what if
9 you can do it without a computer but its going to
10 take you know 20 people a hundred years In other
11 words theoretically you can replicate what the
12 computer does shyshy
13 MR PERRY Two answers
14 CHIEF JUSTICE ROBERTS shyshy but its
15 impractical without looking to do it on the computer
16 MR PERRY Mr Chief Justice first these
17 claims literally read as Alice reads them on a single
18 transaction between two parties so its not 20 people
19 for a hundred years Its one person sitting in a room
20 so thats not a problem
21 Second if what is being claimed is the
22 necessary speed or efficiency or data crunching
23 capabilities if you will of a computer then it would
24 have to be claimed and theres nothing claimed here
25 All that is claimed shyshy and my friend is going to stand
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1 up on rebuttal and tell you all that the expert said
2 well what is claimed is a computer but its just a
3 computer It just says a computer configured too It
4 doesnt say that the computer actually has to shyshy
5 JUSTICE BREYER Yeah but the trouble with
6 that particular test is as I think partly the Chief
7 Justice said how long et cetera and then add to that
8 though you could do it without a computer what happens
9 at the end of the line is the automobile engine goes off
10 or it begins to sputter or it turns left
11 You see its possible to take Archimedes shyshy
12 shyshy you know I use that example purposely to call
13 attention to the problem You can take those things
14 and youre not just saying apply it and youre not even
15 just saying shyshy you are saying use the computer but at
16 the end of the road something physical in the world
17 changes and everybody would say now thats shyshy that
18 will falls within I mean probably I mean my
19 hesitation shows Im looking for the right words
20 MR PERRY Justice Breyer your point is
21 the reason that it is equally fallacious to suggest on
22 the one hand as Alice and IBM does that simply
23 reciting a computer is a magic key that gets you through
24 101 and you never have to any other inquiry and what
25 some of folks the amici on the other side say which
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1 is that computers or software are never eligible Both
2 of those things have to be wrong because what the Court
3 said in Bilski was future innovation is too uncertain
4 We are not going to do that as a Court And the Court
5 laid out an approach using abstract ideas in Bilski and
6 inventive contribution in Mayo that is flexible enough
7 to take into account that innovation and to deal with
8 particular claims in context which is why at the end
9 of the day we have to come back to these patents and
10 decide which shyshy
11 JUSTICE KAGAN Mr Perry before we get
12 back to these matters you said to Justice Scalia if a
13 patent sufficiently describes how a computer will
14 implement an idea then its patentable So how
15 sufficiently does one have to describe it What do we
16 want a judge to do at this threshold level in terms of
17 trying to figure out whether the description is
18 sufficient to get you past it
19 MR PERRY If I can answer in two steps
20 Justice Kagan First in the negative What the
21 applicant or patentee must do shyshy must not do is simply
22 describe the desired result That would take us back to
23 State Street That would simply say I claim a magic
24 box that buys high and sells low or vice versa I
25 suppose I claim a magic box for investing Thats what
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1 these patents do
2 Then to put it in the affirmative and in the
3 language of Mayo the claim has to recite something
4 significantly more something significantly more than
5 the abstract idea itself That would be a contextual
6 analysis based on the claims and specifications and file
7 history and we know that some devices some methods
8 some programming will pass that
9 It is not going to be a brightshyline rule and
10 thats one of the tugshyofshywar issues that this Court and
11 the Federal Circuit have been having in these cases
12 The Federal Circuit wants brightshyline rules All
13 computers are in or all computers are out
14 This Court has been more contextual This
15 Court has been more nuanced This Court has looked at
16 things in a more robust way
17 JUSTICE KAGAN Youre not suggesting that
18 specific code is necessary
19 MR PERRY No Your Honor I think the shyshy
20 actual description of the programming is a 112 problem
21 I agree with that A 112 issue That is the realm of
22 the written description requirement What is a 101
23 problem is it is on the applicant to do more than simply
24 describe the results simply say A magic box that does
25 intermediate settlement And we can tie that back to
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1 this particular prosecution the 510 patent which is
2 the method patent
3 The examiner rejected it Under Section
4 101 the examiner said this is an abstract idea You
5 cant have this patent And the only change that this
6 applicant made was to add in the adjusting step
7 electronic adjustment It put in one word
8 electronic adjustment And under State Street which
9 is what this patent is prosecuted under that was
10 enough because the result of adjusting run through a
11 computer is enough
12 Under current law that cant be enough
13 That just cant get a patent over the line because this
14 Court said in Mayo and I got to quote this language
15 Simply implementing a fundamental principle on a
16 physical machine namely a computer is not a patentable
17 application of that principle Thats all that Alice
18 has done
19 These are preshyBilski patents They never
20 should have been issued General Verrilli will stand up
21 and address that point And certainly under current
22 law shyshy one point on the AIA Congress did not send all
23 this to the administrative process Congress created
24 two avenues the courts and the PTO to use the
25 standards Essentially it ratified Bilski and Mayo and
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1 said we agree with what you all are doing at the
2 Supreme Court and the existing standards are good enough
3 for us This is a judicial problem And that is a good
4 reason The abstract shyshy
5 JUSTICE GINSBURG The Federal Circuit in
6 this case split in many ways and it had our decisions
7 to deal with You said given Bilski and Mayo this is
8 an easy case What is the instruction that escaped a
9 good number of judges on the Federal Circuit How would
10 you state the rule
11 MR PERRY Your Honor I think theres a
12 significant element to the Federal Circuit that
13 disagrees with Mayo and has been resistant in applying
14 it Chief Judge shyshy former Chief Judge Michelle filed a
15 brief in this Court essentially saying Mayo is a
16 lifeshysciences case You should limit it to that because
17 if you apply it to everything else then these patents
18 are no good
19 Mayo we submit is a technologyshyneutral
20 industryshyneutral exceptionshyneutral framework that can
21 be used to answer all of these questions This is not
22 the death of software patents The software industry is
23 all before this Court saying this is fine with us
24 Every company in the United States practically except
25 for IBM is saying go ahead This will not affect
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1 software patents
2 Justice Ginsburg this Courts precedents
3 are clear They are unanimous They just need to be
4 applied To suggest that there is confusion that needs
5 to be addressed by retreating beating a retreat from
6 recent unanimous decisions would simply reward
7 intransigence difficulty refusal to adhere to what are
8 clear precedents because shyshy
9 JUSTICE KAGAN Should we be concerned
10 Mr Perry that there are old patents that in fact could
11 meet the test that you set forth but wont because they
12 were written in a different time and so used much more
13 general language
14 MR PERRY Your Honor the applicant or the
15 patent holder would have the opportunity to institute a
16 reexamination proceeding or some sort of administration
17 process to address that issue
18 And second it should be noted this is a
19 very small problem There are 2 million outstanding
20 patents in the United States In the last four fiscal
21 years there were 22000 infringement litigations
22 instituted but since Bilski there have only been 57
23 district court decisions on Section 101 issues There
24 have only been 12 Federal Circuit decisions total on
25 computer implementation
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1 We are talking about a group of patents
2 Justice Kagan thats way out at the tail end of
3 distribution Most patents never have a 101 challenge
4 This is not an issue with cotton gins and other things
5 This is a problem for the most marginal
6 most dubious most skeptical patents the ones that this
7 Court in Bilski shyshy and remember what Bilskis holding
8 is The majority said they are processes but it did
9 not say they are eligible
10 Thank you Mr Chief Justice
11 CHIEF JUSTICE ROBERTS Thank you counsel
12 General Verrilli
13 ORAL ARGUMENT OF DONALD B VERRILLI JR
14 ON BEHALF OF THE UNITED STATES AS AMICUS
15 CURIAE SUPPORTING RESPONDENTS
16 GENERAL VERRILLI Mr Chief Justice and
17 may it please the Court
18 An abstract idea does not become
19 patentshyeligible merely by tacking on an instruction to
20 use a computer to carry it out A computer makes a
21 difference under Section 101 when it imposes a
22 meaningful limit on the patent claim That occurs when
23 the claim is directed at improvement in computing
24 technology or an innovation that uses computing
25 technology to improve other technological functions
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1 Thats the test that we believe is most faithful to this
2 Courts precedents in Bilski and Mayo It keeps patents
3 within their traditional and appropriate domain and it
4 is capable of being administered consistently by Courts
5 and by PTO examiners
6 JUSTICE GINSBURG How do you answer the
7 argument that your view would extinguish businessshymethod
8 patents and make all software ineligible for patent
9 protection
10 GENERAL VERRILLI Yeah with shyshy let me
11 address software patents first because that I think is
12 obviously a significant question And its just not
13 correct to say that our approach would make software
14 patenting ineligible Any software patent that improves
15 the functioning of the computer technology is eligible
16 Any software patent that improves shyshy that is used to
17 improve another technology is eligible For example
18 the patent in the shyshy in the Diehr case is one in
19 which shyshy
20 JUSTICE SOTOMAYOR Why do we need to reach
21 this in that shyshy reach software patents at all in this
22 case
23 GENERAL VERRILLI Well shyshy
24 JUSTICE SOTOMAYOR Whats the necessity for
25 us to announce a general rule with respect to software
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1 There is no software being patented in this case
2 GENERAL VERRILLI Well I shyshy
3 JUSTICE SOTOMAYOR Theres a systems
4 GENERAL VERRILLI Well I shyshy I think shyshy
5 well they shyshy they shyshy theres a process being and shyshy and
6 one can think of software patents as process patents
7 And I think thats why my friends on the other side are
8 saying the sky is falling because they shyshy they are
9 interpreting what were saying about that when a
10 computer makes shyshy when a computers involvement makes
11 something eligible under 101 its calling those into
12 question and it doesnt
13 JUSTICE SOTOMAYOR Do you think we have to
14 reach the patentability of software to answer this case
15 GENERAL VERRILLI Well I think you can shyshy
16 I think the answer to that question is no not
17 necessarily You can decide it by saying that shyshy that
18 Bilski answers the question whether this is an abstract
19 idea because this form of hedging is really no
20 different than the form of hedging as a conceptual
21 matter at issue in Bilski And then Mayo answers the
22 question of whether the use of a computer in this case
23 adds enough to the abstract idea beyond conventional
24 steps because here all we have after all is just
25 conventional use of computing technology no computer
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1 innovation such that you dont qualify under 101 You
2 could take that approach
3 But it is important to the United States
4 that we shyshy and to our patent examiners that we get some
5 clarity if we can I think the clarity could come from
6 the text that I propose which I want to reiterate shyshy
7 JUSTICE SOTOMAYOR Well shyshy
8 JUSTICE BREYER Could shyshy could shyshy could you
9 go on with that because you were just getting to the
10 point where I think you say a computer improvement that
11 in fact leads to an improvement in harvesting cotton is
12 an improvement through a computer of technology so it
13 qualifies
14 But then I think you were going to say or I
15 got this also from the brief a computer improvement
16 that leads to an improvement in the methods of selling
17 bonds over the telephone is not an improvement in
18 technology reached by the computer Am I right about
19 the distinction youre making
20 GENERAL VERRILLI I dont think theres a
21 yes or no answer to that question
22 JUSTICE BREYER What is your view Yeah
23 what is shyshy how do we deal with just that problem
24 GENERAL VERRILLI If there is a genuine
25 innovation in the functioning of the computer shyshy
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1 JUSTICE BREYER Yes
2 GENERAL VERRILLI shyshy such that business
3 processes shyshy
4 JUSTICE BREYER Weve got that Yes yes
5 We got the computer But then it doesnt improve the
6 computer but rather it improves through the computer
7 the harvesting of cotton
8 Now youve got it in what you said was your
9 second category which is an improvement through the
10 computer of a technology And I thought in your brief
11 you were distinguishing an improvement through the
12 computer of a human activity that is not a technology
13 and in particular to pick an example of that
14 something in finance or something in business
15 Now am I right about the distinction youre
16 making
17 GENERAL VERRILLI Yeah that shyshy
18 JUSTICE BREYER If Im not right what is
19 the distinction
20 GENERAL VERRILLI That is generally the
21 line were drawing Frankly shyshy
22 JUSTICE BREYER And how is that justified
23 GENERAL VERRILLI I do want shyshy
24 JUSTICE BREYER That shyshy that is Judge Dyk
25 in shyshy in Bilski in the Federal circuit 4 people sort of
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1 picked it up maybe 5 didnt pick it up Would you say
2 a few words about it
3 GENERAL VERRILLI Sure About shyshy let me go
4 to Bilski there in that I do think while shyshy while
5 certainly the Court held that the term process got a
6 natural construction which could include business
7 methods it seems to me that thats not all the Court
8 said in Bilski The Court also said that it was
9 historically and traditionally quite rare that business
10 methods were patent eligible
11 It also said that shyshy that the shyshy that courts
12 and the PTO examiners should use the abstract ideas
13 exception to 101 to police the appropriate boundary
14 It also said that the
15 machineshyorshytransformation test that the United States
16 advocated remained a useful tool And of course that
17 directs to you seeing whether there is a technology
18 application
19 And of course the holding in Bilski was
20 that the shyshy the method for hedging risk was ineligible
21 because it was an abstract idea and I cant imagine
22 that if in Bilski the shyshy the claim had been exactly the
23 same but had added use a computer to carry out some of
24 these standard random analysis functions that are
25 claimed by the patent that you would have found it to
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1 be patent eligible
2 And I shyshy I would submit for the Court that
3 the key point here I think is that now given where
4 the Court shyshy what the Court has held in Bilski given
5 what its held in Mayo the abstract ideas exception is
6 really the only tool left to deal with what I shyshy what I
7 think I fairly read Bilski as saying is a significant
8 problem the proliferation of patents of business
9 methods
10 JUSTICE KENNEDY Is there an example that
11 you can give us of a shyshy what we can call a business
12 process that is patentable a process that doesnt
13 involve improving the workings of a computer
14 GENERAL VERRILLI I shyshy I think its going
15 to be difficult for me to do that I think for
16 example if you had a business method a process for
17 additional security pointshyofshysale credit card
18 transactions using particular encryption technology
19 that might well be patent eligible Its a technology
20 that it makes conduct of business more efficient or
21 effective
22 But there is a technological link here and
23 we do think thats critical to our shyshy to our point of
24 view with respect to the case And I shyshy and I do think
25 remember that when we say something is not patent
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1 eligible were not saying they cant do it Were
2 saying they cant monopolize it
3 And the concern in a situation like this one
4 is that if this is patent eligible its hard to see
5 why for example the first person who came up with a
6 frequent flier program wouldnt have been able to claim
7 a patent there because after all thats a business
8 method for improving customer loyalty implemented on a
9 computer
10 CHIEF JUSTICE ROBERTS General I shyshy you
11 mentioned a while ago the need for greater clarity and
12 certainty in this area And Im just wondering in your
13 brief youve got a nonshyexhaustive of factors to
14 consider and there are 6 different ones And Im just
15 doubtful that thats going to bring about greater
16 clarity and certainty
17 GENERAL VERRILLI I take shyshy I take the
18 point Mr Chief Justice but I think the key is that
19 they are all directed to answering the question of
20 whether the innovation that is claimed and is an
21 innovation in either A the improvement of a computers
22 functioning or B the use of computer technology to
23 improve the functioning of another technological
24 process and a case like Diehr would be in the latter
25 category
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1 And so I do think that thats the key
2 benchmark Thats the baseline Thats the test that
3 we do think can be applied clearly and consistently by
4 the courts or the PTO And it avoids the risk of things
5 like frequent flier programs or the Oakland As money
6 ball methods for evaluating the contributions in
7 individual baseball players make or any one of a host of
8 other things that our intuitions tell us just dont
9 belong in the patent system
10 Thats the shyshy drawing that line keeps them
11 out not drawing that line lets them in And with all
12 due respect I dont think that the novelty and
13 nonobviousness filters that 102 and 103 really deal with
14 that problem effectively because when you get to
15 nonobviousness in 103 for example youll be asking a
16 different question
17 If you take the frequent flier program you
18 would say well is this innovation in building consumer
19 loyalty something that would have been obvious to
20 somebody who runs an airline Its totally divorced
21 from the question of technology at that point and
22 therefore I dont think youre going to get the screen
23 that you need to get in order for the patent system to
24 be confined to its traditional and appropriate scope
25 If there are no further questions thank
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1 you
2 JUSTICE GINSBURG I have a question about
3 how do you identify an abstract concept The shyshy a
4 natural phenomenon a mathematical formula those are
5 easy to identify but there has been some confusion on
6 what qualifies as an abstract concept
7 GENERAL VERRILLI We would define
8 abstract shyshy an abstract concept as a claim that is not
9 directed to a concrete innovation in technology
10 science or the industrial arts So its the shyshy its
11 abstract in the sense that it is not a concrete
12 innovation in the traditional realm of patent law
13 Thank you
14 CHIEF JUSTICE ROBERTS Thank you General
15 Mr Phillips you have four minutes
16 remaining
17 REBUTTAL ARGUMENT OF CARTER G PHILLIPS
18 ON BEHALF OF THE PETITIONERS
19 MR PHILLIPS Thank you Mr Chief Justice
20 Id just like to make a few points
21 First of all with respect to the question
22 you asked which is looking at 159 et cetera all I can
23 tell you is that if you look at claim 33 it talks about
24 matched orders the matched orders that are described in
25 286 and 287 and then makes specific reference to 159
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1 and that flow chart thats there And its all designed
2 as a package Its only one element of the shyshy of the
3 invention but it is a central element and its an easy
4 one to understand And it goes well beyond simply the
5 notion of hedge shyshy hedge against settlement risk and do
6 it by a computer
7 JUSTICE SOTOMAYOR Your adversary says that
8 his shyshy the appendix to his brief are the only patents at
9 issue that the flow charts are not at issue in this
10 case
11 MR PHILLIPS Theres no basis for that
12 statement Your Honor There shyshy remember this went off
13 on a very truncated litigation process So theres shyshy
14 you know we shyshy we got cut off at the beginning of it
15 Theres been no construction of the shyshy of the claims
16 and shyshy and obviously these are specifications that go
17 to how you interpret the claim
18 JUSTICE SOTOMAYOR If we were to say that
19 there are no business patents shyshy
20 MR PHILLIPS Yes
21 JUSTICE SOTOMAYOR shyshy would your patent
22 survive at all
23 MR PHILLIPS No I dont shyshy I dont
24 believe so I think theres no question And you
25 know General Verrilli could not have been any plainer
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1 in his statement of how he wants to interpret the
2 abstract idea concept
3 JUSTICE SOTOMAYOR Yes he wants to say no
4 business patents
5 MR PHILLIPS No business shyshy just another
6 way of saying no business methods And you know the
7 Court rejected that And it seems to me extraordinary
8 to say Congress didnt reject no business methods in
9 101 but were going to do shyshy were going to manipulate
10 the judicial exception to accomplish precisely that same
11 thing It seems to me thats wholly inappropriate
12 Justice Ginsburg you asked my shyshy my friend
13 here you know whats his test He didnt answer that
14 question youll notice because he doesnt have an
15 answer His basic argument is whatever you do just
16 kill this patent
17 And if I were in his shoes I suppose Id
18 take that same position I think whats absolutely
19 clear is that the test ought to be one that is
20 structured as a very coarse filter not the kind of
21 filter that hes pushing for where it changes over time
22 I mean I thought his shyshy I thought his response to one
23 of the questions about eshymail and word processing that
24 Justice Sotomayor asked is over time it would change
25 Well thats exactly what 102 and 103 are for That is
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1 not the purpose of shyshy of Section 101
2 And then he uses the example of encryption
3 I guarantee you if we were arguing about encryption in
4 this case he would say to me that thats an abstract
5 principle because encryption is a concept thats been
6 around since time immemorial George Washington used
7 it Everybody has used encryption
8 And a question again thats not the
9 solution to these problems The question is how did we
10 go about doing it And we go beyond the basics of
11 simply saying use a computer and thats what we ask
12 this Court to focus on and to evaluate
13 As to the frequent flier program its
14 pretty clear to me that even though it was a novel idea
15 in some sense the concept itself would have been viewed
16 in shyshy in the KSR fashion as quite obvious as a means of
17 improving customer loyalty
18 There are solutions here Giving us 101
19 pass doesnt create a monopoly It just gets us to the
20 102 and 103 inquiries that are at the heart of what the
21 patent laws shyshy and 112 that are at the heart of what the
22 patent laws ought to be dealing with
23 If there are no further questions Your
24 Honor thank you
25 CHIEF JUSTICE ROBERTS Thank you counsel
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1 The case is submitted
2 (Whereupon at 1105 am the case in the
3 aboveshyentitled matter was submitted)
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
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25
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58
A add 714 1023 algorithm 3320 41 automatically
As 525 3621 387 algorithms apply 72425 111
am 115 32 416 3013 3310 2019 281213 automobile 389
572 added 302 Alice 13 34 2822 3814 available 99
abacus 61213 4923 363 3717 4217 avenues 4124
710 1018 additional 5017 3822 4117 applying 4213 avoids 524
1325 3614 3617
address 4121 4317 4511
Alices 271 2919 3678
approach 226 395 4513 B
ability 1514 addressed 435 allow 94 472 B 121 29 4413
able 1511 167 addressing 181 allows 97 242 appropriate 5122
1919 516 adds 4623 amazing 2514 81516 1514 back 1621
aboveshyentitled adhere 437 amici 3825 453 4913 1922 2512
113 573 adjudication amicus 123 5224 3018 322
absolutely 125 241 210 4414 Archimedes 3991222
1215 159 adjusting 3611 analysis 424 281122 3811 4025
5518 41610 364 406 area 219 5112 ball 526
abstract 4267 adjustment 417 4924 argue 2518 Bank 17 35
48 6682023 418 analyze 1416 arguing 563 banks 95
721 8218 administered 1716 argument 114 bars 43
141920 1522 454 announce 4525 225812 33 baseball 527
165 181618 administration answer 119 37 41 144 based 423 406
2220 24925 4316 2219 247 18323 226 baseline 522
2621 277 administrative 3919 4221 26715 4413 basic 413 5515
2938 3422 171218 187 456 461416 457 5317 basically 1821
3523 395 242 4123 4721 551315 5515 2319
405 414 424 adopt 203 answering 5119 arguments basics 5610
4418 461823 adopted 31317 answers 3713 1415 basis 132 1512
491221 505 advancement 461821 arms 1625 1516 2719
53368811 351 anyway 1810 arrangements 5411
552 564 advances 3513 apparatus 2916 131 beating 435
accept 102 adversary 547 APPEARAN arrows 315 beginning 163
accomplish advice 1715 116 art 1919 5414
5510 advocated 4916 appears 820 arts 2124 5310 begins 3810
account 55 618 affect 4225 appendix 1910 aside 1422 157 behalf 11719
397 affirmative 402 311 326 369 asked 2314 122 24710
accounts 823 agent 52 3021 548 278 5322 214 38 2616
9356 3611 ago 318 2224 applicant 3220 551224 4414 5318
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1 If Bilski and Mayo stand Alices patents
2 fail Therefore Mr Phillips and his friends are
3 asking this Court to change the standard even though
4 this Court has had three unanimous decisions in the last
5 four terms establishing what the Court called a myriad
6 a wellshyestablished standard
7 On the abstract idea Justice Ginsburg you
8 asked Mr Phillips whats the difference between hedging
9 and this claim There is no difference This is
10 hedging It is hedging against credit default rather
11 than price fluctuation but it is simply hedging
12 And Mr Phillips stood up for 26 minutes and
13 never once referred to the patent Lets look at what
14 the inventor the soshycalled inventor said about this
15 invention This is at JA 293 to 94 in the
16 specification
17 This claim has simply two steps Its very
18 simple First debiting and crediting on a realtime
19 basis the relevant shadow records and second by
20 periodically affecting corresponding payment
21 instructions Those are direct quotes Debit credit
22 and pay Your Honor you cant get much more simple
23 than that
24 Mr Phillips suggests well we have
25 multilateral transactions global things chronological
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1 time zones and so forth None of those are claimed
2 Your Honor Those are all recited in specification
3 The claims read on a single transaction involving two
4 parties
5 JUSTICE BREYER Can I ask you at some
6 point not necessarily this second to say in my shyshy this
7 is just shyshy you know you have an opinion for a court
8 Different judges can have different interpretations
9 All youre getting is mine okay
10 But I think its pretty easy to say that
11 Archimedes cant just go to a boat builder and say
12 apply my idea All right Everybody agrees with that
13 But now we try to take that word apply and give
14 content to it
15 And what I suspect in my opinion Mayo did
16 and Bilski and the other cases is sketch an outer shell
17 of the content hoping that the experts you and the
18 other lawyers and the shyshy the circuit court could fill
19 in a little better than we had done the content of that
20 shell
21 So so far youre saying well this is
22 close enough to Archimedes saying apply it that we
23 neednt go further
24 Now will you at some point in the next few
25 minutes give me your impression of if it were necessary
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1 to go further what would the right words or example be
2 MR PERRY Your Honor as shyshy Justice
3 Breyer as to abstract ideas the PTO has filled in that
4 shell by listing economic concepts legal concepts
5 financial concepts teaching concepts dating and
6 interpersonal relationships and generally how business
7 should be conducted as examples of those things that are
8 likely abstract which of course all follow directly
9 from Bilski and the discussion this Court had in Bilski
10 And this patent shyshy these patents fall squarely within
11 that
12 Congress in the AIA confirmed that
13 reading Congress in the CBM method said business
14 methods that are subject to special scrutiny shyshy that is
15 dubious patents shyshy include methods and corresponding
16 apparatus which is what we have here that pertain to
17 data processing in the financial services industry and
18 do not offer a technological solution That describes
19 Alices patents to a letter Your Honor So that we
20 have shyshy
21 JUSTICE SOTOMAYOR What do you think is a
22 technological solution
23 MR PERRY Your Honor shyshy
24 JUSTICE SOTOMAYOR How could they if at
25 all written their patents to shyshy to make shyshy to make
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1 their software eligible What would shyshy what do they
2 need shyshy would have needed to have added
3 MR PERRY Justice Sotomayor they have no
4 software first Theyve never written software
5 Theyve never programmed a computer So thats a
6 nonexistent set
7 Second there are many technological
8 solutions to trading and settlement problems For
9 example data compression These shyshy these trading
10 platforms involve the movement of very large quantities
11 of data around the world The physical pipes that is
12 the fiber optic cables and data lines are limited
13 There are very sophisticated algorithms for both
14 security and speed to move data through the transmission
15 lines in novel and useful ways that could well be
16 patented
17 Nothing like that is claimed here To come
18 back to where I started if you look for example at
19 Claim 65 in the 510 patent as Mr Phillips reads it
20 it literally reads on a twoshyparty escrow to sell a
21 house so long as the escrow agent is typing this stuff
22 into the HUDshy1 using a computer That has nothing to do
23 with multilevel shyshy
24 CHIEF JUSTICE ROBERTS Well thats a
25 little more complicated He referred us to Joint
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1 Appendix Page 159 which is not a change in how
2 computers work But it is shyshy constitutes the
3 instructions about how to use the computer and where it
4 needs to be affected And just looking at it it looks
5 pretty complicated There are a lot of arrows and
6 they shyshy you know different things that go shyshy
7 (Laughter)
8 CHIEF JUSTICE ROBERTS Well but I mean
9 you know it shyshy in different directions And I
10 understand him to say that in each of those places
11 thats where the computer is needed
12 MR PERRY Mr Chief Justice Figure 16 has
13 nothing to do with the invention asserted against my
14 client in this case There are two inventions in this
15 patent One invention involving multilateral contract
16 formation is not asserted against my client And all of
17 these drawings pertain to that The only drawings that
18 pertain to the asserted claims are 25 and 33 to 37 And
19 that was established below and its established in this
20 Court And Mr Phillips has never disputed it
21 So the claim hes pointed the Court shyshy the
22 figure hes pointed the Court to has nothing to do with
23 the invention Its for a different invention that is
24 not at issue in this case
25 Remember there are hundreds and hundreds of
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1 pages of these patents They all pertain to the other
2 invention Thats why in the back of our red brief we
3 excerpted the very little bit that actually pertains to
4 this You sort of tack on patent shyshy the tack on claim
5 that Mr Phillips is asserting here Its 4 columns
6 Its less than five pages in the printed appendix that
7 actually pertains to this invention And it contains no
8 disclosure whatever
9 Justice Scalia to your question about how
10 the computer does it Of course a patent that
11 describes sufficiently how a computer does a new and
12 useful thing whether its data compression or any other
13 technological solution to a business problem a social
14 problem or a technological problem would be within the
15 realm of the shyshy of the patent laws That is what the
16 patent laws have always been for
17 This is not such a patent And the reason
18 for that is this is a preshyBilski set of patents These
19 were prosecuted under the old State Street test where
20 all the applicant had to claim was a result
21 JUSTICE KENNEDY Would you give me shyshy
22 again you already did it once shyshy an example of a
23 business process patent shyshy of a business process idea
24 and invention that is patentable
25 MR PERRY Your Honor there are many
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1 examples One would be a technological solution to a
2 business problem So that for example shyshy Ill give a
3 different example There are many applications today
4 The Court may be familiar with streaming video to watch
5 video on your computer
6 It is not possible to get enough data
7 through existing lines in its raw format The data has
8 to be manipulated in order to see live video So if you
9 want to watch TV on your phone for example
10 Those algorithms those inventions are
11 undoubtedly technological And if they are used in a
12 trading platform or a hedging system or something else
13 that wouldnt disable them And this is what the Diehr
14 case shyshy
15 JUSTICE KENNEDY Well I shyshy I shyshy in my
16 language Ive called that mechanical rather than
17 process Can you give me an example of process
18 MR PERRY Yes Your Honor The process in
19 that example would be a computer running the particular
20 data compression algorithm
21 JUSTICE KENNEDY But thats how to make
22 a shyshy thats how to make a machine work better
23 MR PERRY Yes Your Honor
24 JUSTICE KENNEDY Im asking you Is there
25 any business process any business activity that is
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1 susceptible to a patent a pure patent innovations that
2 deserve patents
3 MR PERRY Your Honor again a
4 technological solution to a business problem could well
5 be whether its a method or a process is equivalent
6 Again Congress said method in a corresponding shyshy
7 JUSTICE KENNEDY Can you give me an
8 example
9 MR PERRY I thought the data compression
10 example was a good one Ill try an encryption
11 technology Many of these trading platforms you know
12 dealing with securities and money would require some
13 sort of security devices You could have a process for
14 securely transmitting data would be another computer
15 implemented technological solution to a business
16 problem Again nothing like that claimed here
17 JUSTICE SOTOMAYOR How about eshymail and
18 just word processing programs
19 MR PERRY Your Honor a program shyshy let me
20 try it this way to both of your questions In our view
21 if what is claimed as the inventive contribution under
22 Mayo shyshy in other words if we have an abstract idea as
23 we do here and what is claimed is the inventive
24 contribution for Step 2 is the computer then the
25 computer must be essential to that operation and
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1 represent an advancement in computer science or other
2 technology And we know thats not met here Justice
3 Sotomayor because shyshy
4 JUSTICE SOTOMAYOR So youre saying no to
5 eshymail and word processing
6 MR PERRY Your Honor I think at a
7 point shyshy
8 JUSTICE SOTOMAYOR They certainly have
9 functionality and shyshy and improvement of functionality
10 for the user
11 MR PERRY At a point in time in the past
12 I think both of those would have been technological
13 advances that were patentable
14 JUSTICE SOTOMAYOR How
15 MR PERRY Today shyshy because they would have
16 provided a technological solution to a then unmet
17 problem Today reciting and do it on a word processor
18 is no different than and do it on a typewriter or shyshy and
19 do it on a calculator
20 The inventive contribution component which
21 uses specifically the language of conventional and
22 routine and well understood will evolve with
23 technology Thats why its different than the abstract
24 idea component
25 And here we know that these patents dont
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1 claim anything that was not conventional well
2 understood and routine We went through that in great
3 detail and Alice has never disputed a word of it They
4 just say youre not supposed to do that analysis even
5 though the Court 9shy0 in Mayo said we should
6 And in this case its very important to
7 look at what Alices own experts said on the subject
8 This is not our expert This is Alices expert And
9 this is at Page 1327shy28 of the Joint Appendix It is
10 possible to do the business methods of maintaining
11 accounts adjusting accounts and providing an
12 instruction without a computer or other hardware
13 And then Justice Breyer directly to your
14 abacus If someone had thought of this invention
15 soshycalled invention 100 years ago they might have
16 implemented it in a nonelectronic manner using various
17 precomputing tools such as an abacus or handwritten
18 ledgers
19 We know from Benson the Courts seminal
20 computer implementation case that if you can do it by
21 head and hand then the computer doesnt add anything
22 inventive within the meaning of the 101 exception That
23 is the holding of Benson And the Court reiterated that
24 in Mayo
25 Flook said exactly the same thing If you
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1 can do it with pencil and paper then the computer is
2 not offering anything that the patent laws are or should
3 be concerned with
4 It is only where the method will not work
5 without a computer which is not these claims and where
6 the computer itself is doing something that the patent
7 law is willing to protect
8 CHIEF JUSTICE ROBERTS What if shyshy what if
9 you can do it without a computer but its going to
10 take you know 20 people a hundred years In other
11 words theoretically you can replicate what the
12 computer does shyshy
13 MR PERRY Two answers
14 CHIEF JUSTICE ROBERTS shyshy but its
15 impractical without looking to do it on the computer
16 MR PERRY Mr Chief Justice first these
17 claims literally read as Alice reads them on a single
18 transaction between two parties so its not 20 people
19 for a hundred years Its one person sitting in a room
20 so thats not a problem
21 Second if what is being claimed is the
22 necessary speed or efficiency or data crunching
23 capabilities if you will of a computer then it would
24 have to be claimed and theres nothing claimed here
25 All that is claimed shyshy and my friend is going to stand
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1 up on rebuttal and tell you all that the expert said
2 well what is claimed is a computer but its just a
3 computer It just says a computer configured too It
4 doesnt say that the computer actually has to shyshy
5 JUSTICE BREYER Yeah but the trouble with
6 that particular test is as I think partly the Chief
7 Justice said how long et cetera and then add to that
8 though you could do it without a computer what happens
9 at the end of the line is the automobile engine goes off
10 or it begins to sputter or it turns left
11 You see its possible to take Archimedes shyshy
12 shyshy you know I use that example purposely to call
13 attention to the problem You can take those things
14 and youre not just saying apply it and youre not even
15 just saying shyshy you are saying use the computer but at
16 the end of the road something physical in the world
17 changes and everybody would say now thats shyshy that
18 will falls within I mean probably I mean my
19 hesitation shows Im looking for the right words
20 MR PERRY Justice Breyer your point is
21 the reason that it is equally fallacious to suggest on
22 the one hand as Alice and IBM does that simply
23 reciting a computer is a magic key that gets you through
24 101 and you never have to any other inquiry and what
25 some of folks the amici on the other side say which
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1 is that computers or software are never eligible Both
2 of those things have to be wrong because what the Court
3 said in Bilski was future innovation is too uncertain
4 We are not going to do that as a Court And the Court
5 laid out an approach using abstract ideas in Bilski and
6 inventive contribution in Mayo that is flexible enough
7 to take into account that innovation and to deal with
8 particular claims in context which is why at the end
9 of the day we have to come back to these patents and
10 decide which shyshy
11 JUSTICE KAGAN Mr Perry before we get
12 back to these matters you said to Justice Scalia if a
13 patent sufficiently describes how a computer will
14 implement an idea then its patentable So how
15 sufficiently does one have to describe it What do we
16 want a judge to do at this threshold level in terms of
17 trying to figure out whether the description is
18 sufficient to get you past it
19 MR PERRY If I can answer in two steps
20 Justice Kagan First in the negative What the
21 applicant or patentee must do shyshy must not do is simply
22 describe the desired result That would take us back to
23 State Street That would simply say I claim a magic
24 box that buys high and sells low or vice versa I
25 suppose I claim a magic box for investing Thats what
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1 these patents do
2 Then to put it in the affirmative and in the
3 language of Mayo the claim has to recite something
4 significantly more something significantly more than
5 the abstract idea itself That would be a contextual
6 analysis based on the claims and specifications and file
7 history and we know that some devices some methods
8 some programming will pass that
9 It is not going to be a brightshyline rule and
10 thats one of the tugshyofshywar issues that this Court and
11 the Federal Circuit have been having in these cases
12 The Federal Circuit wants brightshyline rules All
13 computers are in or all computers are out
14 This Court has been more contextual This
15 Court has been more nuanced This Court has looked at
16 things in a more robust way
17 JUSTICE KAGAN Youre not suggesting that
18 specific code is necessary
19 MR PERRY No Your Honor I think the shyshy
20 actual description of the programming is a 112 problem
21 I agree with that A 112 issue That is the realm of
22 the written description requirement What is a 101
23 problem is it is on the applicant to do more than simply
24 describe the results simply say A magic box that does
25 intermediate settlement And we can tie that back to
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1 this particular prosecution the 510 patent which is
2 the method patent
3 The examiner rejected it Under Section
4 101 the examiner said this is an abstract idea You
5 cant have this patent And the only change that this
6 applicant made was to add in the adjusting step
7 electronic adjustment It put in one word
8 electronic adjustment And under State Street which
9 is what this patent is prosecuted under that was
10 enough because the result of adjusting run through a
11 computer is enough
12 Under current law that cant be enough
13 That just cant get a patent over the line because this
14 Court said in Mayo and I got to quote this language
15 Simply implementing a fundamental principle on a
16 physical machine namely a computer is not a patentable
17 application of that principle Thats all that Alice
18 has done
19 These are preshyBilski patents They never
20 should have been issued General Verrilli will stand up
21 and address that point And certainly under current
22 law shyshy one point on the AIA Congress did not send all
23 this to the administrative process Congress created
24 two avenues the courts and the PTO to use the
25 standards Essentially it ratified Bilski and Mayo and
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1 said we agree with what you all are doing at the
2 Supreme Court and the existing standards are good enough
3 for us This is a judicial problem And that is a good
4 reason The abstract shyshy
5 JUSTICE GINSBURG The Federal Circuit in
6 this case split in many ways and it had our decisions
7 to deal with You said given Bilski and Mayo this is
8 an easy case What is the instruction that escaped a
9 good number of judges on the Federal Circuit How would
10 you state the rule
11 MR PERRY Your Honor I think theres a
12 significant element to the Federal Circuit that
13 disagrees with Mayo and has been resistant in applying
14 it Chief Judge shyshy former Chief Judge Michelle filed a
15 brief in this Court essentially saying Mayo is a
16 lifeshysciences case You should limit it to that because
17 if you apply it to everything else then these patents
18 are no good
19 Mayo we submit is a technologyshyneutral
20 industryshyneutral exceptionshyneutral framework that can
21 be used to answer all of these questions This is not
22 the death of software patents The software industry is
23 all before this Court saying this is fine with us
24 Every company in the United States practically except
25 for IBM is saying go ahead This will not affect
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1 software patents
2 Justice Ginsburg this Courts precedents
3 are clear They are unanimous They just need to be
4 applied To suggest that there is confusion that needs
5 to be addressed by retreating beating a retreat from
6 recent unanimous decisions would simply reward
7 intransigence difficulty refusal to adhere to what are
8 clear precedents because shyshy
9 JUSTICE KAGAN Should we be concerned
10 Mr Perry that there are old patents that in fact could
11 meet the test that you set forth but wont because they
12 were written in a different time and so used much more
13 general language
14 MR PERRY Your Honor the applicant or the
15 patent holder would have the opportunity to institute a
16 reexamination proceeding or some sort of administration
17 process to address that issue
18 And second it should be noted this is a
19 very small problem There are 2 million outstanding
20 patents in the United States In the last four fiscal
21 years there were 22000 infringement litigations
22 instituted but since Bilski there have only been 57
23 district court decisions on Section 101 issues There
24 have only been 12 Federal Circuit decisions total on
25 computer implementation
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1 We are talking about a group of patents
2 Justice Kagan thats way out at the tail end of
3 distribution Most patents never have a 101 challenge
4 This is not an issue with cotton gins and other things
5 This is a problem for the most marginal
6 most dubious most skeptical patents the ones that this
7 Court in Bilski shyshy and remember what Bilskis holding
8 is The majority said they are processes but it did
9 not say they are eligible
10 Thank you Mr Chief Justice
11 CHIEF JUSTICE ROBERTS Thank you counsel
12 General Verrilli
13 ORAL ARGUMENT OF DONALD B VERRILLI JR
14 ON BEHALF OF THE UNITED STATES AS AMICUS
15 CURIAE SUPPORTING RESPONDENTS
16 GENERAL VERRILLI Mr Chief Justice and
17 may it please the Court
18 An abstract idea does not become
19 patentshyeligible merely by tacking on an instruction to
20 use a computer to carry it out A computer makes a
21 difference under Section 101 when it imposes a
22 meaningful limit on the patent claim That occurs when
23 the claim is directed at improvement in computing
24 technology or an innovation that uses computing
25 technology to improve other technological functions
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1 Thats the test that we believe is most faithful to this
2 Courts precedents in Bilski and Mayo It keeps patents
3 within their traditional and appropriate domain and it
4 is capable of being administered consistently by Courts
5 and by PTO examiners
6 JUSTICE GINSBURG How do you answer the
7 argument that your view would extinguish businessshymethod
8 patents and make all software ineligible for patent
9 protection
10 GENERAL VERRILLI Yeah with shyshy let me
11 address software patents first because that I think is
12 obviously a significant question And its just not
13 correct to say that our approach would make software
14 patenting ineligible Any software patent that improves
15 the functioning of the computer technology is eligible
16 Any software patent that improves shyshy that is used to
17 improve another technology is eligible For example
18 the patent in the shyshy in the Diehr case is one in
19 which shyshy
20 JUSTICE SOTOMAYOR Why do we need to reach
21 this in that shyshy reach software patents at all in this
22 case
23 GENERAL VERRILLI Well shyshy
24 JUSTICE SOTOMAYOR Whats the necessity for
25 us to announce a general rule with respect to software
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1 There is no software being patented in this case
2 GENERAL VERRILLI Well I shyshy
3 JUSTICE SOTOMAYOR Theres a systems
4 GENERAL VERRILLI Well I shyshy I think shyshy
5 well they shyshy they shyshy theres a process being and shyshy and
6 one can think of software patents as process patents
7 And I think thats why my friends on the other side are
8 saying the sky is falling because they shyshy they are
9 interpreting what were saying about that when a
10 computer makes shyshy when a computers involvement makes
11 something eligible under 101 its calling those into
12 question and it doesnt
13 JUSTICE SOTOMAYOR Do you think we have to
14 reach the patentability of software to answer this case
15 GENERAL VERRILLI Well I think you can shyshy
16 I think the answer to that question is no not
17 necessarily You can decide it by saying that shyshy that
18 Bilski answers the question whether this is an abstract
19 idea because this form of hedging is really no
20 different than the form of hedging as a conceptual
21 matter at issue in Bilski And then Mayo answers the
22 question of whether the use of a computer in this case
23 adds enough to the abstract idea beyond conventional
24 steps because here all we have after all is just
25 conventional use of computing technology no computer
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1 innovation such that you dont qualify under 101 You
2 could take that approach
3 But it is important to the United States
4 that we shyshy and to our patent examiners that we get some
5 clarity if we can I think the clarity could come from
6 the text that I propose which I want to reiterate shyshy
7 JUSTICE SOTOMAYOR Well shyshy
8 JUSTICE BREYER Could shyshy could shyshy could you
9 go on with that because you were just getting to the
10 point where I think you say a computer improvement that
11 in fact leads to an improvement in harvesting cotton is
12 an improvement through a computer of technology so it
13 qualifies
14 But then I think you were going to say or I
15 got this also from the brief a computer improvement
16 that leads to an improvement in the methods of selling
17 bonds over the telephone is not an improvement in
18 technology reached by the computer Am I right about
19 the distinction youre making
20 GENERAL VERRILLI I dont think theres a
21 yes or no answer to that question
22 JUSTICE BREYER What is your view Yeah
23 what is shyshy how do we deal with just that problem
24 GENERAL VERRILLI If there is a genuine
25 innovation in the functioning of the computer shyshy
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1 JUSTICE BREYER Yes
2 GENERAL VERRILLI shyshy such that business
3 processes shyshy
4 JUSTICE BREYER Weve got that Yes yes
5 We got the computer But then it doesnt improve the
6 computer but rather it improves through the computer
7 the harvesting of cotton
8 Now youve got it in what you said was your
9 second category which is an improvement through the
10 computer of a technology And I thought in your brief
11 you were distinguishing an improvement through the
12 computer of a human activity that is not a technology
13 and in particular to pick an example of that
14 something in finance or something in business
15 Now am I right about the distinction youre
16 making
17 GENERAL VERRILLI Yeah that shyshy
18 JUSTICE BREYER If Im not right what is
19 the distinction
20 GENERAL VERRILLI That is generally the
21 line were drawing Frankly shyshy
22 JUSTICE BREYER And how is that justified
23 GENERAL VERRILLI I do want shyshy
24 JUSTICE BREYER That shyshy that is Judge Dyk
25 in shyshy in Bilski in the Federal circuit 4 people sort of
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1 picked it up maybe 5 didnt pick it up Would you say
2 a few words about it
3 GENERAL VERRILLI Sure About shyshy let me go
4 to Bilski there in that I do think while shyshy while
5 certainly the Court held that the term process got a
6 natural construction which could include business
7 methods it seems to me that thats not all the Court
8 said in Bilski The Court also said that it was
9 historically and traditionally quite rare that business
10 methods were patent eligible
11 It also said that shyshy that the shyshy that courts
12 and the PTO examiners should use the abstract ideas
13 exception to 101 to police the appropriate boundary
14 It also said that the
15 machineshyorshytransformation test that the United States
16 advocated remained a useful tool And of course that
17 directs to you seeing whether there is a technology
18 application
19 And of course the holding in Bilski was
20 that the shyshy the method for hedging risk was ineligible
21 because it was an abstract idea and I cant imagine
22 that if in Bilski the shyshy the claim had been exactly the
23 same but had added use a computer to carry out some of
24 these standard random analysis functions that are
25 claimed by the patent that you would have found it to
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1 be patent eligible
2 And I shyshy I would submit for the Court that
3 the key point here I think is that now given where
4 the Court shyshy what the Court has held in Bilski given
5 what its held in Mayo the abstract ideas exception is
6 really the only tool left to deal with what I shyshy what I
7 think I fairly read Bilski as saying is a significant
8 problem the proliferation of patents of business
9 methods
10 JUSTICE KENNEDY Is there an example that
11 you can give us of a shyshy what we can call a business
12 process that is patentable a process that doesnt
13 involve improving the workings of a computer
14 GENERAL VERRILLI I shyshy I think its going
15 to be difficult for me to do that I think for
16 example if you had a business method a process for
17 additional security pointshyofshysale credit card
18 transactions using particular encryption technology
19 that might well be patent eligible Its a technology
20 that it makes conduct of business more efficient or
21 effective
22 But there is a technological link here and
23 we do think thats critical to our shyshy to our point of
24 view with respect to the case And I shyshy and I do think
25 remember that when we say something is not patent
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1 eligible were not saying they cant do it Were
2 saying they cant monopolize it
3 And the concern in a situation like this one
4 is that if this is patent eligible its hard to see
5 why for example the first person who came up with a
6 frequent flier program wouldnt have been able to claim
7 a patent there because after all thats a business
8 method for improving customer loyalty implemented on a
9 computer
10 CHIEF JUSTICE ROBERTS General I shyshy you
11 mentioned a while ago the need for greater clarity and
12 certainty in this area And Im just wondering in your
13 brief youve got a nonshyexhaustive of factors to
14 consider and there are 6 different ones And Im just
15 doubtful that thats going to bring about greater
16 clarity and certainty
17 GENERAL VERRILLI I take shyshy I take the
18 point Mr Chief Justice but I think the key is that
19 they are all directed to answering the question of
20 whether the innovation that is claimed and is an
21 innovation in either A the improvement of a computers
22 functioning or B the use of computer technology to
23 improve the functioning of another technological
24 process and a case like Diehr would be in the latter
25 category
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1 And so I do think that thats the key
2 benchmark Thats the baseline Thats the test that
3 we do think can be applied clearly and consistently by
4 the courts or the PTO And it avoids the risk of things
5 like frequent flier programs or the Oakland As money
6 ball methods for evaluating the contributions in
7 individual baseball players make or any one of a host of
8 other things that our intuitions tell us just dont
9 belong in the patent system
10 Thats the shyshy drawing that line keeps them
11 out not drawing that line lets them in And with all
12 due respect I dont think that the novelty and
13 nonobviousness filters that 102 and 103 really deal with
14 that problem effectively because when you get to
15 nonobviousness in 103 for example youll be asking a
16 different question
17 If you take the frequent flier program you
18 would say well is this innovation in building consumer
19 loyalty something that would have been obvious to
20 somebody who runs an airline Its totally divorced
21 from the question of technology at that point and
22 therefore I dont think youre going to get the screen
23 that you need to get in order for the patent system to
24 be confined to its traditional and appropriate scope
25 If there are no further questions thank
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1 you
2 JUSTICE GINSBURG I have a question about
3 how do you identify an abstract concept The shyshy a
4 natural phenomenon a mathematical formula those are
5 easy to identify but there has been some confusion on
6 what qualifies as an abstract concept
7 GENERAL VERRILLI We would define
8 abstract shyshy an abstract concept as a claim that is not
9 directed to a concrete innovation in technology
10 science or the industrial arts So its the shyshy its
11 abstract in the sense that it is not a concrete
12 innovation in the traditional realm of patent law
13 Thank you
14 CHIEF JUSTICE ROBERTS Thank you General
15 Mr Phillips you have four minutes
16 remaining
17 REBUTTAL ARGUMENT OF CARTER G PHILLIPS
18 ON BEHALF OF THE PETITIONERS
19 MR PHILLIPS Thank you Mr Chief Justice
20 Id just like to make a few points
21 First of all with respect to the question
22 you asked which is looking at 159 et cetera all I can
23 tell you is that if you look at claim 33 it talks about
24 matched orders the matched orders that are described in
25 286 and 287 and then makes specific reference to 159
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1 and that flow chart thats there And its all designed
2 as a package Its only one element of the shyshy of the
3 invention but it is a central element and its an easy
4 one to understand And it goes well beyond simply the
5 notion of hedge shyshy hedge against settlement risk and do
6 it by a computer
7 JUSTICE SOTOMAYOR Your adversary says that
8 his shyshy the appendix to his brief are the only patents at
9 issue that the flow charts are not at issue in this
10 case
11 MR PHILLIPS Theres no basis for that
12 statement Your Honor There shyshy remember this went off
13 on a very truncated litigation process So theres shyshy
14 you know we shyshy we got cut off at the beginning of it
15 Theres been no construction of the shyshy of the claims
16 and shyshy and obviously these are specifications that go
17 to how you interpret the claim
18 JUSTICE SOTOMAYOR If we were to say that
19 there are no business patents shyshy
20 MR PHILLIPS Yes
21 JUSTICE SOTOMAYOR shyshy would your patent
22 survive at all
23 MR PHILLIPS No I dont shyshy I dont
24 believe so I think theres no question And you
25 know General Verrilli could not have been any plainer
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1 in his statement of how he wants to interpret the
2 abstract idea concept
3 JUSTICE SOTOMAYOR Yes he wants to say no
4 business patents
5 MR PHILLIPS No business shyshy just another
6 way of saying no business methods And you know the
7 Court rejected that And it seems to me extraordinary
8 to say Congress didnt reject no business methods in
9 101 but were going to do shyshy were going to manipulate
10 the judicial exception to accomplish precisely that same
11 thing It seems to me thats wholly inappropriate
12 Justice Ginsburg you asked my shyshy my friend
13 here you know whats his test He didnt answer that
14 question youll notice because he doesnt have an
15 answer His basic argument is whatever you do just
16 kill this patent
17 And if I were in his shoes I suppose Id
18 take that same position I think whats absolutely
19 clear is that the test ought to be one that is
20 structured as a very coarse filter not the kind of
21 filter that hes pushing for where it changes over time
22 I mean I thought his shyshy I thought his response to one
23 of the questions about eshymail and word processing that
24 Justice Sotomayor asked is over time it would change
25 Well thats exactly what 102 and 103 are for That is
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1 not the purpose of shyshy of Section 101
2 And then he uses the example of encryption
3 I guarantee you if we were arguing about encryption in
4 this case he would say to me that thats an abstract
5 principle because encryption is a concept thats been
6 around since time immemorial George Washington used
7 it Everybody has used encryption
8 And a question again thats not the
9 solution to these problems The question is how did we
10 go about doing it And we go beyond the basics of
11 simply saying use a computer and thats what we ask
12 this Court to focus on and to evaluate
13 As to the frequent flier program its
14 pretty clear to me that even though it was a novel idea
15 in some sense the concept itself would have been viewed
16 in shyshy in the KSR fashion as quite obvious as a means of
17 improving customer loyalty
18 There are solutions here Giving us 101
19 pass doesnt create a monopoly It just gets us to the
20 102 and 103 inquiries that are at the heart of what the
21 patent laws shyshy and 112 that are at the heart of what the
22 patent laws ought to be dealing with
23 If there are no further questions Your
24 Honor thank you
25 CHIEF JUSTICE ROBERTS Thank you counsel
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1 The case is submitted
2 (Whereupon at 1105 am the case in the
3 aboveshyentitled matter was submitted)
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
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various 3616 3420 4016 4312 1327shy28 369 94 2715 vary 1420 442 556 wrong 392 159 1910 311 Verrilli 121 29 ways 717 3015 wrote 1213 532225
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1 time zones and so forth None of those are claimed
2 Your Honor Those are all recited in specification
3 The claims read on a single transaction involving two
4 parties
5 JUSTICE BREYER Can I ask you at some
6 point not necessarily this second to say in my shyshy this
7 is just shyshy you know you have an opinion for a court
8 Different judges can have different interpretations
9 All youre getting is mine okay
10 But I think its pretty easy to say that
11 Archimedes cant just go to a boat builder and say
12 apply my idea All right Everybody agrees with that
13 But now we try to take that word apply and give
14 content to it
15 And what I suspect in my opinion Mayo did
16 and Bilski and the other cases is sketch an outer shell
17 of the content hoping that the experts you and the
18 other lawyers and the shyshy the circuit court could fill
19 in a little better than we had done the content of that
20 shell
21 So so far youre saying well this is
22 close enough to Archimedes saying apply it that we
23 neednt go further
24 Now will you at some point in the next few
25 minutes give me your impression of if it were necessary
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1 to go further what would the right words or example be
2 MR PERRY Your Honor as shyshy Justice
3 Breyer as to abstract ideas the PTO has filled in that
4 shell by listing economic concepts legal concepts
5 financial concepts teaching concepts dating and
6 interpersonal relationships and generally how business
7 should be conducted as examples of those things that are
8 likely abstract which of course all follow directly
9 from Bilski and the discussion this Court had in Bilski
10 And this patent shyshy these patents fall squarely within
11 that
12 Congress in the AIA confirmed that
13 reading Congress in the CBM method said business
14 methods that are subject to special scrutiny shyshy that is
15 dubious patents shyshy include methods and corresponding
16 apparatus which is what we have here that pertain to
17 data processing in the financial services industry and
18 do not offer a technological solution That describes
19 Alices patents to a letter Your Honor So that we
20 have shyshy
21 JUSTICE SOTOMAYOR What do you think is a
22 technological solution
23 MR PERRY Your Honor shyshy
24 JUSTICE SOTOMAYOR How could they if at
25 all written their patents to shyshy to make shyshy to make
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1 their software eligible What would shyshy what do they
2 need shyshy would have needed to have added
3 MR PERRY Justice Sotomayor they have no
4 software first Theyve never written software
5 Theyve never programmed a computer So thats a
6 nonexistent set
7 Second there are many technological
8 solutions to trading and settlement problems For
9 example data compression These shyshy these trading
10 platforms involve the movement of very large quantities
11 of data around the world The physical pipes that is
12 the fiber optic cables and data lines are limited
13 There are very sophisticated algorithms for both
14 security and speed to move data through the transmission
15 lines in novel and useful ways that could well be
16 patented
17 Nothing like that is claimed here To come
18 back to where I started if you look for example at
19 Claim 65 in the 510 patent as Mr Phillips reads it
20 it literally reads on a twoshyparty escrow to sell a
21 house so long as the escrow agent is typing this stuff
22 into the HUDshy1 using a computer That has nothing to do
23 with multilevel shyshy
24 CHIEF JUSTICE ROBERTS Well thats a
25 little more complicated He referred us to Joint
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1 Appendix Page 159 which is not a change in how
2 computers work But it is shyshy constitutes the
3 instructions about how to use the computer and where it
4 needs to be affected And just looking at it it looks
5 pretty complicated There are a lot of arrows and
6 they shyshy you know different things that go shyshy
7 (Laughter)
8 CHIEF JUSTICE ROBERTS Well but I mean
9 you know it shyshy in different directions And I
10 understand him to say that in each of those places
11 thats where the computer is needed
12 MR PERRY Mr Chief Justice Figure 16 has
13 nothing to do with the invention asserted against my
14 client in this case There are two inventions in this
15 patent One invention involving multilateral contract
16 formation is not asserted against my client And all of
17 these drawings pertain to that The only drawings that
18 pertain to the asserted claims are 25 and 33 to 37 And
19 that was established below and its established in this
20 Court And Mr Phillips has never disputed it
21 So the claim hes pointed the Court shyshy the
22 figure hes pointed the Court to has nothing to do with
23 the invention Its for a different invention that is
24 not at issue in this case
25 Remember there are hundreds and hundreds of
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1 pages of these patents They all pertain to the other
2 invention Thats why in the back of our red brief we
3 excerpted the very little bit that actually pertains to
4 this You sort of tack on patent shyshy the tack on claim
5 that Mr Phillips is asserting here Its 4 columns
6 Its less than five pages in the printed appendix that
7 actually pertains to this invention And it contains no
8 disclosure whatever
9 Justice Scalia to your question about how
10 the computer does it Of course a patent that
11 describes sufficiently how a computer does a new and
12 useful thing whether its data compression or any other
13 technological solution to a business problem a social
14 problem or a technological problem would be within the
15 realm of the shyshy of the patent laws That is what the
16 patent laws have always been for
17 This is not such a patent And the reason
18 for that is this is a preshyBilski set of patents These
19 were prosecuted under the old State Street test where
20 all the applicant had to claim was a result
21 JUSTICE KENNEDY Would you give me shyshy
22 again you already did it once shyshy an example of a
23 business process patent shyshy of a business process idea
24 and invention that is patentable
25 MR PERRY Your Honor there are many
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1 examples One would be a technological solution to a
2 business problem So that for example shyshy Ill give a
3 different example There are many applications today
4 The Court may be familiar with streaming video to watch
5 video on your computer
6 It is not possible to get enough data
7 through existing lines in its raw format The data has
8 to be manipulated in order to see live video So if you
9 want to watch TV on your phone for example
10 Those algorithms those inventions are
11 undoubtedly technological And if they are used in a
12 trading platform or a hedging system or something else
13 that wouldnt disable them And this is what the Diehr
14 case shyshy
15 JUSTICE KENNEDY Well I shyshy I shyshy in my
16 language Ive called that mechanical rather than
17 process Can you give me an example of process
18 MR PERRY Yes Your Honor The process in
19 that example would be a computer running the particular
20 data compression algorithm
21 JUSTICE KENNEDY But thats how to make
22 a shyshy thats how to make a machine work better
23 MR PERRY Yes Your Honor
24 JUSTICE KENNEDY Im asking you Is there
25 any business process any business activity that is
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1 susceptible to a patent a pure patent innovations that
2 deserve patents
3 MR PERRY Your Honor again a
4 technological solution to a business problem could well
5 be whether its a method or a process is equivalent
6 Again Congress said method in a corresponding shyshy
7 JUSTICE KENNEDY Can you give me an
8 example
9 MR PERRY I thought the data compression
10 example was a good one Ill try an encryption
11 technology Many of these trading platforms you know
12 dealing with securities and money would require some
13 sort of security devices You could have a process for
14 securely transmitting data would be another computer
15 implemented technological solution to a business
16 problem Again nothing like that claimed here
17 JUSTICE SOTOMAYOR How about eshymail and
18 just word processing programs
19 MR PERRY Your Honor a program shyshy let me
20 try it this way to both of your questions In our view
21 if what is claimed as the inventive contribution under
22 Mayo shyshy in other words if we have an abstract idea as
23 we do here and what is claimed is the inventive
24 contribution for Step 2 is the computer then the
25 computer must be essential to that operation and
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1 represent an advancement in computer science or other
2 technology And we know thats not met here Justice
3 Sotomayor because shyshy
4 JUSTICE SOTOMAYOR So youre saying no to
5 eshymail and word processing
6 MR PERRY Your Honor I think at a
7 point shyshy
8 JUSTICE SOTOMAYOR They certainly have
9 functionality and shyshy and improvement of functionality
10 for the user
11 MR PERRY At a point in time in the past
12 I think both of those would have been technological
13 advances that were patentable
14 JUSTICE SOTOMAYOR How
15 MR PERRY Today shyshy because they would have
16 provided a technological solution to a then unmet
17 problem Today reciting and do it on a word processor
18 is no different than and do it on a typewriter or shyshy and
19 do it on a calculator
20 The inventive contribution component which
21 uses specifically the language of conventional and
22 routine and well understood will evolve with
23 technology Thats why its different than the abstract
24 idea component
25 And here we know that these patents dont
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1 claim anything that was not conventional well
2 understood and routine We went through that in great
3 detail and Alice has never disputed a word of it They
4 just say youre not supposed to do that analysis even
5 though the Court 9shy0 in Mayo said we should
6 And in this case its very important to
7 look at what Alices own experts said on the subject
8 This is not our expert This is Alices expert And
9 this is at Page 1327shy28 of the Joint Appendix It is
10 possible to do the business methods of maintaining
11 accounts adjusting accounts and providing an
12 instruction without a computer or other hardware
13 And then Justice Breyer directly to your
14 abacus If someone had thought of this invention
15 soshycalled invention 100 years ago they might have
16 implemented it in a nonelectronic manner using various
17 precomputing tools such as an abacus or handwritten
18 ledgers
19 We know from Benson the Courts seminal
20 computer implementation case that if you can do it by
21 head and hand then the computer doesnt add anything
22 inventive within the meaning of the 101 exception That
23 is the holding of Benson And the Court reiterated that
24 in Mayo
25 Flook said exactly the same thing If you
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1 can do it with pencil and paper then the computer is
2 not offering anything that the patent laws are or should
3 be concerned with
4 It is only where the method will not work
5 without a computer which is not these claims and where
6 the computer itself is doing something that the patent
7 law is willing to protect
8 CHIEF JUSTICE ROBERTS What if shyshy what if
9 you can do it without a computer but its going to
10 take you know 20 people a hundred years In other
11 words theoretically you can replicate what the
12 computer does shyshy
13 MR PERRY Two answers
14 CHIEF JUSTICE ROBERTS shyshy but its
15 impractical without looking to do it on the computer
16 MR PERRY Mr Chief Justice first these
17 claims literally read as Alice reads them on a single
18 transaction between two parties so its not 20 people
19 for a hundred years Its one person sitting in a room
20 so thats not a problem
21 Second if what is being claimed is the
22 necessary speed or efficiency or data crunching
23 capabilities if you will of a computer then it would
24 have to be claimed and theres nothing claimed here
25 All that is claimed shyshy and my friend is going to stand
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1 up on rebuttal and tell you all that the expert said
2 well what is claimed is a computer but its just a
3 computer It just says a computer configured too It
4 doesnt say that the computer actually has to shyshy
5 JUSTICE BREYER Yeah but the trouble with
6 that particular test is as I think partly the Chief
7 Justice said how long et cetera and then add to that
8 though you could do it without a computer what happens
9 at the end of the line is the automobile engine goes off
10 or it begins to sputter or it turns left
11 You see its possible to take Archimedes shyshy
12 shyshy you know I use that example purposely to call
13 attention to the problem You can take those things
14 and youre not just saying apply it and youre not even
15 just saying shyshy you are saying use the computer but at
16 the end of the road something physical in the world
17 changes and everybody would say now thats shyshy that
18 will falls within I mean probably I mean my
19 hesitation shows Im looking for the right words
20 MR PERRY Justice Breyer your point is
21 the reason that it is equally fallacious to suggest on
22 the one hand as Alice and IBM does that simply
23 reciting a computer is a magic key that gets you through
24 101 and you never have to any other inquiry and what
25 some of folks the amici on the other side say which
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1 is that computers or software are never eligible Both
2 of those things have to be wrong because what the Court
3 said in Bilski was future innovation is too uncertain
4 We are not going to do that as a Court And the Court
5 laid out an approach using abstract ideas in Bilski and
6 inventive contribution in Mayo that is flexible enough
7 to take into account that innovation and to deal with
8 particular claims in context which is why at the end
9 of the day we have to come back to these patents and
10 decide which shyshy
11 JUSTICE KAGAN Mr Perry before we get
12 back to these matters you said to Justice Scalia if a
13 patent sufficiently describes how a computer will
14 implement an idea then its patentable So how
15 sufficiently does one have to describe it What do we
16 want a judge to do at this threshold level in terms of
17 trying to figure out whether the description is
18 sufficient to get you past it
19 MR PERRY If I can answer in two steps
20 Justice Kagan First in the negative What the
21 applicant or patentee must do shyshy must not do is simply
22 describe the desired result That would take us back to
23 State Street That would simply say I claim a magic
24 box that buys high and sells low or vice versa I
25 suppose I claim a magic box for investing Thats what
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1 these patents do
2 Then to put it in the affirmative and in the
3 language of Mayo the claim has to recite something
4 significantly more something significantly more than
5 the abstract idea itself That would be a contextual
6 analysis based on the claims and specifications and file
7 history and we know that some devices some methods
8 some programming will pass that
9 It is not going to be a brightshyline rule and
10 thats one of the tugshyofshywar issues that this Court and
11 the Federal Circuit have been having in these cases
12 The Federal Circuit wants brightshyline rules All
13 computers are in or all computers are out
14 This Court has been more contextual This
15 Court has been more nuanced This Court has looked at
16 things in a more robust way
17 JUSTICE KAGAN Youre not suggesting that
18 specific code is necessary
19 MR PERRY No Your Honor I think the shyshy
20 actual description of the programming is a 112 problem
21 I agree with that A 112 issue That is the realm of
22 the written description requirement What is a 101
23 problem is it is on the applicant to do more than simply
24 describe the results simply say A magic box that does
25 intermediate settlement And we can tie that back to
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1 this particular prosecution the 510 patent which is
2 the method patent
3 The examiner rejected it Under Section
4 101 the examiner said this is an abstract idea You
5 cant have this patent And the only change that this
6 applicant made was to add in the adjusting step
7 electronic adjustment It put in one word
8 electronic adjustment And under State Street which
9 is what this patent is prosecuted under that was
10 enough because the result of adjusting run through a
11 computer is enough
12 Under current law that cant be enough
13 That just cant get a patent over the line because this
14 Court said in Mayo and I got to quote this language
15 Simply implementing a fundamental principle on a
16 physical machine namely a computer is not a patentable
17 application of that principle Thats all that Alice
18 has done
19 These are preshyBilski patents They never
20 should have been issued General Verrilli will stand up
21 and address that point And certainly under current
22 law shyshy one point on the AIA Congress did not send all
23 this to the administrative process Congress created
24 two avenues the courts and the PTO to use the
25 standards Essentially it ratified Bilski and Mayo and
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1 said we agree with what you all are doing at the
2 Supreme Court and the existing standards are good enough
3 for us This is a judicial problem And that is a good
4 reason The abstract shyshy
5 JUSTICE GINSBURG The Federal Circuit in
6 this case split in many ways and it had our decisions
7 to deal with You said given Bilski and Mayo this is
8 an easy case What is the instruction that escaped a
9 good number of judges on the Federal Circuit How would
10 you state the rule
11 MR PERRY Your Honor I think theres a
12 significant element to the Federal Circuit that
13 disagrees with Mayo and has been resistant in applying
14 it Chief Judge shyshy former Chief Judge Michelle filed a
15 brief in this Court essentially saying Mayo is a
16 lifeshysciences case You should limit it to that because
17 if you apply it to everything else then these patents
18 are no good
19 Mayo we submit is a technologyshyneutral
20 industryshyneutral exceptionshyneutral framework that can
21 be used to answer all of these questions This is not
22 the death of software patents The software industry is
23 all before this Court saying this is fine with us
24 Every company in the United States practically except
25 for IBM is saying go ahead This will not affect
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1 software patents
2 Justice Ginsburg this Courts precedents
3 are clear They are unanimous They just need to be
4 applied To suggest that there is confusion that needs
5 to be addressed by retreating beating a retreat from
6 recent unanimous decisions would simply reward
7 intransigence difficulty refusal to adhere to what are
8 clear precedents because shyshy
9 JUSTICE KAGAN Should we be concerned
10 Mr Perry that there are old patents that in fact could
11 meet the test that you set forth but wont because they
12 were written in a different time and so used much more
13 general language
14 MR PERRY Your Honor the applicant or the
15 patent holder would have the opportunity to institute a
16 reexamination proceeding or some sort of administration
17 process to address that issue
18 And second it should be noted this is a
19 very small problem There are 2 million outstanding
20 patents in the United States In the last four fiscal
21 years there were 22000 infringement litigations
22 instituted but since Bilski there have only been 57
23 district court decisions on Section 101 issues There
24 have only been 12 Federal Circuit decisions total on
25 computer implementation
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1 We are talking about a group of patents
2 Justice Kagan thats way out at the tail end of
3 distribution Most patents never have a 101 challenge
4 This is not an issue with cotton gins and other things
5 This is a problem for the most marginal
6 most dubious most skeptical patents the ones that this
7 Court in Bilski shyshy and remember what Bilskis holding
8 is The majority said they are processes but it did
9 not say they are eligible
10 Thank you Mr Chief Justice
11 CHIEF JUSTICE ROBERTS Thank you counsel
12 General Verrilli
13 ORAL ARGUMENT OF DONALD B VERRILLI JR
14 ON BEHALF OF THE UNITED STATES AS AMICUS
15 CURIAE SUPPORTING RESPONDENTS
16 GENERAL VERRILLI Mr Chief Justice and
17 may it please the Court
18 An abstract idea does not become
19 patentshyeligible merely by tacking on an instruction to
20 use a computer to carry it out A computer makes a
21 difference under Section 101 when it imposes a
22 meaningful limit on the patent claim That occurs when
23 the claim is directed at improvement in computing
24 technology or an innovation that uses computing
25 technology to improve other technological functions
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1 Thats the test that we believe is most faithful to this
2 Courts precedents in Bilski and Mayo It keeps patents
3 within their traditional and appropriate domain and it
4 is capable of being administered consistently by Courts
5 and by PTO examiners
6 JUSTICE GINSBURG How do you answer the
7 argument that your view would extinguish businessshymethod
8 patents and make all software ineligible for patent
9 protection
10 GENERAL VERRILLI Yeah with shyshy let me
11 address software patents first because that I think is
12 obviously a significant question And its just not
13 correct to say that our approach would make software
14 patenting ineligible Any software patent that improves
15 the functioning of the computer technology is eligible
16 Any software patent that improves shyshy that is used to
17 improve another technology is eligible For example
18 the patent in the shyshy in the Diehr case is one in
19 which shyshy
20 JUSTICE SOTOMAYOR Why do we need to reach
21 this in that shyshy reach software patents at all in this
22 case
23 GENERAL VERRILLI Well shyshy
24 JUSTICE SOTOMAYOR Whats the necessity for
25 us to announce a general rule with respect to software
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1 There is no software being patented in this case
2 GENERAL VERRILLI Well I shyshy
3 JUSTICE SOTOMAYOR Theres a systems
4 GENERAL VERRILLI Well I shyshy I think shyshy
5 well they shyshy they shyshy theres a process being and shyshy and
6 one can think of software patents as process patents
7 And I think thats why my friends on the other side are
8 saying the sky is falling because they shyshy they are
9 interpreting what were saying about that when a
10 computer makes shyshy when a computers involvement makes
11 something eligible under 101 its calling those into
12 question and it doesnt
13 JUSTICE SOTOMAYOR Do you think we have to
14 reach the patentability of software to answer this case
15 GENERAL VERRILLI Well I think you can shyshy
16 I think the answer to that question is no not
17 necessarily You can decide it by saying that shyshy that
18 Bilski answers the question whether this is an abstract
19 idea because this form of hedging is really no
20 different than the form of hedging as a conceptual
21 matter at issue in Bilski And then Mayo answers the
22 question of whether the use of a computer in this case
23 adds enough to the abstract idea beyond conventional
24 steps because here all we have after all is just
25 conventional use of computing technology no computer
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1 innovation such that you dont qualify under 101 You
2 could take that approach
3 But it is important to the United States
4 that we shyshy and to our patent examiners that we get some
5 clarity if we can I think the clarity could come from
6 the text that I propose which I want to reiterate shyshy
7 JUSTICE SOTOMAYOR Well shyshy
8 JUSTICE BREYER Could shyshy could shyshy could you
9 go on with that because you were just getting to the
10 point where I think you say a computer improvement that
11 in fact leads to an improvement in harvesting cotton is
12 an improvement through a computer of technology so it
13 qualifies
14 But then I think you were going to say or I
15 got this also from the brief a computer improvement
16 that leads to an improvement in the methods of selling
17 bonds over the telephone is not an improvement in
18 technology reached by the computer Am I right about
19 the distinction youre making
20 GENERAL VERRILLI I dont think theres a
21 yes or no answer to that question
22 JUSTICE BREYER What is your view Yeah
23 what is shyshy how do we deal with just that problem
24 GENERAL VERRILLI If there is a genuine
25 innovation in the functioning of the computer shyshy
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1 JUSTICE BREYER Yes
2 GENERAL VERRILLI shyshy such that business
3 processes shyshy
4 JUSTICE BREYER Weve got that Yes yes
5 We got the computer But then it doesnt improve the
6 computer but rather it improves through the computer
7 the harvesting of cotton
8 Now youve got it in what you said was your
9 second category which is an improvement through the
10 computer of a technology And I thought in your brief
11 you were distinguishing an improvement through the
12 computer of a human activity that is not a technology
13 and in particular to pick an example of that
14 something in finance or something in business
15 Now am I right about the distinction youre
16 making
17 GENERAL VERRILLI Yeah that shyshy
18 JUSTICE BREYER If Im not right what is
19 the distinction
20 GENERAL VERRILLI That is generally the
21 line were drawing Frankly shyshy
22 JUSTICE BREYER And how is that justified
23 GENERAL VERRILLI I do want shyshy
24 JUSTICE BREYER That shyshy that is Judge Dyk
25 in shyshy in Bilski in the Federal circuit 4 people sort of
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1 picked it up maybe 5 didnt pick it up Would you say
2 a few words about it
3 GENERAL VERRILLI Sure About shyshy let me go
4 to Bilski there in that I do think while shyshy while
5 certainly the Court held that the term process got a
6 natural construction which could include business
7 methods it seems to me that thats not all the Court
8 said in Bilski The Court also said that it was
9 historically and traditionally quite rare that business
10 methods were patent eligible
11 It also said that shyshy that the shyshy that courts
12 and the PTO examiners should use the abstract ideas
13 exception to 101 to police the appropriate boundary
14 It also said that the
15 machineshyorshytransformation test that the United States
16 advocated remained a useful tool And of course that
17 directs to you seeing whether there is a technology
18 application
19 And of course the holding in Bilski was
20 that the shyshy the method for hedging risk was ineligible
21 because it was an abstract idea and I cant imagine
22 that if in Bilski the shyshy the claim had been exactly the
23 same but had added use a computer to carry out some of
24 these standard random analysis functions that are
25 claimed by the patent that you would have found it to
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1 be patent eligible
2 And I shyshy I would submit for the Court that
3 the key point here I think is that now given where
4 the Court shyshy what the Court has held in Bilski given
5 what its held in Mayo the abstract ideas exception is
6 really the only tool left to deal with what I shyshy what I
7 think I fairly read Bilski as saying is a significant
8 problem the proliferation of patents of business
9 methods
10 JUSTICE KENNEDY Is there an example that
11 you can give us of a shyshy what we can call a business
12 process that is patentable a process that doesnt
13 involve improving the workings of a computer
14 GENERAL VERRILLI I shyshy I think its going
15 to be difficult for me to do that I think for
16 example if you had a business method a process for
17 additional security pointshyofshysale credit card
18 transactions using particular encryption technology
19 that might well be patent eligible Its a technology
20 that it makes conduct of business more efficient or
21 effective
22 But there is a technological link here and
23 we do think thats critical to our shyshy to our point of
24 view with respect to the case And I shyshy and I do think
25 remember that when we say something is not patent
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1 eligible were not saying they cant do it Were
2 saying they cant monopolize it
3 And the concern in a situation like this one
4 is that if this is patent eligible its hard to see
5 why for example the first person who came up with a
6 frequent flier program wouldnt have been able to claim
7 a patent there because after all thats a business
8 method for improving customer loyalty implemented on a
9 computer
10 CHIEF JUSTICE ROBERTS General I shyshy you
11 mentioned a while ago the need for greater clarity and
12 certainty in this area And Im just wondering in your
13 brief youve got a nonshyexhaustive of factors to
14 consider and there are 6 different ones And Im just
15 doubtful that thats going to bring about greater
16 clarity and certainty
17 GENERAL VERRILLI I take shyshy I take the
18 point Mr Chief Justice but I think the key is that
19 they are all directed to answering the question of
20 whether the innovation that is claimed and is an
21 innovation in either A the improvement of a computers
22 functioning or B the use of computer technology to
23 improve the functioning of another technological
24 process and a case like Diehr would be in the latter
25 category
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1 And so I do think that thats the key
2 benchmark Thats the baseline Thats the test that
3 we do think can be applied clearly and consistently by
4 the courts or the PTO And it avoids the risk of things
5 like frequent flier programs or the Oakland As money
6 ball methods for evaluating the contributions in
7 individual baseball players make or any one of a host of
8 other things that our intuitions tell us just dont
9 belong in the patent system
10 Thats the shyshy drawing that line keeps them
11 out not drawing that line lets them in And with all
12 due respect I dont think that the novelty and
13 nonobviousness filters that 102 and 103 really deal with
14 that problem effectively because when you get to
15 nonobviousness in 103 for example youll be asking a
16 different question
17 If you take the frequent flier program you
18 would say well is this innovation in building consumer
19 loyalty something that would have been obvious to
20 somebody who runs an airline Its totally divorced
21 from the question of technology at that point and
22 therefore I dont think youre going to get the screen
23 that you need to get in order for the patent system to
24 be confined to its traditional and appropriate scope
25 If there are no further questions thank
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1 you
2 JUSTICE GINSBURG I have a question about
3 how do you identify an abstract concept The shyshy a
4 natural phenomenon a mathematical formula those are
5 easy to identify but there has been some confusion on
6 what qualifies as an abstract concept
7 GENERAL VERRILLI We would define
8 abstract shyshy an abstract concept as a claim that is not
9 directed to a concrete innovation in technology
10 science or the industrial arts So its the shyshy its
11 abstract in the sense that it is not a concrete
12 innovation in the traditional realm of patent law
13 Thank you
14 CHIEF JUSTICE ROBERTS Thank you General
15 Mr Phillips you have four minutes
16 remaining
17 REBUTTAL ARGUMENT OF CARTER G PHILLIPS
18 ON BEHALF OF THE PETITIONERS
19 MR PHILLIPS Thank you Mr Chief Justice
20 Id just like to make a few points
21 First of all with respect to the question
22 you asked which is looking at 159 et cetera all I can
23 tell you is that if you look at claim 33 it talks about
24 matched orders the matched orders that are described in
25 286 and 287 and then makes specific reference to 159
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54
1 and that flow chart thats there And its all designed
2 as a package Its only one element of the shyshy of the
3 invention but it is a central element and its an easy
4 one to understand And it goes well beyond simply the
5 notion of hedge shyshy hedge against settlement risk and do
6 it by a computer
7 JUSTICE SOTOMAYOR Your adversary says that
8 his shyshy the appendix to his brief are the only patents at
9 issue that the flow charts are not at issue in this
10 case
11 MR PHILLIPS Theres no basis for that
12 statement Your Honor There shyshy remember this went off
13 on a very truncated litigation process So theres shyshy
14 you know we shyshy we got cut off at the beginning of it
15 Theres been no construction of the shyshy of the claims
16 and shyshy and obviously these are specifications that go
17 to how you interpret the claim
18 JUSTICE SOTOMAYOR If we were to say that
19 there are no business patents shyshy
20 MR PHILLIPS Yes
21 JUSTICE SOTOMAYOR shyshy would your patent
22 survive at all
23 MR PHILLIPS No I dont shyshy I dont
24 believe so I think theres no question And you
25 know General Verrilli could not have been any plainer
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1 in his statement of how he wants to interpret the
2 abstract idea concept
3 JUSTICE SOTOMAYOR Yes he wants to say no
4 business patents
5 MR PHILLIPS No business shyshy just another
6 way of saying no business methods And you know the
7 Court rejected that And it seems to me extraordinary
8 to say Congress didnt reject no business methods in
9 101 but were going to do shyshy were going to manipulate
10 the judicial exception to accomplish precisely that same
11 thing It seems to me thats wholly inappropriate
12 Justice Ginsburg you asked my shyshy my friend
13 here you know whats his test He didnt answer that
14 question youll notice because he doesnt have an
15 answer His basic argument is whatever you do just
16 kill this patent
17 And if I were in his shoes I suppose Id
18 take that same position I think whats absolutely
19 clear is that the test ought to be one that is
20 structured as a very coarse filter not the kind of
21 filter that hes pushing for where it changes over time
22 I mean I thought his shyshy I thought his response to one
23 of the questions about eshymail and word processing that
24 Justice Sotomayor asked is over time it would change
25 Well thats exactly what 102 and 103 are for That is
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1 not the purpose of shyshy of Section 101
2 And then he uses the example of encryption
3 I guarantee you if we were arguing about encryption in
4 this case he would say to me that thats an abstract
5 principle because encryption is a concept thats been
6 around since time immemorial George Washington used
7 it Everybody has used encryption
8 And a question again thats not the
9 solution to these problems The question is how did we
10 go about doing it And we go beyond the basics of
11 simply saying use a computer and thats what we ask
12 this Court to focus on and to evaluate
13 As to the frequent flier program its
14 pretty clear to me that even though it was a novel idea
15 in some sense the concept itself would have been viewed
16 in shyshy in the KSR fashion as quite obvious as a means of
17 improving customer loyalty
18 There are solutions here Giving us 101
19 pass doesnt create a monopoly It just gets us to the
20 102 and 103 inquiries that are at the heart of what the
21 patent laws shyshy and 112 that are at the heart of what the
22 patent laws ought to be dealing with
23 If there are no further questions Your
24 Honor thank you
25 CHIEF JUSTICE ROBERTS Thank you counsel
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1 The case is submitted
2 (Whereupon at 1105 am the case in the
3 aboveshyentitled matter was submitted)
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
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58
A add 714 1023 algorithm 3320 41 automatically
As 525 3621 387 algorithms apply 72425 111
am 115 32 416 3013 3310 2019 281213 automobile 389
572 added 302 Alice 13 34 2822 3814 available 99
abacus 61213 4923 363 3717 4217 avenues 4124
710 1018 additional 5017 3822 4117 applying 4213 avoids 524
1325 3614 3617
address 4121 4317 4511
Alices 271 2919 3678
approach 226 395 4513 B
ability 1514 addressed 435 allow 94 472 B 121 29 4413
able 1511 167 addressing 181 allows 97 242 appropriate 5122
1919 516 adds 4623 amazing 2514 81516 1514 back 1621
aboveshyentitled adhere 437 amici 3825 453 4913 1922 2512
113 573 adjudication amicus 123 5224 3018 322
absolutely 125 241 210 4414 Archimedes 3991222
1215 159 adjusting 3611 analysis 424 281122 3811 4025
5518 41610 364 406 area 219 5112 ball 526
abstract 4267 adjustment 417 4924 argue 2518 Bank 17 35
48 6682023 418 analyze 1416 arguing 563 banks 95
721 8218 administered 1716 argument 114 bars 43
141920 1522 454 announce 4525 225812 33 baseball 527
165 181618 administration answer 119 37 41 144 based 423 406
2220 24925 4316 2219 247 18323 226 baseline 522
2621 277 administrative 3919 4221 26715 4413 basic 413 5515
2938 3422 171218 187 456 461416 457 5317 basically 1821
3523 395 242 4123 4721 551315 5515 2319
405 414 424 adopt 203 answering 5119 arguments basics 5610
4418 461823 adopted 31317 answers 3713 1415 basis 132 1512
491221 505 advancement 461821 arms 1625 1516 2719
53368811 351 anyway 1810 arrangements 5411
552 564 advances 3513 apparatus 2916 131 beating 435
accept 102 adversary 547 APPEARAN arrows 315 beginning 163
accomplish advice 1715 116 art 1919 5414
5510 advocated 4916 appears 820 arts 2124 5310 begins 3810
account 55 618 affect 4225 appendix 1910 aside 1422 157 behalf 11719
397 affirmative 402 311 326 369 asked 2314 122 24710
accounts 823 agent 52 3021 548 278 5322 214 38 2616
9356 3611 ago 318 2224 applicant 3220 551224 4414 5318
3611 3615 5111 3921 4023 asking 193 believe 1316
accurately 2413 agree 920 2021 416 4314 221213 273 1416 2421
acknowledges 221 2418 application 3324 5215 255 264 451
1121 4021 421 2623 4117 aspect 517 5424
act 99 2017 agrees 2812 4918 asserted 3113 belong 529
activities 229 ahead 4225 applications 311618 benchmark 522
activity 2122 AIA 2912 4122 333 asserting 325 Benson 361923
3325 4812 airline 5220 applied 434 attaching 124 best 161124
actual 4020 AL 18 523 attention 3813 better 1610 albeit 923 applies 31418 Attorney 2021 216 2819
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59
3322 brightshyline 409 2313 37 71 4338 5519 beyond 115 4012 5317 checks 618 5614
1312 4623 bring 5115 case 3412 46 Chief 339 clearly 211 251 544 5610 broad 248 116 1524 261217 3024 523
Bilski 313 46 broader 225 2022 213 31812 378 client 311416 415 1722 browsing 228 2211 2313 371416 386 close 2822 2224 2329 builder 2811 2625 311424 421414 4410 CLS 17 35 262020 271 building 5218 3314 36620 441116 5110 1120 2816 2999 built 2324 426816 5118 531419 coarse 247 3935 4125 business 168 451822 461 5625 5520 427 4322 1749 203 461422 5024 chits 611 code 1213 142 447 452 2124 222122 5124 5410 chronological 1916171720 461821 4825 2311 29613 564 5712 1512 2725 4018 49481922 32132323 cases 244 2816 chronologically coffee 1211 5047 3322525 4011 423 colleagues 116
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2115 225 554568 category 489 circumstances 475 boat 2811 businessshymeth 5125 318 1515 comes 1318 bonds 4717 457 CBM 2913 claim 416 2418 2018 231 bothering 118 buy 183 cellphones 228 2423 2522 coming 923 bound 1521 buys 3924 central 95 543 264 27917 common 31120 boundary 4913 certain 1216 3019 3121 2157 bounds 1521 C certainly 518 32420 361 company 4224 box 392425 C 21 31 263 358 392325 403 competition
4024 cables 3012 4121 495 442223 4922 161011 Breyer 66823 calculator 3519 certainty 5112 516 53823 completely 921
74691923 call 3812 5011 5116 5417 1422 2320 85810 1012 called 721 275 cetera 387 claimed 41014 complex 126 1021 1523 3316 5322 281 3017 complicated 161418 171 calling 4611 Chakrabarty 34162123 1225 235 1922 2114 capabilities 2016 3721242425 3025 315 221216 239 3723 challenge 443 382 4925 component 2315 285 capable 141 change 186 5120 352024 293 3613 454 273 311 415 claims 1416 compression 38520 478 capture 2415 5524 171616 2419 309 3212 4722 4814 captures 2412 changes 3817 2424 2515 3320 349 48182224 card 5017 5521 2520 2648 computer 422
brief 211315 carefully 1725 chart 541 283 3118 516 621 710 2255 322 caricature 718 charted 2620 37517 398 71325 9113 4215 4715 72020 1417 charts 1911 406 5415 91824 1035 4810 5113 1716 549 clarity 4755 10725 1116 548 carry 4420 Charybdis 511116 124102024
briefs 1524 4923 1620 2619 class 59 13911 1479 1618 CARTER 117 checkbook 617 clear 1015 118 1421 15710
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1517 165 confess 1111 coterminous 4121 5324 181719 196 configured 383 2321 customer 518 describes 425 19814 206 confined 5224 cotton 914 444 5617 2918 3211 2025 211016 confirmed 2912 4711 487 cut 5414 3913 2117 2410 confusion 434 counsel 4411 description
D2521525 535 5625 3917 402022 D 312622 30522 Congress 178 countries 137 deserve 342 DC 1101719 31311 3210 1725 1856 course 719 designed 720
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910 399442020 4515 454 523 2618 27345 dicta 923 1012 deal 42023 46102225 constitutes 312 28718 299 Diehr 2322
172 187 397 4710121518 construction 31202122 3313 4518 427 47234725 48566 496 5415 334 36523 5124 506 5213481012 4923 consumer 5218 39244 4010 difference 921
dealing 4175013 51922 contains 327 40141515 2789 4421 1119 135546 5611 content 281417 4114 42215 different 421 151216 3412 computers 2819 4223 4323 79 919 1377 56224610 5121 context 2319 44717 4957 191 259 266
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1112 391522 253 53911 corresponding curiae 123 211 144 1520 4024conduct 5020 2720 2915 4415 disagree 513
described 717conducted 297 346 current 4112 disagrees 4213
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disclosure 328 413 302021 4220 figure 1146 discuss 164 economy 1516 ESQ 1171921 excerpted 323 311222 3917 discussion 299 effective 1223 236913 exhausted 1813 file 406 dispose 2625 5021 essence 211 exist 420 131 filed 4214 dispute 325 effectively 5214 essential 1224 existence 1119 fill 2818 disputed 3120 efficacy 1224 3425 175 filled 293
363 1517 essentially 2016 existing 337 filter 248 5520 distance 2311 efficiency 3722 261 4125 422 5521 distinction 415 efficient 5020 4215 exists 42 filters 5213
4719 481519 either 202 established expert 3688 finance 2124 distinguishing 5121 311919 381 4814
4811 electronic 262 establishing expertise 1210 financial 1225 distribution 4178 275 experts 2817 29517
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four 1720 182 48172023 5599 3312 461920 1016 123 18912 2216 493 5014 gold 6101114 4920 138 14610 2311 275 511017 537 134 held 46 495 141120 164 4320 5315 5314 5425 good 611 167 5045 181618 2220
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future 393 316 4225 hard 201423 3719 imposes 4421 479 493 514 hundreds 2010 impractical
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48911 5121 410 53 issue 316 1010 31812 329 141919 5520 improvements International 3124 4021 3221 331521 kinds 248
324 17 35 4317 444 3324 34717 King 6924 improves 206 Internet 2514 4621 5499 3524814 1016 1124
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4321 invalid 2011 judicially 317 laid 395 inherently 209 invented 107 Justice 122 33 K language 322 initial 1123 1425 3919 45 57 Kagan 14313 1112 3316 innovation 393 invention 714 51415 6168 142124 152 3521 403
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innovations 32724 3614 1123 1228 keep 1018 111 law 377 4112 341 3615 543 12141720 keeping 613 4122 5312
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level 920 3916 M 452 4621 4716 49710 needs 314 434 liberal 1715 machine 915 505 509 526 556 negative 3920 lifeshysciences 2120 3322 mean 69 716 558 never 1615
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lines 2522 maintain 1117 2210 3622 money 3412 nonelectronic 301215 337 maintaining meaningful 525 3616
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147891012 sees 613 164 2121 solvency 72124 3923 418 141424 194 segments 169 267 271117 1016 1117 4210 197 2017 sell 3020 3822 392123 somebody 95 statement 5412 282122 354 selling 4716 402324 4115 1022 2510 551 38141515 sells 3924 436 544 5220 states 111423 42152325 seminal 3619 5611 sophisticated 210 169 248 468917 507 send 2512 simultaneously 3013 4224 4320 5112 556 4122 421 815 136 sorry 67 819 4414 473 5611 sense 151920 1512 sort 324 3413 4915
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1 to go further what would the right words or example be
2 MR PERRY Your Honor as shyshy Justice
3 Breyer as to abstract ideas the PTO has filled in that
4 shell by listing economic concepts legal concepts
5 financial concepts teaching concepts dating and
6 interpersonal relationships and generally how business
7 should be conducted as examples of those things that are
8 likely abstract which of course all follow directly
9 from Bilski and the discussion this Court had in Bilski
10 And this patent shyshy these patents fall squarely within
11 that
12 Congress in the AIA confirmed that
13 reading Congress in the CBM method said business
14 methods that are subject to special scrutiny shyshy that is
15 dubious patents shyshy include methods and corresponding
16 apparatus which is what we have here that pertain to
17 data processing in the financial services industry and
18 do not offer a technological solution That describes
19 Alices patents to a letter Your Honor So that we
20 have shyshy
21 JUSTICE SOTOMAYOR What do you think is a
22 technological solution
23 MR PERRY Your Honor shyshy
24 JUSTICE SOTOMAYOR How could they if at
25 all written their patents to shyshy to make shyshy to make
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1 their software eligible What would shyshy what do they
2 need shyshy would have needed to have added
3 MR PERRY Justice Sotomayor they have no
4 software first Theyve never written software
5 Theyve never programmed a computer So thats a
6 nonexistent set
7 Second there are many technological
8 solutions to trading and settlement problems For
9 example data compression These shyshy these trading
10 platforms involve the movement of very large quantities
11 of data around the world The physical pipes that is
12 the fiber optic cables and data lines are limited
13 There are very sophisticated algorithms for both
14 security and speed to move data through the transmission
15 lines in novel and useful ways that could well be
16 patented
17 Nothing like that is claimed here To come
18 back to where I started if you look for example at
19 Claim 65 in the 510 patent as Mr Phillips reads it
20 it literally reads on a twoshyparty escrow to sell a
21 house so long as the escrow agent is typing this stuff
22 into the HUDshy1 using a computer That has nothing to do
23 with multilevel shyshy
24 CHIEF JUSTICE ROBERTS Well thats a
25 little more complicated He referred us to Joint
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1 Appendix Page 159 which is not a change in how
2 computers work But it is shyshy constitutes the
3 instructions about how to use the computer and where it
4 needs to be affected And just looking at it it looks
5 pretty complicated There are a lot of arrows and
6 they shyshy you know different things that go shyshy
7 (Laughter)
8 CHIEF JUSTICE ROBERTS Well but I mean
9 you know it shyshy in different directions And I
10 understand him to say that in each of those places
11 thats where the computer is needed
12 MR PERRY Mr Chief Justice Figure 16 has
13 nothing to do with the invention asserted against my
14 client in this case There are two inventions in this
15 patent One invention involving multilateral contract
16 formation is not asserted against my client And all of
17 these drawings pertain to that The only drawings that
18 pertain to the asserted claims are 25 and 33 to 37 And
19 that was established below and its established in this
20 Court And Mr Phillips has never disputed it
21 So the claim hes pointed the Court shyshy the
22 figure hes pointed the Court to has nothing to do with
23 the invention Its for a different invention that is
24 not at issue in this case
25 Remember there are hundreds and hundreds of
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1 pages of these patents They all pertain to the other
2 invention Thats why in the back of our red brief we
3 excerpted the very little bit that actually pertains to
4 this You sort of tack on patent shyshy the tack on claim
5 that Mr Phillips is asserting here Its 4 columns
6 Its less than five pages in the printed appendix that
7 actually pertains to this invention And it contains no
8 disclosure whatever
9 Justice Scalia to your question about how
10 the computer does it Of course a patent that
11 describes sufficiently how a computer does a new and
12 useful thing whether its data compression or any other
13 technological solution to a business problem a social
14 problem or a technological problem would be within the
15 realm of the shyshy of the patent laws That is what the
16 patent laws have always been for
17 This is not such a patent And the reason
18 for that is this is a preshyBilski set of patents These
19 were prosecuted under the old State Street test where
20 all the applicant had to claim was a result
21 JUSTICE KENNEDY Would you give me shyshy
22 again you already did it once shyshy an example of a
23 business process patent shyshy of a business process idea
24 and invention that is patentable
25 MR PERRY Your Honor there are many
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1 examples One would be a technological solution to a
2 business problem So that for example shyshy Ill give a
3 different example There are many applications today
4 The Court may be familiar with streaming video to watch
5 video on your computer
6 It is not possible to get enough data
7 through existing lines in its raw format The data has
8 to be manipulated in order to see live video So if you
9 want to watch TV on your phone for example
10 Those algorithms those inventions are
11 undoubtedly technological And if they are used in a
12 trading platform or a hedging system or something else
13 that wouldnt disable them And this is what the Diehr
14 case shyshy
15 JUSTICE KENNEDY Well I shyshy I shyshy in my
16 language Ive called that mechanical rather than
17 process Can you give me an example of process
18 MR PERRY Yes Your Honor The process in
19 that example would be a computer running the particular
20 data compression algorithm
21 JUSTICE KENNEDY But thats how to make
22 a shyshy thats how to make a machine work better
23 MR PERRY Yes Your Honor
24 JUSTICE KENNEDY Im asking you Is there
25 any business process any business activity that is
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1 susceptible to a patent a pure patent innovations that
2 deserve patents
3 MR PERRY Your Honor again a
4 technological solution to a business problem could well
5 be whether its a method or a process is equivalent
6 Again Congress said method in a corresponding shyshy
7 JUSTICE KENNEDY Can you give me an
8 example
9 MR PERRY I thought the data compression
10 example was a good one Ill try an encryption
11 technology Many of these trading platforms you know
12 dealing with securities and money would require some
13 sort of security devices You could have a process for
14 securely transmitting data would be another computer
15 implemented technological solution to a business
16 problem Again nothing like that claimed here
17 JUSTICE SOTOMAYOR How about eshymail and
18 just word processing programs
19 MR PERRY Your Honor a program shyshy let me
20 try it this way to both of your questions In our view
21 if what is claimed as the inventive contribution under
22 Mayo shyshy in other words if we have an abstract idea as
23 we do here and what is claimed is the inventive
24 contribution for Step 2 is the computer then the
25 computer must be essential to that operation and
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1 represent an advancement in computer science or other
2 technology And we know thats not met here Justice
3 Sotomayor because shyshy
4 JUSTICE SOTOMAYOR So youre saying no to
5 eshymail and word processing
6 MR PERRY Your Honor I think at a
7 point shyshy
8 JUSTICE SOTOMAYOR They certainly have
9 functionality and shyshy and improvement of functionality
10 for the user
11 MR PERRY At a point in time in the past
12 I think both of those would have been technological
13 advances that were patentable
14 JUSTICE SOTOMAYOR How
15 MR PERRY Today shyshy because they would have
16 provided a technological solution to a then unmet
17 problem Today reciting and do it on a word processor
18 is no different than and do it on a typewriter or shyshy and
19 do it on a calculator
20 The inventive contribution component which
21 uses specifically the language of conventional and
22 routine and well understood will evolve with
23 technology Thats why its different than the abstract
24 idea component
25 And here we know that these patents dont
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1 claim anything that was not conventional well
2 understood and routine We went through that in great
3 detail and Alice has never disputed a word of it They
4 just say youre not supposed to do that analysis even
5 though the Court 9shy0 in Mayo said we should
6 And in this case its very important to
7 look at what Alices own experts said on the subject
8 This is not our expert This is Alices expert And
9 this is at Page 1327shy28 of the Joint Appendix It is
10 possible to do the business methods of maintaining
11 accounts adjusting accounts and providing an
12 instruction without a computer or other hardware
13 And then Justice Breyer directly to your
14 abacus If someone had thought of this invention
15 soshycalled invention 100 years ago they might have
16 implemented it in a nonelectronic manner using various
17 precomputing tools such as an abacus or handwritten
18 ledgers
19 We know from Benson the Courts seminal
20 computer implementation case that if you can do it by
21 head and hand then the computer doesnt add anything
22 inventive within the meaning of the 101 exception That
23 is the holding of Benson And the Court reiterated that
24 in Mayo
25 Flook said exactly the same thing If you
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1 can do it with pencil and paper then the computer is
2 not offering anything that the patent laws are or should
3 be concerned with
4 It is only where the method will not work
5 without a computer which is not these claims and where
6 the computer itself is doing something that the patent
7 law is willing to protect
8 CHIEF JUSTICE ROBERTS What if shyshy what if
9 you can do it without a computer but its going to
10 take you know 20 people a hundred years In other
11 words theoretically you can replicate what the
12 computer does shyshy
13 MR PERRY Two answers
14 CHIEF JUSTICE ROBERTS shyshy but its
15 impractical without looking to do it on the computer
16 MR PERRY Mr Chief Justice first these
17 claims literally read as Alice reads them on a single
18 transaction between two parties so its not 20 people
19 for a hundred years Its one person sitting in a room
20 so thats not a problem
21 Second if what is being claimed is the
22 necessary speed or efficiency or data crunching
23 capabilities if you will of a computer then it would
24 have to be claimed and theres nothing claimed here
25 All that is claimed shyshy and my friend is going to stand
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1 up on rebuttal and tell you all that the expert said
2 well what is claimed is a computer but its just a
3 computer It just says a computer configured too It
4 doesnt say that the computer actually has to shyshy
5 JUSTICE BREYER Yeah but the trouble with
6 that particular test is as I think partly the Chief
7 Justice said how long et cetera and then add to that
8 though you could do it without a computer what happens
9 at the end of the line is the automobile engine goes off
10 or it begins to sputter or it turns left
11 You see its possible to take Archimedes shyshy
12 shyshy you know I use that example purposely to call
13 attention to the problem You can take those things
14 and youre not just saying apply it and youre not even
15 just saying shyshy you are saying use the computer but at
16 the end of the road something physical in the world
17 changes and everybody would say now thats shyshy that
18 will falls within I mean probably I mean my
19 hesitation shows Im looking for the right words
20 MR PERRY Justice Breyer your point is
21 the reason that it is equally fallacious to suggest on
22 the one hand as Alice and IBM does that simply
23 reciting a computer is a magic key that gets you through
24 101 and you never have to any other inquiry and what
25 some of folks the amici on the other side say which
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1 is that computers or software are never eligible Both
2 of those things have to be wrong because what the Court
3 said in Bilski was future innovation is too uncertain
4 We are not going to do that as a Court And the Court
5 laid out an approach using abstract ideas in Bilski and
6 inventive contribution in Mayo that is flexible enough
7 to take into account that innovation and to deal with
8 particular claims in context which is why at the end
9 of the day we have to come back to these patents and
10 decide which shyshy
11 JUSTICE KAGAN Mr Perry before we get
12 back to these matters you said to Justice Scalia if a
13 patent sufficiently describes how a computer will
14 implement an idea then its patentable So how
15 sufficiently does one have to describe it What do we
16 want a judge to do at this threshold level in terms of
17 trying to figure out whether the description is
18 sufficient to get you past it
19 MR PERRY If I can answer in two steps
20 Justice Kagan First in the negative What the
21 applicant or patentee must do shyshy must not do is simply
22 describe the desired result That would take us back to
23 State Street That would simply say I claim a magic
24 box that buys high and sells low or vice versa I
25 suppose I claim a magic box for investing Thats what
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1 these patents do
2 Then to put it in the affirmative and in the
3 language of Mayo the claim has to recite something
4 significantly more something significantly more than
5 the abstract idea itself That would be a contextual
6 analysis based on the claims and specifications and file
7 history and we know that some devices some methods
8 some programming will pass that
9 It is not going to be a brightshyline rule and
10 thats one of the tugshyofshywar issues that this Court and
11 the Federal Circuit have been having in these cases
12 The Federal Circuit wants brightshyline rules All
13 computers are in or all computers are out
14 This Court has been more contextual This
15 Court has been more nuanced This Court has looked at
16 things in a more robust way
17 JUSTICE KAGAN Youre not suggesting that
18 specific code is necessary
19 MR PERRY No Your Honor I think the shyshy
20 actual description of the programming is a 112 problem
21 I agree with that A 112 issue That is the realm of
22 the written description requirement What is a 101
23 problem is it is on the applicant to do more than simply
24 describe the results simply say A magic box that does
25 intermediate settlement And we can tie that back to
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1 this particular prosecution the 510 patent which is
2 the method patent
3 The examiner rejected it Under Section
4 101 the examiner said this is an abstract idea You
5 cant have this patent And the only change that this
6 applicant made was to add in the adjusting step
7 electronic adjustment It put in one word
8 electronic adjustment And under State Street which
9 is what this patent is prosecuted under that was
10 enough because the result of adjusting run through a
11 computer is enough
12 Under current law that cant be enough
13 That just cant get a patent over the line because this
14 Court said in Mayo and I got to quote this language
15 Simply implementing a fundamental principle on a
16 physical machine namely a computer is not a patentable
17 application of that principle Thats all that Alice
18 has done
19 These are preshyBilski patents They never
20 should have been issued General Verrilli will stand up
21 and address that point And certainly under current
22 law shyshy one point on the AIA Congress did not send all
23 this to the administrative process Congress created
24 two avenues the courts and the PTO to use the
25 standards Essentially it ratified Bilski and Mayo and
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1 said we agree with what you all are doing at the
2 Supreme Court and the existing standards are good enough
3 for us This is a judicial problem And that is a good
4 reason The abstract shyshy
5 JUSTICE GINSBURG The Federal Circuit in
6 this case split in many ways and it had our decisions
7 to deal with You said given Bilski and Mayo this is
8 an easy case What is the instruction that escaped a
9 good number of judges on the Federal Circuit How would
10 you state the rule
11 MR PERRY Your Honor I think theres a
12 significant element to the Federal Circuit that
13 disagrees with Mayo and has been resistant in applying
14 it Chief Judge shyshy former Chief Judge Michelle filed a
15 brief in this Court essentially saying Mayo is a
16 lifeshysciences case You should limit it to that because
17 if you apply it to everything else then these patents
18 are no good
19 Mayo we submit is a technologyshyneutral
20 industryshyneutral exceptionshyneutral framework that can
21 be used to answer all of these questions This is not
22 the death of software patents The software industry is
23 all before this Court saying this is fine with us
24 Every company in the United States practically except
25 for IBM is saying go ahead This will not affect
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1 software patents
2 Justice Ginsburg this Courts precedents
3 are clear They are unanimous They just need to be
4 applied To suggest that there is confusion that needs
5 to be addressed by retreating beating a retreat from
6 recent unanimous decisions would simply reward
7 intransigence difficulty refusal to adhere to what are
8 clear precedents because shyshy
9 JUSTICE KAGAN Should we be concerned
10 Mr Perry that there are old patents that in fact could
11 meet the test that you set forth but wont because they
12 were written in a different time and so used much more
13 general language
14 MR PERRY Your Honor the applicant or the
15 patent holder would have the opportunity to institute a
16 reexamination proceeding or some sort of administration
17 process to address that issue
18 And second it should be noted this is a
19 very small problem There are 2 million outstanding
20 patents in the United States In the last four fiscal
21 years there were 22000 infringement litigations
22 instituted but since Bilski there have only been 57
23 district court decisions on Section 101 issues There
24 have only been 12 Federal Circuit decisions total on
25 computer implementation
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1 We are talking about a group of patents
2 Justice Kagan thats way out at the tail end of
3 distribution Most patents never have a 101 challenge
4 This is not an issue with cotton gins and other things
5 This is a problem for the most marginal
6 most dubious most skeptical patents the ones that this
7 Court in Bilski shyshy and remember what Bilskis holding
8 is The majority said they are processes but it did
9 not say they are eligible
10 Thank you Mr Chief Justice
11 CHIEF JUSTICE ROBERTS Thank you counsel
12 General Verrilli
13 ORAL ARGUMENT OF DONALD B VERRILLI JR
14 ON BEHALF OF THE UNITED STATES AS AMICUS
15 CURIAE SUPPORTING RESPONDENTS
16 GENERAL VERRILLI Mr Chief Justice and
17 may it please the Court
18 An abstract idea does not become
19 patentshyeligible merely by tacking on an instruction to
20 use a computer to carry it out A computer makes a
21 difference under Section 101 when it imposes a
22 meaningful limit on the patent claim That occurs when
23 the claim is directed at improvement in computing
24 technology or an innovation that uses computing
25 technology to improve other technological functions
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1 Thats the test that we believe is most faithful to this
2 Courts precedents in Bilski and Mayo It keeps patents
3 within their traditional and appropriate domain and it
4 is capable of being administered consistently by Courts
5 and by PTO examiners
6 JUSTICE GINSBURG How do you answer the
7 argument that your view would extinguish businessshymethod
8 patents and make all software ineligible for patent
9 protection
10 GENERAL VERRILLI Yeah with shyshy let me
11 address software patents first because that I think is
12 obviously a significant question And its just not
13 correct to say that our approach would make software
14 patenting ineligible Any software patent that improves
15 the functioning of the computer technology is eligible
16 Any software patent that improves shyshy that is used to
17 improve another technology is eligible For example
18 the patent in the shyshy in the Diehr case is one in
19 which shyshy
20 JUSTICE SOTOMAYOR Why do we need to reach
21 this in that shyshy reach software patents at all in this
22 case
23 GENERAL VERRILLI Well shyshy
24 JUSTICE SOTOMAYOR Whats the necessity for
25 us to announce a general rule with respect to software
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1 There is no software being patented in this case
2 GENERAL VERRILLI Well I shyshy
3 JUSTICE SOTOMAYOR Theres a systems
4 GENERAL VERRILLI Well I shyshy I think shyshy
5 well they shyshy they shyshy theres a process being and shyshy and
6 one can think of software patents as process patents
7 And I think thats why my friends on the other side are
8 saying the sky is falling because they shyshy they are
9 interpreting what were saying about that when a
10 computer makes shyshy when a computers involvement makes
11 something eligible under 101 its calling those into
12 question and it doesnt
13 JUSTICE SOTOMAYOR Do you think we have to
14 reach the patentability of software to answer this case
15 GENERAL VERRILLI Well I think you can shyshy
16 I think the answer to that question is no not
17 necessarily You can decide it by saying that shyshy that
18 Bilski answers the question whether this is an abstract
19 idea because this form of hedging is really no
20 different than the form of hedging as a conceptual
21 matter at issue in Bilski And then Mayo answers the
22 question of whether the use of a computer in this case
23 adds enough to the abstract idea beyond conventional
24 steps because here all we have after all is just
25 conventional use of computing technology no computer
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1 innovation such that you dont qualify under 101 You
2 could take that approach
3 But it is important to the United States
4 that we shyshy and to our patent examiners that we get some
5 clarity if we can I think the clarity could come from
6 the text that I propose which I want to reiterate shyshy
7 JUSTICE SOTOMAYOR Well shyshy
8 JUSTICE BREYER Could shyshy could shyshy could you
9 go on with that because you were just getting to the
10 point where I think you say a computer improvement that
11 in fact leads to an improvement in harvesting cotton is
12 an improvement through a computer of technology so it
13 qualifies
14 But then I think you were going to say or I
15 got this also from the brief a computer improvement
16 that leads to an improvement in the methods of selling
17 bonds over the telephone is not an improvement in
18 technology reached by the computer Am I right about
19 the distinction youre making
20 GENERAL VERRILLI I dont think theres a
21 yes or no answer to that question
22 JUSTICE BREYER What is your view Yeah
23 what is shyshy how do we deal with just that problem
24 GENERAL VERRILLI If there is a genuine
25 innovation in the functioning of the computer shyshy
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1 JUSTICE BREYER Yes
2 GENERAL VERRILLI shyshy such that business
3 processes shyshy
4 JUSTICE BREYER Weve got that Yes yes
5 We got the computer But then it doesnt improve the
6 computer but rather it improves through the computer
7 the harvesting of cotton
8 Now youve got it in what you said was your
9 second category which is an improvement through the
10 computer of a technology And I thought in your brief
11 you were distinguishing an improvement through the
12 computer of a human activity that is not a technology
13 and in particular to pick an example of that
14 something in finance or something in business
15 Now am I right about the distinction youre
16 making
17 GENERAL VERRILLI Yeah that shyshy
18 JUSTICE BREYER If Im not right what is
19 the distinction
20 GENERAL VERRILLI That is generally the
21 line were drawing Frankly shyshy
22 JUSTICE BREYER And how is that justified
23 GENERAL VERRILLI I do want shyshy
24 JUSTICE BREYER That shyshy that is Judge Dyk
25 in shyshy in Bilski in the Federal circuit 4 people sort of
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1 picked it up maybe 5 didnt pick it up Would you say
2 a few words about it
3 GENERAL VERRILLI Sure About shyshy let me go
4 to Bilski there in that I do think while shyshy while
5 certainly the Court held that the term process got a
6 natural construction which could include business
7 methods it seems to me that thats not all the Court
8 said in Bilski The Court also said that it was
9 historically and traditionally quite rare that business
10 methods were patent eligible
11 It also said that shyshy that the shyshy that courts
12 and the PTO examiners should use the abstract ideas
13 exception to 101 to police the appropriate boundary
14 It also said that the
15 machineshyorshytransformation test that the United States
16 advocated remained a useful tool And of course that
17 directs to you seeing whether there is a technology
18 application
19 And of course the holding in Bilski was
20 that the shyshy the method for hedging risk was ineligible
21 because it was an abstract idea and I cant imagine
22 that if in Bilski the shyshy the claim had been exactly the
23 same but had added use a computer to carry out some of
24 these standard random analysis functions that are
25 claimed by the patent that you would have found it to
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1 be patent eligible
2 And I shyshy I would submit for the Court that
3 the key point here I think is that now given where
4 the Court shyshy what the Court has held in Bilski given
5 what its held in Mayo the abstract ideas exception is
6 really the only tool left to deal with what I shyshy what I
7 think I fairly read Bilski as saying is a significant
8 problem the proliferation of patents of business
9 methods
10 JUSTICE KENNEDY Is there an example that
11 you can give us of a shyshy what we can call a business
12 process that is patentable a process that doesnt
13 involve improving the workings of a computer
14 GENERAL VERRILLI I shyshy I think its going
15 to be difficult for me to do that I think for
16 example if you had a business method a process for
17 additional security pointshyofshysale credit card
18 transactions using particular encryption technology
19 that might well be patent eligible Its a technology
20 that it makes conduct of business more efficient or
21 effective
22 But there is a technological link here and
23 we do think thats critical to our shyshy to our point of
24 view with respect to the case And I shyshy and I do think
25 remember that when we say something is not patent
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1 eligible were not saying they cant do it Were
2 saying they cant monopolize it
3 And the concern in a situation like this one
4 is that if this is patent eligible its hard to see
5 why for example the first person who came up with a
6 frequent flier program wouldnt have been able to claim
7 a patent there because after all thats a business
8 method for improving customer loyalty implemented on a
9 computer
10 CHIEF JUSTICE ROBERTS General I shyshy you
11 mentioned a while ago the need for greater clarity and
12 certainty in this area And Im just wondering in your
13 brief youve got a nonshyexhaustive of factors to
14 consider and there are 6 different ones And Im just
15 doubtful that thats going to bring about greater
16 clarity and certainty
17 GENERAL VERRILLI I take shyshy I take the
18 point Mr Chief Justice but I think the key is that
19 they are all directed to answering the question of
20 whether the innovation that is claimed and is an
21 innovation in either A the improvement of a computers
22 functioning or B the use of computer technology to
23 improve the functioning of another technological
24 process and a case like Diehr would be in the latter
25 category
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1 And so I do think that thats the key
2 benchmark Thats the baseline Thats the test that
3 we do think can be applied clearly and consistently by
4 the courts or the PTO And it avoids the risk of things
5 like frequent flier programs or the Oakland As money
6 ball methods for evaluating the contributions in
7 individual baseball players make or any one of a host of
8 other things that our intuitions tell us just dont
9 belong in the patent system
10 Thats the shyshy drawing that line keeps them
11 out not drawing that line lets them in And with all
12 due respect I dont think that the novelty and
13 nonobviousness filters that 102 and 103 really deal with
14 that problem effectively because when you get to
15 nonobviousness in 103 for example youll be asking a
16 different question
17 If you take the frequent flier program you
18 would say well is this innovation in building consumer
19 loyalty something that would have been obvious to
20 somebody who runs an airline Its totally divorced
21 from the question of technology at that point and
22 therefore I dont think youre going to get the screen
23 that you need to get in order for the patent system to
24 be confined to its traditional and appropriate scope
25 If there are no further questions thank
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1 you
2 JUSTICE GINSBURG I have a question about
3 how do you identify an abstract concept The shyshy a
4 natural phenomenon a mathematical formula those are
5 easy to identify but there has been some confusion on
6 what qualifies as an abstract concept
7 GENERAL VERRILLI We would define
8 abstract shyshy an abstract concept as a claim that is not
9 directed to a concrete innovation in technology
10 science or the industrial arts So its the shyshy its
11 abstract in the sense that it is not a concrete
12 innovation in the traditional realm of patent law
13 Thank you
14 CHIEF JUSTICE ROBERTS Thank you General
15 Mr Phillips you have four minutes
16 remaining
17 REBUTTAL ARGUMENT OF CARTER G PHILLIPS
18 ON BEHALF OF THE PETITIONERS
19 MR PHILLIPS Thank you Mr Chief Justice
20 Id just like to make a few points
21 First of all with respect to the question
22 you asked which is looking at 159 et cetera all I can
23 tell you is that if you look at claim 33 it talks about
24 matched orders the matched orders that are described in
25 286 and 287 and then makes specific reference to 159
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1 and that flow chart thats there And its all designed
2 as a package Its only one element of the shyshy of the
3 invention but it is a central element and its an easy
4 one to understand And it goes well beyond simply the
5 notion of hedge shyshy hedge against settlement risk and do
6 it by a computer
7 JUSTICE SOTOMAYOR Your adversary says that
8 his shyshy the appendix to his brief are the only patents at
9 issue that the flow charts are not at issue in this
10 case
11 MR PHILLIPS Theres no basis for that
12 statement Your Honor There shyshy remember this went off
13 on a very truncated litigation process So theres shyshy
14 you know we shyshy we got cut off at the beginning of it
15 Theres been no construction of the shyshy of the claims
16 and shyshy and obviously these are specifications that go
17 to how you interpret the claim
18 JUSTICE SOTOMAYOR If we were to say that
19 there are no business patents shyshy
20 MR PHILLIPS Yes
21 JUSTICE SOTOMAYOR shyshy would your patent
22 survive at all
23 MR PHILLIPS No I dont shyshy I dont
24 believe so I think theres no question And you
25 know General Verrilli could not have been any plainer
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1 in his statement of how he wants to interpret the
2 abstract idea concept
3 JUSTICE SOTOMAYOR Yes he wants to say no
4 business patents
5 MR PHILLIPS No business shyshy just another
6 way of saying no business methods And you know the
7 Court rejected that And it seems to me extraordinary
8 to say Congress didnt reject no business methods in
9 101 but were going to do shyshy were going to manipulate
10 the judicial exception to accomplish precisely that same
11 thing It seems to me thats wholly inappropriate
12 Justice Ginsburg you asked my shyshy my friend
13 here you know whats his test He didnt answer that
14 question youll notice because he doesnt have an
15 answer His basic argument is whatever you do just
16 kill this patent
17 And if I were in his shoes I suppose Id
18 take that same position I think whats absolutely
19 clear is that the test ought to be one that is
20 structured as a very coarse filter not the kind of
21 filter that hes pushing for where it changes over time
22 I mean I thought his shyshy I thought his response to one
23 of the questions about eshymail and word processing that
24 Justice Sotomayor asked is over time it would change
25 Well thats exactly what 102 and 103 are for That is
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1 not the purpose of shyshy of Section 101
2 And then he uses the example of encryption
3 I guarantee you if we were arguing about encryption in
4 this case he would say to me that thats an abstract
5 principle because encryption is a concept thats been
6 around since time immemorial George Washington used
7 it Everybody has used encryption
8 And a question again thats not the
9 solution to these problems The question is how did we
10 go about doing it And we go beyond the basics of
11 simply saying use a computer and thats what we ask
12 this Court to focus on and to evaluate
13 As to the frequent flier program its
14 pretty clear to me that even though it was a novel idea
15 in some sense the concept itself would have been viewed
16 in shyshy in the KSR fashion as quite obvious as a means of
17 improving customer loyalty
18 There are solutions here Giving us 101
19 pass doesnt create a monopoly It just gets us to the
20 102 and 103 inquiries that are at the heart of what the
21 patent laws shyshy and 112 that are at the heart of what the
22 patent laws ought to be dealing with
23 If there are no further questions Your
24 Honor thank you
25 CHIEF JUSTICE ROBERTS Thank you counsel
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1 The case is submitted
2 (Whereupon at 1105 am the case in the
3 aboveshyentitled matter was submitted)
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
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58
A add 714 1023 algorithm 3320 41 automatically
As 525 3621 387 algorithms apply 72425 111
am 115 32 416 3013 3310 2019 281213 automobile 389
572 added 302 Alice 13 34 2822 3814 available 99
abacus 61213 4923 363 3717 4217 avenues 4124
710 1018 additional 5017 3822 4117 applying 4213 avoids 524
1325 3614 3617
address 4121 4317 4511
Alices 271 2919 3678
approach 226 395 4513 B
ability 1514 addressed 435 allow 94 472 B 121 29 4413
able 1511 167 addressing 181 allows 97 242 appropriate 5122
1919 516 adds 4623 amazing 2514 81516 1514 back 1621
aboveshyentitled adhere 437 amici 3825 453 4913 1922 2512
113 573 adjudication amicus 123 5224 3018 322
absolutely 125 241 210 4414 Archimedes 3991222
1215 159 adjusting 3611 analysis 424 281122 3811 4025
5518 41610 364 406 area 219 5112 ball 526
abstract 4267 adjustment 417 4924 argue 2518 Bank 17 35
48 6682023 418 analyze 1416 arguing 563 banks 95
721 8218 administered 1716 argument 114 bars 43
141920 1522 454 announce 4525 225812 33 baseball 527
165 181618 administration answer 119 37 41 144 based 423 406
2220 24925 4316 2219 247 18323 226 baseline 522
2621 277 administrative 3919 4221 26715 4413 basic 413 5515
2938 3422 171218 187 456 461416 457 5317 basically 1821
3523 395 242 4123 4721 551315 5515 2319
405 414 424 adopt 203 answering 5119 arguments basics 5610
4418 461823 adopted 31317 answers 3713 1415 basis 132 1512
491221 505 advancement 461821 arms 1625 1516 2719
53368811 351 anyway 1810 arrangements 5411
552 564 advances 3513 apparatus 2916 131 beating 435
accept 102 adversary 547 APPEARAN arrows 315 beginning 163
accomplish advice 1715 116 art 1919 5414
5510 advocated 4916 appears 820 arts 2124 5310 begins 3810
account 55 618 affect 4225 appendix 1910 aside 1422 157 behalf 11719
397 affirmative 402 311 326 369 asked 2314 122 24710
accounts 823 agent 52 3021 548 278 5322 214 38 2616
9356 3611 ago 318 2224 applicant 3220 551224 4414 5318
3611 3615 5111 3921 4023 asking 193 believe 1316
accurately 2413 agree 920 2021 416 4314 221213 273 1416 2421
acknowledges 221 2418 application 3324 5215 255 264 451
1121 4021 421 2623 4117 aspect 517 5424
act 99 2017 agrees 2812 4918 asserted 3113 belong 529
activities 229 ahead 4225 applications 311618 benchmark 522
activity 2122 AIA 2912 4122 333 asserting 325 Benson 361923
3325 4812 airline 5220 applied 434 attaching 124 best 161124
actual 4020 AL 18 523 attention 3813 better 1610 albeit 923 applies 31418 Attorney 2021 216 2819
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59
3322 brightshyline 409 2313 37 71 4338 5519 beyond 115 4012 5317 checks 618 5614
1312 4623 bring 5115 case 3412 46 Chief 339 clearly 211 251 544 5610 broad 248 116 1524 261217 3024 523
Bilski 313 46 broader 225 2022 213 31812 378 client 311416 415 1722 browsing 228 2211 2313 371416 386 close 2822 2224 2329 builder 2811 2625 311424 421414 4410 CLS 17 35 262020 271 building 5218 3314 36620 441116 5110 1120 2816 2999 built 2324 426816 5118 531419 coarse 247 3935 4125 business 168 451822 461 5625 5520 427 4322 1749 203 461422 5024 chits 611 code 1213 142 447 452 2124 222122 5124 5410 chronological 1916171720 461821 4825 2311 29613 564 5712 1512 2725 4018 49481922 32132323 cases 244 2816 chronologically coffee 1211 5047 3322525 4011 423 colleagues 116
Bilskis 447 34415 3610 catalogues 2512 circuit 2818 college 58 bit 323 48214 4969 262 401112 425 columns 325 blocks 54 508111620 categorically 42912 4324 come 108 234 Bloomberg 517 5419 202 4825 3017 399
2115 225 554568 category 489 circumstances 475 boat 2811 businessshymeth 5125 318 1515 comes 1318 bonds 4717 457 CBM 2913 claim 416 2418 2018 231 bothering 118 buy 183 cellphones 228 2423 2522 coming 923 bound 1521 buys 3924 central 95 543 264 27917 common 31120 boundary 4913 certain 1216 3019 3121 2157 bounds 1521 C certainly 518 32420 361 company 4224 box 392425 C 21 31 263 358 392325 403 competition
4024 cables 3012 4121 495 442223 4922 161011 Breyer 66823 calculator 3519 certainty 5112 516 53823 completely 921
74691923 call 3812 5011 5116 5417 1422 2320 85810 1012 called 721 275 cetera 387 claimed 41014 complex 126 1021 1523 3316 5322 281 3017 complicated 161418 171 calling 4611 Chakrabarty 34162123 1225 235 1922 2114 capabilities 2016 3721242425 3025 315 221216 239 3723 challenge 443 382 4925 component 2315 285 capable 141 change 186 5120 352024 293 3613 454 273 311 415 claims 1416 compression 38520 478 capture 2415 5524 171616 2419 309 3212 4722 4814 captures 2412 changes 3817 2424 2515 3320 349 48182224 card 5017 5521 2520 2648 computer 422
brief 211315 carefully 1725 chart 541 283 3118 516 621 710 2255 322 caricature 718 charted 2620 37517 398 71325 9113 4215 4715 72020 1417 charts 1911 406 5415 91824 1035 4810 5113 1716 549 clarity 4755 10725 1116 548 carry 4420 Charybdis 511116 124102024
briefs 1524 4923 1620 2619 class 59 13911 1479 1618 CARTER 117 checkbook 617 clear 1015 118 1421 15710
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1517 165 confess 1111 coterminous 4121 5324 181719 196 configured 383 2321 customer 518 describes 425 19814 206 confined 5224 cotton 914 444 5617 2918 3211 2025 211016 confirmed 2912 4711 487 cut 5414 3913 2117 2410 confusion 434 counsel 4411 description
D2521525 535 5625 3917 402022 D 312622 30522 Congress 178 countries 137 deserve 342 DC 1101719 31311 3210 1725 1856 course 719 designed 720
1223211 33519 1924 2014 1613 298 812 541 data 2917 309 34142425 2325 291213 3210 491619 desired 3922
30111214 351 361220 346 412223 court 1114 detail 363 3212 3367 3621 37156 558 3101317 detailed 1914 3320 34914 379121523 consequences 922 145 developed 2119 3722382334815 2011 1720 1939 device 207
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910 399442020 4515 454 523 2618 27345 dicta 923 1012 deal 42023 46102225 constitutes 312 28718 299 Diehr 2322
172 187 397 4710121518 construction 31202122 3313 4518 427 47234725 48566 496 5415 334 36523 5124 506 5213481012 4923 consumer 5218 39244 4010 difference 921
dealing 4175013 51922 contains 327 40141515 2789 4421 1119 135546 5611 content 281417 4114 42215 different 421 151216 3412 computers 2819 4223 4323 79 919 1377 56224610 5121 context 2319 44717 4957 191 259 266
deals 814computers 243 398 498 50244 2888 3169 death 42221616 195 contextual 405 557 5612 3123 333 Debit 27212119 312 4014 Courts 3619 351823 4312 debiting 2718391 401313 contract 3115 432 452 4620 5114 decade 176computing contribution courts 2018 5216 decide 3910442324 4625 342124 3520 4124 454 difficult 817
4617concept 413 396 4911 524 159 5015 decision 161810 1419 contributions create 96 1712 difficulties 420
1811522 53368 526 241 251 difficulty 437 decisions 274552 56515 conventional 5619 direct 2721
426 43623 concepts 2944 3521 361 created 186 directed 4423 43242955 462325 244 4123 5119 539
declare 2010conceptual converting 141 creates 93 directions 319 default 27104620 copyrighted creation 518 directly 31415 define 537concern 513 1315 credit 231 322 2019 Departmentconcerned 373 Corporation 13 271021 5017 298 3613
122439 34 crediting 2718 directs 4917 depends 2520concerns 93 correct 4513 critical 5023 disable 3313 describe 58concrete 1118 correctly 2416 crunching 3722 disaggregate
1112 391522 253 53911 corresponding curiae 123 211 144 1520 4024conduct 5020 2720 2915 4415 disagree 513
described 717conducted 297 346 current 4112 disagrees 4213
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disclosure 328 413 302021 4220 figure 1146 discuss 164 economy 1516 ESQ 1171921 excerpted 323 311222 3917 discussion 299 effective 1223 236913 exhausted 1813 file 406 dispose 2625 5021 essence 211 exist 420 131 filed 4214 dispute 325 effectively 5214 essential 1224 existence 1119 fill 2818 disputed 3120 efficacy 1224 3425 175 filled 293
363 1517 essentially 2016 existing 337 filter 248 5520 distance 2311 efficiency 3722 261 4125 422 5521 distinction 415 efficient 5020 4215 exists 42 filters 5213
4719 481519 either 202 established expert 3688 finance 2124 distinguishing 5121 311919 381 4814
4811 electronic 262 establishing expertise 1210 financial 1225 distribution 4178 275 experts 2817 29517
443 electronically et 18 387 5322 367 fine 103 2223 district 4323 2525 evaluate 97 extent 1924 4223 divorced 5220 element 811 5612 2323 265 finished 133 doing 91315 4212 5423 evaluating 526 extinguish 457 first 1111 2718
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domain 453 eligible 301 evolve 3522 557 fiscal 4320 DONALD 121 391 449 exact 236 five 18912
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factors 5113drawings 3117 embedded 1418 exaggeration flow 1911 541 fail 2419 272 3117 employ 75 1017 549 fairly 511 507 dubious 2915 enabled 1921 examiner 4134 fluctuation faithful 451446 encourages examiners 455 2711 fall 925 229 due 5212 132222 474 4912 focus 1013
242022 2910 Dyk 4824 encryption example 1912 5612 fallacious 38213410 5018 291 30918 folks 3825
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3417 355 far 2821engineering 59 4517 4813 format 337 5523 fashion 5616ensure 812 98 501016 515 formation 3116
earlier 822 faster 166enter 95 5215 562 former 4214 early 417 Federal 4011entire 186 examples 83 forms 2513 easy 511 1113 4012 4259 environment 297 331 formula 534
2810 428 4212 43241118 exception 317 forth 281 4311 535 543 4825equally 3821 42 235 3622 forward 1121
economic 2621 fell 2010equivalent 345 4913 505 found 1525 294 fiber 3012escaped 428 5510 4925
economics 413 fifth 2217escrow 52 exceptionshyneu founders 2513
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four 1720 182 48172023 5599 3312 461920 1016 123 18912 2216 493 5014 gold 6101114 4920 138 14610 2311 275 511017 537 134 held 46 495 141120 164 4320 5315 5314 5425 good 611 167 5045 181618 2220
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52517 5613 genuine 4724 governments high 3924 414 4418 friend 3725 George 566 211313 2210 hires 612 461923 4921
5512 getting 289 grab 618 historically 499 552 5614 friends 272 479 grain 624 711 history 1721 ideas 293 395
467 gin 914 great 132 362 407 4912 505 front 69 gins 444 greater 511115 holder 4315 identify 1323 function 425 Ginsburg 45 ground 31120 holding 3623 5335
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1 their software eligible What would shyshy what do they
2 need shyshy would have needed to have added
3 MR PERRY Justice Sotomayor they have no
4 software first Theyve never written software
5 Theyve never programmed a computer So thats a
6 nonexistent set
7 Second there are many technological
8 solutions to trading and settlement problems For
9 example data compression These shyshy these trading
10 platforms involve the movement of very large quantities
11 of data around the world The physical pipes that is
12 the fiber optic cables and data lines are limited
13 There are very sophisticated algorithms for both
14 security and speed to move data through the transmission
15 lines in novel and useful ways that could well be
16 patented
17 Nothing like that is claimed here To come
18 back to where I started if you look for example at
19 Claim 65 in the 510 patent as Mr Phillips reads it
20 it literally reads on a twoshyparty escrow to sell a
21 house so long as the escrow agent is typing this stuff
22 into the HUDshy1 using a computer That has nothing to do
23 with multilevel shyshy
24 CHIEF JUSTICE ROBERTS Well thats a
25 little more complicated He referred us to Joint
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1 Appendix Page 159 which is not a change in how
2 computers work But it is shyshy constitutes the
3 instructions about how to use the computer and where it
4 needs to be affected And just looking at it it looks
5 pretty complicated There are a lot of arrows and
6 they shyshy you know different things that go shyshy
7 (Laughter)
8 CHIEF JUSTICE ROBERTS Well but I mean
9 you know it shyshy in different directions And I
10 understand him to say that in each of those places
11 thats where the computer is needed
12 MR PERRY Mr Chief Justice Figure 16 has
13 nothing to do with the invention asserted against my
14 client in this case There are two inventions in this
15 patent One invention involving multilateral contract
16 formation is not asserted against my client And all of
17 these drawings pertain to that The only drawings that
18 pertain to the asserted claims are 25 and 33 to 37 And
19 that was established below and its established in this
20 Court And Mr Phillips has never disputed it
21 So the claim hes pointed the Court shyshy the
22 figure hes pointed the Court to has nothing to do with
23 the invention Its for a different invention that is
24 not at issue in this case
25 Remember there are hundreds and hundreds of
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1 pages of these patents They all pertain to the other
2 invention Thats why in the back of our red brief we
3 excerpted the very little bit that actually pertains to
4 this You sort of tack on patent shyshy the tack on claim
5 that Mr Phillips is asserting here Its 4 columns
6 Its less than five pages in the printed appendix that
7 actually pertains to this invention And it contains no
8 disclosure whatever
9 Justice Scalia to your question about how
10 the computer does it Of course a patent that
11 describes sufficiently how a computer does a new and
12 useful thing whether its data compression or any other
13 technological solution to a business problem a social
14 problem or a technological problem would be within the
15 realm of the shyshy of the patent laws That is what the
16 patent laws have always been for
17 This is not such a patent And the reason
18 for that is this is a preshyBilski set of patents These
19 were prosecuted under the old State Street test where
20 all the applicant had to claim was a result
21 JUSTICE KENNEDY Would you give me shyshy
22 again you already did it once shyshy an example of a
23 business process patent shyshy of a business process idea
24 and invention that is patentable
25 MR PERRY Your Honor there are many
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1 examples One would be a technological solution to a
2 business problem So that for example shyshy Ill give a
3 different example There are many applications today
4 The Court may be familiar with streaming video to watch
5 video on your computer
6 It is not possible to get enough data
7 through existing lines in its raw format The data has
8 to be manipulated in order to see live video So if you
9 want to watch TV on your phone for example
10 Those algorithms those inventions are
11 undoubtedly technological And if they are used in a
12 trading platform or a hedging system or something else
13 that wouldnt disable them And this is what the Diehr
14 case shyshy
15 JUSTICE KENNEDY Well I shyshy I shyshy in my
16 language Ive called that mechanical rather than
17 process Can you give me an example of process
18 MR PERRY Yes Your Honor The process in
19 that example would be a computer running the particular
20 data compression algorithm
21 JUSTICE KENNEDY But thats how to make
22 a shyshy thats how to make a machine work better
23 MR PERRY Yes Your Honor
24 JUSTICE KENNEDY Im asking you Is there
25 any business process any business activity that is
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1 susceptible to a patent a pure patent innovations that
2 deserve patents
3 MR PERRY Your Honor again a
4 technological solution to a business problem could well
5 be whether its a method or a process is equivalent
6 Again Congress said method in a corresponding shyshy
7 JUSTICE KENNEDY Can you give me an
8 example
9 MR PERRY I thought the data compression
10 example was a good one Ill try an encryption
11 technology Many of these trading platforms you know
12 dealing with securities and money would require some
13 sort of security devices You could have a process for
14 securely transmitting data would be another computer
15 implemented technological solution to a business
16 problem Again nothing like that claimed here
17 JUSTICE SOTOMAYOR How about eshymail and
18 just word processing programs
19 MR PERRY Your Honor a program shyshy let me
20 try it this way to both of your questions In our view
21 if what is claimed as the inventive contribution under
22 Mayo shyshy in other words if we have an abstract idea as
23 we do here and what is claimed is the inventive
24 contribution for Step 2 is the computer then the
25 computer must be essential to that operation and
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1 represent an advancement in computer science or other
2 technology And we know thats not met here Justice
3 Sotomayor because shyshy
4 JUSTICE SOTOMAYOR So youre saying no to
5 eshymail and word processing
6 MR PERRY Your Honor I think at a
7 point shyshy
8 JUSTICE SOTOMAYOR They certainly have
9 functionality and shyshy and improvement of functionality
10 for the user
11 MR PERRY At a point in time in the past
12 I think both of those would have been technological
13 advances that were patentable
14 JUSTICE SOTOMAYOR How
15 MR PERRY Today shyshy because they would have
16 provided a technological solution to a then unmet
17 problem Today reciting and do it on a word processor
18 is no different than and do it on a typewriter or shyshy and
19 do it on a calculator
20 The inventive contribution component which
21 uses specifically the language of conventional and
22 routine and well understood will evolve with
23 technology Thats why its different than the abstract
24 idea component
25 And here we know that these patents dont
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1 claim anything that was not conventional well
2 understood and routine We went through that in great
3 detail and Alice has never disputed a word of it They
4 just say youre not supposed to do that analysis even
5 though the Court 9shy0 in Mayo said we should
6 And in this case its very important to
7 look at what Alices own experts said on the subject
8 This is not our expert This is Alices expert And
9 this is at Page 1327shy28 of the Joint Appendix It is
10 possible to do the business methods of maintaining
11 accounts adjusting accounts and providing an
12 instruction without a computer or other hardware
13 And then Justice Breyer directly to your
14 abacus If someone had thought of this invention
15 soshycalled invention 100 years ago they might have
16 implemented it in a nonelectronic manner using various
17 precomputing tools such as an abacus or handwritten
18 ledgers
19 We know from Benson the Courts seminal
20 computer implementation case that if you can do it by
21 head and hand then the computer doesnt add anything
22 inventive within the meaning of the 101 exception That
23 is the holding of Benson And the Court reiterated that
24 in Mayo
25 Flook said exactly the same thing If you
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1 can do it with pencil and paper then the computer is
2 not offering anything that the patent laws are or should
3 be concerned with
4 It is only where the method will not work
5 without a computer which is not these claims and where
6 the computer itself is doing something that the patent
7 law is willing to protect
8 CHIEF JUSTICE ROBERTS What if shyshy what if
9 you can do it without a computer but its going to
10 take you know 20 people a hundred years In other
11 words theoretically you can replicate what the
12 computer does shyshy
13 MR PERRY Two answers
14 CHIEF JUSTICE ROBERTS shyshy but its
15 impractical without looking to do it on the computer
16 MR PERRY Mr Chief Justice first these
17 claims literally read as Alice reads them on a single
18 transaction between two parties so its not 20 people
19 for a hundred years Its one person sitting in a room
20 so thats not a problem
21 Second if what is being claimed is the
22 necessary speed or efficiency or data crunching
23 capabilities if you will of a computer then it would
24 have to be claimed and theres nothing claimed here
25 All that is claimed shyshy and my friend is going to stand
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1 up on rebuttal and tell you all that the expert said
2 well what is claimed is a computer but its just a
3 computer It just says a computer configured too It
4 doesnt say that the computer actually has to shyshy
5 JUSTICE BREYER Yeah but the trouble with
6 that particular test is as I think partly the Chief
7 Justice said how long et cetera and then add to that
8 though you could do it without a computer what happens
9 at the end of the line is the automobile engine goes off
10 or it begins to sputter or it turns left
11 You see its possible to take Archimedes shyshy
12 shyshy you know I use that example purposely to call
13 attention to the problem You can take those things
14 and youre not just saying apply it and youre not even
15 just saying shyshy you are saying use the computer but at
16 the end of the road something physical in the world
17 changes and everybody would say now thats shyshy that
18 will falls within I mean probably I mean my
19 hesitation shows Im looking for the right words
20 MR PERRY Justice Breyer your point is
21 the reason that it is equally fallacious to suggest on
22 the one hand as Alice and IBM does that simply
23 reciting a computer is a magic key that gets you through
24 101 and you never have to any other inquiry and what
25 some of folks the amici on the other side say which
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1 is that computers or software are never eligible Both
2 of those things have to be wrong because what the Court
3 said in Bilski was future innovation is too uncertain
4 We are not going to do that as a Court And the Court
5 laid out an approach using abstract ideas in Bilski and
6 inventive contribution in Mayo that is flexible enough
7 to take into account that innovation and to deal with
8 particular claims in context which is why at the end
9 of the day we have to come back to these patents and
10 decide which shyshy
11 JUSTICE KAGAN Mr Perry before we get
12 back to these matters you said to Justice Scalia if a
13 patent sufficiently describes how a computer will
14 implement an idea then its patentable So how
15 sufficiently does one have to describe it What do we
16 want a judge to do at this threshold level in terms of
17 trying to figure out whether the description is
18 sufficient to get you past it
19 MR PERRY If I can answer in two steps
20 Justice Kagan First in the negative What the
21 applicant or patentee must do shyshy must not do is simply
22 describe the desired result That would take us back to
23 State Street That would simply say I claim a magic
24 box that buys high and sells low or vice versa I
25 suppose I claim a magic box for investing Thats what
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1 these patents do
2 Then to put it in the affirmative and in the
3 language of Mayo the claim has to recite something
4 significantly more something significantly more than
5 the abstract idea itself That would be a contextual
6 analysis based on the claims and specifications and file
7 history and we know that some devices some methods
8 some programming will pass that
9 It is not going to be a brightshyline rule and
10 thats one of the tugshyofshywar issues that this Court and
11 the Federal Circuit have been having in these cases
12 The Federal Circuit wants brightshyline rules All
13 computers are in or all computers are out
14 This Court has been more contextual This
15 Court has been more nuanced This Court has looked at
16 things in a more robust way
17 JUSTICE KAGAN Youre not suggesting that
18 specific code is necessary
19 MR PERRY No Your Honor I think the shyshy
20 actual description of the programming is a 112 problem
21 I agree with that A 112 issue That is the realm of
22 the written description requirement What is a 101
23 problem is it is on the applicant to do more than simply
24 describe the results simply say A magic box that does
25 intermediate settlement And we can tie that back to
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1 this particular prosecution the 510 patent which is
2 the method patent
3 The examiner rejected it Under Section
4 101 the examiner said this is an abstract idea You
5 cant have this patent And the only change that this
6 applicant made was to add in the adjusting step
7 electronic adjustment It put in one word
8 electronic adjustment And under State Street which
9 is what this patent is prosecuted under that was
10 enough because the result of adjusting run through a
11 computer is enough
12 Under current law that cant be enough
13 That just cant get a patent over the line because this
14 Court said in Mayo and I got to quote this language
15 Simply implementing a fundamental principle on a
16 physical machine namely a computer is not a patentable
17 application of that principle Thats all that Alice
18 has done
19 These are preshyBilski patents They never
20 should have been issued General Verrilli will stand up
21 and address that point And certainly under current
22 law shyshy one point on the AIA Congress did not send all
23 this to the administrative process Congress created
24 two avenues the courts and the PTO to use the
25 standards Essentially it ratified Bilski and Mayo and
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1 said we agree with what you all are doing at the
2 Supreme Court and the existing standards are good enough
3 for us This is a judicial problem And that is a good
4 reason The abstract shyshy
5 JUSTICE GINSBURG The Federal Circuit in
6 this case split in many ways and it had our decisions
7 to deal with You said given Bilski and Mayo this is
8 an easy case What is the instruction that escaped a
9 good number of judges on the Federal Circuit How would
10 you state the rule
11 MR PERRY Your Honor I think theres a
12 significant element to the Federal Circuit that
13 disagrees with Mayo and has been resistant in applying
14 it Chief Judge shyshy former Chief Judge Michelle filed a
15 brief in this Court essentially saying Mayo is a
16 lifeshysciences case You should limit it to that because
17 if you apply it to everything else then these patents
18 are no good
19 Mayo we submit is a technologyshyneutral
20 industryshyneutral exceptionshyneutral framework that can
21 be used to answer all of these questions This is not
22 the death of software patents The software industry is
23 all before this Court saying this is fine with us
24 Every company in the United States practically except
25 for IBM is saying go ahead This will not affect
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1 software patents
2 Justice Ginsburg this Courts precedents
3 are clear They are unanimous They just need to be
4 applied To suggest that there is confusion that needs
5 to be addressed by retreating beating a retreat from
6 recent unanimous decisions would simply reward
7 intransigence difficulty refusal to adhere to what are
8 clear precedents because shyshy
9 JUSTICE KAGAN Should we be concerned
10 Mr Perry that there are old patents that in fact could
11 meet the test that you set forth but wont because they
12 were written in a different time and so used much more
13 general language
14 MR PERRY Your Honor the applicant or the
15 patent holder would have the opportunity to institute a
16 reexamination proceeding or some sort of administration
17 process to address that issue
18 And second it should be noted this is a
19 very small problem There are 2 million outstanding
20 patents in the United States In the last four fiscal
21 years there were 22000 infringement litigations
22 instituted but since Bilski there have only been 57
23 district court decisions on Section 101 issues There
24 have only been 12 Federal Circuit decisions total on
25 computer implementation
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1 We are talking about a group of patents
2 Justice Kagan thats way out at the tail end of
3 distribution Most patents never have a 101 challenge
4 This is not an issue with cotton gins and other things
5 This is a problem for the most marginal
6 most dubious most skeptical patents the ones that this
7 Court in Bilski shyshy and remember what Bilskis holding
8 is The majority said they are processes but it did
9 not say they are eligible
10 Thank you Mr Chief Justice
11 CHIEF JUSTICE ROBERTS Thank you counsel
12 General Verrilli
13 ORAL ARGUMENT OF DONALD B VERRILLI JR
14 ON BEHALF OF THE UNITED STATES AS AMICUS
15 CURIAE SUPPORTING RESPONDENTS
16 GENERAL VERRILLI Mr Chief Justice and
17 may it please the Court
18 An abstract idea does not become
19 patentshyeligible merely by tacking on an instruction to
20 use a computer to carry it out A computer makes a
21 difference under Section 101 when it imposes a
22 meaningful limit on the patent claim That occurs when
23 the claim is directed at improvement in computing
24 technology or an innovation that uses computing
25 technology to improve other technological functions
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1 Thats the test that we believe is most faithful to this
2 Courts precedents in Bilski and Mayo It keeps patents
3 within their traditional and appropriate domain and it
4 is capable of being administered consistently by Courts
5 and by PTO examiners
6 JUSTICE GINSBURG How do you answer the
7 argument that your view would extinguish businessshymethod
8 patents and make all software ineligible for patent
9 protection
10 GENERAL VERRILLI Yeah with shyshy let me
11 address software patents first because that I think is
12 obviously a significant question And its just not
13 correct to say that our approach would make software
14 patenting ineligible Any software patent that improves
15 the functioning of the computer technology is eligible
16 Any software patent that improves shyshy that is used to
17 improve another technology is eligible For example
18 the patent in the shyshy in the Diehr case is one in
19 which shyshy
20 JUSTICE SOTOMAYOR Why do we need to reach
21 this in that shyshy reach software patents at all in this
22 case
23 GENERAL VERRILLI Well shyshy
24 JUSTICE SOTOMAYOR Whats the necessity for
25 us to announce a general rule with respect to software
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1 There is no software being patented in this case
2 GENERAL VERRILLI Well I shyshy
3 JUSTICE SOTOMAYOR Theres a systems
4 GENERAL VERRILLI Well I shyshy I think shyshy
5 well they shyshy they shyshy theres a process being and shyshy and
6 one can think of software patents as process patents
7 And I think thats why my friends on the other side are
8 saying the sky is falling because they shyshy they are
9 interpreting what were saying about that when a
10 computer makes shyshy when a computers involvement makes
11 something eligible under 101 its calling those into
12 question and it doesnt
13 JUSTICE SOTOMAYOR Do you think we have to
14 reach the patentability of software to answer this case
15 GENERAL VERRILLI Well I think you can shyshy
16 I think the answer to that question is no not
17 necessarily You can decide it by saying that shyshy that
18 Bilski answers the question whether this is an abstract
19 idea because this form of hedging is really no
20 different than the form of hedging as a conceptual
21 matter at issue in Bilski And then Mayo answers the
22 question of whether the use of a computer in this case
23 adds enough to the abstract idea beyond conventional
24 steps because here all we have after all is just
25 conventional use of computing technology no computer
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1 innovation such that you dont qualify under 101 You
2 could take that approach
3 But it is important to the United States
4 that we shyshy and to our patent examiners that we get some
5 clarity if we can I think the clarity could come from
6 the text that I propose which I want to reiterate shyshy
7 JUSTICE SOTOMAYOR Well shyshy
8 JUSTICE BREYER Could shyshy could shyshy could you
9 go on with that because you were just getting to the
10 point where I think you say a computer improvement that
11 in fact leads to an improvement in harvesting cotton is
12 an improvement through a computer of technology so it
13 qualifies
14 But then I think you were going to say or I
15 got this also from the brief a computer improvement
16 that leads to an improvement in the methods of selling
17 bonds over the telephone is not an improvement in
18 technology reached by the computer Am I right about
19 the distinction youre making
20 GENERAL VERRILLI I dont think theres a
21 yes or no answer to that question
22 JUSTICE BREYER What is your view Yeah
23 what is shyshy how do we deal with just that problem
24 GENERAL VERRILLI If there is a genuine
25 innovation in the functioning of the computer shyshy
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1 JUSTICE BREYER Yes
2 GENERAL VERRILLI shyshy such that business
3 processes shyshy
4 JUSTICE BREYER Weve got that Yes yes
5 We got the computer But then it doesnt improve the
6 computer but rather it improves through the computer
7 the harvesting of cotton
8 Now youve got it in what you said was your
9 second category which is an improvement through the
10 computer of a technology And I thought in your brief
11 you were distinguishing an improvement through the
12 computer of a human activity that is not a technology
13 and in particular to pick an example of that
14 something in finance or something in business
15 Now am I right about the distinction youre
16 making
17 GENERAL VERRILLI Yeah that shyshy
18 JUSTICE BREYER If Im not right what is
19 the distinction
20 GENERAL VERRILLI That is generally the
21 line were drawing Frankly shyshy
22 JUSTICE BREYER And how is that justified
23 GENERAL VERRILLI I do want shyshy
24 JUSTICE BREYER That shyshy that is Judge Dyk
25 in shyshy in Bilski in the Federal circuit 4 people sort of
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1 picked it up maybe 5 didnt pick it up Would you say
2 a few words about it
3 GENERAL VERRILLI Sure About shyshy let me go
4 to Bilski there in that I do think while shyshy while
5 certainly the Court held that the term process got a
6 natural construction which could include business
7 methods it seems to me that thats not all the Court
8 said in Bilski The Court also said that it was
9 historically and traditionally quite rare that business
10 methods were patent eligible
11 It also said that shyshy that the shyshy that courts
12 and the PTO examiners should use the abstract ideas
13 exception to 101 to police the appropriate boundary
14 It also said that the
15 machineshyorshytransformation test that the United States
16 advocated remained a useful tool And of course that
17 directs to you seeing whether there is a technology
18 application
19 And of course the holding in Bilski was
20 that the shyshy the method for hedging risk was ineligible
21 because it was an abstract idea and I cant imagine
22 that if in Bilski the shyshy the claim had been exactly the
23 same but had added use a computer to carry out some of
24 these standard random analysis functions that are
25 claimed by the patent that you would have found it to
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1 be patent eligible
2 And I shyshy I would submit for the Court that
3 the key point here I think is that now given where
4 the Court shyshy what the Court has held in Bilski given
5 what its held in Mayo the abstract ideas exception is
6 really the only tool left to deal with what I shyshy what I
7 think I fairly read Bilski as saying is a significant
8 problem the proliferation of patents of business
9 methods
10 JUSTICE KENNEDY Is there an example that
11 you can give us of a shyshy what we can call a business
12 process that is patentable a process that doesnt
13 involve improving the workings of a computer
14 GENERAL VERRILLI I shyshy I think its going
15 to be difficult for me to do that I think for
16 example if you had a business method a process for
17 additional security pointshyofshysale credit card
18 transactions using particular encryption technology
19 that might well be patent eligible Its a technology
20 that it makes conduct of business more efficient or
21 effective
22 But there is a technological link here and
23 we do think thats critical to our shyshy to our point of
24 view with respect to the case And I shyshy and I do think
25 remember that when we say something is not patent
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1 eligible were not saying they cant do it Were
2 saying they cant monopolize it
3 And the concern in a situation like this one
4 is that if this is patent eligible its hard to see
5 why for example the first person who came up with a
6 frequent flier program wouldnt have been able to claim
7 a patent there because after all thats a business
8 method for improving customer loyalty implemented on a
9 computer
10 CHIEF JUSTICE ROBERTS General I shyshy you
11 mentioned a while ago the need for greater clarity and
12 certainty in this area And Im just wondering in your
13 brief youve got a nonshyexhaustive of factors to
14 consider and there are 6 different ones And Im just
15 doubtful that thats going to bring about greater
16 clarity and certainty
17 GENERAL VERRILLI I take shyshy I take the
18 point Mr Chief Justice but I think the key is that
19 they are all directed to answering the question of
20 whether the innovation that is claimed and is an
21 innovation in either A the improvement of a computers
22 functioning or B the use of computer technology to
23 improve the functioning of another technological
24 process and a case like Diehr would be in the latter
25 category
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1 And so I do think that thats the key
2 benchmark Thats the baseline Thats the test that
3 we do think can be applied clearly and consistently by
4 the courts or the PTO And it avoids the risk of things
5 like frequent flier programs or the Oakland As money
6 ball methods for evaluating the contributions in
7 individual baseball players make or any one of a host of
8 other things that our intuitions tell us just dont
9 belong in the patent system
10 Thats the shyshy drawing that line keeps them
11 out not drawing that line lets them in And with all
12 due respect I dont think that the novelty and
13 nonobviousness filters that 102 and 103 really deal with
14 that problem effectively because when you get to
15 nonobviousness in 103 for example youll be asking a
16 different question
17 If you take the frequent flier program you
18 would say well is this innovation in building consumer
19 loyalty something that would have been obvious to
20 somebody who runs an airline Its totally divorced
21 from the question of technology at that point and
22 therefore I dont think youre going to get the screen
23 that you need to get in order for the patent system to
24 be confined to its traditional and appropriate scope
25 If there are no further questions thank
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1 you
2 JUSTICE GINSBURG I have a question about
3 how do you identify an abstract concept The shyshy a
4 natural phenomenon a mathematical formula those are
5 easy to identify but there has been some confusion on
6 what qualifies as an abstract concept
7 GENERAL VERRILLI We would define
8 abstract shyshy an abstract concept as a claim that is not
9 directed to a concrete innovation in technology
10 science or the industrial arts So its the shyshy its
11 abstract in the sense that it is not a concrete
12 innovation in the traditional realm of patent law
13 Thank you
14 CHIEF JUSTICE ROBERTS Thank you General
15 Mr Phillips you have four minutes
16 remaining
17 REBUTTAL ARGUMENT OF CARTER G PHILLIPS
18 ON BEHALF OF THE PETITIONERS
19 MR PHILLIPS Thank you Mr Chief Justice
20 Id just like to make a few points
21 First of all with respect to the question
22 you asked which is looking at 159 et cetera all I can
23 tell you is that if you look at claim 33 it talks about
24 matched orders the matched orders that are described in
25 286 and 287 and then makes specific reference to 159
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1 and that flow chart thats there And its all designed
2 as a package Its only one element of the shyshy of the
3 invention but it is a central element and its an easy
4 one to understand And it goes well beyond simply the
5 notion of hedge shyshy hedge against settlement risk and do
6 it by a computer
7 JUSTICE SOTOMAYOR Your adversary says that
8 his shyshy the appendix to his brief are the only patents at
9 issue that the flow charts are not at issue in this
10 case
11 MR PHILLIPS Theres no basis for that
12 statement Your Honor There shyshy remember this went off
13 on a very truncated litigation process So theres shyshy
14 you know we shyshy we got cut off at the beginning of it
15 Theres been no construction of the shyshy of the claims
16 and shyshy and obviously these are specifications that go
17 to how you interpret the claim
18 JUSTICE SOTOMAYOR If we were to say that
19 there are no business patents shyshy
20 MR PHILLIPS Yes
21 JUSTICE SOTOMAYOR shyshy would your patent
22 survive at all
23 MR PHILLIPS No I dont shyshy I dont
24 believe so I think theres no question And you
25 know General Verrilli could not have been any plainer
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1 in his statement of how he wants to interpret the
2 abstract idea concept
3 JUSTICE SOTOMAYOR Yes he wants to say no
4 business patents
5 MR PHILLIPS No business shyshy just another
6 way of saying no business methods And you know the
7 Court rejected that And it seems to me extraordinary
8 to say Congress didnt reject no business methods in
9 101 but were going to do shyshy were going to manipulate
10 the judicial exception to accomplish precisely that same
11 thing It seems to me thats wholly inappropriate
12 Justice Ginsburg you asked my shyshy my friend
13 here you know whats his test He didnt answer that
14 question youll notice because he doesnt have an
15 answer His basic argument is whatever you do just
16 kill this patent
17 And if I were in his shoes I suppose Id
18 take that same position I think whats absolutely
19 clear is that the test ought to be one that is
20 structured as a very coarse filter not the kind of
21 filter that hes pushing for where it changes over time
22 I mean I thought his shyshy I thought his response to one
23 of the questions about eshymail and word processing that
24 Justice Sotomayor asked is over time it would change
25 Well thats exactly what 102 and 103 are for That is
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1 not the purpose of shyshy of Section 101
2 And then he uses the example of encryption
3 I guarantee you if we were arguing about encryption in
4 this case he would say to me that thats an abstract
5 principle because encryption is a concept thats been
6 around since time immemorial George Washington used
7 it Everybody has used encryption
8 And a question again thats not the
9 solution to these problems The question is how did we
10 go about doing it And we go beyond the basics of
11 simply saying use a computer and thats what we ask
12 this Court to focus on and to evaluate
13 As to the frequent flier program its
14 pretty clear to me that even though it was a novel idea
15 in some sense the concept itself would have been viewed
16 in shyshy in the KSR fashion as quite obvious as a means of
17 improving customer loyalty
18 There are solutions here Giving us 101
19 pass doesnt create a monopoly It just gets us to the
20 102 and 103 inquiries that are at the heart of what the
21 patent laws shyshy and 112 that are at the heart of what the
22 patent laws ought to be dealing with
23 If there are no further questions Your
24 Honor thank you
25 CHIEF JUSTICE ROBERTS Thank you counsel
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1 The case is submitted
2 (Whereupon at 1105 am the case in the
3 aboveshyentitled matter was submitted)
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
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25
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58
A add 714 1023 algorithm 3320 41 automatically
As 525 3621 387 algorithms apply 72425 111
am 115 32 416 3013 3310 2019 281213 automobile 389
572 added 302 Alice 13 34 2822 3814 available 99
abacus 61213 4923 363 3717 4217 avenues 4124
710 1018 additional 5017 3822 4117 applying 4213 avoids 524
1325 3614 3617
address 4121 4317 4511
Alices 271 2919 3678
approach 226 395 4513 B
ability 1514 addressed 435 allow 94 472 B 121 29 4413
able 1511 167 addressing 181 allows 97 242 appropriate 5122
1919 516 adds 4623 amazing 2514 81516 1514 back 1621
aboveshyentitled adhere 437 amici 3825 453 4913 1922 2512
113 573 adjudication amicus 123 5224 3018 322
absolutely 125 241 210 4414 Archimedes 3991222
1215 159 adjusting 3611 analysis 424 281122 3811 4025
5518 41610 364 406 area 219 5112 ball 526
abstract 4267 adjustment 417 4924 argue 2518 Bank 17 35
48 6682023 418 analyze 1416 arguing 563 banks 95
721 8218 administered 1716 argument 114 bars 43
141920 1522 454 announce 4525 225812 33 baseball 527
165 181618 administration answer 119 37 41 144 based 423 406
2220 24925 4316 2219 247 18323 226 baseline 522
2621 277 administrative 3919 4221 26715 4413 basic 413 5515
2938 3422 171218 187 456 461416 457 5317 basically 1821
3523 395 242 4123 4721 551315 5515 2319
405 414 424 adopt 203 answering 5119 arguments basics 5610
4418 461823 adopted 31317 answers 3713 1415 basis 132 1512
491221 505 advancement 461821 arms 1625 1516 2719
53368811 351 anyway 1810 arrangements 5411
552 564 advances 3513 apparatus 2916 131 beating 435
accept 102 adversary 547 APPEARAN arrows 315 beginning 163
accomplish advice 1715 116 art 1919 5414
5510 advocated 4916 appears 820 arts 2124 5310 begins 3810
account 55 618 affect 4225 appendix 1910 aside 1422 157 behalf 11719
397 affirmative 402 311 326 369 asked 2314 122 24710
accounts 823 agent 52 3021 548 278 5322 214 38 2616
9356 3611 ago 318 2224 applicant 3220 551224 4414 5318
3611 3615 5111 3921 4023 asking 193 believe 1316
accurately 2413 agree 920 2021 416 4314 221213 273 1416 2421
acknowledges 221 2418 application 3324 5215 255 264 451
1121 4021 421 2623 4117 aspect 517 5424
act 99 2017 agrees 2812 4918 asserted 3113 belong 529
activities 229 ahead 4225 applications 311618 benchmark 522
activity 2122 AIA 2912 4122 333 asserting 325 Benson 361923
3325 4812 airline 5220 applied 434 attaching 124 best 161124
actual 4020 AL 18 523 attention 3813 better 1610 albeit 923 applies 31418 Attorney 2021 216 2819
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59
3322 brightshyline 409 2313 37 71 4338 5519 beyond 115 4012 5317 checks 618 5614
1312 4623 bring 5115 case 3412 46 Chief 339 clearly 211 251 544 5610 broad 248 116 1524 261217 3024 523
Bilski 313 46 broader 225 2022 213 31812 378 client 311416 415 1722 browsing 228 2211 2313 371416 386 close 2822 2224 2329 builder 2811 2625 311424 421414 4410 CLS 17 35 262020 271 building 5218 3314 36620 441116 5110 1120 2816 2999 built 2324 426816 5118 531419 coarse 247 3935 4125 business 168 451822 461 5625 5520 427 4322 1749 203 461422 5024 chits 611 code 1213 142 447 452 2124 222122 5124 5410 chronological 1916171720 461821 4825 2311 29613 564 5712 1512 2725 4018 49481922 32132323 cases 244 2816 chronologically coffee 1211 5047 3322525 4011 423 colleagues 116
Bilskis 447 34415 3610 catalogues 2512 circuit 2818 college 58 bit 323 48214 4969 262 401112 425 columns 325 blocks 54 508111620 categorically 42912 4324 come 108 234 Bloomberg 517 5419 202 4825 3017 399
2115 225 554568 category 489 circumstances 475 boat 2811 businessshymeth 5125 318 1515 comes 1318 bonds 4717 457 CBM 2913 claim 416 2418 2018 231 bothering 118 buy 183 cellphones 228 2423 2522 coming 923 bound 1521 buys 3924 central 95 543 264 27917 common 31120 boundary 4913 certain 1216 3019 3121 2157 bounds 1521 C certainly 518 32420 361 company 4224 box 392425 C 21 31 263 358 392325 403 competition
4024 cables 3012 4121 495 442223 4922 161011 Breyer 66823 calculator 3519 certainty 5112 516 53823 completely 921
74691923 call 3812 5011 5116 5417 1422 2320 85810 1012 called 721 275 cetera 387 claimed 41014 complex 126 1021 1523 3316 5322 281 3017 complicated 161418 171 calling 4611 Chakrabarty 34162123 1225 235 1922 2114 capabilities 2016 3721242425 3025 315 221216 239 3723 challenge 443 382 4925 component 2315 285 capable 141 change 186 5120 352024 293 3613 454 273 311 415 claims 1416 compression 38520 478 capture 2415 5524 171616 2419 309 3212 4722 4814 captures 2412 changes 3817 2424 2515 3320 349 48182224 card 5017 5521 2520 2648 computer 422
brief 211315 carefully 1725 chart 541 283 3118 516 621 710 2255 322 caricature 718 charted 2620 37517 398 71325 9113 4215 4715 72020 1417 charts 1911 406 5415 91824 1035 4810 5113 1716 549 clarity 4755 10725 1116 548 carry 4420 Charybdis 511116 124102024
briefs 1524 4923 1620 2619 class 59 13911 1479 1618 CARTER 117 checkbook 617 clear 1015 118 1421 15710
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1517 165 confess 1111 coterminous 4121 5324 181719 196 configured 383 2321 customer 518 describes 425 19814 206 confined 5224 cotton 914 444 5617 2918 3211 2025 211016 confirmed 2912 4711 487 cut 5414 3913 2117 2410 confusion 434 counsel 4411 description
D2521525 535 5625 3917 402022 D 312622 30522 Congress 178 countries 137 deserve 342 DC 1101719 31311 3210 1725 1856 course 719 designed 720
1223211 33519 1924 2014 1613 298 812 541 data 2917 309 34142425 2325 291213 3210 491619 desired 3922
30111214 351 361220 346 412223 court 1114 detail 363 3212 3367 3621 37156 558 3101317 detailed 1914 3320 34914 379121523 consequences 922 145 developed 2119 3722382334815 2011 1720 1939 device 207
dating 2953823 3913 consider 5114 2011216 devices 3413 day 612 813 411116 4325 consistently 2222 2321 407
910 399442020 4515 454 523 2618 27345 dicta 923 1012 deal 42023 46102225 constitutes 312 28718 299 Diehr 2322
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1 Appendix Page 159 which is not a change in how
2 computers work But it is shyshy constitutes the
3 instructions about how to use the computer and where it
4 needs to be affected And just looking at it it looks
5 pretty complicated There are a lot of arrows and
6 they shyshy you know different things that go shyshy
7 (Laughter)
8 CHIEF JUSTICE ROBERTS Well but I mean
9 you know it shyshy in different directions And I
10 understand him to say that in each of those places
11 thats where the computer is needed
12 MR PERRY Mr Chief Justice Figure 16 has
13 nothing to do with the invention asserted against my
14 client in this case There are two inventions in this
15 patent One invention involving multilateral contract
16 formation is not asserted against my client And all of
17 these drawings pertain to that The only drawings that
18 pertain to the asserted claims are 25 and 33 to 37 And
19 that was established below and its established in this
20 Court And Mr Phillips has never disputed it
21 So the claim hes pointed the Court shyshy the
22 figure hes pointed the Court to has nothing to do with
23 the invention Its for a different invention that is
24 not at issue in this case
25 Remember there are hundreds and hundreds of
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1 pages of these patents They all pertain to the other
2 invention Thats why in the back of our red brief we
3 excerpted the very little bit that actually pertains to
4 this You sort of tack on patent shyshy the tack on claim
5 that Mr Phillips is asserting here Its 4 columns
6 Its less than five pages in the printed appendix that
7 actually pertains to this invention And it contains no
8 disclosure whatever
9 Justice Scalia to your question about how
10 the computer does it Of course a patent that
11 describes sufficiently how a computer does a new and
12 useful thing whether its data compression or any other
13 technological solution to a business problem a social
14 problem or a technological problem would be within the
15 realm of the shyshy of the patent laws That is what the
16 patent laws have always been for
17 This is not such a patent And the reason
18 for that is this is a preshyBilski set of patents These
19 were prosecuted under the old State Street test where
20 all the applicant had to claim was a result
21 JUSTICE KENNEDY Would you give me shyshy
22 again you already did it once shyshy an example of a
23 business process patent shyshy of a business process idea
24 and invention that is patentable
25 MR PERRY Your Honor there are many
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1 examples One would be a technological solution to a
2 business problem So that for example shyshy Ill give a
3 different example There are many applications today
4 The Court may be familiar with streaming video to watch
5 video on your computer
6 It is not possible to get enough data
7 through existing lines in its raw format The data has
8 to be manipulated in order to see live video So if you
9 want to watch TV on your phone for example
10 Those algorithms those inventions are
11 undoubtedly technological And if they are used in a
12 trading platform or a hedging system or something else
13 that wouldnt disable them And this is what the Diehr
14 case shyshy
15 JUSTICE KENNEDY Well I shyshy I shyshy in my
16 language Ive called that mechanical rather than
17 process Can you give me an example of process
18 MR PERRY Yes Your Honor The process in
19 that example would be a computer running the particular
20 data compression algorithm
21 JUSTICE KENNEDY But thats how to make
22 a shyshy thats how to make a machine work better
23 MR PERRY Yes Your Honor
24 JUSTICE KENNEDY Im asking you Is there
25 any business process any business activity that is
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1 susceptible to a patent a pure patent innovations that
2 deserve patents
3 MR PERRY Your Honor again a
4 technological solution to a business problem could well
5 be whether its a method or a process is equivalent
6 Again Congress said method in a corresponding shyshy
7 JUSTICE KENNEDY Can you give me an
8 example
9 MR PERRY I thought the data compression
10 example was a good one Ill try an encryption
11 technology Many of these trading platforms you know
12 dealing with securities and money would require some
13 sort of security devices You could have a process for
14 securely transmitting data would be another computer
15 implemented technological solution to a business
16 problem Again nothing like that claimed here
17 JUSTICE SOTOMAYOR How about eshymail and
18 just word processing programs
19 MR PERRY Your Honor a program shyshy let me
20 try it this way to both of your questions In our view
21 if what is claimed as the inventive contribution under
22 Mayo shyshy in other words if we have an abstract idea as
23 we do here and what is claimed is the inventive
24 contribution for Step 2 is the computer then the
25 computer must be essential to that operation and
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1 represent an advancement in computer science or other
2 technology And we know thats not met here Justice
3 Sotomayor because shyshy
4 JUSTICE SOTOMAYOR So youre saying no to
5 eshymail and word processing
6 MR PERRY Your Honor I think at a
7 point shyshy
8 JUSTICE SOTOMAYOR They certainly have
9 functionality and shyshy and improvement of functionality
10 for the user
11 MR PERRY At a point in time in the past
12 I think both of those would have been technological
13 advances that were patentable
14 JUSTICE SOTOMAYOR How
15 MR PERRY Today shyshy because they would have
16 provided a technological solution to a then unmet
17 problem Today reciting and do it on a word processor
18 is no different than and do it on a typewriter or shyshy and
19 do it on a calculator
20 The inventive contribution component which
21 uses specifically the language of conventional and
22 routine and well understood will evolve with
23 technology Thats why its different than the abstract
24 idea component
25 And here we know that these patents dont
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1 claim anything that was not conventional well
2 understood and routine We went through that in great
3 detail and Alice has never disputed a word of it They
4 just say youre not supposed to do that analysis even
5 though the Court 9shy0 in Mayo said we should
6 And in this case its very important to
7 look at what Alices own experts said on the subject
8 This is not our expert This is Alices expert And
9 this is at Page 1327shy28 of the Joint Appendix It is
10 possible to do the business methods of maintaining
11 accounts adjusting accounts and providing an
12 instruction without a computer or other hardware
13 And then Justice Breyer directly to your
14 abacus If someone had thought of this invention
15 soshycalled invention 100 years ago they might have
16 implemented it in a nonelectronic manner using various
17 precomputing tools such as an abacus or handwritten
18 ledgers
19 We know from Benson the Courts seminal
20 computer implementation case that if you can do it by
21 head and hand then the computer doesnt add anything
22 inventive within the meaning of the 101 exception That
23 is the holding of Benson And the Court reiterated that
24 in Mayo
25 Flook said exactly the same thing If you
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1 can do it with pencil and paper then the computer is
2 not offering anything that the patent laws are or should
3 be concerned with
4 It is only where the method will not work
5 without a computer which is not these claims and where
6 the computer itself is doing something that the patent
7 law is willing to protect
8 CHIEF JUSTICE ROBERTS What if shyshy what if
9 you can do it without a computer but its going to
10 take you know 20 people a hundred years In other
11 words theoretically you can replicate what the
12 computer does shyshy
13 MR PERRY Two answers
14 CHIEF JUSTICE ROBERTS shyshy but its
15 impractical without looking to do it on the computer
16 MR PERRY Mr Chief Justice first these
17 claims literally read as Alice reads them on a single
18 transaction between two parties so its not 20 people
19 for a hundred years Its one person sitting in a room
20 so thats not a problem
21 Second if what is being claimed is the
22 necessary speed or efficiency or data crunching
23 capabilities if you will of a computer then it would
24 have to be claimed and theres nothing claimed here
25 All that is claimed shyshy and my friend is going to stand
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1 up on rebuttal and tell you all that the expert said
2 well what is claimed is a computer but its just a
3 computer It just says a computer configured too It
4 doesnt say that the computer actually has to shyshy
5 JUSTICE BREYER Yeah but the trouble with
6 that particular test is as I think partly the Chief
7 Justice said how long et cetera and then add to that
8 though you could do it without a computer what happens
9 at the end of the line is the automobile engine goes off
10 or it begins to sputter or it turns left
11 You see its possible to take Archimedes shyshy
12 shyshy you know I use that example purposely to call
13 attention to the problem You can take those things
14 and youre not just saying apply it and youre not even
15 just saying shyshy you are saying use the computer but at
16 the end of the road something physical in the world
17 changes and everybody would say now thats shyshy that
18 will falls within I mean probably I mean my
19 hesitation shows Im looking for the right words
20 MR PERRY Justice Breyer your point is
21 the reason that it is equally fallacious to suggest on
22 the one hand as Alice and IBM does that simply
23 reciting a computer is a magic key that gets you through
24 101 and you never have to any other inquiry and what
25 some of folks the amici on the other side say which
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1 is that computers or software are never eligible Both
2 of those things have to be wrong because what the Court
3 said in Bilski was future innovation is too uncertain
4 We are not going to do that as a Court And the Court
5 laid out an approach using abstract ideas in Bilski and
6 inventive contribution in Mayo that is flexible enough
7 to take into account that innovation and to deal with
8 particular claims in context which is why at the end
9 of the day we have to come back to these patents and
10 decide which shyshy
11 JUSTICE KAGAN Mr Perry before we get
12 back to these matters you said to Justice Scalia if a
13 patent sufficiently describes how a computer will
14 implement an idea then its patentable So how
15 sufficiently does one have to describe it What do we
16 want a judge to do at this threshold level in terms of
17 trying to figure out whether the description is
18 sufficient to get you past it
19 MR PERRY If I can answer in two steps
20 Justice Kagan First in the negative What the
21 applicant or patentee must do shyshy must not do is simply
22 describe the desired result That would take us back to
23 State Street That would simply say I claim a magic
24 box that buys high and sells low or vice versa I
25 suppose I claim a magic box for investing Thats what
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1 these patents do
2 Then to put it in the affirmative and in the
3 language of Mayo the claim has to recite something
4 significantly more something significantly more than
5 the abstract idea itself That would be a contextual
6 analysis based on the claims and specifications and file
7 history and we know that some devices some methods
8 some programming will pass that
9 It is not going to be a brightshyline rule and
10 thats one of the tugshyofshywar issues that this Court and
11 the Federal Circuit have been having in these cases
12 The Federal Circuit wants brightshyline rules All
13 computers are in or all computers are out
14 This Court has been more contextual This
15 Court has been more nuanced This Court has looked at
16 things in a more robust way
17 JUSTICE KAGAN Youre not suggesting that
18 specific code is necessary
19 MR PERRY No Your Honor I think the shyshy
20 actual description of the programming is a 112 problem
21 I agree with that A 112 issue That is the realm of
22 the written description requirement What is a 101
23 problem is it is on the applicant to do more than simply
24 describe the results simply say A magic box that does
25 intermediate settlement And we can tie that back to
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1 this particular prosecution the 510 patent which is
2 the method patent
3 The examiner rejected it Under Section
4 101 the examiner said this is an abstract idea You
5 cant have this patent And the only change that this
6 applicant made was to add in the adjusting step
7 electronic adjustment It put in one word
8 electronic adjustment And under State Street which
9 is what this patent is prosecuted under that was
10 enough because the result of adjusting run through a
11 computer is enough
12 Under current law that cant be enough
13 That just cant get a patent over the line because this
14 Court said in Mayo and I got to quote this language
15 Simply implementing a fundamental principle on a
16 physical machine namely a computer is not a patentable
17 application of that principle Thats all that Alice
18 has done
19 These are preshyBilski patents They never
20 should have been issued General Verrilli will stand up
21 and address that point And certainly under current
22 law shyshy one point on the AIA Congress did not send all
23 this to the administrative process Congress created
24 two avenues the courts and the PTO to use the
25 standards Essentially it ratified Bilski and Mayo and
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1 said we agree with what you all are doing at the
2 Supreme Court and the existing standards are good enough
3 for us This is a judicial problem And that is a good
4 reason The abstract shyshy
5 JUSTICE GINSBURG The Federal Circuit in
6 this case split in many ways and it had our decisions
7 to deal with You said given Bilski and Mayo this is
8 an easy case What is the instruction that escaped a
9 good number of judges on the Federal Circuit How would
10 you state the rule
11 MR PERRY Your Honor I think theres a
12 significant element to the Federal Circuit that
13 disagrees with Mayo and has been resistant in applying
14 it Chief Judge shyshy former Chief Judge Michelle filed a
15 brief in this Court essentially saying Mayo is a
16 lifeshysciences case You should limit it to that because
17 if you apply it to everything else then these patents
18 are no good
19 Mayo we submit is a technologyshyneutral
20 industryshyneutral exceptionshyneutral framework that can
21 be used to answer all of these questions This is not
22 the death of software patents The software industry is
23 all before this Court saying this is fine with us
24 Every company in the United States practically except
25 for IBM is saying go ahead This will not affect
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1 software patents
2 Justice Ginsburg this Courts precedents
3 are clear They are unanimous They just need to be
4 applied To suggest that there is confusion that needs
5 to be addressed by retreating beating a retreat from
6 recent unanimous decisions would simply reward
7 intransigence difficulty refusal to adhere to what are
8 clear precedents because shyshy
9 JUSTICE KAGAN Should we be concerned
10 Mr Perry that there are old patents that in fact could
11 meet the test that you set forth but wont because they
12 were written in a different time and so used much more
13 general language
14 MR PERRY Your Honor the applicant or the
15 patent holder would have the opportunity to institute a
16 reexamination proceeding or some sort of administration
17 process to address that issue
18 And second it should be noted this is a
19 very small problem There are 2 million outstanding
20 patents in the United States In the last four fiscal
21 years there were 22000 infringement litigations
22 instituted but since Bilski there have only been 57
23 district court decisions on Section 101 issues There
24 have only been 12 Federal Circuit decisions total on
25 computer implementation
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1 We are talking about a group of patents
2 Justice Kagan thats way out at the tail end of
3 distribution Most patents never have a 101 challenge
4 This is not an issue with cotton gins and other things
5 This is a problem for the most marginal
6 most dubious most skeptical patents the ones that this
7 Court in Bilski shyshy and remember what Bilskis holding
8 is The majority said they are processes but it did
9 not say they are eligible
10 Thank you Mr Chief Justice
11 CHIEF JUSTICE ROBERTS Thank you counsel
12 General Verrilli
13 ORAL ARGUMENT OF DONALD B VERRILLI JR
14 ON BEHALF OF THE UNITED STATES AS AMICUS
15 CURIAE SUPPORTING RESPONDENTS
16 GENERAL VERRILLI Mr Chief Justice and
17 may it please the Court
18 An abstract idea does not become
19 patentshyeligible merely by tacking on an instruction to
20 use a computer to carry it out A computer makes a
21 difference under Section 101 when it imposes a
22 meaningful limit on the patent claim That occurs when
23 the claim is directed at improvement in computing
24 technology or an innovation that uses computing
25 technology to improve other technological functions
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1 Thats the test that we believe is most faithful to this
2 Courts precedents in Bilski and Mayo It keeps patents
3 within their traditional and appropriate domain and it
4 is capable of being administered consistently by Courts
5 and by PTO examiners
6 JUSTICE GINSBURG How do you answer the
7 argument that your view would extinguish businessshymethod
8 patents and make all software ineligible for patent
9 protection
10 GENERAL VERRILLI Yeah with shyshy let me
11 address software patents first because that I think is
12 obviously a significant question And its just not
13 correct to say that our approach would make software
14 patenting ineligible Any software patent that improves
15 the functioning of the computer technology is eligible
16 Any software patent that improves shyshy that is used to
17 improve another technology is eligible For example
18 the patent in the shyshy in the Diehr case is one in
19 which shyshy
20 JUSTICE SOTOMAYOR Why do we need to reach
21 this in that shyshy reach software patents at all in this
22 case
23 GENERAL VERRILLI Well shyshy
24 JUSTICE SOTOMAYOR Whats the necessity for
25 us to announce a general rule with respect to software
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1 There is no software being patented in this case
2 GENERAL VERRILLI Well I shyshy
3 JUSTICE SOTOMAYOR Theres a systems
4 GENERAL VERRILLI Well I shyshy I think shyshy
5 well they shyshy they shyshy theres a process being and shyshy and
6 one can think of software patents as process patents
7 And I think thats why my friends on the other side are
8 saying the sky is falling because they shyshy they are
9 interpreting what were saying about that when a
10 computer makes shyshy when a computers involvement makes
11 something eligible under 101 its calling those into
12 question and it doesnt
13 JUSTICE SOTOMAYOR Do you think we have to
14 reach the patentability of software to answer this case
15 GENERAL VERRILLI Well I think you can shyshy
16 I think the answer to that question is no not
17 necessarily You can decide it by saying that shyshy that
18 Bilski answers the question whether this is an abstract
19 idea because this form of hedging is really no
20 different than the form of hedging as a conceptual
21 matter at issue in Bilski And then Mayo answers the
22 question of whether the use of a computer in this case
23 adds enough to the abstract idea beyond conventional
24 steps because here all we have after all is just
25 conventional use of computing technology no computer
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1 innovation such that you dont qualify under 101 You
2 could take that approach
3 But it is important to the United States
4 that we shyshy and to our patent examiners that we get some
5 clarity if we can I think the clarity could come from
6 the text that I propose which I want to reiterate shyshy
7 JUSTICE SOTOMAYOR Well shyshy
8 JUSTICE BREYER Could shyshy could shyshy could you
9 go on with that because you were just getting to the
10 point where I think you say a computer improvement that
11 in fact leads to an improvement in harvesting cotton is
12 an improvement through a computer of technology so it
13 qualifies
14 But then I think you were going to say or I
15 got this also from the brief a computer improvement
16 that leads to an improvement in the methods of selling
17 bonds over the telephone is not an improvement in
18 technology reached by the computer Am I right about
19 the distinction youre making
20 GENERAL VERRILLI I dont think theres a
21 yes or no answer to that question
22 JUSTICE BREYER What is your view Yeah
23 what is shyshy how do we deal with just that problem
24 GENERAL VERRILLI If there is a genuine
25 innovation in the functioning of the computer shyshy
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1 JUSTICE BREYER Yes
2 GENERAL VERRILLI shyshy such that business
3 processes shyshy
4 JUSTICE BREYER Weve got that Yes yes
5 We got the computer But then it doesnt improve the
6 computer but rather it improves through the computer
7 the harvesting of cotton
8 Now youve got it in what you said was your
9 second category which is an improvement through the
10 computer of a technology And I thought in your brief
11 you were distinguishing an improvement through the
12 computer of a human activity that is not a technology
13 and in particular to pick an example of that
14 something in finance or something in business
15 Now am I right about the distinction youre
16 making
17 GENERAL VERRILLI Yeah that shyshy
18 JUSTICE BREYER If Im not right what is
19 the distinction
20 GENERAL VERRILLI That is generally the
21 line were drawing Frankly shyshy
22 JUSTICE BREYER And how is that justified
23 GENERAL VERRILLI I do want shyshy
24 JUSTICE BREYER That shyshy that is Judge Dyk
25 in shyshy in Bilski in the Federal circuit 4 people sort of
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1 picked it up maybe 5 didnt pick it up Would you say
2 a few words about it
3 GENERAL VERRILLI Sure About shyshy let me go
4 to Bilski there in that I do think while shyshy while
5 certainly the Court held that the term process got a
6 natural construction which could include business
7 methods it seems to me that thats not all the Court
8 said in Bilski The Court also said that it was
9 historically and traditionally quite rare that business
10 methods were patent eligible
11 It also said that shyshy that the shyshy that courts
12 and the PTO examiners should use the abstract ideas
13 exception to 101 to police the appropriate boundary
14 It also said that the
15 machineshyorshytransformation test that the United States
16 advocated remained a useful tool And of course that
17 directs to you seeing whether there is a technology
18 application
19 And of course the holding in Bilski was
20 that the shyshy the method for hedging risk was ineligible
21 because it was an abstract idea and I cant imagine
22 that if in Bilski the shyshy the claim had been exactly the
23 same but had added use a computer to carry out some of
24 these standard random analysis functions that are
25 claimed by the patent that you would have found it to
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1 be patent eligible
2 And I shyshy I would submit for the Court that
3 the key point here I think is that now given where
4 the Court shyshy what the Court has held in Bilski given
5 what its held in Mayo the abstract ideas exception is
6 really the only tool left to deal with what I shyshy what I
7 think I fairly read Bilski as saying is a significant
8 problem the proliferation of patents of business
9 methods
10 JUSTICE KENNEDY Is there an example that
11 you can give us of a shyshy what we can call a business
12 process that is patentable a process that doesnt
13 involve improving the workings of a computer
14 GENERAL VERRILLI I shyshy I think its going
15 to be difficult for me to do that I think for
16 example if you had a business method a process for
17 additional security pointshyofshysale credit card
18 transactions using particular encryption technology
19 that might well be patent eligible Its a technology
20 that it makes conduct of business more efficient or
21 effective
22 But there is a technological link here and
23 we do think thats critical to our shyshy to our point of
24 view with respect to the case And I shyshy and I do think
25 remember that when we say something is not patent
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1 eligible were not saying they cant do it Were
2 saying they cant monopolize it
3 And the concern in a situation like this one
4 is that if this is patent eligible its hard to see
5 why for example the first person who came up with a
6 frequent flier program wouldnt have been able to claim
7 a patent there because after all thats a business
8 method for improving customer loyalty implemented on a
9 computer
10 CHIEF JUSTICE ROBERTS General I shyshy you
11 mentioned a while ago the need for greater clarity and
12 certainty in this area And Im just wondering in your
13 brief youve got a nonshyexhaustive of factors to
14 consider and there are 6 different ones And Im just
15 doubtful that thats going to bring about greater
16 clarity and certainty
17 GENERAL VERRILLI I take shyshy I take the
18 point Mr Chief Justice but I think the key is that
19 they are all directed to answering the question of
20 whether the innovation that is claimed and is an
21 innovation in either A the improvement of a computers
22 functioning or B the use of computer technology to
23 improve the functioning of another technological
24 process and a case like Diehr would be in the latter
25 category
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1 And so I do think that thats the key
2 benchmark Thats the baseline Thats the test that
3 we do think can be applied clearly and consistently by
4 the courts or the PTO And it avoids the risk of things
5 like frequent flier programs or the Oakland As money
6 ball methods for evaluating the contributions in
7 individual baseball players make or any one of a host of
8 other things that our intuitions tell us just dont
9 belong in the patent system
10 Thats the shyshy drawing that line keeps them
11 out not drawing that line lets them in And with all
12 due respect I dont think that the novelty and
13 nonobviousness filters that 102 and 103 really deal with
14 that problem effectively because when you get to
15 nonobviousness in 103 for example youll be asking a
16 different question
17 If you take the frequent flier program you
18 would say well is this innovation in building consumer
19 loyalty something that would have been obvious to
20 somebody who runs an airline Its totally divorced
21 from the question of technology at that point and
22 therefore I dont think youre going to get the screen
23 that you need to get in order for the patent system to
24 be confined to its traditional and appropriate scope
25 If there are no further questions thank
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1 you
2 JUSTICE GINSBURG I have a question about
3 how do you identify an abstract concept The shyshy a
4 natural phenomenon a mathematical formula those are
5 easy to identify but there has been some confusion on
6 what qualifies as an abstract concept
7 GENERAL VERRILLI We would define
8 abstract shyshy an abstract concept as a claim that is not
9 directed to a concrete innovation in technology
10 science or the industrial arts So its the shyshy its
11 abstract in the sense that it is not a concrete
12 innovation in the traditional realm of patent law
13 Thank you
14 CHIEF JUSTICE ROBERTS Thank you General
15 Mr Phillips you have four minutes
16 remaining
17 REBUTTAL ARGUMENT OF CARTER G PHILLIPS
18 ON BEHALF OF THE PETITIONERS
19 MR PHILLIPS Thank you Mr Chief Justice
20 Id just like to make a few points
21 First of all with respect to the question
22 you asked which is looking at 159 et cetera all I can
23 tell you is that if you look at claim 33 it talks about
24 matched orders the matched orders that are described in
25 286 and 287 and then makes specific reference to 159
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1 and that flow chart thats there And its all designed
2 as a package Its only one element of the shyshy of the
3 invention but it is a central element and its an easy
4 one to understand And it goes well beyond simply the
5 notion of hedge shyshy hedge against settlement risk and do
6 it by a computer
7 JUSTICE SOTOMAYOR Your adversary says that
8 his shyshy the appendix to his brief are the only patents at
9 issue that the flow charts are not at issue in this
10 case
11 MR PHILLIPS Theres no basis for that
12 statement Your Honor There shyshy remember this went off
13 on a very truncated litigation process So theres shyshy
14 you know we shyshy we got cut off at the beginning of it
15 Theres been no construction of the shyshy of the claims
16 and shyshy and obviously these are specifications that go
17 to how you interpret the claim
18 JUSTICE SOTOMAYOR If we were to say that
19 there are no business patents shyshy
20 MR PHILLIPS Yes
21 JUSTICE SOTOMAYOR shyshy would your patent
22 survive at all
23 MR PHILLIPS No I dont shyshy I dont
24 believe so I think theres no question And you
25 know General Verrilli could not have been any plainer
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1 in his statement of how he wants to interpret the
2 abstract idea concept
3 JUSTICE SOTOMAYOR Yes he wants to say no
4 business patents
5 MR PHILLIPS No business shyshy just another
6 way of saying no business methods And you know the
7 Court rejected that And it seems to me extraordinary
8 to say Congress didnt reject no business methods in
9 101 but were going to do shyshy were going to manipulate
10 the judicial exception to accomplish precisely that same
11 thing It seems to me thats wholly inappropriate
12 Justice Ginsburg you asked my shyshy my friend
13 here you know whats his test He didnt answer that
14 question youll notice because he doesnt have an
15 answer His basic argument is whatever you do just
16 kill this patent
17 And if I were in his shoes I suppose Id
18 take that same position I think whats absolutely
19 clear is that the test ought to be one that is
20 structured as a very coarse filter not the kind of
21 filter that hes pushing for where it changes over time
22 I mean I thought his shyshy I thought his response to one
23 of the questions about eshymail and word processing that
24 Justice Sotomayor asked is over time it would change
25 Well thats exactly what 102 and 103 are for That is
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1 not the purpose of shyshy of Section 101
2 And then he uses the example of encryption
3 I guarantee you if we were arguing about encryption in
4 this case he would say to me that thats an abstract
5 principle because encryption is a concept thats been
6 around since time immemorial George Washington used
7 it Everybody has used encryption
8 And a question again thats not the
9 solution to these problems The question is how did we
10 go about doing it And we go beyond the basics of
11 simply saying use a computer and thats what we ask
12 this Court to focus on and to evaluate
13 As to the frequent flier program its
14 pretty clear to me that even though it was a novel idea
15 in some sense the concept itself would have been viewed
16 in shyshy in the KSR fashion as quite obvious as a means of
17 improving customer loyalty
18 There are solutions here Giving us 101
19 pass doesnt create a monopoly It just gets us to the
20 102 and 103 inquiries that are at the heart of what the
21 patent laws shyshy and 112 that are at the heart of what the
22 patent laws ought to be dealing with
23 If there are no further questions Your
24 Honor thank you
25 CHIEF JUSTICE ROBERTS Thank you counsel
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1 The case is submitted
2 (Whereupon at 1105 am the case in the
3 aboveshyentitled matter was submitted)
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
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58
A add 714 1023 algorithm 3320 41 automatically
As 525 3621 387 algorithms apply 72425 111
am 115 32 416 3013 3310 2019 281213 automobile 389
572 added 302 Alice 13 34 2822 3814 available 99
abacus 61213 4923 363 3717 4217 avenues 4124
710 1018 additional 5017 3822 4117 applying 4213 avoids 524
1325 3614 3617
address 4121 4317 4511
Alices 271 2919 3678
approach 226 395 4513 B
ability 1514 addressed 435 allow 94 472 B 121 29 4413
able 1511 167 addressing 181 allows 97 242 appropriate 5122
1919 516 adds 4623 amazing 2514 81516 1514 back 1621
aboveshyentitled adhere 437 amici 3825 453 4913 1922 2512
113 573 adjudication amicus 123 5224 3018 322
absolutely 125 241 210 4414 Archimedes 3991222
1215 159 adjusting 3611 analysis 424 281122 3811 4025
5518 41610 364 406 area 219 5112 ball 526
abstract 4267 adjustment 417 4924 argue 2518 Bank 17 35
48 6682023 418 analyze 1416 arguing 563 banks 95
721 8218 administered 1716 argument 114 bars 43
141920 1522 454 announce 4525 225812 33 baseball 527
165 181618 administration answer 119 37 41 144 based 423 406
2220 24925 4316 2219 247 18323 226 baseline 522
2621 277 administrative 3919 4221 26715 4413 basic 413 5515
2938 3422 171218 187 456 461416 457 5317 basically 1821
3523 395 242 4123 4721 551315 5515 2319
405 414 424 adopt 203 answering 5119 arguments basics 5610
4418 461823 adopted 31317 answers 3713 1415 basis 132 1512
491221 505 advancement 461821 arms 1625 1516 2719
53368811 351 anyway 1810 arrangements 5411
552 564 advances 3513 apparatus 2916 131 beating 435
accept 102 adversary 547 APPEARAN arrows 315 beginning 163
accomplish advice 1715 116 art 1919 5414
5510 advocated 4916 appears 820 arts 2124 5310 begins 3810
account 55 618 affect 4225 appendix 1910 aside 1422 157 behalf 11719
397 affirmative 402 311 326 369 asked 2314 122 24710
accounts 823 agent 52 3021 548 278 5322 214 38 2616
9356 3611 ago 318 2224 applicant 3220 551224 4414 5318
3611 3615 5111 3921 4023 asking 193 believe 1316
accurately 2413 agree 920 2021 416 4314 221213 273 1416 2421
acknowledges 221 2418 application 3324 5215 255 264 451
1121 4021 421 2623 4117 aspect 517 5424
act 99 2017 agrees 2812 4918 asserted 3113 belong 529
activities 229 ahead 4225 applications 311618 benchmark 522
activity 2122 AIA 2912 4122 333 asserting 325 Benson 361923
3325 4812 airline 5220 applied 434 attaching 124 best 161124
actual 4020 AL 18 523 attention 3813 better 1610 albeit 923 applies 31418 Attorney 2021 216 2819
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3322 brightshyline 409 2313 37 71 4338 5519 beyond 115 4012 5317 checks 618 5614
1312 4623 bring 5115 case 3412 46 Chief 339 clearly 211 251 544 5610 broad 248 116 1524 261217 3024 523
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1 pages of these patents They all pertain to the other
2 invention Thats why in the back of our red brief we
3 excerpted the very little bit that actually pertains to
4 this You sort of tack on patent shyshy the tack on claim
5 that Mr Phillips is asserting here Its 4 columns
6 Its less than five pages in the printed appendix that
7 actually pertains to this invention And it contains no
8 disclosure whatever
9 Justice Scalia to your question about how
10 the computer does it Of course a patent that
11 describes sufficiently how a computer does a new and
12 useful thing whether its data compression or any other
13 technological solution to a business problem a social
14 problem or a technological problem would be within the
15 realm of the shyshy of the patent laws That is what the
16 patent laws have always been for
17 This is not such a patent And the reason
18 for that is this is a preshyBilski set of patents These
19 were prosecuted under the old State Street test where
20 all the applicant had to claim was a result
21 JUSTICE KENNEDY Would you give me shyshy
22 again you already did it once shyshy an example of a
23 business process patent shyshy of a business process idea
24 and invention that is patentable
25 MR PERRY Your Honor there are many
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1 examples One would be a technological solution to a
2 business problem So that for example shyshy Ill give a
3 different example There are many applications today
4 The Court may be familiar with streaming video to watch
5 video on your computer
6 It is not possible to get enough data
7 through existing lines in its raw format The data has
8 to be manipulated in order to see live video So if you
9 want to watch TV on your phone for example
10 Those algorithms those inventions are
11 undoubtedly technological And if they are used in a
12 trading platform or a hedging system or something else
13 that wouldnt disable them And this is what the Diehr
14 case shyshy
15 JUSTICE KENNEDY Well I shyshy I shyshy in my
16 language Ive called that mechanical rather than
17 process Can you give me an example of process
18 MR PERRY Yes Your Honor The process in
19 that example would be a computer running the particular
20 data compression algorithm
21 JUSTICE KENNEDY But thats how to make
22 a shyshy thats how to make a machine work better
23 MR PERRY Yes Your Honor
24 JUSTICE KENNEDY Im asking you Is there
25 any business process any business activity that is
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1 susceptible to a patent a pure patent innovations that
2 deserve patents
3 MR PERRY Your Honor again a
4 technological solution to a business problem could well
5 be whether its a method or a process is equivalent
6 Again Congress said method in a corresponding shyshy
7 JUSTICE KENNEDY Can you give me an
8 example
9 MR PERRY I thought the data compression
10 example was a good one Ill try an encryption
11 technology Many of these trading platforms you know
12 dealing with securities and money would require some
13 sort of security devices You could have a process for
14 securely transmitting data would be another computer
15 implemented technological solution to a business
16 problem Again nothing like that claimed here
17 JUSTICE SOTOMAYOR How about eshymail and
18 just word processing programs
19 MR PERRY Your Honor a program shyshy let me
20 try it this way to both of your questions In our view
21 if what is claimed as the inventive contribution under
22 Mayo shyshy in other words if we have an abstract idea as
23 we do here and what is claimed is the inventive
24 contribution for Step 2 is the computer then the
25 computer must be essential to that operation and
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1 represent an advancement in computer science or other
2 technology And we know thats not met here Justice
3 Sotomayor because shyshy
4 JUSTICE SOTOMAYOR So youre saying no to
5 eshymail and word processing
6 MR PERRY Your Honor I think at a
7 point shyshy
8 JUSTICE SOTOMAYOR They certainly have
9 functionality and shyshy and improvement of functionality
10 for the user
11 MR PERRY At a point in time in the past
12 I think both of those would have been technological
13 advances that were patentable
14 JUSTICE SOTOMAYOR How
15 MR PERRY Today shyshy because they would have
16 provided a technological solution to a then unmet
17 problem Today reciting and do it on a word processor
18 is no different than and do it on a typewriter or shyshy and
19 do it on a calculator
20 The inventive contribution component which
21 uses specifically the language of conventional and
22 routine and well understood will evolve with
23 technology Thats why its different than the abstract
24 idea component
25 And here we know that these patents dont
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1 claim anything that was not conventional well
2 understood and routine We went through that in great
3 detail and Alice has never disputed a word of it They
4 just say youre not supposed to do that analysis even
5 though the Court 9shy0 in Mayo said we should
6 And in this case its very important to
7 look at what Alices own experts said on the subject
8 This is not our expert This is Alices expert And
9 this is at Page 1327shy28 of the Joint Appendix It is
10 possible to do the business methods of maintaining
11 accounts adjusting accounts and providing an
12 instruction without a computer or other hardware
13 And then Justice Breyer directly to your
14 abacus If someone had thought of this invention
15 soshycalled invention 100 years ago they might have
16 implemented it in a nonelectronic manner using various
17 precomputing tools such as an abacus or handwritten
18 ledgers
19 We know from Benson the Courts seminal
20 computer implementation case that if you can do it by
21 head and hand then the computer doesnt add anything
22 inventive within the meaning of the 101 exception That
23 is the holding of Benson And the Court reiterated that
24 in Mayo
25 Flook said exactly the same thing If you
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1 can do it with pencil and paper then the computer is
2 not offering anything that the patent laws are or should
3 be concerned with
4 It is only where the method will not work
5 without a computer which is not these claims and where
6 the computer itself is doing something that the patent
7 law is willing to protect
8 CHIEF JUSTICE ROBERTS What if shyshy what if
9 you can do it without a computer but its going to
10 take you know 20 people a hundred years In other
11 words theoretically you can replicate what the
12 computer does shyshy
13 MR PERRY Two answers
14 CHIEF JUSTICE ROBERTS shyshy but its
15 impractical without looking to do it on the computer
16 MR PERRY Mr Chief Justice first these
17 claims literally read as Alice reads them on a single
18 transaction between two parties so its not 20 people
19 for a hundred years Its one person sitting in a room
20 so thats not a problem
21 Second if what is being claimed is the
22 necessary speed or efficiency or data crunching
23 capabilities if you will of a computer then it would
24 have to be claimed and theres nothing claimed here
25 All that is claimed shyshy and my friend is going to stand
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1 up on rebuttal and tell you all that the expert said
2 well what is claimed is a computer but its just a
3 computer It just says a computer configured too It
4 doesnt say that the computer actually has to shyshy
5 JUSTICE BREYER Yeah but the trouble with
6 that particular test is as I think partly the Chief
7 Justice said how long et cetera and then add to that
8 though you could do it without a computer what happens
9 at the end of the line is the automobile engine goes off
10 or it begins to sputter or it turns left
11 You see its possible to take Archimedes shyshy
12 shyshy you know I use that example purposely to call
13 attention to the problem You can take those things
14 and youre not just saying apply it and youre not even
15 just saying shyshy you are saying use the computer but at
16 the end of the road something physical in the world
17 changes and everybody would say now thats shyshy that
18 will falls within I mean probably I mean my
19 hesitation shows Im looking for the right words
20 MR PERRY Justice Breyer your point is
21 the reason that it is equally fallacious to suggest on
22 the one hand as Alice and IBM does that simply
23 reciting a computer is a magic key that gets you through
24 101 and you never have to any other inquiry and what
25 some of folks the amici on the other side say which
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1 is that computers or software are never eligible Both
2 of those things have to be wrong because what the Court
3 said in Bilski was future innovation is too uncertain
4 We are not going to do that as a Court And the Court
5 laid out an approach using abstract ideas in Bilski and
6 inventive contribution in Mayo that is flexible enough
7 to take into account that innovation and to deal with
8 particular claims in context which is why at the end
9 of the day we have to come back to these patents and
10 decide which shyshy
11 JUSTICE KAGAN Mr Perry before we get
12 back to these matters you said to Justice Scalia if a
13 patent sufficiently describes how a computer will
14 implement an idea then its patentable So how
15 sufficiently does one have to describe it What do we
16 want a judge to do at this threshold level in terms of
17 trying to figure out whether the description is
18 sufficient to get you past it
19 MR PERRY If I can answer in two steps
20 Justice Kagan First in the negative What the
21 applicant or patentee must do shyshy must not do is simply
22 describe the desired result That would take us back to
23 State Street That would simply say I claim a magic
24 box that buys high and sells low or vice versa I
25 suppose I claim a magic box for investing Thats what
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1 these patents do
2 Then to put it in the affirmative and in the
3 language of Mayo the claim has to recite something
4 significantly more something significantly more than
5 the abstract idea itself That would be a contextual
6 analysis based on the claims and specifications and file
7 history and we know that some devices some methods
8 some programming will pass that
9 It is not going to be a brightshyline rule and
10 thats one of the tugshyofshywar issues that this Court and
11 the Federal Circuit have been having in these cases
12 The Federal Circuit wants brightshyline rules All
13 computers are in or all computers are out
14 This Court has been more contextual This
15 Court has been more nuanced This Court has looked at
16 things in a more robust way
17 JUSTICE KAGAN Youre not suggesting that
18 specific code is necessary
19 MR PERRY No Your Honor I think the shyshy
20 actual description of the programming is a 112 problem
21 I agree with that A 112 issue That is the realm of
22 the written description requirement What is a 101
23 problem is it is on the applicant to do more than simply
24 describe the results simply say A magic box that does
25 intermediate settlement And we can tie that back to
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1 this particular prosecution the 510 patent which is
2 the method patent
3 The examiner rejected it Under Section
4 101 the examiner said this is an abstract idea You
5 cant have this patent And the only change that this
6 applicant made was to add in the adjusting step
7 electronic adjustment It put in one word
8 electronic adjustment And under State Street which
9 is what this patent is prosecuted under that was
10 enough because the result of adjusting run through a
11 computer is enough
12 Under current law that cant be enough
13 That just cant get a patent over the line because this
14 Court said in Mayo and I got to quote this language
15 Simply implementing a fundamental principle on a
16 physical machine namely a computer is not a patentable
17 application of that principle Thats all that Alice
18 has done
19 These are preshyBilski patents They never
20 should have been issued General Verrilli will stand up
21 and address that point And certainly under current
22 law shyshy one point on the AIA Congress did not send all
23 this to the administrative process Congress created
24 two avenues the courts and the PTO to use the
25 standards Essentially it ratified Bilski and Mayo and
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1 said we agree with what you all are doing at the
2 Supreme Court and the existing standards are good enough
3 for us This is a judicial problem And that is a good
4 reason The abstract shyshy
5 JUSTICE GINSBURG The Federal Circuit in
6 this case split in many ways and it had our decisions
7 to deal with You said given Bilski and Mayo this is
8 an easy case What is the instruction that escaped a
9 good number of judges on the Federal Circuit How would
10 you state the rule
11 MR PERRY Your Honor I think theres a
12 significant element to the Federal Circuit that
13 disagrees with Mayo and has been resistant in applying
14 it Chief Judge shyshy former Chief Judge Michelle filed a
15 brief in this Court essentially saying Mayo is a
16 lifeshysciences case You should limit it to that because
17 if you apply it to everything else then these patents
18 are no good
19 Mayo we submit is a technologyshyneutral
20 industryshyneutral exceptionshyneutral framework that can
21 be used to answer all of these questions This is not
22 the death of software patents The software industry is
23 all before this Court saying this is fine with us
24 Every company in the United States practically except
25 for IBM is saying go ahead This will not affect
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1 software patents
2 Justice Ginsburg this Courts precedents
3 are clear They are unanimous They just need to be
4 applied To suggest that there is confusion that needs
5 to be addressed by retreating beating a retreat from
6 recent unanimous decisions would simply reward
7 intransigence difficulty refusal to adhere to what are
8 clear precedents because shyshy
9 JUSTICE KAGAN Should we be concerned
10 Mr Perry that there are old patents that in fact could
11 meet the test that you set forth but wont because they
12 were written in a different time and so used much more
13 general language
14 MR PERRY Your Honor the applicant or the
15 patent holder would have the opportunity to institute a
16 reexamination proceeding or some sort of administration
17 process to address that issue
18 And second it should be noted this is a
19 very small problem There are 2 million outstanding
20 patents in the United States In the last four fiscal
21 years there were 22000 infringement litigations
22 instituted but since Bilski there have only been 57
23 district court decisions on Section 101 issues There
24 have only been 12 Federal Circuit decisions total on
25 computer implementation
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1 We are talking about a group of patents
2 Justice Kagan thats way out at the tail end of
3 distribution Most patents never have a 101 challenge
4 This is not an issue with cotton gins and other things
5 This is a problem for the most marginal
6 most dubious most skeptical patents the ones that this
7 Court in Bilski shyshy and remember what Bilskis holding
8 is The majority said they are processes but it did
9 not say they are eligible
10 Thank you Mr Chief Justice
11 CHIEF JUSTICE ROBERTS Thank you counsel
12 General Verrilli
13 ORAL ARGUMENT OF DONALD B VERRILLI JR
14 ON BEHALF OF THE UNITED STATES AS AMICUS
15 CURIAE SUPPORTING RESPONDENTS
16 GENERAL VERRILLI Mr Chief Justice and
17 may it please the Court
18 An abstract idea does not become
19 patentshyeligible merely by tacking on an instruction to
20 use a computer to carry it out A computer makes a
21 difference under Section 101 when it imposes a
22 meaningful limit on the patent claim That occurs when
23 the claim is directed at improvement in computing
24 technology or an innovation that uses computing
25 technology to improve other technological functions
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1 Thats the test that we believe is most faithful to this
2 Courts precedents in Bilski and Mayo It keeps patents
3 within their traditional and appropriate domain and it
4 is capable of being administered consistently by Courts
5 and by PTO examiners
6 JUSTICE GINSBURG How do you answer the
7 argument that your view would extinguish businessshymethod
8 patents and make all software ineligible for patent
9 protection
10 GENERAL VERRILLI Yeah with shyshy let me
11 address software patents first because that I think is
12 obviously a significant question And its just not
13 correct to say that our approach would make software
14 patenting ineligible Any software patent that improves
15 the functioning of the computer technology is eligible
16 Any software patent that improves shyshy that is used to
17 improve another technology is eligible For example
18 the patent in the shyshy in the Diehr case is one in
19 which shyshy
20 JUSTICE SOTOMAYOR Why do we need to reach
21 this in that shyshy reach software patents at all in this
22 case
23 GENERAL VERRILLI Well shyshy
24 JUSTICE SOTOMAYOR Whats the necessity for
25 us to announce a general rule with respect to software
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1 There is no software being patented in this case
2 GENERAL VERRILLI Well I shyshy
3 JUSTICE SOTOMAYOR Theres a systems
4 GENERAL VERRILLI Well I shyshy I think shyshy
5 well they shyshy they shyshy theres a process being and shyshy and
6 one can think of software patents as process patents
7 And I think thats why my friends on the other side are
8 saying the sky is falling because they shyshy they are
9 interpreting what were saying about that when a
10 computer makes shyshy when a computers involvement makes
11 something eligible under 101 its calling those into
12 question and it doesnt
13 JUSTICE SOTOMAYOR Do you think we have to
14 reach the patentability of software to answer this case
15 GENERAL VERRILLI Well I think you can shyshy
16 I think the answer to that question is no not
17 necessarily You can decide it by saying that shyshy that
18 Bilski answers the question whether this is an abstract
19 idea because this form of hedging is really no
20 different than the form of hedging as a conceptual
21 matter at issue in Bilski And then Mayo answers the
22 question of whether the use of a computer in this case
23 adds enough to the abstract idea beyond conventional
24 steps because here all we have after all is just
25 conventional use of computing technology no computer
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1 innovation such that you dont qualify under 101 You
2 could take that approach
3 But it is important to the United States
4 that we shyshy and to our patent examiners that we get some
5 clarity if we can I think the clarity could come from
6 the text that I propose which I want to reiterate shyshy
7 JUSTICE SOTOMAYOR Well shyshy
8 JUSTICE BREYER Could shyshy could shyshy could you
9 go on with that because you were just getting to the
10 point where I think you say a computer improvement that
11 in fact leads to an improvement in harvesting cotton is
12 an improvement through a computer of technology so it
13 qualifies
14 But then I think you were going to say or I
15 got this also from the brief a computer improvement
16 that leads to an improvement in the methods of selling
17 bonds over the telephone is not an improvement in
18 technology reached by the computer Am I right about
19 the distinction youre making
20 GENERAL VERRILLI I dont think theres a
21 yes or no answer to that question
22 JUSTICE BREYER What is your view Yeah
23 what is shyshy how do we deal with just that problem
24 GENERAL VERRILLI If there is a genuine
25 innovation in the functioning of the computer shyshy
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1 JUSTICE BREYER Yes
2 GENERAL VERRILLI shyshy such that business
3 processes shyshy
4 JUSTICE BREYER Weve got that Yes yes
5 We got the computer But then it doesnt improve the
6 computer but rather it improves through the computer
7 the harvesting of cotton
8 Now youve got it in what you said was your
9 second category which is an improvement through the
10 computer of a technology And I thought in your brief
11 you were distinguishing an improvement through the
12 computer of a human activity that is not a technology
13 and in particular to pick an example of that
14 something in finance or something in business
15 Now am I right about the distinction youre
16 making
17 GENERAL VERRILLI Yeah that shyshy
18 JUSTICE BREYER If Im not right what is
19 the distinction
20 GENERAL VERRILLI That is generally the
21 line were drawing Frankly shyshy
22 JUSTICE BREYER And how is that justified
23 GENERAL VERRILLI I do want shyshy
24 JUSTICE BREYER That shyshy that is Judge Dyk
25 in shyshy in Bilski in the Federal circuit 4 people sort of
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1 picked it up maybe 5 didnt pick it up Would you say
2 a few words about it
3 GENERAL VERRILLI Sure About shyshy let me go
4 to Bilski there in that I do think while shyshy while
5 certainly the Court held that the term process got a
6 natural construction which could include business
7 methods it seems to me that thats not all the Court
8 said in Bilski The Court also said that it was
9 historically and traditionally quite rare that business
10 methods were patent eligible
11 It also said that shyshy that the shyshy that courts
12 and the PTO examiners should use the abstract ideas
13 exception to 101 to police the appropriate boundary
14 It also said that the
15 machineshyorshytransformation test that the United States
16 advocated remained a useful tool And of course that
17 directs to you seeing whether there is a technology
18 application
19 And of course the holding in Bilski was
20 that the shyshy the method for hedging risk was ineligible
21 because it was an abstract idea and I cant imagine
22 that if in Bilski the shyshy the claim had been exactly the
23 same but had added use a computer to carry out some of
24 these standard random analysis functions that are
25 claimed by the patent that you would have found it to
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1 be patent eligible
2 And I shyshy I would submit for the Court that
3 the key point here I think is that now given where
4 the Court shyshy what the Court has held in Bilski given
5 what its held in Mayo the abstract ideas exception is
6 really the only tool left to deal with what I shyshy what I
7 think I fairly read Bilski as saying is a significant
8 problem the proliferation of patents of business
9 methods
10 JUSTICE KENNEDY Is there an example that
11 you can give us of a shyshy what we can call a business
12 process that is patentable a process that doesnt
13 involve improving the workings of a computer
14 GENERAL VERRILLI I shyshy I think its going
15 to be difficult for me to do that I think for
16 example if you had a business method a process for
17 additional security pointshyofshysale credit card
18 transactions using particular encryption technology
19 that might well be patent eligible Its a technology
20 that it makes conduct of business more efficient or
21 effective
22 But there is a technological link here and
23 we do think thats critical to our shyshy to our point of
24 view with respect to the case And I shyshy and I do think
25 remember that when we say something is not patent
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1 eligible were not saying they cant do it Were
2 saying they cant monopolize it
3 And the concern in a situation like this one
4 is that if this is patent eligible its hard to see
5 why for example the first person who came up with a
6 frequent flier program wouldnt have been able to claim
7 a patent there because after all thats a business
8 method for improving customer loyalty implemented on a
9 computer
10 CHIEF JUSTICE ROBERTS General I shyshy you
11 mentioned a while ago the need for greater clarity and
12 certainty in this area And Im just wondering in your
13 brief youve got a nonshyexhaustive of factors to
14 consider and there are 6 different ones And Im just
15 doubtful that thats going to bring about greater
16 clarity and certainty
17 GENERAL VERRILLI I take shyshy I take the
18 point Mr Chief Justice but I think the key is that
19 they are all directed to answering the question of
20 whether the innovation that is claimed and is an
21 innovation in either A the improvement of a computers
22 functioning or B the use of computer technology to
23 improve the functioning of another technological
24 process and a case like Diehr would be in the latter
25 category
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1 And so I do think that thats the key
2 benchmark Thats the baseline Thats the test that
3 we do think can be applied clearly and consistently by
4 the courts or the PTO And it avoids the risk of things
5 like frequent flier programs or the Oakland As money
6 ball methods for evaluating the contributions in
7 individual baseball players make or any one of a host of
8 other things that our intuitions tell us just dont
9 belong in the patent system
10 Thats the shyshy drawing that line keeps them
11 out not drawing that line lets them in And with all
12 due respect I dont think that the novelty and
13 nonobviousness filters that 102 and 103 really deal with
14 that problem effectively because when you get to
15 nonobviousness in 103 for example youll be asking a
16 different question
17 If you take the frequent flier program you
18 would say well is this innovation in building consumer
19 loyalty something that would have been obvious to
20 somebody who runs an airline Its totally divorced
21 from the question of technology at that point and
22 therefore I dont think youre going to get the screen
23 that you need to get in order for the patent system to
24 be confined to its traditional and appropriate scope
25 If there are no further questions thank
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1 you
2 JUSTICE GINSBURG I have a question about
3 how do you identify an abstract concept The shyshy a
4 natural phenomenon a mathematical formula those are
5 easy to identify but there has been some confusion on
6 what qualifies as an abstract concept
7 GENERAL VERRILLI We would define
8 abstract shyshy an abstract concept as a claim that is not
9 directed to a concrete innovation in technology
10 science or the industrial arts So its the shyshy its
11 abstract in the sense that it is not a concrete
12 innovation in the traditional realm of patent law
13 Thank you
14 CHIEF JUSTICE ROBERTS Thank you General
15 Mr Phillips you have four minutes
16 remaining
17 REBUTTAL ARGUMENT OF CARTER G PHILLIPS
18 ON BEHALF OF THE PETITIONERS
19 MR PHILLIPS Thank you Mr Chief Justice
20 Id just like to make a few points
21 First of all with respect to the question
22 you asked which is looking at 159 et cetera all I can
23 tell you is that if you look at claim 33 it talks about
24 matched orders the matched orders that are described in
25 286 and 287 and then makes specific reference to 159
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1 and that flow chart thats there And its all designed
2 as a package Its only one element of the shyshy of the
3 invention but it is a central element and its an easy
4 one to understand And it goes well beyond simply the
5 notion of hedge shyshy hedge against settlement risk and do
6 it by a computer
7 JUSTICE SOTOMAYOR Your adversary says that
8 his shyshy the appendix to his brief are the only patents at
9 issue that the flow charts are not at issue in this
10 case
11 MR PHILLIPS Theres no basis for that
12 statement Your Honor There shyshy remember this went off
13 on a very truncated litigation process So theres shyshy
14 you know we shyshy we got cut off at the beginning of it
15 Theres been no construction of the shyshy of the claims
16 and shyshy and obviously these are specifications that go
17 to how you interpret the claim
18 JUSTICE SOTOMAYOR If we were to say that
19 there are no business patents shyshy
20 MR PHILLIPS Yes
21 JUSTICE SOTOMAYOR shyshy would your patent
22 survive at all
23 MR PHILLIPS No I dont shyshy I dont
24 believe so I think theres no question And you
25 know General Verrilli could not have been any plainer
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1 in his statement of how he wants to interpret the
2 abstract idea concept
3 JUSTICE SOTOMAYOR Yes he wants to say no
4 business patents
5 MR PHILLIPS No business shyshy just another
6 way of saying no business methods And you know the
7 Court rejected that And it seems to me extraordinary
8 to say Congress didnt reject no business methods in
9 101 but were going to do shyshy were going to manipulate
10 the judicial exception to accomplish precisely that same
11 thing It seems to me thats wholly inappropriate
12 Justice Ginsburg you asked my shyshy my friend
13 here you know whats his test He didnt answer that
14 question youll notice because he doesnt have an
15 answer His basic argument is whatever you do just
16 kill this patent
17 And if I were in his shoes I suppose Id
18 take that same position I think whats absolutely
19 clear is that the test ought to be one that is
20 structured as a very coarse filter not the kind of
21 filter that hes pushing for where it changes over time
22 I mean I thought his shyshy I thought his response to one
23 of the questions about eshymail and word processing that
24 Justice Sotomayor asked is over time it would change
25 Well thats exactly what 102 and 103 are for That is
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1 not the purpose of shyshy of Section 101
2 And then he uses the example of encryption
3 I guarantee you if we were arguing about encryption in
4 this case he would say to me that thats an abstract
5 principle because encryption is a concept thats been
6 around since time immemorial George Washington used
7 it Everybody has used encryption
8 And a question again thats not the
9 solution to these problems The question is how did we
10 go about doing it And we go beyond the basics of
11 simply saying use a computer and thats what we ask
12 this Court to focus on and to evaluate
13 As to the frequent flier program its
14 pretty clear to me that even though it was a novel idea
15 in some sense the concept itself would have been viewed
16 in shyshy in the KSR fashion as quite obvious as a means of
17 improving customer loyalty
18 There are solutions here Giving us 101
19 pass doesnt create a monopoly It just gets us to the
20 102 and 103 inquiries that are at the heart of what the
21 patent laws shyshy and 112 that are at the heart of what the
22 patent laws ought to be dealing with
23 If there are no further questions Your
24 Honor thank you
25 CHIEF JUSTICE ROBERTS Thank you counsel
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1 The case is submitted
2 (Whereupon at 1105 am the case in the
3 aboveshyentitled matter was submitted)
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
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25
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58
A add 714 1023 algorithm 3320 41 automatically
As 525 3621 387 algorithms apply 72425 111
am 115 32 416 3013 3310 2019 281213 automobile 389
572 added 302 Alice 13 34 2822 3814 available 99
abacus 61213 4923 363 3717 4217 avenues 4124
710 1018 additional 5017 3822 4117 applying 4213 avoids 524
1325 3614 3617
address 4121 4317 4511
Alices 271 2919 3678
approach 226 395 4513 B
ability 1514 addressed 435 allow 94 472 B 121 29 4413
able 1511 167 addressing 181 allows 97 242 appropriate 5122
1919 516 adds 4623 amazing 2514 81516 1514 back 1621
aboveshyentitled adhere 437 amici 3825 453 4913 1922 2512
113 573 adjudication amicus 123 5224 3018 322
absolutely 125 241 210 4414 Archimedes 3991222
1215 159 adjusting 3611 analysis 424 281122 3811 4025
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1 1004 115 32 100 3615 101 3121522
414 65 1715 18267 2019 2324 2467 2545 2658 3622 3824 4022 414 4323 44321 4611 471 4913 559 56118
102 1717 187 2325 2425 5213 5525 5620
103 1717 187 2325 2435 521315 5525 5620
11 2445 1105 572 112 1921 4020
4021 5621 12 4324 13shy298 15 34
3 3 24 30 259 31 111 33 3118 5323 37 3118
4 4 325 4825 42 1524 1618 44 211
5 5 491 510 3019 411 53 214 57 4322
6 6 5114 65 3019
7
8
9 9 245 9shy0 365
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1 examples One would be a technological solution to a
2 business problem So that for example shyshy Ill give a
3 different example There are many applications today
4 The Court may be familiar with streaming video to watch
5 video on your computer
6 It is not possible to get enough data
7 through existing lines in its raw format The data has
8 to be manipulated in order to see live video So if you
9 want to watch TV on your phone for example
10 Those algorithms those inventions are
11 undoubtedly technological And if they are used in a
12 trading platform or a hedging system or something else
13 that wouldnt disable them And this is what the Diehr
14 case shyshy
15 JUSTICE KENNEDY Well I shyshy I shyshy in my
16 language Ive called that mechanical rather than
17 process Can you give me an example of process
18 MR PERRY Yes Your Honor The process in
19 that example would be a computer running the particular
20 data compression algorithm
21 JUSTICE KENNEDY But thats how to make
22 a shyshy thats how to make a machine work better
23 MR PERRY Yes Your Honor
24 JUSTICE KENNEDY Im asking you Is there
25 any business process any business activity that is
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1 susceptible to a patent a pure patent innovations that
2 deserve patents
3 MR PERRY Your Honor again a
4 technological solution to a business problem could well
5 be whether its a method or a process is equivalent
6 Again Congress said method in a corresponding shyshy
7 JUSTICE KENNEDY Can you give me an
8 example
9 MR PERRY I thought the data compression
10 example was a good one Ill try an encryption
11 technology Many of these trading platforms you know
12 dealing with securities and money would require some
13 sort of security devices You could have a process for
14 securely transmitting data would be another computer
15 implemented technological solution to a business
16 problem Again nothing like that claimed here
17 JUSTICE SOTOMAYOR How about eshymail and
18 just word processing programs
19 MR PERRY Your Honor a program shyshy let me
20 try it this way to both of your questions In our view
21 if what is claimed as the inventive contribution under
22 Mayo shyshy in other words if we have an abstract idea as
23 we do here and what is claimed is the inventive
24 contribution for Step 2 is the computer then the
25 computer must be essential to that operation and
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1 represent an advancement in computer science or other
2 technology And we know thats not met here Justice
3 Sotomayor because shyshy
4 JUSTICE SOTOMAYOR So youre saying no to
5 eshymail and word processing
6 MR PERRY Your Honor I think at a
7 point shyshy
8 JUSTICE SOTOMAYOR They certainly have
9 functionality and shyshy and improvement of functionality
10 for the user
11 MR PERRY At a point in time in the past
12 I think both of those would have been technological
13 advances that were patentable
14 JUSTICE SOTOMAYOR How
15 MR PERRY Today shyshy because they would have
16 provided a technological solution to a then unmet
17 problem Today reciting and do it on a word processor
18 is no different than and do it on a typewriter or shyshy and
19 do it on a calculator
20 The inventive contribution component which
21 uses specifically the language of conventional and
22 routine and well understood will evolve with
23 technology Thats why its different than the abstract
24 idea component
25 And here we know that these patents dont
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1 claim anything that was not conventional well
2 understood and routine We went through that in great
3 detail and Alice has never disputed a word of it They
4 just say youre not supposed to do that analysis even
5 though the Court 9shy0 in Mayo said we should
6 And in this case its very important to
7 look at what Alices own experts said on the subject
8 This is not our expert This is Alices expert And
9 this is at Page 1327shy28 of the Joint Appendix It is
10 possible to do the business methods of maintaining
11 accounts adjusting accounts and providing an
12 instruction without a computer or other hardware
13 And then Justice Breyer directly to your
14 abacus If someone had thought of this invention
15 soshycalled invention 100 years ago they might have
16 implemented it in a nonelectronic manner using various
17 precomputing tools such as an abacus or handwritten
18 ledgers
19 We know from Benson the Courts seminal
20 computer implementation case that if you can do it by
21 head and hand then the computer doesnt add anything
22 inventive within the meaning of the 101 exception That
23 is the holding of Benson And the Court reiterated that
24 in Mayo
25 Flook said exactly the same thing If you
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1 can do it with pencil and paper then the computer is
2 not offering anything that the patent laws are or should
3 be concerned with
4 It is only where the method will not work
5 without a computer which is not these claims and where
6 the computer itself is doing something that the patent
7 law is willing to protect
8 CHIEF JUSTICE ROBERTS What if shyshy what if
9 you can do it without a computer but its going to
10 take you know 20 people a hundred years In other
11 words theoretically you can replicate what the
12 computer does shyshy
13 MR PERRY Two answers
14 CHIEF JUSTICE ROBERTS shyshy but its
15 impractical without looking to do it on the computer
16 MR PERRY Mr Chief Justice first these
17 claims literally read as Alice reads them on a single
18 transaction between two parties so its not 20 people
19 for a hundred years Its one person sitting in a room
20 so thats not a problem
21 Second if what is being claimed is the
22 necessary speed or efficiency or data crunching
23 capabilities if you will of a computer then it would
24 have to be claimed and theres nothing claimed here
25 All that is claimed shyshy and my friend is going to stand
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1 up on rebuttal and tell you all that the expert said
2 well what is claimed is a computer but its just a
3 computer It just says a computer configured too It
4 doesnt say that the computer actually has to shyshy
5 JUSTICE BREYER Yeah but the trouble with
6 that particular test is as I think partly the Chief
7 Justice said how long et cetera and then add to that
8 though you could do it without a computer what happens
9 at the end of the line is the automobile engine goes off
10 or it begins to sputter or it turns left
11 You see its possible to take Archimedes shyshy
12 shyshy you know I use that example purposely to call
13 attention to the problem You can take those things
14 and youre not just saying apply it and youre not even
15 just saying shyshy you are saying use the computer but at
16 the end of the road something physical in the world
17 changes and everybody would say now thats shyshy that
18 will falls within I mean probably I mean my
19 hesitation shows Im looking for the right words
20 MR PERRY Justice Breyer your point is
21 the reason that it is equally fallacious to suggest on
22 the one hand as Alice and IBM does that simply
23 reciting a computer is a magic key that gets you through
24 101 and you never have to any other inquiry and what
25 some of folks the amici on the other side say which
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1 is that computers or software are never eligible Both
2 of those things have to be wrong because what the Court
3 said in Bilski was future innovation is too uncertain
4 We are not going to do that as a Court And the Court
5 laid out an approach using abstract ideas in Bilski and
6 inventive contribution in Mayo that is flexible enough
7 to take into account that innovation and to deal with
8 particular claims in context which is why at the end
9 of the day we have to come back to these patents and
10 decide which shyshy
11 JUSTICE KAGAN Mr Perry before we get
12 back to these matters you said to Justice Scalia if a
13 patent sufficiently describes how a computer will
14 implement an idea then its patentable So how
15 sufficiently does one have to describe it What do we
16 want a judge to do at this threshold level in terms of
17 trying to figure out whether the description is
18 sufficient to get you past it
19 MR PERRY If I can answer in two steps
20 Justice Kagan First in the negative What the
21 applicant or patentee must do shyshy must not do is simply
22 describe the desired result That would take us back to
23 State Street That would simply say I claim a magic
24 box that buys high and sells low or vice versa I
25 suppose I claim a magic box for investing Thats what
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1 these patents do
2 Then to put it in the affirmative and in the
3 language of Mayo the claim has to recite something
4 significantly more something significantly more than
5 the abstract idea itself That would be a contextual
6 analysis based on the claims and specifications and file
7 history and we know that some devices some methods
8 some programming will pass that
9 It is not going to be a brightshyline rule and
10 thats one of the tugshyofshywar issues that this Court and
11 the Federal Circuit have been having in these cases
12 The Federal Circuit wants brightshyline rules All
13 computers are in or all computers are out
14 This Court has been more contextual This
15 Court has been more nuanced This Court has looked at
16 things in a more robust way
17 JUSTICE KAGAN Youre not suggesting that
18 specific code is necessary
19 MR PERRY No Your Honor I think the shyshy
20 actual description of the programming is a 112 problem
21 I agree with that A 112 issue That is the realm of
22 the written description requirement What is a 101
23 problem is it is on the applicant to do more than simply
24 describe the results simply say A magic box that does
25 intermediate settlement And we can tie that back to
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1 this particular prosecution the 510 patent which is
2 the method patent
3 The examiner rejected it Under Section
4 101 the examiner said this is an abstract idea You
5 cant have this patent And the only change that this
6 applicant made was to add in the adjusting step
7 electronic adjustment It put in one word
8 electronic adjustment And under State Street which
9 is what this patent is prosecuted under that was
10 enough because the result of adjusting run through a
11 computer is enough
12 Under current law that cant be enough
13 That just cant get a patent over the line because this
14 Court said in Mayo and I got to quote this language
15 Simply implementing a fundamental principle on a
16 physical machine namely a computer is not a patentable
17 application of that principle Thats all that Alice
18 has done
19 These are preshyBilski patents They never
20 should have been issued General Verrilli will stand up
21 and address that point And certainly under current
22 law shyshy one point on the AIA Congress did not send all
23 this to the administrative process Congress created
24 two avenues the courts and the PTO to use the
25 standards Essentially it ratified Bilski and Mayo and
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1 said we agree with what you all are doing at the
2 Supreme Court and the existing standards are good enough
3 for us This is a judicial problem And that is a good
4 reason The abstract shyshy
5 JUSTICE GINSBURG The Federal Circuit in
6 this case split in many ways and it had our decisions
7 to deal with You said given Bilski and Mayo this is
8 an easy case What is the instruction that escaped a
9 good number of judges on the Federal Circuit How would
10 you state the rule
11 MR PERRY Your Honor I think theres a
12 significant element to the Federal Circuit that
13 disagrees with Mayo and has been resistant in applying
14 it Chief Judge shyshy former Chief Judge Michelle filed a
15 brief in this Court essentially saying Mayo is a
16 lifeshysciences case You should limit it to that because
17 if you apply it to everything else then these patents
18 are no good
19 Mayo we submit is a technologyshyneutral
20 industryshyneutral exceptionshyneutral framework that can
21 be used to answer all of these questions This is not
22 the death of software patents The software industry is
23 all before this Court saying this is fine with us
24 Every company in the United States practically except
25 for IBM is saying go ahead This will not affect
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1 software patents
2 Justice Ginsburg this Courts precedents
3 are clear They are unanimous They just need to be
4 applied To suggest that there is confusion that needs
5 to be addressed by retreating beating a retreat from
6 recent unanimous decisions would simply reward
7 intransigence difficulty refusal to adhere to what are
8 clear precedents because shyshy
9 JUSTICE KAGAN Should we be concerned
10 Mr Perry that there are old patents that in fact could
11 meet the test that you set forth but wont because they
12 were written in a different time and so used much more
13 general language
14 MR PERRY Your Honor the applicant or the
15 patent holder would have the opportunity to institute a
16 reexamination proceeding or some sort of administration
17 process to address that issue
18 And second it should be noted this is a
19 very small problem There are 2 million outstanding
20 patents in the United States In the last four fiscal
21 years there were 22000 infringement litigations
22 instituted but since Bilski there have only been 57
23 district court decisions on Section 101 issues There
24 have only been 12 Federal Circuit decisions total on
25 computer implementation
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1 We are talking about a group of patents
2 Justice Kagan thats way out at the tail end of
3 distribution Most patents never have a 101 challenge
4 This is not an issue with cotton gins and other things
5 This is a problem for the most marginal
6 most dubious most skeptical patents the ones that this
7 Court in Bilski shyshy and remember what Bilskis holding
8 is The majority said they are processes but it did
9 not say they are eligible
10 Thank you Mr Chief Justice
11 CHIEF JUSTICE ROBERTS Thank you counsel
12 General Verrilli
13 ORAL ARGUMENT OF DONALD B VERRILLI JR
14 ON BEHALF OF THE UNITED STATES AS AMICUS
15 CURIAE SUPPORTING RESPONDENTS
16 GENERAL VERRILLI Mr Chief Justice and
17 may it please the Court
18 An abstract idea does not become
19 patentshyeligible merely by tacking on an instruction to
20 use a computer to carry it out A computer makes a
21 difference under Section 101 when it imposes a
22 meaningful limit on the patent claim That occurs when
23 the claim is directed at improvement in computing
24 technology or an innovation that uses computing
25 technology to improve other technological functions
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1 Thats the test that we believe is most faithful to this
2 Courts precedents in Bilski and Mayo It keeps patents
3 within their traditional and appropriate domain and it
4 is capable of being administered consistently by Courts
5 and by PTO examiners
6 JUSTICE GINSBURG How do you answer the
7 argument that your view would extinguish businessshymethod
8 patents and make all software ineligible for patent
9 protection
10 GENERAL VERRILLI Yeah with shyshy let me
11 address software patents first because that I think is
12 obviously a significant question And its just not
13 correct to say that our approach would make software
14 patenting ineligible Any software patent that improves
15 the functioning of the computer technology is eligible
16 Any software patent that improves shyshy that is used to
17 improve another technology is eligible For example
18 the patent in the shyshy in the Diehr case is one in
19 which shyshy
20 JUSTICE SOTOMAYOR Why do we need to reach
21 this in that shyshy reach software patents at all in this
22 case
23 GENERAL VERRILLI Well shyshy
24 JUSTICE SOTOMAYOR Whats the necessity for
25 us to announce a general rule with respect to software
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1 There is no software being patented in this case
2 GENERAL VERRILLI Well I shyshy
3 JUSTICE SOTOMAYOR Theres a systems
4 GENERAL VERRILLI Well I shyshy I think shyshy
5 well they shyshy they shyshy theres a process being and shyshy and
6 one can think of software patents as process patents
7 And I think thats why my friends on the other side are
8 saying the sky is falling because they shyshy they are
9 interpreting what were saying about that when a
10 computer makes shyshy when a computers involvement makes
11 something eligible under 101 its calling those into
12 question and it doesnt
13 JUSTICE SOTOMAYOR Do you think we have to
14 reach the patentability of software to answer this case
15 GENERAL VERRILLI Well I think you can shyshy
16 I think the answer to that question is no not
17 necessarily You can decide it by saying that shyshy that
18 Bilski answers the question whether this is an abstract
19 idea because this form of hedging is really no
20 different than the form of hedging as a conceptual
21 matter at issue in Bilski And then Mayo answers the
22 question of whether the use of a computer in this case
23 adds enough to the abstract idea beyond conventional
24 steps because here all we have after all is just
25 conventional use of computing technology no computer
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1 innovation such that you dont qualify under 101 You
2 could take that approach
3 But it is important to the United States
4 that we shyshy and to our patent examiners that we get some
5 clarity if we can I think the clarity could come from
6 the text that I propose which I want to reiterate shyshy
7 JUSTICE SOTOMAYOR Well shyshy
8 JUSTICE BREYER Could shyshy could shyshy could you
9 go on with that because you were just getting to the
10 point where I think you say a computer improvement that
11 in fact leads to an improvement in harvesting cotton is
12 an improvement through a computer of technology so it
13 qualifies
14 But then I think you were going to say or I
15 got this also from the brief a computer improvement
16 that leads to an improvement in the methods of selling
17 bonds over the telephone is not an improvement in
18 technology reached by the computer Am I right about
19 the distinction youre making
20 GENERAL VERRILLI I dont think theres a
21 yes or no answer to that question
22 JUSTICE BREYER What is your view Yeah
23 what is shyshy how do we deal with just that problem
24 GENERAL VERRILLI If there is a genuine
25 innovation in the functioning of the computer shyshy
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1 JUSTICE BREYER Yes
2 GENERAL VERRILLI shyshy such that business
3 processes shyshy
4 JUSTICE BREYER Weve got that Yes yes
5 We got the computer But then it doesnt improve the
6 computer but rather it improves through the computer
7 the harvesting of cotton
8 Now youve got it in what you said was your
9 second category which is an improvement through the
10 computer of a technology And I thought in your brief
11 you were distinguishing an improvement through the
12 computer of a human activity that is not a technology
13 and in particular to pick an example of that
14 something in finance or something in business
15 Now am I right about the distinction youre
16 making
17 GENERAL VERRILLI Yeah that shyshy
18 JUSTICE BREYER If Im not right what is
19 the distinction
20 GENERAL VERRILLI That is generally the
21 line were drawing Frankly shyshy
22 JUSTICE BREYER And how is that justified
23 GENERAL VERRILLI I do want shyshy
24 JUSTICE BREYER That shyshy that is Judge Dyk
25 in shyshy in Bilski in the Federal circuit 4 people sort of
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1 picked it up maybe 5 didnt pick it up Would you say
2 a few words about it
3 GENERAL VERRILLI Sure About shyshy let me go
4 to Bilski there in that I do think while shyshy while
5 certainly the Court held that the term process got a
6 natural construction which could include business
7 methods it seems to me that thats not all the Court
8 said in Bilski The Court also said that it was
9 historically and traditionally quite rare that business
10 methods were patent eligible
11 It also said that shyshy that the shyshy that courts
12 and the PTO examiners should use the abstract ideas
13 exception to 101 to police the appropriate boundary
14 It also said that the
15 machineshyorshytransformation test that the United States
16 advocated remained a useful tool And of course that
17 directs to you seeing whether there is a technology
18 application
19 And of course the holding in Bilski was
20 that the shyshy the method for hedging risk was ineligible
21 because it was an abstract idea and I cant imagine
22 that if in Bilski the shyshy the claim had been exactly the
23 same but had added use a computer to carry out some of
24 these standard random analysis functions that are
25 claimed by the patent that you would have found it to
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1 be patent eligible
2 And I shyshy I would submit for the Court that
3 the key point here I think is that now given where
4 the Court shyshy what the Court has held in Bilski given
5 what its held in Mayo the abstract ideas exception is
6 really the only tool left to deal with what I shyshy what I
7 think I fairly read Bilski as saying is a significant
8 problem the proliferation of patents of business
9 methods
10 JUSTICE KENNEDY Is there an example that
11 you can give us of a shyshy what we can call a business
12 process that is patentable a process that doesnt
13 involve improving the workings of a computer
14 GENERAL VERRILLI I shyshy I think its going
15 to be difficult for me to do that I think for
16 example if you had a business method a process for
17 additional security pointshyofshysale credit card
18 transactions using particular encryption technology
19 that might well be patent eligible Its a technology
20 that it makes conduct of business more efficient or
21 effective
22 But there is a technological link here and
23 we do think thats critical to our shyshy to our point of
24 view with respect to the case And I shyshy and I do think
25 remember that when we say something is not patent
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1 eligible were not saying they cant do it Were
2 saying they cant monopolize it
3 And the concern in a situation like this one
4 is that if this is patent eligible its hard to see
5 why for example the first person who came up with a
6 frequent flier program wouldnt have been able to claim
7 a patent there because after all thats a business
8 method for improving customer loyalty implemented on a
9 computer
10 CHIEF JUSTICE ROBERTS General I shyshy you
11 mentioned a while ago the need for greater clarity and
12 certainty in this area And Im just wondering in your
13 brief youve got a nonshyexhaustive of factors to
14 consider and there are 6 different ones And Im just
15 doubtful that thats going to bring about greater
16 clarity and certainty
17 GENERAL VERRILLI I take shyshy I take the
18 point Mr Chief Justice but I think the key is that
19 they are all directed to answering the question of
20 whether the innovation that is claimed and is an
21 innovation in either A the improvement of a computers
22 functioning or B the use of computer technology to
23 improve the functioning of another technological
24 process and a case like Diehr would be in the latter
25 category
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1 And so I do think that thats the key
2 benchmark Thats the baseline Thats the test that
3 we do think can be applied clearly and consistently by
4 the courts or the PTO And it avoids the risk of things
5 like frequent flier programs or the Oakland As money
6 ball methods for evaluating the contributions in
7 individual baseball players make or any one of a host of
8 other things that our intuitions tell us just dont
9 belong in the patent system
10 Thats the shyshy drawing that line keeps them
11 out not drawing that line lets them in And with all
12 due respect I dont think that the novelty and
13 nonobviousness filters that 102 and 103 really deal with
14 that problem effectively because when you get to
15 nonobviousness in 103 for example youll be asking a
16 different question
17 If you take the frequent flier program you
18 would say well is this innovation in building consumer
19 loyalty something that would have been obvious to
20 somebody who runs an airline Its totally divorced
21 from the question of technology at that point and
22 therefore I dont think youre going to get the screen
23 that you need to get in order for the patent system to
24 be confined to its traditional and appropriate scope
25 If there are no further questions thank
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1 you
2 JUSTICE GINSBURG I have a question about
3 how do you identify an abstract concept The shyshy a
4 natural phenomenon a mathematical formula those are
5 easy to identify but there has been some confusion on
6 what qualifies as an abstract concept
7 GENERAL VERRILLI We would define
8 abstract shyshy an abstract concept as a claim that is not
9 directed to a concrete innovation in technology
10 science or the industrial arts So its the shyshy its
11 abstract in the sense that it is not a concrete
12 innovation in the traditional realm of patent law
13 Thank you
14 CHIEF JUSTICE ROBERTS Thank you General
15 Mr Phillips you have four minutes
16 remaining
17 REBUTTAL ARGUMENT OF CARTER G PHILLIPS
18 ON BEHALF OF THE PETITIONERS
19 MR PHILLIPS Thank you Mr Chief Justice
20 Id just like to make a few points
21 First of all with respect to the question
22 you asked which is looking at 159 et cetera all I can
23 tell you is that if you look at claim 33 it talks about
24 matched orders the matched orders that are described in
25 286 and 287 and then makes specific reference to 159
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1 and that flow chart thats there And its all designed
2 as a package Its only one element of the shyshy of the
3 invention but it is a central element and its an easy
4 one to understand And it goes well beyond simply the
5 notion of hedge shyshy hedge against settlement risk and do
6 it by a computer
7 JUSTICE SOTOMAYOR Your adversary says that
8 his shyshy the appendix to his brief are the only patents at
9 issue that the flow charts are not at issue in this
10 case
11 MR PHILLIPS Theres no basis for that
12 statement Your Honor There shyshy remember this went off
13 on a very truncated litigation process So theres shyshy
14 you know we shyshy we got cut off at the beginning of it
15 Theres been no construction of the shyshy of the claims
16 and shyshy and obviously these are specifications that go
17 to how you interpret the claim
18 JUSTICE SOTOMAYOR If we were to say that
19 there are no business patents shyshy
20 MR PHILLIPS Yes
21 JUSTICE SOTOMAYOR shyshy would your patent
22 survive at all
23 MR PHILLIPS No I dont shyshy I dont
24 believe so I think theres no question And you
25 know General Verrilli could not have been any plainer
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1 in his statement of how he wants to interpret the
2 abstract idea concept
3 JUSTICE SOTOMAYOR Yes he wants to say no
4 business patents
5 MR PHILLIPS No business shyshy just another
6 way of saying no business methods And you know the
7 Court rejected that And it seems to me extraordinary
8 to say Congress didnt reject no business methods in
9 101 but were going to do shyshy were going to manipulate
10 the judicial exception to accomplish precisely that same
11 thing It seems to me thats wholly inappropriate
12 Justice Ginsburg you asked my shyshy my friend
13 here you know whats his test He didnt answer that
14 question youll notice because he doesnt have an
15 answer His basic argument is whatever you do just
16 kill this patent
17 And if I were in his shoes I suppose Id
18 take that same position I think whats absolutely
19 clear is that the test ought to be one that is
20 structured as a very coarse filter not the kind of
21 filter that hes pushing for where it changes over time
22 I mean I thought his shyshy I thought his response to one
23 of the questions about eshymail and word processing that
24 Justice Sotomayor asked is over time it would change
25 Well thats exactly what 102 and 103 are for That is
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1 not the purpose of shyshy of Section 101
2 And then he uses the example of encryption
3 I guarantee you if we were arguing about encryption in
4 this case he would say to me that thats an abstract
5 principle because encryption is a concept thats been
6 around since time immemorial George Washington used
7 it Everybody has used encryption
8 And a question again thats not the
9 solution to these problems The question is how did we
10 go about doing it And we go beyond the basics of
11 simply saying use a computer and thats what we ask
12 this Court to focus on and to evaluate
13 As to the frequent flier program its
14 pretty clear to me that even though it was a novel idea
15 in some sense the concept itself would have been viewed
16 in shyshy in the KSR fashion as quite obvious as a means of
17 improving customer loyalty
18 There are solutions here Giving us 101
19 pass doesnt create a monopoly It just gets us to the
20 102 and 103 inquiries that are at the heart of what the
21 patent laws shyshy and 112 that are at the heart of what the
22 patent laws ought to be dealing with
23 If there are no further questions Your
24 Honor thank you
25 CHIEF JUSTICE ROBERTS Thank you counsel
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1 The case is submitted
2 (Whereupon at 1105 am the case in the
3 aboveshyentitled matter was submitted)
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58
A add 714 1023 algorithm 3320 41 automatically
As 525 3621 387 algorithms apply 72425 111
am 115 32 416 3013 3310 2019 281213 automobile 389
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viewed 5615 violate 55
W waiting 1334 want 1324 172
221 232 252424 339 3916 476 4823
wanted 2423 wants 2222
4012 5513 Washington
110171922 566
wasnt 2125 2310
watch 3349 water 71 way 416 58
81625 1113 151520 1614 1624 1721 1815 2017 2112 235 2425 254
5412 wholly 5511 willing 377 wondering
5112 word 52021
821 228 2813 3418 35517 363 417 5523
words 713 291 3422 3711 3819 492
work 51719 1124 2110 312 3322 374
workings 5013 world 2018
2510 3011 3816
wouldnt 414 415 2514 3313 516
write 264 writers 132325 written 617
1716 2925 304 4022
1 1004 115 32 100 3615 101 3121522
414 65 1715 18267 2019 2324 2467 2545 2658 3622 3824 4022 414 4323 44321 4611 471 4913 559 56118
102 1717 187 2325 2425 5213 5525 5620
103 1717 187 2325 2435 521315 5525 5620
11 2445 1105 572 112 1921 4020
4021 5621 12 4324 13shy298 15 34
3 3 24 30 259 31 111 33 3118 5323 37 3118
4 4 325 4825 42 1524 1618 44 211
5 5 491 510 3019 411 53 214 57 4322
6 6 5114 65 3019
7
8
9 9 245 9shy0 365
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1 susceptible to a patent a pure patent innovations that
2 deserve patents
3 MR PERRY Your Honor again a
4 technological solution to a business problem could well
5 be whether its a method or a process is equivalent
6 Again Congress said method in a corresponding shyshy
7 JUSTICE KENNEDY Can you give me an
8 example
9 MR PERRY I thought the data compression
10 example was a good one Ill try an encryption
11 technology Many of these trading platforms you know
12 dealing with securities and money would require some
13 sort of security devices You could have a process for
14 securely transmitting data would be another computer
15 implemented technological solution to a business
16 problem Again nothing like that claimed here
17 JUSTICE SOTOMAYOR How about eshymail and
18 just word processing programs
19 MR PERRY Your Honor a program shyshy let me
20 try it this way to both of your questions In our view
21 if what is claimed as the inventive contribution under
22 Mayo shyshy in other words if we have an abstract idea as
23 we do here and what is claimed is the inventive
24 contribution for Step 2 is the computer then the
25 computer must be essential to that operation and
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1 represent an advancement in computer science or other
2 technology And we know thats not met here Justice
3 Sotomayor because shyshy
4 JUSTICE SOTOMAYOR So youre saying no to
5 eshymail and word processing
6 MR PERRY Your Honor I think at a
7 point shyshy
8 JUSTICE SOTOMAYOR They certainly have
9 functionality and shyshy and improvement of functionality
10 for the user
11 MR PERRY At a point in time in the past
12 I think both of those would have been technological
13 advances that were patentable
14 JUSTICE SOTOMAYOR How
15 MR PERRY Today shyshy because they would have
16 provided a technological solution to a then unmet
17 problem Today reciting and do it on a word processor
18 is no different than and do it on a typewriter or shyshy and
19 do it on a calculator
20 The inventive contribution component which
21 uses specifically the language of conventional and
22 routine and well understood will evolve with
23 technology Thats why its different than the abstract
24 idea component
25 And here we know that these patents dont
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1 claim anything that was not conventional well
2 understood and routine We went through that in great
3 detail and Alice has never disputed a word of it They
4 just say youre not supposed to do that analysis even
5 though the Court 9shy0 in Mayo said we should
6 And in this case its very important to
7 look at what Alices own experts said on the subject
8 This is not our expert This is Alices expert And
9 this is at Page 1327shy28 of the Joint Appendix It is
10 possible to do the business methods of maintaining
11 accounts adjusting accounts and providing an
12 instruction without a computer or other hardware
13 And then Justice Breyer directly to your
14 abacus If someone had thought of this invention
15 soshycalled invention 100 years ago they might have
16 implemented it in a nonelectronic manner using various
17 precomputing tools such as an abacus or handwritten
18 ledgers
19 We know from Benson the Courts seminal
20 computer implementation case that if you can do it by
21 head and hand then the computer doesnt add anything
22 inventive within the meaning of the 101 exception That
23 is the holding of Benson And the Court reiterated that
24 in Mayo
25 Flook said exactly the same thing If you
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1 can do it with pencil and paper then the computer is
2 not offering anything that the patent laws are or should
3 be concerned with
4 It is only where the method will not work
5 without a computer which is not these claims and where
6 the computer itself is doing something that the patent
7 law is willing to protect
8 CHIEF JUSTICE ROBERTS What if shyshy what if
9 you can do it without a computer but its going to
10 take you know 20 people a hundred years In other
11 words theoretically you can replicate what the
12 computer does shyshy
13 MR PERRY Two answers
14 CHIEF JUSTICE ROBERTS shyshy but its
15 impractical without looking to do it on the computer
16 MR PERRY Mr Chief Justice first these
17 claims literally read as Alice reads them on a single
18 transaction between two parties so its not 20 people
19 for a hundred years Its one person sitting in a room
20 so thats not a problem
21 Second if what is being claimed is the
22 necessary speed or efficiency or data crunching
23 capabilities if you will of a computer then it would
24 have to be claimed and theres nothing claimed here
25 All that is claimed shyshy and my friend is going to stand
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1 up on rebuttal and tell you all that the expert said
2 well what is claimed is a computer but its just a
3 computer It just says a computer configured too It
4 doesnt say that the computer actually has to shyshy
5 JUSTICE BREYER Yeah but the trouble with
6 that particular test is as I think partly the Chief
7 Justice said how long et cetera and then add to that
8 though you could do it without a computer what happens
9 at the end of the line is the automobile engine goes off
10 or it begins to sputter or it turns left
11 You see its possible to take Archimedes shyshy
12 shyshy you know I use that example purposely to call
13 attention to the problem You can take those things
14 and youre not just saying apply it and youre not even
15 just saying shyshy you are saying use the computer but at
16 the end of the road something physical in the world
17 changes and everybody would say now thats shyshy that
18 will falls within I mean probably I mean my
19 hesitation shows Im looking for the right words
20 MR PERRY Justice Breyer your point is
21 the reason that it is equally fallacious to suggest on
22 the one hand as Alice and IBM does that simply
23 reciting a computer is a magic key that gets you through
24 101 and you never have to any other inquiry and what
25 some of folks the amici on the other side say which
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1 is that computers or software are never eligible Both
2 of those things have to be wrong because what the Court
3 said in Bilski was future innovation is too uncertain
4 We are not going to do that as a Court And the Court
5 laid out an approach using abstract ideas in Bilski and
6 inventive contribution in Mayo that is flexible enough
7 to take into account that innovation and to deal with
8 particular claims in context which is why at the end
9 of the day we have to come back to these patents and
10 decide which shyshy
11 JUSTICE KAGAN Mr Perry before we get
12 back to these matters you said to Justice Scalia if a
13 patent sufficiently describes how a computer will
14 implement an idea then its patentable So how
15 sufficiently does one have to describe it What do we
16 want a judge to do at this threshold level in terms of
17 trying to figure out whether the description is
18 sufficient to get you past it
19 MR PERRY If I can answer in two steps
20 Justice Kagan First in the negative What the
21 applicant or patentee must do shyshy must not do is simply
22 describe the desired result That would take us back to
23 State Street That would simply say I claim a magic
24 box that buys high and sells low or vice versa I
25 suppose I claim a magic box for investing Thats what
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1 these patents do
2 Then to put it in the affirmative and in the
3 language of Mayo the claim has to recite something
4 significantly more something significantly more than
5 the abstract idea itself That would be a contextual
6 analysis based on the claims and specifications and file
7 history and we know that some devices some methods
8 some programming will pass that
9 It is not going to be a brightshyline rule and
10 thats one of the tugshyofshywar issues that this Court and
11 the Federal Circuit have been having in these cases
12 The Federal Circuit wants brightshyline rules All
13 computers are in or all computers are out
14 This Court has been more contextual This
15 Court has been more nuanced This Court has looked at
16 things in a more robust way
17 JUSTICE KAGAN Youre not suggesting that
18 specific code is necessary
19 MR PERRY No Your Honor I think the shyshy
20 actual description of the programming is a 112 problem
21 I agree with that A 112 issue That is the realm of
22 the written description requirement What is a 101
23 problem is it is on the applicant to do more than simply
24 describe the results simply say A magic box that does
25 intermediate settlement And we can tie that back to
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1 this particular prosecution the 510 patent which is
2 the method patent
3 The examiner rejected it Under Section
4 101 the examiner said this is an abstract idea You
5 cant have this patent And the only change that this
6 applicant made was to add in the adjusting step
7 electronic adjustment It put in one word
8 electronic adjustment And under State Street which
9 is what this patent is prosecuted under that was
10 enough because the result of adjusting run through a
11 computer is enough
12 Under current law that cant be enough
13 That just cant get a patent over the line because this
14 Court said in Mayo and I got to quote this language
15 Simply implementing a fundamental principle on a
16 physical machine namely a computer is not a patentable
17 application of that principle Thats all that Alice
18 has done
19 These are preshyBilski patents They never
20 should have been issued General Verrilli will stand up
21 and address that point And certainly under current
22 law shyshy one point on the AIA Congress did not send all
23 this to the administrative process Congress created
24 two avenues the courts and the PTO to use the
25 standards Essentially it ratified Bilski and Mayo and
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1 said we agree with what you all are doing at the
2 Supreme Court and the existing standards are good enough
3 for us This is a judicial problem And that is a good
4 reason The abstract shyshy
5 JUSTICE GINSBURG The Federal Circuit in
6 this case split in many ways and it had our decisions
7 to deal with You said given Bilski and Mayo this is
8 an easy case What is the instruction that escaped a
9 good number of judges on the Federal Circuit How would
10 you state the rule
11 MR PERRY Your Honor I think theres a
12 significant element to the Federal Circuit that
13 disagrees with Mayo and has been resistant in applying
14 it Chief Judge shyshy former Chief Judge Michelle filed a
15 brief in this Court essentially saying Mayo is a
16 lifeshysciences case You should limit it to that because
17 if you apply it to everything else then these patents
18 are no good
19 Mayo we submit is a technologyshyneutral
20 industryshyneutral exceptionshyneutral framework that can
21 be used to answer all of these questions This is not
22 the death of software patents The software industry is
23 all before this Court saying this is fine with us
24 Every company in the United States practically except
25 for IBM is saying go ahead This will not affect
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1 software patents
2 Justice Ginsburg this Courts precedents
3 are clear They are unanimous They just need to be
4 applied To suggest that there is confusion that needs
5 to be addressed by retreating beating a retreat from
6 recent unanimous decisions would simply reward
7 intransigence difficulty refusal to adhere to what are
8 clear precedents because shyshy
9 JUSTICE KAGAN Should we be concerned
10 Mr Perry that there are old patents that in fact could
11 meet the test that you set forth but wont because they
12 were written in a different time and so used much more
13 general language
14 MR PERRY Your Honor the applicant or the
15 patent holder would have the opportunity to institute a
16 reexamination proceeding or some sort of administration
17 process to address that issue
18 And second it should be noted this is a
19 very small problem There are 2 million outstanding
20 patents in the United States In the last four fiscal
21 years there were 22000 infringement litigations
22 instituted but since Bilski there have only been 57
23 district court decisions on Section 101 issues There
24 have only been 12 Federal Circuit decisions total on
25 computer implementation
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1 We are talking about a group of patents
2 Justice Kagan thats way out at the tail end of
3 distribution Most patents never have a 101 challenge
4 This is not an issue with cotton gins and other things
5 This is a problem for the most marginal
6 most dubious most skeptical patents the ones that this
7 Court in Bilski shyshy and remember what Bilskis holding
8 is The majority said they are processes but it did
9 not say they are eligible
10 Thank you Mr Chief Justice
11 CHIEF JUSTICE ROBERTS Thank you counsel
12 General Verrilli
13 ORAL ARGUMENT OF DONALD B VERRILLI JR
14 ON BEHALF OF THE UNITED STATES AS AMICUS
15 CURIAE SUPPORTING RESPONDENTS
16 GENERAL VERRILLI Mr Chief Justice and
17 may it please the Court
18 An abstract idea does not become
19 patentshyeligible merely by tacking on an instruction to
20 use a computer to carry it out A computer makes a
21 difference under Section 101 when it imposes a
22 meaningful limit on the patent claim That occurs when
23 the claim is directed at improvement in computing
24 technology or an innovation that uses computing
25 technology to improve other technological functions
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1 Thats the test that we believe is most faithful to this
2 Courts precedents in Bilski and Mayo It keeps patents
3 within their traditional and appropriate domain and it
4 is capable of being administered consistently by Courts
5 and by PTO examiners
6 JUSTICE GINSBURG How do you answer the
7 argument that your view would extinguish businessshymethod
8 patents and make all software ineligible for patent
9 protection
10 GENERAL VERRILLI Yeah with shyshy let me
11 address software patents first because that I think is
12 obviously a significant question And its just not
13 correct to say that our approach would make software
14 patenting ineligible Any software patent that improves
15 the functioning of the computer technology is eligible
16 Any software patent that improves shyshy that is used to
17 improve another technology is eligible For example
18 the patent in the shyshy in the Diehr case is one in
19 which shyshy
20 JUSTICE SOTOMAYOR Why do we need to reach
21 this in that shyshy reach software patents at all in this
22 case
23 GENERAL VERRILLI Well shyshy
24 JUSTICE SOTOMAYOR Whats the necessity for
25 us to announce a general rule with respect to software
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1 There is no software being patented in this case
2 GENERAL VERRILLI Well I shyshy
3 JUSTICE SOTOMAYOR Theres a systems
4 GENERAL VERRILLI Well I shyshy I think shyshy
5 well they shyshy they shyshy theres a process being and shyshy and
6 one can think of software patents as process patents
7 And I think thats why my friends on the other side are
8 saying the sky is falling because they shyshy they are
9 interpreting what were saying about that when a
10 computer makes shyshy when a computers involvement makes
11 something eligible under 101 its calling those into
12 question and it doesnt
13 JUSTICE SOTOMAYOR Do you think we have to
14 reach the patentability of software to answer this case
15 GENERAL VERRILLI Well I think you can shyshy
16 I think the answer to that question is no not
17 necessarily You can decide it by saying that shyshy that
18 Bilski answers the question whether this is an abstract
19 idea because this form of hedging is really no
20 different than the form of hedging as a conceptual
21 matter at issue in Bilski And then Mayo answers the
22 question of whether the use of a computer in this case
23 adds enough to the abstract idea beyond conventional
24 steps because here all we have after all is just
25 conventional use of computing technology no computer
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1 innovation such that you dont qualify under 101 You
2 could take that approach
3 But it is important to the United States
4 that we shyshy and to our patent examiners that we get some
5 clarity if we can I think the clarity could come from
6 the text that I propose which I want to reiterate shyshy
7 JUSTICE SOTOMAYOR Well shyshy
8 JUSTICE BREYER Could shyshy could shyshy could you
9 go on with that because you were just getting to the
10 point where I think you say a computer improvement that
11 in fact leads to an improvement in harvesting cotton is
12 an improvement through a computer of technology so it
13 qualifies
14 But then I think you were going to say or I
15 got this also from the brief a computer improvement
16 that leads to an improvement in the methods of selling
17 bonds over the telephone is not an improvement in
18 technology reached by the computer Am I right about
19 the distinction youre making
20 GENERAL VERRILLI I dont think theres a
21 yes or no answer to that question
22 JUSTICE BREYER What is your view Yeah
23 what is shyshy how do we deal with just that problem
24 GENERAL VERRILLI If there is a genuine
25 innovation in the functioning of the computer shyshy
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1 JUSTICE BREYER Yes
2 GENERAL VERRILLI shyshy such that business
3 processes shyshy
4 JUSTICE BREYER Weve got that Yes yes
5 We got the computer But then it doesnt improve the
6 computer but rather it improves through the computer
7 the harvesting of cotton
8 Now youve got it in what you said was your
9 second category which is an improvement through the
10 computer of a technology And I thought in your brief
11 you were distinguishing an improvement through the
12 computer of a human activity that is not a technology
13 and in particular to pick an example of that
14 something in finance or something in business
15 Now am I right about the distinction youre
16 making
17 GENERAL VERRILLI Yeah that shyshy
18 JUSTICE BREYER If Im not right what is
19 the distinction
20 GENERAL VERRILLI That is generally the
21 line were drawing Frankly shyshy
22 JUSTICE BREYER And how is that justified
23 GENERAL VERRILLI I do want shyshy
24 JUSTICE BREYER That shyshy that is Judge Dyk
25 in shyshy in Bilski in the Federal circuit 4 people sort of
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1 picked it up maybe 5 didnt pick it up Would you say
2 a few words about it
3 GENERAL VERRILLI Sure About shyshy let me go
4 to Bilski there in that I do think while shyshy while
5 certainly the Court held that the term process got a
6 natural construction which could include business
7 methods it seems to me that thats not all the Court
8 said in Bilski The Court also said that it was
9 historically and traditionally quite rare that business
10 methods were patent eligible
11 It also said that shyshy that the shyshy that courts
12 and the PTO examiners should use the abstract ideas
13 exception to 101 to police the appropriate boundary
14 It also said that the
15 machineshyorshytransformation test that the United States
16 advocated remained a useful tool And of course that
17 directs to you seeing whether there is a technology
18 application
19 And of course the holding in Bilski was
20 that the shyshy the method for hedging risk was ineligible
21 because it was an abstract idea and I cant imagine
22 that if in Bilski the shyshy the claim had been exactly the
23 same but had added use a computer to carry out some of
24 these standard random analysis functions that are
25 claimed by the patent that you would have found it to
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1 be patent eligible
2 And I shyshy I would submit for the Court that
3 the key point here I think is that now given where
4 the Court shyshy what the Court has held in Bilski given
5 what its held in Mayo the abstract ideas exception is
6 really the only tool left to deal with what I shyshy what I
7 think I fairly read Bilski as saying is a significant
8 problem the proliferation of patents of business
9 methods
10 JUSTICE KENNEDY Is there an example that
11 you can give us of a shyshy what we can call a business
12 process that is patentable a process that doesnt
13 involve improving the workings of a computer
14 GENERAL VERRILLI I shyshy I think its going
15 to be difficult for me to do that I think for
16 example if you had a business method a process for
17 additional security pointshyofshysale credit card
18 transactions using particular encryption technology
19 that might well be patent eligible Its a technology
20 that it makes conduct of business more efficient or
21 effective
22 But there is a technological link here and
23 we do think thats critical to our shyshy to our point of
24 view with respect to the case And I shyshy and I do think
25 remember that when we say something is not patent
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1 eligible were not saying they cant do it Were
2 saying they cant monopolize it
3 And the concern in a situation like this one
4 is that if this is patent eligible its hard to see
5 why for example the first person who came up with a
6 frequent flier program wouldnt have been able to claim
7 a patent there because after all thats a business
8 method for improving customer loyalty implemented on a
9 computer
10 CHIEF JUSTICE ROBERTS General I shyshy you
11 mentioned a while ago the need for greater clarity and
12 certainty in this area And Im just wondering in your
13 brief youve got a nonshyexhaustive of factors to
14 consider and there are 6 different ones And Im just
15 doubtful that thats going to bring about greater
16 clarity and certainty
17 GENERAL VERRILLI I take shyshy I take the
18 point Mr Chief Justice but I think the key is that
19 they are all directed to answering the question of
20 whether the innovation that is claimed and is an
21 innovation in either A the improvement of a computers
22 functioning or B the use of computer technology to
23 improve the functioning of another technological
24 process and a case like Diehr would be in the latter
25 category
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1 And so I do think that thats the key
2 benchmark Thats the baseline Thats the test that
3 we do think can be applied clearly and consistently by
4 the courts or the PTO And it avoids the risk of things
5 like frequent flier programs or the Oakland As money
6 ball methods for evaluating the contributions in
7 individual baseball players make or any one of a host of
8 other things that our intuitions tell us just dont
9 belong in the patent system
10 Thats the shyshy drawing that line keeps them
11 out not drawing that line lets them in And with all
12 due respect I dont think that the novelty and
13 nonobviousness filters that 102 and 103 really deal with
14 that problem effectively because when you get to
15 nonobviousness in 103 for example youll be asking a
16 different question
17 If you take the frequent flier program you
18 would say well is this innovation in building consumer
19 loyalty something that would have been obvious to
20 somebody who runs an airline Its totally divorced
21 from the question of technology at that point and
22 therefore I dont think youre going to get the screen
23 that you need to get in order for the patent system to
24 be confined to its traditional and appropriate scope
25 If there are no further questions thank
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1 you
2 JUSTICE GINSBURG I have a question about
3 how do you identify an abstract concept The shyshy a
4 natural phenomenon a mathematical formula those are
5 easy to identify but there has been some confusion on
6 what qualifies as an abstract concept
7 GENERAL VERRILLI We would define
8 abstract shyshy an abstract concept as a claim that is not
9 directed to a concrete innovation in technology
10 science or the industrial arts So its the shyshy its
11 abstract in the sense that it is not a concrete
12 innovation in the traditional realm of patent law
13 Thank you
14 CHIEF JUSTICE ROBERTS Thank you General
15 Mr Phillips you have four minutes
16 remaining
17 REBUTTAL ARGUMENT OF CARTER G PHILLIPS
18 ON BEHALF OF THE PETITIONERS
19 MR PHILLIPS Thank you Mr Chief Justice
20 Id just like to make a few points
21 First of all with respect to the question
22 you asked which is looking at 159 et cetera all I can
23 tell you is that if you look at claim 33 it talks about
24 matched orders the matched orders that are described in
25 286 and 287 and then makes specific reference to 159
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1 and that flow chart thats there And its all designed
2 as a package Its only one element of the shyshy of the
3 invention but it is a central element and its an easy
4 one to understand And it goes well beyond simply the
5 notion of hedge shyshy hedge against settlement risk and do
6 it by a computer
7 JUSTICE SOTOMAYOR Your adversary says that
8 his shyshy the appendix to his brief are the only patents at
9 issue that the flow charts are not at issue in this
10 case
11 MR PHILLIPS Theres no basis for that
12 statement Your Honor There shyshy remember this went off
13 on a very truncated litigation process So theres shyshy
14 you know we shyshy we got cut off at the beginning of it
15 Theres been no construction of the shyshy of the claims
16 and shyshy and obviously these are specifications that go
17 to how you interpret the claim
18 JUSTICE SOTOMAYOR If we were to say that
19 there are no business patents shyshy
20 MR PHILLIPS Yes
21 JUSTICE SOTOMAYOR shyshy would your patent
22 survive at all
23 MR PHILLIPS No I dont shyshy I dont
24 believe so I think theres no question And you
25 know General Verrilli could not have been any plainer
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1 in his statement of how he wants to interpret the
2 abstract idea concept
3 JUSTICE SOTOMAYOR Yes he wants to say no
4 business patents
5 MR PHILLIPS No business shyshy just another
6 way of saying no business methods And you know the
7 Court rejected that And it seems to me extraordinary
8 to say Congress didnt reject no business methods in
9 101 but were going to do shyshy were going to manipulate
10 the judicial exception to accomplish precisely that same
11 thing It seems to me thats wholly inappropriate
12 Justice Ginsburg you asked my shyshy my friend
13 here you know whats his test He didnt answer that
14 question youll notice because he doesnt have an
15 answer His basic argument is whatever you do just
16 kill this patent
17 And if I were in his shoes I suppose Id
18 take that same position I think whats absolutely
19 clear is that the test ought to be one that is
20 structured as a very coarse filter not the kind of
21 filter that hes pushing for where it changes over time
22 I mean I thought his shyshy I thought his response to one
23 of the questions about eshymail and word processing that
24 Justice Sotomayor asked is over time it would change
25 Well thats exactly what 102 and 103 are for That is
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1 not the purpose of shyshy of Section 101
2 And then he uses the example of encryption
3 I guarantee you if we were arguing about encryption in
4 this case he would say to me that thats an abstract
5 principle because encryption is a concept thats been
6 around since time immemorial George Washington used
7 it Everybody has used encryption
8 And a question again thats not the
9 solution to these problems The question is how did we
10 go about doing it And we go beyond the basics of
11 simply saying use a computer and thats what we ask
12 this Court to focus on and to evaluate
13 As to the frequent flier program its
14 pretty clear to me that even though it was a novel idea
15 in some sense the concept itself would have been viewed
16 in shyshy in the KSR fashion as quite obvious as a means of
17 improving customer loyalty
18 There are solutions here Giving us 101
19 pass doesnt create a monopoly It just gets us to the
20 102 and 103 inquiries that are at the heart of what the
21 patent laws shyshy and 112 that are at the heart of what the
22 patent laws ought to be dealing with
23 If there are no further questions Your
24 Honor thank you
25 CHIEF JUSTICE ROBERTS Thank you counsel
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1 The case is submitted
2 (Whereupon at 1105 am the case in the
3 aboveshyentitled matter was submitted)
4
5
6
7
8
9
10
11
12
13
14
15
16
17
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58
A add 714 1023 algorithm 3320 41 automatically
As 525 3621 387 algorithms apply 72425 111
am 115 32 416 3013 3310 2019 281213 automobile 389
572 added 302 Alice 13 34 2822 3814 available 99
abacus 61213 4923 363 3717 4217 avenues 4124
710 1018 additional 5017 3822 4117 applying 4213 avoids 524
1325 3614 3617
address 4121 4317 4511
Alices 271 2919 3678
approach 226 395 4513 B
ability 1514 addressed 435 allow 94 472 B 121 29 4413
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5412 wholly 5511 willing 377 wondering
5112 word 52021
821 228 2813 3418 35517 363 417 5523
words 713 291 3422 3711 3819 492
work 51719 1124 2110 312 3322 374
workings 5013 world 2018
2510 3011 3816
wouldnt 414 415 2514 3313 516
write 264 writers 132325 written 617
1716 2925 304 4022
1 1004 115 32 100 3615 101 3121522
414 65 1715 18267 2019 2324 2467 2545 2658 3622 3824 4022 414 4323 44321 4611 471 4913 559 56118
102 1717 187 2325 2425 5213 5525 5620
103 1717 187 2325 2435 521315 5525 5620
11 2445 1105 572 112 1921 4020
4021 5621 12 4324 13shy298 15 34
3 3 24 30 259 31 111 33 3118 5323 37 3118
4 4 325 4825 42 1524 1618 44 211
5 5 491 510 3019 411 53 214 57 4322
6 6 5114 65 3019
7
8
9 9 245 9shy0 365
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1 represent an advancement in computer science or other
2 technology And we know thats not met here Justice
3 Sotomayor because shyshy
4 JUSTICE SOTOMAYOR So youre saying no to
5 eshymail and word processing
6 MR PERRY Your Honor I think at a
7 point shyshy
8 JUSTICE SOTOMAYOR They certainly have
9 functionality and shyshy and improvement of functionality
10 for the user
11 MR PERRY At a point in time in the past
12 I think both of those would have been technological
13 advances that were patentable
14 JUSTICE SOTOMAYOR How
15 MR PERRY Today shyshy because they would have
16 provided a technological solution to a then unmet
17 problem Today reciting and do it on a word processor
18 is no different than and do it on a typewriter or shyshy and
19 do it on a calculator
20 The inventive contribution component which
21 uses specifically the language of conventional and
22 routine and well understood will evolve with
23 technology Thats why its different than the abstract
24 idea component
25 And here we know that these patents dont
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1 claim anything that was not conventional well
2 understood and routine We went through that in great
3 detail and Alice has never disputed a word of it They
4 just say youre not supposed to do that analysis even
5 though the Court 9shy0 in Mayo said we should
6 And in this case its very important to
7 look at what Alices own experts said on the subject
8 This is not our expert This is Alices expert And
9 this is at Page 1327shy28 of the Joint Appendix It is
10 possible to do the business methods of maintaining
11 accounts adjusting accounts and providing an
12 instruction without a computer or other hardware
13 And then Justice Breyer directly to your
14 abacus If someone had thought of this invention
15 soshycalled invention 100 years ago they might have
16 implemented it in a nonelectronic manner using various
17 precomputing tools such as an abacus or handwritten
18 ledgers
19 We know from Benson the Courts seminal
20 computer implementation case that if you can do it by
21 head and hand then the computer doesnt add anything
22 inventive within the meaning of the 101 exception That
23 is the holding of Benson And the Court reiterated that
24 in Mayo
25 Flook said exactly the same thing If you
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1 can do it with pencil and paper then the computer is
2 not offering anything that the patent laws are or should
3 be concerned with
4 It is only where the method will not work
5 without a computer which is not these claims and where
6 the computer itself is doing something that the patent
7 law is willing to protect
8 CHIEF JUSTICE ROBERTS What if shyshy what if
9 you can do it without a computer but its going to
10 take you know 20 people a hundred years In other
11 words theoretically you can replicate what the
12 computer does shyshy
13 MR PERRY Two answers
14 CHIEF JUSTICE ROBERTS shyshy but its
15 impractical without looking to do it on the computer
16 MR PERRY Mr Chief Justice first these
17 claims literally read as Alice reads them on a single
18 transaction between two parties so its not 20 people
19 for a hundred years Its one person sitting in a room
20 so thats not a problem
21 Second if what is being claimed is the
22 necessary speed or efficiency or data crunching
23 capabilities if you will of a computer then it would
24 have to be claimed and theres nothing claimed here
25 All that is claimed shyshy and my friend is going to stand
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1 up on rebuttal and tell you all that the expert said
2 well what is claimed is a computer but its just a
3 computer It just says a computer configured too It
4 doesnt say that the computer actually has to shyshy
5 JUSTICE BREYER Yeah but the trouble with
6 that particular test is as I think partly the Chief
7 Justice said how long et cetera and then add to that
8 though you could do it without a computer what happens
9 at the end of the line is the automobile engine goes off
10 or it begins to sputter or it turns left
11 You see its possible to take Archimedes shyshy
12 shyshy you know I use that example purposely to call
13 attention to the problem You can take those things
14 and youre not just saying apply it and youre not even
15 just saying shyshy you are saying use the computer but at
16 the end of the road something physical in the world
17 changes and everybody would say now thats shyshy that
18 will falls within I mean probably I mean my
19 hesitation shows Im looking for the right words
20 MR PERRY Justice Breyer your point is
21 the reason that it is equally fallacious to suggest on
22 the one hand as Alice and IBM does that simply
23 reciting a computer is a magic key that gets you through
24 101 and you never have to any other inquiry and what
25 some of folks the amici on the other side say which
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1 is that computers or software are never eligible Both
2 of those things have to be wrong because what the Court
3 said in Bilski was future innovation is too uncertain
4 We are not going to do that as a Court And the Court
5 laid out an approach using abstract ideas in Bilski and
6 inventive contribution in Mayo that is flexible enough
7 to take into account that innovation and to deal with
8 particular claims in context which is why at the end
9 of the day we have to come back to these patents and
10 decide which shyshy
11 JUSTICE KAGAN Mr Perry before we get
12 back to these matters you said to Justice Scalia if a
13 patent sufficiently describes how a computer will
14 implement an idea then its patentable So how
15 sufficiently does one have to describe it What do we
16 want a judge to do at this threshold level in terms of
17 trying to figure out whether the description is
18 sufficient to get you past it
19 MR PERRY If I can answer in two steps
20 Justice Kagan First in the negative What the
21 applicant or patentee must do shyshy must not do is simply
22 describe the desired result That would take us back to
23 State Street That would simply say I claim a magic
24 box that buys high and sells low or vice versa I
25 suppose I claim a magic box for investing Thats what
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1 these patents do
2 Then to put it in the affirmative and in the
3 language of Mayo the claim has to recite something
4 significantly more something significantly more than
5 the abstract idea itself That would be a contextual
6 analysis based on the claims and specifications and file
7 history and we know that some devices some methods
8 some programming will pass that
9 It is not going to be a brightshyline rule and
10 thats one of the tugshyofshywar issues that this Court and
11 the Federal Circuit have been having in these cases
12 The Federal Circuit wants brightshyline rules All
13 computers are in or all computers are out
14 This Court has been more contextual This
15 Court has been more nuanced This Court has looked at
16 things in a more robust way
17 JUSTICE KAGAN Youre not suggesting that
18 specific code is necessary
19 MR PERRY No Your Honor I think the shyshy
20 actual description of the programming is a 112 problem
21 I agree with that A 112 issue That is the realm of
22 the written description requirement What is a 101
23 problem is it is on the applicant to do more than simply
24 describe the results simply say A magic box that does
25 intermediate settlement And we can tie that back to
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1 this particular prosecution the 510 patent which is
2 the method patent
3 The examiner rejected it Under Section
4 101 the examiner said this is an abstract idea You
5 cant have this patent And the only change that this
6 applicant made was to add in the adjusting step
7 electronic adjustment It put in one word
8 electronic adjustment And under State Street which
9 is what this patent is prosecuted under that was
10 enough because the result of adjusting run through a
11 computer is enough
12 Under current law that cant be enough
13 That just cant get a patent over the line because this
14 Court said in Mayo and I got to quote this language
15 Simply implementing a fundamental principle on a
16 physical machine namely a computer is not a patentable
17 application of that principle Thats all that Alice
18 has done
19 These are preshyBilski patents They never
20 should have been issued General Verrilli will stand up
21 and address that point And certainly under current
22 law shyshy one point on the AIA Congress did not send all
23 this to the administrative process Congress created
24 two avenues the courts and the PTO to use the
25 standards Essentially it ratified Bilski and Mayo and
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1 said we agree with what you all are doing at the
2 Supreme Court and the existing standards are good enough
3 for us This is a judicial problem And that is a good
4 reason The abstract shyshy
5 JUSTICE GINSBURG The Federal Circuit in
6 this case split in many ways and it had our decisions
7 to deal with You said given Bilski and Mayo this is
8 an easy case What is the instruction that escaped a
9 good number of judges on the Federal Circuit How would
10 you state the rule
11 MR PERRY Your Honor I think theres a
12 significant element to the Federal Circuit that
13 disagrees with Mayo and has been resistant in applying
14 it Chief Judge shyshy former Chief Judge Michelle filed a
15 brief in this Court essentially saying Mayo is a
16 lifeshysciences case You should limit it to that because
17 if you apply it to everything else then these patents
18 are no good
19 Mayo we submit is a technologyshyneutral
20 industryshyneutral exceptionshyneutral framework that can
21 be used to answer all of these questions This is not
22 the death of software patents The software industry is
23 all before this Court saying this is fine with us
24 Every company in the United States practically except
25 for IBM is saying go ahead This will not affect
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1 software patents
2 Justice Ginsburg this Courts precedents
3 are clear They are unanimous They just need to be
4 applied To suggest that there is confusion that needs
5 to be addressed by retreating beating a retreat from
6 recent unanimous decisions would simply reward
7 intransigence difficulty refusal to adhere to what are
8 clear precedents because shyshy
9 JUSTICE KAGAN Should we be concerned
10 Mr Perry that there are old patents that in fact could
11 meet the test that you set forth but wont because they
12 were written in a different time and so used much more
13 general language
14 MR PERRY Your Honor the applicant or the
15 patent holder would have the opportunity to institute a
16 reexamination proceeding or some sort of administration
17 process to address that issue
18 And second it should be noted this is a
19 very small problem There are 2 million outstanding
20 patents in the United States In the last four fiscal
21 years there were 22000 infringement litigations
22 instituted but since Bilski there have only been 57
23 district court decisions on Section 101 issues There
24 have only been 12 Federal Circuit decisions total on
25 computer implementation
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1 We are talking about a group of patents
2 Justice Kagan thats way out at the tail end of
3 distribution Most patents never have a 101 challenge
4 This is not an issue with cotton gins and other things
5 This is a problem for the most marginal
6 most dubious most skeptical patents the ones that this
7 Court in Bilski shyshy and remember what Bilskis holding
8 is The majority said they are processes but it did
9 not say they are eligible
10 Thank you Mr Chief Justice
11 CHIEF JUSTICE ROBERTS Thank you counsel
12 General Verrilli
13 ORAL ARGUMENT OF DONALD B VERRILLI JR
14 ON BEHALF OF THE UNITED STATES AS AMICUS
15 CURIAE SUPPORTING RESPONDENTS
16 GENERAL VERRILLI Mr Chief Justice and
17 may it please the Court
18 An abstract idea does not become
19 patentshyeligible merely by tacking on an instruction to
20 use a computer to carry it out A computer makes a
21 difference under Section 101 when it imposes a
22 meaningful limit on the patent claim That occurs when
23 the claim is directed at improvement in computing
24 technology or an innovation that uses computing
25 technology to improve other technological functions
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1 Thats the test that we believe is most faithful to this
2 Courts precedents in Bilski and Mayo It keeps patents
3 within their traditional and appropriate domain and it
4 is capable of being administered consistently by Courts
5 and by PTO examiners
6 JUSTICE GINSBURG How do you answer the
7 argument that your view would extinguish businessshymethod
8 patents and make all software ineligible for patent
9 protection
10 GENERAL VERRILLI Yeah with shyshy let me
11 address software patents first because that I think is
12 obviously a significant question And its just not
13 correct to say that our approach would make software
14 patenting ineligible Any software patent that improves
15 the functioning of the computer technology is eligible
16 Any software patent that improves shyshy that is used to
17 improve another technology is eligible For example
18 the patent in the shyshy in the Diehr case is one in
19 which shyshy
20 JUSTICE SOTOMAYOR Why do we need to reach
21 this in that shyshy reach software patents at all in this
22 case
23 GENERAL VERRILLI Well shyshy
24 JUSTICE SOTOMAYOR Whats the necessity for
25 us to announce a general rule with respect to software
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1 There is no software being patented in this case
2 GENERAL VERRILLI Well I shyshy
3 JUSTICE SOTOMAYOR Theres a systems
4 GENERAL VERRILLI Well I shyshy I think shyshy
5 well they shyshy they shyshy theres a process being and shyshy and
6 one can think of software patents as process patents
7 And I think thats why my friends on the other side are
8 saying the sky is falling because they shyshy they are
9 interpreting what were saying about that when a
10 computer makes shyshy when a computers involvement makes
11 something eligible under 101 its calling those into
12 question and it doesnt
13 JUSTICE SOTOMAYOR Do you think we have to
14 reach the patentability of software to answer this case
15 GENERAL VERRILLI Well I think you can shyshy
16 I think the answer to that question is no not
17 necessarily You can decide it by saying that shyshy that
18 Bilski answers the question whether this is an abstract
19 idea because this form of hedging is really no
20 different than the form of hedging as a conceptual
21 matter at issue in Bilski And then Mayo answers the
22 question of whether the use of a computer in this case
23 adds enough to the abstract idea beyond conventional
24 steps because here all we have after all is just
25 conventional use of computing technology no computer
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1 innovation such that you dont qualify under 101 You
2 could take that approach
3 But it is important to the United States
4 that we shyshy and to our patent examiners that we get some
5 clarity if we can I think the clarity could come from
6 the text that I propose which I want to reiterate shyshy
7 JUSTICE SOTOMAYOR Well shyshy
8 JUSTICE BREYER Could shyshy could shyshy could you
9 go on with that because you were just getting to the
10 point where I think you say a computer improvement that
11 in fact leads to an improvement in harvesting cotton is
12 an improvement through a computer of technology so it
13 qualifies
14 But then I think you were going to say or I
15 got this also from the brief a computer improvement
16 that leads to an improvement in the methods of selling
17 bonds over the telephone is not an improvement in
18 technology reached by the computer Am I right about
19 the distinction youre making
20 GENERAL VERRILLI I dont think theres a
21 yes or no answer to that question
22 JUSTICE BREYER What is your view Yeah
23 what is shyshy how do we deal with just that problem
24 GENERAL VERRILLI If there is a genuine
25 innovation in the functioning of the computer shyshy
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1 JUSTICE BREYER Yes
2 GENERAL VERRILLI shyshy such that business
3 processes shyshy
4 JUSTICE BREYER Weve got that Yes yes
5 We got the computer But then it doesnt improve the
6 computer but rather it improves through the computer
7 the harvesting of cotton
8 Now youve got it in what you said was your
9 second category which is an improvement through the
10 computer of a technology And I thought in your brief
11 you were distinguishing an improvement through the
12 computer of a human activity that is not a technology
13 and in particular to pick an example of that
14 something in finance or something in business
15 Now am I right about the distinction youre
16 making
17 GENERAL VERRILLI Yeah that shyshy
18 JUSTICE BREYER If Im not right what is
19 the distinction
20 GENERAL VERRILLI That is generally the
21 line were drawing Frankly shyshy
22 JUSTICE BREYER And how is that justified
23 GENERAL VERRILLI I do want shyshy
24 JUSTICE BREYER That shyshy that is Judge Dyk
25 in shyshy in Bilski in the Federal circuit 4 people sort of
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1 picked it up maybe 5 didnt pick it up Would you say
2 a few words about it
3 GENERAL VERRILLI Sure About shyshy let me go
4 to Bilski there in that I do think while shyshy while
5 certainly the Court held that the term process got a
6 natural construction which could include business
7 methods it seems to me that thats not all the Court
8 said in Bilski The Court also said that it was
9 historically and traditionally quite rare that business
10 methods were patent eligible
11 It also said that shyshy that the shyshy that courts
12 and the PTO examiners should use the abstract ideas
13 exception to 101 to police the appropriate boundary
14 It also said that the
15 machineshyorshytransformation test that the United States
16 advocated remained a useful tool And of course that
17 directs to you seeing whether there is a technology
18 application
19 And of course the holding in Bilski was
20 that the shyshy the method for hedging risk was ineligible
21 because it was an abstract idea and I cant imagine
22 that if in Bilski the shyshy the claim had been exactly the
23 same but had added use a computer to carry out some of
24 these standard random analysis functions that are
25 claimed by the patent that you would have found it to
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1 be patent eligible
2 And I shyshy I would submit for the Court that
3 the key point here I think is that now given where
4 the Court shyshy what the Court has held in Bilski given
5 what its held in Mayo the abstract ideas exception is
6 really the only tool left to deal with what I shyshy what I
7 think I fairly read Bilski as saying is a significant
8 problem the proliferation of patents of business
9 methods
10 JUSTICE KENNEDY Is there an example that
11 you can give us of a shyshy what we can call a business
12 process that is patentable a process that doesnt
13 involve improving the workings of a computer
14 GENERAL VERRILLI I shyshy I think its going
15 to be difficult for me to do that I think for
16 example if you had a business method a process for
17 additional security pointshyofshysale credit card
18 transactions using particular encryption technology
19 that might well be patent eligible Its a technology
20 that it makes conduct of business more efficient or
21 effective
22 But there is a technological link here and
23 we do think thats critical to our shyshy to our point of
24 view with respect to the case And I shyshy and I do think
25 remember that when we say something is not patent
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1 eligible were not saying they cant do it Were
2 saying they cant monopolize it
3 And the concern in a situation like this one
4 is that if this is patent eligible its hard to see
5 why for example the first person who came up with a
6 frequent flier program wouldnt have been able to claim
7 a patent there because after all thats a business
8 method for improving customer loyalty implemented on a
9 computer
10 CHIEF JUSTICE ROBERTS General I shyshy you
11 mentioned a while ago the need for greater clarity and
12 certainty in this area And Im just wondering in your
13 brief youve got a nonshyexhaustive of factors to
14 consider and there are 6 different ones And Im just
15 doubtful that thats going to bring about greater
16 clarity and certainty
17 GENERAL VERRILLI I take shyshy I take the
18 point Mr Chief Justice but I think the key is that
19 they are all directed to answering the question of
20 whether the innovation that is claimed and is an
21 innovation in either A the improvement of a computers
22 functioning or B the use of computer technology to
23 improve the functioning of another technological
24 process and a case like Diehr would be in the latter
25 category
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1 And so I do think that thats the key
2 benchmark Thats the baseline Thats the test that
3 we do think can be applied clearly and consistently by
4 the courts or the PTO And it avoids the risk of things
5 like frequent flier programs or the Oakland As money
6 ball methods for evaluating the contributions in
7 individual baseball players make or any one of a host of
8 other things that our intuitions tell us just dont
9 belong in the patent system
10 Thats the shyshy drawing that line keeps them
11 out not drawing that line lets them in And with all
12 due respect I dont think that the novelty and
13 nonobviousness filters that 102 and 103 really deal with
14 that problem effectively because when you get to
15 nonobviousness in 103 for example youll be asking a
16 different question
17 If you take the frequent flier program you
18 would say well is this innovation in building consumer
19 loyalty something that would have been obvious to
20 somebody who runs an airline Its totally divorced
21 from the question of technology at that point and
22 therefore I dont think youre going to get the screen
23 that you need to get in order for the patent system to
24 be confined to its traditional and appropriate scope
25 If there are no further questions thank
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1 you
2 JUSTICE GINSBURG I have a question about
3 how do you identify an abstract concept The shyshy a
4 natural phenomenon a mathematical formula those are
5 easy to identify but there has been some confusion on
6 what qualifies as an abstract concept
7 GENERAL VERRILLI We would define
8 abstract shyshy an abstract concept as a claim that is not
9 directed to a concrete innovation in technology
10 science or the industrial arts So its the shyshy its
11 abstract in the sense that it is not a concrete
12 innovation in the traditional realm of patent law
13 Thank you
14 CHIEF JUSTICE ROBERTS Thank you General
15 Mr Phillips you have four minutes
16 remaining
17 REBUTTAL ARGUMENT OF CARTER G PHILLIPS
18 ON BEHALF OF THE PETITIONERS
19 MR PHILLIPS Thank you Mr Chief Justice
20 Id just like to make a few points
21 First of all with respect to the question
22 you asked which is looking at 159 et cetera all I can
23 tell you is that if you look at claim 33 it talks about
24 matched orders the matched orders that are described in
25 286 and 287 and then makes specific reference to 159
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54
1 and that flow chart thats there And its all designed
2 as a package Its only one element of the shyshy of the
3 invention but it is a central element and its an easy
4 one to understand And it goes well beyond simply the
5 notion of hedge shyshy hedge against settlement risk and do
6 it by a computer
7 JUSTICE SOTOMAYOR Your adversary says that
8 his shyshy the appendix to his brief are the only patents at
9 issue that the flow charts are not at issue in this
10 case
11 MR PHILLIPS Theres no basis for that
12 statement Your Honor There shyshy remember this went off
13 on a very truncated litigation process So theres shyshy
14 you know we shyshy we got cut off at the beginning of it
15 Theres been no construction of the shyshy of the claims
16 and shyshy and obviously these are specifications that go
17 to how you interpret the claim
18 JUSTICE SOTOMAYOR If we were to say that
19 there are no business patents shyshy
20 MR PHILLIPS Yes
21 JUSTICE SOTOMAYOR shyshy would your patent
22 survive at all
23 MR PHILLIPS No I dont shyshy I dont
24 believe so I think theres no question And you
25 know General Verrilli could not have been any plainer
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1 in his statement of how he wants to interpret the
2 abstract idea concept
3 JUSTICE SOTOMAYOR Yes he wants to say no
4 business patents
5 MR PHILLIPS No business shyshy just another
6 way of saying no business methods And you know the
7 Court rejected that And it seems to me extraordinary
8 to say Congress didnt reject no business methods in
9 101 but were going to do shyshy were going to manipulate
10 the judicial exception to accomplish precisely that same
11 thing It seems to me thats wholly inappropriate
12 Justice Ginsburg you asked my shyshy my friend
13 here you know whats his test He didnt answer that
14 question youll notice because he doesnt have an
15 answer His basic argument is whatever you do just
16 kill this patent
17 And if I were in his shoes I suppose Id
18 take that same position I think whats absolutely
19 clear is that the test ought to be one that is
20 structured as a very coarse filter not the kind of
21 filter that hes pushing for where it changes over time
22 I mean I thought his shyshy I thought his response to one
23 of the questions about eshymail and word processing that
24 Justice Sotomayor asked is over time it would change
25 Well thats exactly what 102 and 103 are for That is
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1 not the purpose of shyshy of Section 101
2 And then he uses the example of encryption
3 I guarantee you if we were arguing about encryption in
4 this case he would say to me that thats an abstract
5 principle because encryption is a concept thats been
6 around since time immemorial George Washington used
7 it Everybody has used encryption
8 And a question again thats not the
9 solution to these problems The question is how did we
10 go about doing it And we go beyond the basics of
11 simply saying use a computer and thats what we ask
12 this Court to focus on and to evaluate
13 As to the frequent flier program its
14 pretty clear to me that even though it was a novel idea
15 in some sense the concept itself would have been viewed
16 in shyshy in the KSR fashion as quite obvious as a means of
17 improving customer loyalty
18 There are solutions here Giving us 101
19 pass doesnt create a monopoly It just gets us to the
20 102 and 103 inquiries that are at the heart of what the
21 patent laws shyshy and 112 that are at the heart of what the
22 patent laws ought to be dealing with
23 If there are no further questions Your
24 Honor thank you
25 CHIEF JUSTICE ROBERTS Thank you counsel
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1 The case is submitted
2 (Whereupon at 1105 am the case in the
3 aboveshyentitled matter was submitted)
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
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58
A add 714 1023 algorithm 3320 41 automatically
As 525 3621 387 algorithms apply 72425 111
am 115 32 416 3013 3310 2019 281213 automobile 389
572 added 302 Alice 13 34 2822 3814 available 99
abacus 61213 4923 363 3717 4217 avenues 4124
710 1018 additional 5017 3822 4117 applying 4213 avoids 524
1325 3614 3617
address 4121 4317 4511
Alices 271 2919 3678
approach 226 395 4513 B
ability 1514 addressed 435 allow 94 472 B 121 29 4413
able 1511 167 addressing 181 allows 97 242 appropriate 5122
1919 516 adds 4623 amazing 2514 81516 1514 back 1621
aboveshyentitled adhere 437 amici 3825 453 4913 1922 2512
113 573 adjudication amicus 123 5224 3018 322
absolutely 125 241 210 4414 Archimedes 3991222
1215 159 adjusting 3611 analysis 424 281122 3811 4025
5518 41610 364 406 area 219 5112 ball 526
abstract 4267 adjustment 417 4924 argue 2518 Bank 17 35
48 6682023 418 analyze 1416 arguing 563 banks 95
721 8218 administered 1716 argument 114 bars 43
141920 1522 454 announce 4525 225812 33 baseball 527
165 181618 administration answer 119 37 41 144 based 423 406
2220 24925 4316 2219 247 18323 226 baseline 522
2621 277 administrative 3919 4221 26715 4413 basic 413 5515
2938 3422 171218 187 456 461416 457 5317 basically 1821
3523 395 242 4123 4721 551315 5515 2319
405 414 424 adopt 203 answering 5119 arguments basics 5610
4418 461823 adopted 31317 answers 3713 1415 basis 132 1512
491221 505 advancement 461821 arms 1625 1516 2719
53368811 351 anyway 1810 arrangements 5411
552 564 advances 3513 apparatus 2916 131 beating 435
accept 102 adversary 547 APPEARAN arrows 315 beginning 163
accomplish advice 1715 116 art 1919 5414
5510 advocated 4916 appears 820 arts 2124 5310 begins 3810
account 55 618 affect 4225 appendix 1910 aside 1422 157 behalf 11719
397 affirmative 402 311 326 369 asked 2314 122 24710
accounts 823 agent 52 3021 548 278 5322 214 38 2616
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1 claim anything that was not conventional well
2 understood and routine We went through that in great
3 detail and Alice has never disputed a word of it They
4 just say youre not supposed to do that analysis even
5 though the Court 9shy0 in Mayo said we should
6 And in this case its very important to
7 look at what Alices own experts said on the subject
8 This is not our expert This is Alices expert And
9 this is at Page 1327shy28 of the Joint Appendix It is
10 possible to do the business methods of maintaining
11 accounts adjusting accounts and providing an
12 instruction without a computer or other hardware
13 And then Justice Breyer directly to your
14 abacus If someone had thought of this invention
15 soshycalled invention 100 years ago they might have
16 implemented it in a nonelectronic manner using various
17 precomputing tools such as an abacus or handwritten
18 ledgers
19 We know from Benson the Courts seminal
20 computer implementation case that if you can do it by
21 head and hand then the computer doesnt add anything
22 inventive within the meaning of the 101 exception That
23 is the holding of Benson And the Court reiterated that
24 in Mayo
25 Flook said exactly the same thing If you
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1 can do it with pencil and paper then the computer is
2 not offering anything that the patent laws are or should
3 be concerned with
4 It is only where the method will not work
5 without a computer which is not these claims and where
6 the computer itself is doing something that the patent
7 law is willing to protect
8 CHIEF JUSTICE ROBERTS What if shyshy what if
9 you can do it without a computer but its going to
10 take you know 20 people a hundred years In other
11 words theoretically you can replicate what the
12 computer does shyshy
13 MR PERRY Two answers
14 CHIEF JUSTICE ROBERTS shyshy but its
15 impractical without looking to do it on the computer
16 MR PERRY Mr Chief Justice first these
17 claims literally read as Alice reads them on a single
18 transaction between two parties so its not 20 people
19 for a hundred years Its one person sitting in a room
20 so thats not a problem
21 Second if what is being claimed is the
22 necessary speed or efficiency or data crunching
23 capabilities if you will of a computer then it would
24 have to be claimed and theres nothing claimed here
25 All that is claimed shyshy and my friend is going to stand
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1 up on rebuttal and tell you all that the expert said
2 well what is claimed is a computer but its just a
3 computer It just says a computer configured too It
4 doesnt say that the computer actually has to shyshy
5 JUSTICE BREYER Yeah but the trouble with
6 that particular test is as I think partly the Chief
7 Justice said how long et cetera and then add to that
8 though you could do it without a computer what happens
9 at the end of the line is the automobile engine goes off
10 or it begins to sputter or it turns left
11 You see its possible to take Archimedes shyshy
12 shyshy you know I use that example purposely to call
13 attention to the problem You can take those things
14 and youre not just saying apply it and youre not even
15 just saying shyshy you are saying use the computer but at
16 the end of the road something physical in the world
17 changes and everybody would say now thats shyshy that
18 will falls within I mean probably I mean my
19 hesitation shows Im looking for the right words
20 MR PERRY Justice Breyer your point is
21 the reason that it is equally fallacious to suggest on
22 the one hand as Alice and IBM does that simply
23 reciting a computer is a magic key that gets you through
24 101 and you never have to any other inquiry and what
25 some of folks the amici on the other side say which
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1 is that computers or software are never eligible Both
2 of those things have to be wrong because what the Court
3 said in Bilski was future innovation is too uncertain
4 We are not going to do that as a Court And the Court
5 laid out an approach using abstract ideas in Bilski and
6 inventive contribution in Mayo that is flexible enough
7 to take into account that innovation and to deal with
8 particular claims in context which is why at the end
9 of the day we have to come back to these patents and
10 decide which shyshy
11 JUSTICE KAGAN Mr Perry before we get
12 back to these matters you said to Justice Scalia if a
13 patent sufficiently describes how a computer will
14 implement an idea then its patentable So how
15 sufficiently does one have to describe it What do we
16 want a judge to do at this threshold level in terms of
17 trying to figure out whether the description is
18 sufficient to get you past it
19 MR PERRY If I can answer in two steps
20 Justice Kagan First in the negative What the
21 applicant or patentee must do shyshy must not do is simply
22 describe the desired result That would take us back to
23 State Street That would simply say I claim a magic
24 box that buys high and sells low or vice versa I
25 suppose I claim a magic box for investing Thats what
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1 these patents do
2 Then to put it in the affirmative and in the
3 language of Mayo the claim has to recite something
4 significantly more something significantly more than
5 the abstract idea itself That would be a contextual
6 analysis based on the claims and specifications and file
7 history and we know that some devices some methods
8 some programming will pass that
9 It is not going to be a brightshyline rule and
10 thats one of the tugshyofshywar issues that this Court and
11 the Federal Circuit have been having in these cases
12 The Federal Circuit wants brightshyline rules All
13 computers are in or all computers are out
14 This Court has been more contextual This
15 Court has been more nuanced This Court has looked at
16 things in a more robust way
17 JUSTICE KAGAN Youre not suggesting that
18 specific code is necessary
19 MR PERRY No Your Honor I think the shyshy
20 actual description of the programming is a 112 problem
21 I agree with that A 112 issue That is the realm of
22 the written description requirement What is a 101
23 problem is it is on the applicant to do more than simply
24 describe the results simply say A magic box that does
25 intermediate settlement And we can tie that back to
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1 this particular prosecution the 510 patent which is
2 the method patent
3 The examiner rejected it Under Section
4 101 the examiner said this is an abstract idea You
5 cant have this patent And the only change that this
6 applicant made was to add in the adjusting step
7 electronic adjustment It put in one word
8 electronic adjustment And under State Street which
9 is what this patent is prosecuted under that was
10 enough because the result of adjusting run through a
11 computer is enough
12 Under current law that cant be enough
13 That just cant get a patent over the line because this
14 Court said in Mayo and I got to quote this language
15 Simply implementing a fundamental principle on a
16 physical machine namely a computer is not a patentable
17 application of that principle Thats all that Alice
18 has done
19 These are preshyBilski patents They never
20 should have been issued General Verrilli will stand up
21 and address that point And certainly under current
22 law shyshy one point on the AIA Congress did not send all
23 this to the administrative process Congress created
24 two avenues the courts and the PTO to use the
25 standards Essentially it ratified Bilski and Mayo and
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1 said we agree with what you all are doing at the
2 Supreme Court and the existing standards are good enough
3 for us This is a judicial problem And that is a good
4 reason The abstract shyshy
5 JUSTICE GINSBURG The Federal Circuit in
6 this case split in many ways and it had our decisions
7 to deal with You said given Bilski and Mayo this is
8 an easy case What is the instruction that escaped a
9 good number of judges on the Federal Circuit How would
10 you state the rule
11 MR PERRY Your Honor I think theres a
12 significant element to the Federal Circuit that
13 disagrees with Mayo and has been resistant in applying
14 it Chief Judge shyshy former Chief Judge Michelle filed a
15 brief in this Court essentially saying Mayo is a
16 lifeshysciences case You should limit it to that because
17 if you apply it to everything else then these patents
18 are no good
19 Mayo we submit is a technologyshyneutral
20 industryshyneutral exceptionshyneutral framework that can
21 be used to answer all of these questions This is not
22 the death of software patents The software industry is
23 all before this Court saying this is fine with us
24 Every company in the United States practically except
25 for IBM is saying go ahead This will not affect
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1 software patents
2 Justice Ginsburg this Courts precedents
3 are clear They are unanimous They just need to be
4 applied To suggest that there is confusion that needs
5 to be addressed by retreating beating a retreat from
6 recent unanimous decisions would simply reward
7 intransigence difficulty refusal to adhere to what are
8 clear precedents because shyshy
9 JUSTICE KAGAN Should we be concerned
10 Mr Perry that there are old patents that in fact could
11 meet the test that you set forth but wont because they
12 were written in a different time and so used much more
13 general language
14 MR PERRY Your Honor the applicant or the
15 patent holder would have the opportunity to institute a
16 reexamination proceeding or some sort of administration
17 process to address that issue
18 And second it should be noted this is a
19 very small problem There are 2 million outstanding
20 patents in the United States In the last four fiscal
21 years there were 22000 infringement litigations
22 instituted but since Bilski there have only been 57
23 district court decisions on Section 101 issues There
24 have only been 12 Federal Circuit decisions total on
25 computer implementation
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1 We are talking about a group of patents
2 Justice Kagan thats way out at the tail end of
3 distribution Most patents never have a 101 challenge
4 This is not an issue with cotton gins and other things
5 This is a problem for the most marginal
6 most dubious most skeptical patents the ones that this
7 Court in Bilski shyshy and remember what Bilskis holding
8 is The majority said they are processes but it did
9 not say they are eligible
10 Thank you Mr Chief Justice
11 CHIEF JUSTICE ROBERTS Thank you counsel
12 General Verrilli
13 ORAL ARGUMENT OF DONALD B VERRILLI JR
14 ON BEHALF OF THE UNITED STATES AS AMICUS
15 CURIAE SUPPORTING RESPONDENTS
16 GENERAL VERRILLI Mr Chief Justice and
17 may it please the Court
18 An abstract idea does not become
19 patentshyeligible merely by tacking on an instruction to
20 use a computer to carry it out A computer makes a
21 difference under Section 101 when it imposes a
22 meaningful limit on the patent claim That occurs when
23 the claim is directed at improvement in computing
24 technology or an innovation that uses computing
25 technology to improve other technological functions
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1 Thats the test that we believe is most faithful to this
2 Courts precedents in Bilski and Mayo It keeps patents
3 within their traditional and appropriate domain and it
4 is capable of being administered consistently by Courts
5 and by PTO examiners
6 JUSTICE GINSBURG How do you answer the
7 argument that your view would extinguish businessshymethod
8 patents and make all software ineligible for patent
9 protection
10 GENERAL VERRILLI Yeah with shyshy let me
11 address software patents first because that I think is
12 obviously a significant question And its just not
13 correct to say that our approach would make software
14 patenting ineligible Any software patent that improves
15 the functioning of the computer technology is eligible
16 Any software patent that improves shyshy that is used to
17 improve another technology is eligible For example
18 the patent in the shyshy in the Diehr case is one in
19 which shyshy
20 JUSTICE SOTOMAYOR Why do we need to reach
21 this in that shyshy reach software patents at all in this
22 case
23 GENERAL VERRILLI Well shyshy
24 JUSTICE SOTOMAYOR Whats the necessity for
25 us to announce a general rule with respect to software
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1 There is no software being patented in this case
2 GENERAL VERRILLI Well I shyshy
3 JUSTICE SOTOMAYOR Theres a systems
4 GENERAL VERRILLI Well I shyshy I think shyshy
5 well they shyshy they shyshy theres a process being and shyshy and
6 one can think of software patents as process patents
7 And I think thats why my friends on the other side are
8 saying the sky is falling because they shyshy they are
9 interpreting what were saying about that when a
10 computer makes shyshy when a computers involvement makes
11 something eligible under 101 its calling those into
12 question and it doesnt
13 JUSTICE SOTOMAYOR Do you think we have to
14 reach the patentability of software to answer this case
15 GENERAL VERRILLI Well I think you can shyshy
16 I think the answer to that question is no not
17 necessarily You can decide it by saying that shyshy that
18 Bilski answers the question whether this is an abstract
19 idea because this form of hedging is really no
20 different than the form of hedging as a conceptual
21 matter at issue in Bilski And then Mayo answers the
22 question of whether the use of a computer in this case
23 adds enough to the abstract idea beyond conventional
24 steps because here all we have after all is just
25 conventional use of computing technology no computer
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1 innovation such that you dont qualify under 101 You
2 could take that approach
3 But it is important to the United States
4 that we shyshy and to our patent examiners that we get some
5 clarity if we can I think the clarity could come from
6 the text that I propose which I want to reiterate shyshy
7 JUSTICE SOTOMAYOR Well shyshy
8 JUSTICE BREYER Could shyshy could shyshy could you
9 go on with that because you were just getting to the
10 point where I think you say a computer improvement that
11 in fact leads to an improvement in harvesting cotton is
12 an improvement through a computer of technology so it
13 qualifies
14 But then I think you were going to say or I
15 got this also from the brief a computer improvement
16 that leads to an improvement in the methods of selling
17 bonds over the telephone is not an improvement in
18 technology reached by the computer Am I right about
19 the distinction youre making
20 GENERAL VERRILLI I dont think theres a
21 yes or no answer to that question
22 JUSTICE BREYER What is your view Yeah
23 what is shyshy how do we deal with just that problem
24 GENERAL VERRILLI If there is a genuine
25 innovation in the functioning of the computer shyshy
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1 JUSTICE BREYER Yes
2 GENERAL VERRILLI shyshy such that business
3 processes shyshy
4 JUSTICE BREYER Weve got that Yes yes
5 We got the computer But then it doesnt improve the
6 computer but rather it improves through the computer
7 the harvesting of cotton
8 Now youve got it in what you said was your
9 second category which is an improvement through the
10 computer of a technology And I thought in your brief
11 you were distinguishing an improvement through the
12 computer of a human activity that is not a technology
13 and in particular to pick an example of that
14 something in finance or something in business
15 Now am I right about the distinction youre
16 making
17 GENERAL VERRILLI Yeah that shyshy
18 JUSTICE BREYER If Im not right what is
19 the distinction
20 GENERAL VERRILLI That is generally the
21 line were drawing Frankly shyshy
22 JUSTICE BREYER And how is that justified
23 GENERAL VERRILLI I do want shyshy
24 JUSTICE BREYER That shyshy that is Judge Dyk
25 in shyshy in Bilski in the Federal circuit 4 people sort of
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1 picked it up maybe 5 didnt pick it up Would you say
2 a few words about it
3 GENERAL VERRILLI Sure About shyshy let me go
4 to Bilski there in that I do think while shyshy while
5 certainly the Court held that the term process got a
6 natural construction which could include business
7 methods it seems to me that thats not all the Court
8 said in Bilski The Court also said that it was
9 historically and traditionally quite rare that business
10 methods were patent eligible
11 It also said that shyshy that the shyshy that courts
12 and the PTO examiners should use the abstract ideas
13 exception to 101 to police the appropriate boundary
14 It also said that the
15 machineshyorshytransformation test that the United States
16 advocated remained a useful tool And of course that
17 directs to you seeing whether there is a technology
18 application
19 And of course the holding in Bilski was
20 that the shyshy the method for hedging risk was ineligible
21 because it was an abstract idea and I cant imagine
22 that if in Bilski the shyshy the claim had been exactly the
23 same but had added use a computer to carry out some of
24 these standard random analysis functions that are
25 claimed by the patent that you would have found it to
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1 be patent eligible
2 And I shyshy I would submit for the Court that
3 the key point here I think is that now given where
4 the Court shyshy what the Court has held in Bilski given
5 what its held in Mayo the abstract ideas exception is
6 really the only tool left to deal with what I shyshy what I
7 think I fairly read Bilski as saying is a significant
8 problem the proliferation of patents of business
9 methods
10 JUSTICE KENNEDY Is there an example that
11 you can give us of a shyshy what we can call a business
12 process that is patentable a process that doesnt
13 involve improving the workings of a computer
14 GENERAL VERRILLI I shyshy I think its going
15 to be difficult for me to do that I think for
16 example if you had a business method a process for
17 additional security pointshyofshysale credit card
18 transactions using particular encryption technology
19 that might well be patent eligible Its a technology
20 that it makes conduct of business more efficient or
21 effective
22 But there is a technological link here and
23 we do think thats critical to our shyshy to our point of
24 view with respect to the case And I shyshy and I do think
25 remember that when we say something is not patent
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1 eligible were not saying they cant do it Were
2 saying they cant monopolize it
3 And the concern in a situation like this one
4 is that if this is patent eligible its hard to see
5 why for example the first person who came up with a
6 frequent flier program wouldnt have been able to claim
7 a patent there because after all thats a business
8 method for improving customer loyalty implemented on a
9 computer
10 CHIEF JUSTICE ROBERTS General I shyshy you
11 mentioned a while ago the need for greater clarity and
12 certainty in this area And Im just wondering in your
13 brief youve got a nonshyexhaustive of factors to
14 consider and there are 6 different ones And Im just
15 doubtful that thats going to bring about greater
16 clarity and certainty
17 GENERAL VERRILLI I take shyshy I take the
18 point Mr Chief Justice but I think the key is that
19 they are all directed to answering the question of
20 whether the innovation that is claimed and is an
21 innovation in either A the improvement of a computers
22 functioning or B the use of computer technology to
23 improve the functioning of another technological
24 process and a case like Diehr would be in the latter
25 category
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1 And so I do think that thats the key
2 benchmark Thats the baseline Thats the test that
3 we do think can be applied clearly and consistently by
4 the courts or the PTO And it avoids the risk of things
5 like frequent flier programs or the Oakland As money
6 ball methods for evaluating the contributions in
7 individual baseball players make or any one of a host of
8 other things that our intuitions tell us just dont
9 belong in the patent system
10 Thats the shyshy drawing that line keeps them
11 out not drawing that line lets them in And with all
12 due respect I dont think that the novelty and
13 nonobviousness filters that 102 and 103 really deal with
14 that problem effectively because when you get to
15 nonobviousness in 103 for example youll be asking a
16 different question
17 If you take the frequent flier program you
18 would say well is this innovation in building consumer
19 loyalty something that would have been obvious to
20 somebody who runs an airline Its totally divorced
21 from the question of technology at that point and
22 therefore I dont think youre going to get the screen
23 that you need to get in order for the patent system to
24 be confined to its traditional and appropriate scope
25 If there are no further questions thank
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1 you
2 JUSTICE GINSBURG I have a question about
3 how do you identify an abstract concept The shyshy a
4 natural phenomenon a mathematical formula those are
5 easy to identify but there has been some confusion on
6 what qualifies as an abstract concept
7 GENERAL VERRILLI We would define
8 abstract shyshy an abstract concept as a claim that is not
9 directed to a concrete innovation in technology
10 science or the industrial arts So its the shyshy its
11 abstract in the sense that it is not a concrete
12 innovation in the traditional realm of patent law
13 Thank you
14 CHIEF JUSTICE ROBERTS Thank you General
15 Mr Phillips you have four minutes
16 remaining
17 REBUTTAL ARGUMENT OF CARTER G PHILLIPS
18 ON BEHALF OF THE PETITIONERS
19 MR PHILLIPS Thank you Mr Chief Justice
20 Id just like to make a few points
21 First of all with respect to the question
22 you asked which is looking at 159 et cetera all I can
23 tell you is that if you look at claim 33 it talks about
24 matched orders the matched orders that are described in
25 286 and 287 and then makes specific reference to 159
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1 and that flow chart thats there And its all designed
2 as a package Its only one element of the shyshy of the
3 invention but it is a central element and its an easy
4 one to understand And it goes well beyond simply the
5 notion of hedge shyshy hedge against settlement risk and do
6 it by a computer
7 JUSTICE SOTOMAYOR Your adversary says that
8 his shyshy the appendix to his brief are the only patents at
9 issue that the flow charts are not at issue in this
10 case
11 MR PHILLIPS Theres no basis for that
12 statement Your Honor There shyshy remember this went off
13 on a very truncated litigation process So theres shyshy
14 you know we shyshy we got cut off at the beginning of it
15 Theres been no construction of the shyshy of the claims
16 and shyshy and obviously these are specifications that go
17 to how you interpret the claim
18 JUSTICE SOTOMAYOR If we were to say that
19 there are no business patents shyshy
20 MR PHILLIPS Yes
21 JUSTICE SOTOMAYOR shyshy would your patent
22 survive at all
23 MR PHILLIPS No I dont shyshy I dont
24 believe so I think theres no question And you
25 know General Verrilli could not have been any plainer
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1 in his statement of how he wants to interpret the
2 abstract idea concept
3 JUSTICE SOTOMAYOR Yes he wants to say no
4 business patents
5 MR PHILLIPS No business shyshy just another
6 way of saying no business methods And you know the
7 Court rejected that And it seems to me extraordinary
8 to say Congress didnt reject no business methods in
9 101 but were going to do shyshy were going to manipulate
10 the judicial exception to accomplish precisely that same
11 thing It seems to me thats wholly inappropriate
12 Justice Ginsburg you asked my shyshy my friend
13 here you know whats his test He didnt answer that
14 question youll notice because he doesnt have an
15 answer His basic argument is whatever you do just
16 kill this patent
17 And if I were in his shoes I suppose Id
18 take that same position I think whats absolutely
19 clear is that the test ought to be one that is
20 structured as a very coarse filter not the kind of
21 filter that hes pushing for where it changes over time
22 I mean I thought his shyshy I thought his response to one
23 of the questions about eshymail and word processing that
24 Justice Sotomayor asked is over time it would change
25 Well thats exactly what 102 and 103 are for That is
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1 not the purpose of shyshy of Section 101
2 And then he uses the example of encryption
3 I guarantee you if we were arguing about encryption in
4 this case he would say to me that thats an abstract
5 principle because encryption is a concept thats been
6 around since time immemorial George Washington used
7 it Everybody has used encryption
8 And a question again thats not the
9 solution to these problems The question is how did we
10 go about doing it And we go beyond the basics of
11 simply saying use a computer and thats what we ask
12 this Court to focus on and to evaluate
13 As to the frequent flier program its
14 pretty clear to me that even though it was a novel idea
15 in some sense the concept itself would have been viewed
16 in shyshy in the KSR fashion as quite obvious as a means of
17 improving customer loyalty
18 There are solutions here Giving us 101
19 pass doesnt create a monopoly It just gets us to the
20 102 and 103 inquiries that are at the heart of what the
21 patent laws shyshy and 112 that are at the heart of what the
22 patent laws ought to be dealing with
23 If there are no further questions Your
24 Honor thank you
25 CHIEF JUSTICE ROBERTS Thank you counsel
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1 The case is submitted
2 (Whereupon at 1105 am the case in the
3 aboveshyentitled matter was submitted)
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
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25
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58
A add 714 1023 algorithm 3320 41 automatically
As 525 3621 387 algorithms apply 72425 111
am 115 32 416 3013 3310 2019 281213 automobile 389
572 added 302 Alice 13 34 2822 3814 available 99
abacus 61213 4923 363 3717 4217 avenues 4124
710 1018 additional 5017 3822 4117 applying 4213 avoids 524
1325 3614 3617
address 4121 4317 4511
Alices 271 2919 3678
approach 226 395 4513 B
ability 1514 addressed 435 allow 94 472 B 121 29 4413
able 1511 167 addressing 181 allows 97 242 appropriate 5122
1919 516 adds 4623 amazing 2514 81516 1514 back 1621
aboveshyentitled adhere 437 amici 3825 453 4913 1922 2512
113 573 adjudication amicus 123 5224 3018 322
absolutely 125 241 210 4414 Archimedes 3991222
1215 159 adjusting 3611 analysis 424 281122 3811 4025
5518 41610 364 406 area 219 5112 ball 526
abstract 4267 adjustment 417 4924 argue 2518 Bank 17 35
48 6682023 418 analyze 1416 arguing 563 banks 95
721 8218 administered 1716 argument 114 bars 43
141920 1522 454 announce 4525 225812 33 baseball 527
165 181618 administration answer 119 37 41 144 based 423 406
2220 24925 4316 2219 247 18323 226 baseline 522
2621 277 administrative 3919 4221 26715 4413 basic 413 5515
2938 3422 171218 187 456 461416 457 5317 basically 1821
3523 395 242 4123 4721 551315 5515 2319
405 414 424 adopt 203 answering 5119 arguments basics 5610
4418 461823 adopted 31317 answers 3713 1415 basis 132 1512
491221 505 advancement 461821 arms 1625 1516 2719
53368811 351 anyway 1810 arrangements 5411
552 564 advances 3513 apparatus 2916 131 beating 435
accept 102 adversary 547 APPEARAN arrows 315 beginning 163
accomplish advice 1715 116 art 1919 5414
5510 advocated 4916 appears 820 arts 2124 5310 begins 3810
account 55 618 affect 4225 appendix 1910 aside 1422 157 behalf 11719
397 affirmative 402 311 326 369 asked 2314 122 24710
accounts 823 agent 52 3021 548 278 5322 214 38 2616
9356 3611 ago 318 2224 applicant 3220 551224 4414 5318
3611 3615 5111 3921 4023 asking 193 believe 1316
accurately 2413 agree 920 2021 416 4314 221213 273 1416 2421
acknowledges 221 2418 application 3324 5215 255 264 451
1121 4021 421 2623 4117 aspect 517 5424
act 99 2017 agrees 2812 4918 asserted 3113 belong 529
activities 229 ahead 4225 applications 311618 benchmark 522
activity 2122 AIA 2912 4122 333 asserting 325 Benson 361923
3325 4812 airline 5220 applied 434 attaching 124 best 161124
actual 4020 AL 18 523 attention 3813 better 1610 albeit 923 applies 31418 Attorney 2021 216 2819
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59
3322 brightshyline 409 2313 37 71 4338 5519 beyond 115 4012 5317 checks 618 5614
1312 4623 bring 5115 case 3412 46 Chief 339 clearly 211 251 544 5610 broad 248 116 1524 261217 3024 523
Bilski 313 46 broader 225 2022 213 31812 378 client 311416 415 1722 browsing 228 2211 2313 371416 386 close 2822 2224 2329 builder 2811 2625 311424 421414 4410 CLS 17 35 262020 271 building 5218 3314 36620 441116 5110 1120 2816 2999 built 2324 426816 5118 531419 coarse 247 3935 4125 business 168 451822 461 5625 5520 427 4322 1749 203 461422 5024 chits 611 code 1213 142 447 452 2124 222122 5124 5410 chronological 1916171720 461821 4825 2311 29613 564 5712 1512 2725 4018 49481922 32132323 cases 244 2816 chronologically coffee 1211 5047 3322525 4011 423 colleagues 116
Bilskis 447 34415 3610 catalogues 2512 circuit 2818 college 58 bit 323 48214 4969 262 401112 425 columns 325 blocks 54 508111620 categorically 42912 4324 come 108 234 Bloomberg 517 5419 202 4825 3017 399
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1 can do it with pencil and paper then the computer is
2 not offering anything that the patent laws are or should
3 be concerned with
4 It is only where the method will not work
5 without a computer which is not these claims and where
6 the computer itself is doing something that the patent
7 law is willing to protect
8 CHIEF JUSTICE ROBERTS What if shyshy what if
9 you can do it without a computer but its going to
10 take you know 20 people a hundred years In other
11 words theoretically you can replicate what the
12 computer does shyshy
13 MR PERRY Two answers
14 CHIEF JUSTICE ROBERTS shyshy but its
15 impractical without looking to do it on the computer
16 MR PERRY Mr Chief Justice first these
17 claims literally read as Alice reads them on a single
18 transaction between two parties so its not 20 people
19 for a hundred years Its one person sitting in a room
20 so thats not a problem
21 Second if what is being claimed is the
22 necessary speed or efficiency or data crunching
23 capabilities if you will of a computer then it would
24 have to be claimed and theres nothing claimed here
25 All that is claimed shyshy and my friend is going to stand
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1 up on rebuttal and tell you all that the expert said
2 well what is claimed is a computer but its just a
3 computer It just says a computer configured too It
4 doesnt say that the computer actually has to shyshy
5 JUSTICE BREYER Yeah but the trouble with
6 that particular test is as I think partly the Chief
7 Justice said how long et cetera and then add to that
8 though you could do it without a computer what happens
9 at the end of the line is the automobile engine goes off
10 or it begins to sputter or it turns left
11 You see its possible to take Archimedes shyshy
12 shyshy you know I use that example purposely to call
13 attention to the problem You can take those things
14 and youre not just saying apply it and youre not even
15 just saying shyshy you are saying use the computer but at
16 the end of the road something physical in the world
17 changes and everybody would say now thats shyshy that
18 will falls within I mean probably I mean my
19 hesitation shows Im looking for the right words
20 MR PERRY Justice Breyer your point is
21 the reason that it is equally fallacious to suggest on
22 the one hand as Alice and IBM does that simply
23 reciting a computer is a magic key that gets you through
24 101 and you never have to any other inquiry and what
25 some of folks the amici on the other side say which
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1 is that computers or software are never eligible Both
2 of those things have to be wrong because what the Court
3 said in Bilski was future innovation is too uncertain
4 We are not going to do that as a Court And the Court
5 laid out an approach using abstract ideas in Bilski and
6 inventive contribution in Mayo that is flexible enough
7 to take into account that innovation and to deal with
8 particular claims in context which is why at the end
9 of the day we have to come back to these patents and
10 decide which shyshy
11 JUSTICE KAGAN Mr Perry before we get
12 back to these matters you said to Justice Scalia if a
13 patent sufficiently describes how a computer will
14 implement an idea then its patentable So how
15 sufficiently does one have to describe it What do we
16 want a judge to do at this threshold level in terms of
17 trying to figure out whether the description is
18 sufficient to get you past it
19 MR PERRY If I can answer in two steps
20 Justice Kagan First in the negative What the
21 applicant or patentee must do shyshy must not do is simply
22 describe the desired result That would take us back to
23 State Street That would simply say I claim a magic
24 box that buys high and sells low or vice versa I
25 suppose I claim a magic box for investing Thats what
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1 these patents do
2 Then to put it in the affirmative and in the
3 language of Mayo the claim has to recite something
4 significantly more something significantly more than
5 the abstract idea itself That would be a contextual
6 analysis based on the claims and specifications and file
7 history and we know that some devices some methods
8 some programming will pass that
9 It is not going to be a brightshyline rule and
10 thats one of the tugshyofshywar issues that this Court and
11 the Federal Circuit have been having in these cases
12 The Federal Circuit wants brightshyline rules All
13 computers are in or all computers are out
14 This Court has been more contextual This
15 Court has been more nuanced This Court has looked at
16 things in a more robust way
17 JUSTICE KAGAN Youre not suggesting that
18 specific code is necessary
19 MR PERRY No Your Honor I think the shyshy
20 actual description of the programming is a 112 problem
21 I agree with that A 112 issue That is the realm of
22 the written description requirement What is a 101
23 problem is it is on the applicant to do more than simply
24 describe the results simply say A magic box that does
25 intermediate settlement And we can tie that back to
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1 this particular prosecution the 510 patent which is
2 the method patent
3 The examiner rejected it Under Section
4 101 the examiner said this is an abstract idea You
5 cant have this patent And the only change that this
6 applicant made was to add in the adjusting step
7 electronic adjustment It put in one word
8 electronic adjustment And under State Street which
9 is what this patent is prosecuted under that was
10 enough because the result of adjusting run through a
11 computer is enough
12 Under current law that cant be enough
13 That just cant get a patent over the line because this
14 Court said in Mayo and I got to quote this language
15 Simply implementing a fundamental principle on a
16 physical machine namely a computer is not a patentable
17 application of that principle Thats all that Alice
18 has done
19 These are preshyBilski patents They never
20 should have been issued General Verrilli will stand up
21 and address that point And certainly under current
22 law shyshy one point on the AIA Congress did not send all
23 this to the administrative process Congress created
24 two avenues the courts and the PTO to use the
25 standards Essentially it ratified Bilski and Mayo and
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1 said we agree with what you all are doing at the
2 Supreme Court and the existing standards are good enough
3 for us This is a judicial problem And that is a good
4 reason The abstract shyshy
5 JUSTICE GINSBURG The Federal Circuit in
6 this case split in many ways and it had our decisions
7 to deal with You said given Bilski and Mayo this is
8 an easy case What is the instruction that escaped a
9 good number of judges on the Federal Circuit How would
10 you state the rule
11 MR PERRY Your Honor I think theres a
12 significant element to the Federal Circuit that
13 disagrees with Mayo and has been resistant in applying
14 it Chief Judge shyshy former Chief Judge Michelle filed a
15 brief in this Court essentially saying Mayo is a
16 lifeshysciences case You should limit it to that because
17 if you apply it to everything else then these patents
18 are no good
19 Mayo we submit is a technologyshyneutral
20 industryshyneutral exceptionshyneutral framework that can
21 be used to answer all of these questions This is not
22 the death of software patents The software industry is
23 all before this Court saying this is fine with us
24 Every company in the United States practically except
25 for IBM is saying go ahead This will not affect
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1 software patents
2 Justice Ginsburg this Courts precedents
3 are clear They are unanimous They just need to be
4 applied To suggest that there is confusion that needs
5 to be addressed by retreating beating a retreat from
6 recent unanimous decisions would simply reward
7 intransigence difficulty refusal to adhere to what are
8 clear precedents because shyshy
9 JUSTICE KAGAN Should we be concerned
10 Mr Perry that there are old patents that in fact could
11 meet the test that you set forth but wont because they
12 were written in a different time and so used much more
13 general language
14 MR PERRY Your Honor the applicant or the
15 patent holder would have the opportunity to institute a
16 reexamination proceeding or some sort of administration
17 process to address that issue
18 And second it should be noted this is a
19 very small problem There are 2 million outstanding
20 patents in the United States In the last four fiscal
21 years there were 22000 infringement litigations
22 instituted but since Bilski there have only been 57
23 district court decisions on Section 101 issues There
24 have only been 12 Federal Circuit decisions total on
25 computer implementation
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1 We are talking about a group of patents
2 Justice Kagan thats way out at the tail end of
3 distribution Most patents never have a 101 challenge
4 This is not an issue with cotton gins and other things
5 This is a problem for the most marginal
6 most dubious most skeptical patents the ones that this
7 Court in Bilski shyshy and remember what Bilskis holding
8 is The majority said they are processes but it did
9 not say they are eligible
10 Thank you Mr Chief Justice
11 CHIEF JUSTICE ROBERTS Thank you counsel
12 General Verrilli
13 ORAL ARGUMENT OF DONALD B VERRILLI JR
14 ON BEHALF OF THE UNITED STATES AS AMICUS
15 CURIAE SUPPORTING RESPONDENTS
16 GENERAL VERRILLI Mr Chief Justice and
17 may it please the Court
18 An abstract idea does not become
19 patentshyeligible merely by tacking on an instruction to
20 use a computer to carry it out A computer makes a
21 difference under Section 101 when it imposes a
22 meaningful limit on the patent claim That occurs when
23 the claim is directed at improvement in computing
24 technology or an innovation that uses computing
25 technology to improve other technological functions
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1 Thats the test that we believe is most faithful to this
2 Courts precedents in Bilski and Mayo It keeps patents
3 within their traditional and appropriate domain and it
4 is capable of being administered consistently by Courts
5 and by PTO examiners
6 JUSTICE GINSBURG How do you answer the
7 argument that your view would extinguish businessshymethod
8 patents and make all software ineligible for patent
9 protection
10 GENERAL VERRILLI Yeah with shyshy let me
11 address software patents first because that I think is
12 obviously a significant question And its just not
13 correct to say that our approach would make software
14 patenting ineligible Any software patent that improves
15 the functioning of the computer technology is eligible
16 Any software patent that improves shyshy that is used to
17 improve another technology is eligible For example
18 the patent in the shyshy in the Diehr case is one in
19 which shyshy
20 JUSTICE SOTOMAYOR Why do we need to reach
21 this in that shyshy reach software patents at all in this
22 case
23 GENERAL VERRILLI Well shyshy
24 JUSTICE SOTOMAYOR Whats the necessity for
25 us to announce a general rule with respect to software
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1 There is no software being patented in this case
2 GENERAL VERRILLI Well I shyshy
3 JUSTICE SOTOMAYOR Theres a systems
4 GENERAL VERRILLI Well I shyshy I think shyshy
5 well they shyshy they shyshy theres a process being and shyshy and
6 one can think of software patents as process patents
7 And I think thats why my friends on the other side are
8 saying the sky is falling because they shyshy they are
9 interpreting what were saying about that when a
10 computer makes shyshy when a computers involvement makes
11 something eligible under 101 its calling those into
12 question and it doesnt
13 JUSTICE SOTOMAYOR Do you think we have to
14 reach the patentability of software to answer this case
15 GENERAL VERRILLI Well I think you can shyshy
16 I think the answer to that question is no not
17 necessarily You can decide it by saying that shyshy that
18 Bilski answers the question whether this is an abstract
19 idea because this form of hedging is really no
20 different than the form of hedging as a conceptual
21 matter at issue in Bilski And then Mayo answers the
22 question of whether the use of a computer in this case
23 adds enough to the abstract idea beyond conventional
24 steps because here all we have after all is just
25 conventional use of computing technology no computer
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1 innovation such that you dont qualify under 101 You
2 could take that approach
3 But it is important to the United States
4 that we shyshy and to our patent examiners that we get some
5 clarity if we can I think the clarity could come from
6 the text that I propose which I want to reiterate shyshy
7 JUSTICE SOTOMAYOR Well shyshy
8 JUSTICE BREYER Could shyshy could shyshy could you
9 go on with that because you were just getting to the
10 point where I think you say a computer improvement that
11 in fact leads to an improvement in harvesting cotton is
12 an improvement through a computer of technology so it
13 qualifies
14 But then I think you were going to say or I
15 got this also from the brief a computer improvement
16 that leads to an improvement in the methods of selling
17 bonds over the telephone is not an improvement in
18 technology reached by the computer Am I right about
19 the distinction youre making
20 GENERAL VERRILLI I dont think theres a
21 yes or no answer to that question
22 JUSTICE BREYER What is your view Yeah
23 what is shyshy how do we deal with just that problem
24 GENERAL VERRILLI If there is a genuine
25 innovation in the functioning of the computer shyshy
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1 JUSTICE BREYER Yes
2 GENERAL VERRILLI shyshy such that business
3 processes shyshy
4 JUSTICE BREYER Weve got that Yes yes
5 We got the computer But then it doesnt improve the
6 computer but rather it improves through the computer
7 the harvesting of cotton
8 Now youve got it in what you said was your
9 second category which is an improvement through the
10 computer of a technology And I thought in your brief
11 you were distinguishing an improvement through the
12 computer of a human activity that is not a technology
13 and in particular to pick an example of that
14 something in finance or something in business
15 Now am I right about the distinction youre
16 making
17 GENERAL VERRILLI Yeah that shyshy
18 JUSTICE BREYER If Im not right what is
19 the distinction
20 GENERAL VERRILLI That is generally the
21 line were drawing Frankly shyshy
22 JUSTICE BREYER And how is that justified
23 GENERAL VERRILLI I do want shyshy
24 JUSTICE BREYER That shyshy that is Judge Dyk
25 in shyshy in Bilski in the Federal circuit 4 people sort of
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1 picked it up maybe 5 didnt pick it up Would you say
2 a few words about it
3 GENERAL VERRILLI Sure About shyshy let me go
4 to Bilski there in that I do think while shyshy while
5 certainly the Court held that the term process got a
6 natural construction which could include business
7 methods it seems to me that thats not all the Court
8 said in Bilski The Court also said that it was
9 historically and traditionally quite rare that business
10 methods were patent eligible
11 It also said that shyshy that the shyshy that courts
12 and the PTO examiners should use the abstract ideas
13 exception to 101 to police the appropriate boundary
14 It also said that the
15 machineshyorshytransformation test that the United States
16 advocated remained a useful tool And of course that
17 directs to you seeing whether there is a technology
18 application
19 And of course the holding in Bilski was
20 that the shyshy the method for hedging risk was ineligible
21 because it was an abstract idea and I cant imagine
22 that if in Bilski the shyshy the claim had been exactly the
23 same but had added use a computer to carry out some of
24 these standard random analysis functions that are
25 claimed by the patent that you would have found it to
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1 be patent eligible
2 And I shyshy I would submit for the Court that
3 the key point here I think is that now given where
4 the Court shyshy what the Court has held in Bilski given
5 what its held in Mayo the abstract ideas exception is
6 really the only tool left to deal with what I shyshy what I
7 think I fairly read Bilski as saying is a significant
8 problem the proliferation of patents of business
9 methods
10 JUSTICE KENNEDY Is there an example that
11 you can give us of a shyshy what we can call a business
12 process that is patentable a process that doesnt
13 involve improving the workings of a computer
14 GENERAL VERRILLI I shyshy I think its going
15 to be difficult for me to do that I think for
16 example if you had a business method a process for
17 additional security pointshyofshysale credit card
18 transactions using particular encryption technology
19 that might well be patent eligible Its a technology
20 that it makes conduct of business more efficient or
21 effective
22 But there is a technological link here and
23 we do think thats critical to our shyshy to our point of
24 view with respect to the case And I shyshy and I do think
25 remember that when we say something is not patent
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1 eligible were not saying they cant do it Were
2 saying they cant monopolize it
3 And the concern in a situation like this one
4 is that if this is patent eligible its hard to see
5 why for example the first person who came up with a
6 frequent flier program wouldnt have been able to claim
7 a patent there because after all thats a business
8 method for improving customer loyalty implemented on a
9 computer
10 CHIEF JUSTICE ROBERTS General I shyshy you
11 mentioned a while ago the need for greater clarity and
12 certainty in this area And Im just wondering in your
13 brief youve got a nonshyexhaustive of factors to
14 consider and there are 6 different ones And Im just
15 doubtful that thats going to bring about greater
16 clarity and certainty
17 GENERAL VERRILLI I take shyshy I take the
18 point Mr Chief Justice but I think the key is that
19 they are all directed to answering the question of
20 whether the innovation that is claimed and is an
21 innovation in either A the improvement of a computers
22 functioning or B the use of computer technology to
23 improve the functioning of another technological
24 process and a case like Diehr would be in the latter
25 category
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1 And so I do think that thats the key
2 benchmark Thats the baseline Thats the test that
3 we do think can be applied clearly and consistently by
4 the courts or the PTO And it avoids the risk of things
5 like frequent flier programs or the Oakland As money
6 ball methods for evaluating the contributions in
7 individual baseball players make or any one of a host of
8 other things that our intuitions tell us just dont
9 belong in the patent system
10 Thats the shyshy drawing that line keeps them
11 out not drawing that line lets them in And with all
12 due respect I dont think that the novelty and
13 nonobviousness filters that 102 and 103 really deal with
14 that problem effectively because when you get to
15 nonobviousness in 103 for example youll be asking a
16 different question
17 If you take the frequent flier program you
18 would say well is this innovation in building consumer
19 loyalty something that would have been obvious to
20 somebody who runs an airline Its totally divorced
21 from the question of technology at that point and
22 therefore I dont think youre going to get the screen
23 that you need to get in order for the patent system to
24 be confined to its traditional and appropriate scope
25 If there are no further questions thank
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1 you
2 JUSTICE GINSBURG I have a question about
3 how do you identify an abstract concept The shyshy a
4 natural phenomenon a mathematical formula those are
5 easy to identify but there has been some confusion on
6 what qualifies as an abstract concept
7 GENERAL VERRILLI We would define
8 abstract shyshy an abstract concept as a claim that is not
9 directed to a concrete innovation in technology
10 science or the industrial arts So its the shyshy its
11 abstract in the sense that it is not a concrete
12 innovation in the traditional realm of patent law
13 Thank you
14 CHIEF JUSTICE ROBERTS Thank you General
15 Mr Phillips you have four minutes
16 remaining
17 REBUTTAL ARGUMENT OF CARTER G PHILLIPS
18 ON BEHALF OF THE PETITIONERS
19 MR PHILLIPS Thank you Mr Chief Justice
20 Id just like to make a few points
21 First of all with respect to the question
22 you asked which is looking at 159 et cetera all I can
23 tell you is that if you look at claim 33 it talks about
24 matched orders the matched orders that are described in
25 286 and 287 and then makes specific reference to 159
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1 and that flow chart thats there And its all designed
2 as a package Its only one element of the shyshy of the
3 invention but it is a central element and its an easy
4 one to understand And it goes well beyond simply the
5 notion of hedge shyshy hedge against settlement risk and do
6 it by a computer
7 JUSTICE SOTOMAYOR Your adversary says that
8 his shyshy the appendix to his brief are the only patents at
9 issue that the flow charts are not at issue in this
10 case
11 MR PHILLIPS Theres no basis for that
12 statement Your Honor There shyshy remember this went off
13 on a very truncated litigation process So theres shyshy
14 you know we shyshy we got cut off at the beginning of it
15 Theres been no construction of the shyshy of the claims
16 and shyshy and obviously these are specifications that go
17 to how you interpret the claim
18 JUSTICE SOTOMAYOR If we were to say that
19 there are no business patents shyshy
20 MR PHILLIPS Yes
21 JUSTICE SOTOMAYOR shyshy would your patent
22 survive at all
23 MR PHILLIPS No I dont shyshy I dont
24 believe so I think theres no question And you
25 know General Verrilli could not have been any plainer
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1 in his statement of how he wants to interpret the
2 abstract idea concept
3 JUSTICE SOTOMAYOR Yes he wants to say no
4 business patents
5 MR PHILLIPS No business shyshy just another
6 way of saying no business methods And you know the
7 Court rejected that And it seems to me extraordinary
8 to say Congress didnt reject no business methods in
9 101 but were going to do shyshy were going to manipulate
10 the judicial exception to accomplish precisely that same
11 thing It seems to me thats wholly inappropriate
12 Justice Ginsburg you asked my shyshy my friend
13 here you know whats his test He didnt answer that
14 question youll notice because he doesnt have an
15 answer His basic argument is whatever you do just
16 kill this patent
17 And if I were in his shoes I suppose Id
18 take that same position I think whats absolutely
19 clear is that the test ought to be one that is
20 structured as a very coarse filter not the kind of
21 filter that hes pushing for where it changes over time
22 I mean I thought his shyshy I thought his response to one
23 of the questions about eshymail and word processing that
24 Justice Sotomayor asked is over time it would change
25 Well thats exactly what 102 and 103 are for That is
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1 not the purpose of shyshy of Section 101
2 And then he uses the example of encryption
3 I guarantee you if we were arguing about encryption in
4 this case he would say to me that thats an abstract
5 principle because encryption is a concept thats been
6 around since time immemorial George Washington used
7 it Everybody has used encryption
8 And a question again thats not the
9 solution to these problems The question is how did we
10 go about doing it And we go beyond the basics of
11 simply saying use a computer and thats what we ask
12 this Court to focus on and to evaluate
13 As to the frequent flier program its
14 pretty clear to me that even though it was a novel idea
15 in some sense the concept itself would have been viewed
16 in shyshy in the KSR fashion as quite obvious as a means of
17 improving customer loyalty
18 There are solutions here Giving us 101
19 pass doesnt create a monopoly It just gets us to the
20 102 and 103 inquiries that are at the heart of what the
21 patent laws shyshy and 112 that are at the heart of what the
22 patent laws ought to be dealing with
23 If there are no further questions Your
24 Honor thank you
25 CHIEF JUSTICE ROBERTS Thank you counsel
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1 The case is submitted
2 (Whereupon at 1105 am the case in the
3 aboveshyentitled matter was submitted)
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
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58
A add 714 1023 algorithm 3320 41 automatically
As 525 3621 387 algorithms apply 72425 111
am 115 32 416 3013 3310 2019 281213 automobile 389
572 added 302 Alice 13 34 2822 3814 available 99
abacus 61213 4923 363 3717 4217 avenues 4124
710 1018 additional 5017 3822 4117 applying 4213 avoids 524
1325 3614 3617
address 4121 4317 4511
Alices 271 2919 3678
approach 226 395 4513 B
ability 1514 addressed 435 allow 94 472 B 121 29 4413
able 1511 167 addressing 181 allows 97 242 appropriate 5122
1919 516 adds 4623 amazing 2514 81516 1514 back 1621
aboveshyentitled adhere 437 amici 3825 453 4913 1922 2512
113 573 adjudication amicus 123 5224 3018 322
absolutely 125 241 210 4414 Archimedes 3991222
1215 159 adjusting 3611 analysis 424 281122 3811 4025
5518 41610 364 406 area 219 5112 ball 526
abstract 4267 adjustment 417 4924 argue 2518 Bank 17 35
48 6682023 418 analyze 1416 arguing 563 banks 95
721 8218 administered 1716 argument 114 bars 43
141920 1522 454 announce 4525 225812 33 baseball 527
165 181618 administration answer 119 37 41 144 based 423 406
2220 24925 4316 2219 247 18323 226 baseline 522
2621 277 administrative 3919 4221 26715 4413 basic 413 5515
2938 3422 171218 187 456 461416 457 5317 basically 1821
3523 395 242 4123 4721 551315 5515 2319
405 414 424 adopt 203 answering 5119 arguments basics 5610
4418 461823 adopted 31317 answers 3713 1415 basis 132 1512
491221 505 advancement 461821 arms 1625 1516 2719
53368811 351 anyway 1810 arrangements 5411
552 564 advances 3513 apparatus 2916 131 beating 435
accept 102 adversary 547 APPEARAN arrows 315 beginning 163
accomplish advice 1715 116 art 1919 5414
5510 advocated 4916 appears 820 arts 2124 5310 begins 3810
account 55 618 affect 4225 appendix 1910 aside 1422 157 behalf 11719
397 affirmative 402 311 326 369 asked 2314 122 24710
accounts 823 agent 52 3021 548 278 5322 214 38 2616
9356 3611 ago 318 2224 applicant 3220 551224 4414 5318
3611 3615 5111 3921 4023 asking 193 believe 1316
accurately 2413 agree 920 2021 416 4314 221213 273 1416 2421
acknowledges 221 2418 application 3324 5215 255 264 451
1121 4021 421 2623 4117 aspect 517 5424
act 99 2017 agrees 2812 4918 asserted 3113 belong 529
activities 229 ahead 4225 applications 311618 benchmark 522
activity 2122 AIA 2912 4122 333 asserting 325 Benson 361923
3325 4812 airline 5220 applied 434 attaching 124 best 161124
actual 4020 AL 18 523 attention 3813 better 1610 albeit 923 applies 31418 Attorney 2021 216 2819
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59
3322 brightshyline 409 2313 37 71 4338 5519 beyond 115 4012 5317 checks 618 5614
1312 4623 bring 5115 case 3412 46 Chief 339 clearly 211 251 544 5610 broad 248 116 1524 261217 3024 523
Bilski 313 46 broader 225 2022 213 31812 378 client 311416 415 1722 browsing 228 2211 2313 371416 386 close 2822 2224 2329 builder 2811 2625 311424 421414 4410 CLS 17 35 262020 271 building 5218 3314 36620 441116 5110 1120 2816 2999 built 2324 426816 5118 531419 coarse 247 3935 4125 business 168 451822 461 5625 5520 427 4322 1749 203 461422 5024 chits 611 code 1213 142 447 452 2124 222122 5124 5410 chronological 1916171720 461821 4825 2311 29613 564 5712 1512 2725 4018 49481922 32132323 cases 244 2816 chronologically coffee 1211 5047 3322525 4011 423 colleagues 116
Bilskis 447 34415 3610 catalogues 2512 circuit 2818 college 58 bit 323 48214 4969 262 401112 425 columns 325 blocks 54 508111620 categorically 42912 4324 come 108 234 Bloomberg 517 5419 202 4825 3017 399
2115 225 554568 category 489 circumstances 475 boat 2811 businessshymeth 5125 318 1515 comes 1318 bonds 4717 457 CBM 2913 claim 416 2418 2018 231 bothering 118 buy 183 cellphones 228 2423 2522 coming 923 bound 1521 buys 3924 central 95 543 264 27917 common 31120 boundary 4913 certain 1216 3019 3121 2157 bounds 1521 C certainly 518 32420 361 company 4224 box 392425 C 21 31 263 358 392325 403 competition
4024 cables 3012 4121 495 442223 4922 161011 Breyer 66823 calculator 3519 certainty 5112 516 53823 completely 921
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brief 211315 carefully 1725 chart 541 283 3118 516 621 710 2255 322 caricature 718 charted 2620 37517 398 71325 9113 4215 4715 72020 1417 charts 1911 406 5415 91824 1035 4810 5113 1716 549 clarity 4755 10725 1116 548 carry 4420 Charybdis 511116 124102024
briefs 1524 4923 1620 2619 class 59 13911 1479 1618 CARTER 117 checkbook 617 clear 1015 118 1421 15710
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1517 165 confess 1111 coterminous 4121 5324 181719 196 configured 383 2321 customer 518 describes 425 19814 206 confined 5224 cotton 914 444 5617 2918 3211 2025 211016 confirmed 2912 4711 487 cut 5414 3913 2117 2410 confusion 434 counsel 4411 description
D2521525 535 5625 3917 402022 D 312622 30522 Congress 178 countries 137 deserve 342 DC 1101719 31311 3210 1725 1856 course 719 designed 720
1223211 33519 1924 2014 1613 298 812 541 data 2917 309 34142425 2325 291213 3210 491619 desired 3922
30111214 351 361220 346 412223 court 1114 detail 363 3212 3367 3621 37156 558 3101317 detailed 1914 3320 34914 379121523 consequences 922 145 developed 2119 3722382334815 2011 1720 1939 device 207
dating 2953823 3913 consider 5114 2011216 devices 3413 day 612 813 411116 4325 consistently 2222 2321 407
910 399442020 4515 454 523 2618 27345 dicta 923 1012 deal 42023 46102225 constitutes 312 28718 299 Diehr 2322
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dealing 4175013 51922 contains 327 40141515 2789 4421 1119 135546 5611 content 281417 4114 42215 different 421 151216 3412 computers 2819 4223 4323 79 919 1377 56224610 5121 context 2319 44717 4957 191 259 266
deals 814computers 243 398 498 50244 2888 3169 death 42221616 195 contextual 405 557 5612 3123 333 Debit 27212119 312 4014 Courts 3619 351823 4312 debiting 2718391 401313 contract 3115 432 452 4620 5114 decade 176computing contribution courts 2018 5216 decide 3910442324 4625 342124 3520 4124 454 difficult 817
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1811522 53368 526 241 251 difficulty 437 decisions 274552 56515 conventional 5619 direct 2721
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1 up on rebuttal and tell you all that the expert said
2 well what is claimed is a computer but its just a
3 computer It just says a computer configured too It
4 doesnt say that the computer actually has to shyshy
5 JUSTICE BREYER Yeah but the trouble with
6 that particular test is as I think partly the Chief
7 Justice said how long et cetera and then add to that
8 though you could do it without a computer what happens
9 at the end of the line is the automobile engine goes off
10 or it begins to sputter or it turns left
11 You see its possible to take Archimedes shyshy
12 shyshy you know I use that example purposely to call
13 attention to the problem You can take those things
14 and youre not just saying apply it and youre not even
15 just saying shyshy you are saying use the computer but at
16 the end of the road something physical in the world
17 changes and everybody would say now thats shyshy that
18 will falls within I mean probably I mean my
19 hesitation shows Im looking for the right words
20 MR PERRY Justice Breyer your point is
21 the reason that it is equally fallacious to suggest on
22 the one hand as Alice and IBM does that simply
23 reciting a computer is a magic key that gets you through
24 101 and you never have to any other inquiry and what
25 some of folks the amici on the other side say which
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1 is that computers or software are never eligible Both
2 of those things have to be wrong because what the Court
3 said in Bilski was future innovation is too uncertain
4 We are not going to do that as a Court And the Court
5 laid out an approach using abstract ideas in Bilski and
6 inventive contribution in Mayo that is flexible enough
7 to take into account that innovation and to deal with
8 particular claims in context which is why at the end
9 of the day we have to come back to these patents and
10 decide which shyshy
11 JUSTICE KAGAN Mr Perry before we get
12 back to these matters you said to Justice Scalia if a
13 patent sufficiently describes how a computer will
14 implement an idea then its patentable So how
15 sufficiently does one have to describe it What do we
16 want a judge to do at this threshold level in terms of
17 trying to figure out whether the description is
18 sufficient to get you past it
19 MR PERRY If I can answer in two steps
20 Justice Kagan First in the negative What the
21 applicant or patentee must do shyshy must not do is simply
22 describe the desired result That would take us back to
23 State Street That would simply say I claim a magic
24 box that buys high and sells low or vice versa I
25 suppose I claim a magic box for investing Thats what
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1 these patents do
2 Then to put it in the affirmative and in the
3 language of Mayo the claim has to recite something
4 significantly more something significantly more than
5 the abstract idea itself That would be a contextual
6 analysis based on the claims and specifications and file
7 history and we know that some devices some methods
8 some programming will pass that
9 It is not going to be a brightshyline rule and
10 thats one of the tugshyofshywar issues that this Court and
11 the Federal Circuit have been having in these cases
12 The Federal Circuit wants brightshyline rules All
13 computers are in or all computers are out
14 This Court has been more contextual This
15 Court has been more nuanced This Court has looked at
16 things in a more robust way
17 JUSTICE KAGAN Youre not suggesting that
18 specific code is necessary
19 MR PERRY No Your Honor I think the shyshy
20 actual description of the programming is a 112 problem
21 I agree with that A 112 issue That is the realm of
22 the written description requirement What is a 101
23 problem is it is on the applicant to do more than simply
24 describe the results simply say A magic box that does
25 intermediate settlement And we can tie that back to
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1 this particular prosecution the 510 patent which is
2 the method patent
3 The examiner rejected it Under Section
4 101 the examiner said this is an abstract idea You
5 cant have this patent And the only change that this
6 applicant made was to add in the adjusting step
7 electronic adjustment It put in one word
8 electronic adjustment And under State Street which
9 is what this patent is prosecuted under that was
10 enough because the result of adjusting run through a
11 computer is enough
12 Under current law that cant be enough
13 That just cant get a patent over the line because this
14 Court said in Mayo and I got to quote this language
15 Simply implementing a fundamental principle on a
16 physical machine namely a computer is not a patentable
17 application of that principle Thats all that Alice
18 has done
19 These are preshyBilski patents They never
20 should have been issued General Verrilli will stand up
21 and address that point And certainly under current
22 law shyshy one point on the AIA Congress did not send all
23 this to the administrative process Congress created
24 two avenues the courts and the PTO to use the
25 standards Essentially it ratified Bilski and Mayo and
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1 said we agree with what you all are doing at the
2 Supreme Court and the existing standards are good enough
3 for us This is a judicial problem And that is a good
4 reason The abstract shyshy
5 JUSTICE GINSBURG The Federal Circuit in
6 this case split in many ways and it had our decisions
7 to deal with You said given Bilski and Mayo this is
8 an easy case What is the instruction that escaped a
9 good number of judges on the Federal Circuit How would
10 you state the rule
11 MR PERRY Your Honor I think theres a
12 significant element to the Federal Circuit that
13 disagrees with Mayo and has been resistant in applying
14 it Chief Judge shyshy former Chief Judge Michelle filed a
15 brief in this Court essentially saying Mayo is a
16 lifeshysciences case You should limit it to that because
17 if you apply it to everything else then these patents
18 are no good
19 Mayo we submit is a technologyshyneutral
20 industryshyneutral exceptionshyneutral framework that can
21 be used to answer all of these questions This is not
22 the death of software patents The software industry is
23 all before this Court saying this is fine with us
24 Every company in the United States practically except
25 for IBM is saying go ahead This will not affect
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1 software patents
2 Justice Ginsburg this Courts precedents
3 are clear They are unanimous They just need to be
4 applied To suggest that there is confusion that needs
5 to be addressed by retreating beating a retreat from
6 recent unanimous decisions would simply reward
7 intransigence difficulty refusal to adhere to what are
8 clear precedents because shyshy
9 JUSTICE KAGAN Should we be concerned
10 Mr Perry that there are old patents that in fact could
11 meet the test that you set forth but wont because they
12 were written in a different time and so used much more
13 general language
14 MR PERRY Your Honor the applicant or the
15 patent holder would have the opportunity to institute a
16 reexamination proceeding or some sort of administration
17 process to address that issue
18 And second it should be noted this is a
19 very small problem There are 2 million outstanding
20 patents in the United States In the last four fiscal
21 years there were 22000 infringement litigations
22 instituted but since Bilski there have only been 57
23 district court decisions on Section 101 issues There
24 have only been 12 Federal Circuit decisions total on
25 computer implementation
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1 We are talking about a group of patents
2 Justice Kagan thats way out at the tail end of
3 distribution Most patents never have a 101 challenge
4 This is not an issue with cotton gins and other things
5 This is a problem for the most marginal
6 most dubious most skeptical patents the ones that this
7 Court in Bilski shyshy and remember what Bilskis holding
8 is The majority said they are processes but it did
9 not say they are eligible
10 Thank you Mr Chief Justice
11 CHIEF JUSTICE ROBERTS Thank you counsel
12 General Verrilli
13 ORAL ARGUMENT OF DONALD B VERRILLI JR
14 ON BEHALF OF THE UNITED STATES AS AMICUS
15 CURIAE SUPPORTING RESPONDENTS
16 GENERAL VERRILLI Mr Chief Justice and
17 may it please the Court
18 An abstract idea does not become
19 patentshyeligible merely by tacking on an instruction to
20 use a computer to carry it out A computer makes a
21 difference under Section 101 when it imposes a
22 meaningful limit on the patent claim That occurs when
23 the claim is directed at improvement in computing
24 technology or an innovation that uses computing
25 technology to improve other technological functions
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1 Thats the test that we believe is most faithful to this
2 Courts precedents in Bilski and Mayo It keeps patents
3 within their traditional and appropriate domain and it
4 is capable of being administered consistently by Courts
5 and by PTO examiners
6 JUSTICE GINSBURG How do you answer the
7 argument that your view would extinguish businessshymethod
8 patents and make all software ineligible for patent
9 protection
10 GENERAL VERRILLI Yeah with shyshy let me
11 address software patents first because that I think is
12 obviously a significant question And its just not
13 correct to say that our approach would make software
14 patenting ineligible Any software patent that improves
15 the functioning of the computer technology is eligible
16 Any software patent that improves shyshy that is used to
17 improve another technology is eligible For example
18 the patent in the shyshy in the Diehr case is one in
19 which shyshy
20 JUSTICE SOTOMAYOR Why do we need to reach
21 this in that shyshy reach software patents at all in this
22 case
23 GENERAL VERRILLI Well shyshy
24 JUSTICE SOTOMAYOR Whats the necessity for
25 us to announce a general rule with respect to software
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1 There is no software being patented in this case
2 GENERAL VERRILLI Well I shyshy
3 JUSTICE SOTOMAYOR Theres a systems
4 GENERAL VERRILLI Well I shyshy I think shyshy
5 well they shyshy they shyshy theres a process being and shyshy and
6 one can think of software patents as process patents
7 And I think thats why my friends on the other side are
8 saying the sky is falling because they shyshy they are
9 interpreting what were saying about that when a
10 computer makes shyshy when a computers involvement makes
11 something eligible under 101 its calling those into
12 question and it doesnt
13 JUSTICE SOTOMAYOR Do you think we have to
14 reach the patentability of software to answer this case
15 GENERAL VERRILLI Well I think you can shyshy
16 I think the answer to that question is no not
17 necessarily You can decide it by saying that shyshy that
18 Bilski answers the question whether this is an abstract
19 idea because this form of hedging is really no
20 different than the form of hedging as a conceptual
21 matter at issue in Bilski And then Mayo answers the
22 question of whether the use of a computer in this case
23 adds enough to the abstract idea beyond conventional
24 steps because here all we have after all is just
25 conventional use of computing technology no computer
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1 innovation such that you dont qualify under 101 You
2 could take that approach
3 But it is important to the United States
4 that we shyshy and to our patent examiners that we get some
5 clarity if we can I think the clarity could come from
6 the text that I propose which I want to reiterate shyshy
7 JUSTICE SOTOMAYOR Well shyshy
8 JUSTICE BREYER Could shyshy could shyshy could you
9 go on with that because you were just getting to the
10 point where I think you say a computer improvement that
11 in fact leads to an improvement in harvesting cotton is
12 an improvement through a computer of technology so it
13 qualifies
14 But then I think you were going to say or I
15 got this also from the brief a computer improvement
16 that leads to an improvement in the methods of selling
17 bonds over the telephone is not an improvement in
18 technology reached by the computer Am I right about
19 the distinction youre making
20 GENERAL VERRILLI I dont think theres a
21 yes or no answer to that question
22 JUSTICE BREYER What is your view Yeah
23 what is shyshy how do we deal with just that problem
24 GENERAL VERRILLI If there is a genuine
25 innovation in the functioning of the computer shyshy
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1 JUSTICE BREYER Yes
2 GENERAL VERRILLI shyshy such that business
3 processes shyshy
4 JUSTICE BREYER Weve got that Yes yes
5 We got the computer But then it doesnt improve the
6 computer but rather it improves through the computer
7 the harvesting of cotton
8 Now youve got it in what you said was your
9 second category which is an improvement through the
10 computer of a technology And I thought in your brief
11 you were distinguishing an improvement through the
12 computer of a human activity that is not a technology
13 and in particular to pick an example of that
14 something in finance or something in business
15 Now am I right about the distinction youre
16 making
17 GENERAL VERRILLI Yeah that shyshy
18 JUSTICE BREYER If Im not right what is
19 the distinction
20 GENERAL VERRILLI That is generally the
21 line were drawing Frankly shyshy
22 JUSTICE BREYER And how is that justified
23 GENERAL VERRILLI I do want shyshy
24 JUSTICE BREYER That shyshy that is Judge Dyk
25 in shyshy in Bilski in the Federal circuit 4 people sort of
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1 picked it up maybe 5 didnt pick it up Would you say
2 a few words about it
3 GENERAL VERRILLI Sure About shyshy let me go
4 to Bilski there in that I do think while shyshy while
5 certainly the Court held that the term process got a
6 natural construction which could include business
7 methods it seems to me that thats not all the Court
8 said in Bilski The Court also said that it was
9 historically and traditionally quite rare that business
10 methods were patent eligible
11 It also said that shyshy that the shyshy that courts
12 and the PTO examiners should use the abstract ideas
13 exception to 101 to police the appropriate boundary
14 It also said that the
15 machineshyorshytransformation test that the United States
16 advocated remained a useful tool And of course that
17 directs to you seeing whether there is a technology
18 application
19 And of course the holding in Bilski was
20 that the shyshy the method for hedging risk was ineligible
21 because it was an abstract idea and I cant imagine
22 that if in Bilski the shyshy the claim had been exactly the
23 same but had added use a computer to carry out some of
24 these standard random analysis functions that are
25 claimed by the patent that you would have found it to
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1 be patent eligible
2 And I shyshy I would submit for the Court that
3 the key point here I think is that now given where
4 the Court shyshy what the Court has held in Bilski given
5 what its held in Mayo the abstract ideas exception is
6 really the only tool left to deal with what I shyshy what I
7 think I fairly read Bilski as saying is a significant
8 problem the proliferation of patents of business
9 methods
10 JUSTICE KENNEDY Is there an example that
11 you can give us of a shyshy what we can call a business
12 process that is patentable a process that doesnt
13 involve improving the workings of a computer
14 GENERAL VERRILLI I shyshy I think its going
15 to be difficult for me to do that I think for
16 example if you had a business method a process for
17 additional security pointshyofshysale credit card
18 transactions using particular encryption technology
19 that might well be patent eligible Its a technology
20 that it makes conduct of business more efficient or
21 effective
22 But there is a technological link here and
23 we do think thats critical to our shyshy to our point of
24 view with respect to the case And I shyshy and I do think
25 remember that when we say something is not patent
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1 eligible were not saying they cant do it Were
2 saying they cant monopolize it
3 And the concern in a situation like this one
4 is that if this is patent eligible its hard to see
5 why for example the first person who came up with a
6 frequent flier program wouldnt have been able to claim
7 a patent there because after all thats a business
8 method for improving customer loyalty implemented on a
9 computer
10 CHIEF JUSTICE ROBERTS General I shyshy you
11 mentioned a while ago the need for greater clarity and
12 certainty in this area And Im just wondering in your
13 brief youve got a nonshyexhaustive of factors to
14 consider and there are 6 different ones And Im just
15 doubtful that thats going to bring about greater
16 clarity and certainty
17 GENERAL VERRILLI I take shyshy I take the
18 point Mr Chief Justice but I think the key is that
19 they are all directed to answering the question of
20 whether the innovation that is claimed and is an
21 innovation in either A the improvement of a computers
22 functioning or B the use of computer technology to
23 improve the functioning of another technological
24 process and a case like Diehr would be in the latter
25 category
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1 And so I do think that thats the key
2 benchmark Thats the baseline Thats the test that
3 we do think can be applied clearly and consistently by
4 the courts or the PTO And it avoids the risk of things
5 like frequent flier programs or the Oakland As money
6 ball methods for evaluating the contributions in
7 individual baseball players make or any one of a host of
8 other things that our intuitions tell us just dont
9 belong in the patent system
10 Thats the shyshy drawing that line keeps them
11 out not drawing that line lets them in And with all
12 due respect I dont think that the novelty and
13 nonobviousness filters that 102 and 103 really deal with
14 that problem effectively because when you get to
15 nonobviousness in 103 for example youll be asking a
16 different question
17 If you take the frequent flier program you
18 would say well is this innovation in building consumer
19 loyalty something that would have been obvious to
20 somebody who runs an airline Its totally divorced
21 from the question of technology at that point and
22 therefore I dont think youre going to get the screen
23 that you need to get in order for the patent system to
24 be confined to its traditional and appropriate scope
25 If there are no further questions thank
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1 you
2 JUSTICE GINSBURG I have a question about
3 how do you identify an abstract concept The shyshy a
4 natural phenomenon a mathematical formula those are
5 easy to identify but there has been some confusion on
6 what qualifies as an abstract concept
7 GENERAL VERRILLI We would define
8 abstract shyshy an abstract concept as a claim that is not
9 directed to a concrete innovation in technology
10 science or the industrial arts So its the shyshy its
11 abstract in the sense that it is not a concrete
12 innovation in the traditional realm of patent law
13 Thank you
14 CHIEF JUSTICE ROBERTS Thank you General
15 Mr Phillips you have four minutes
16 remaining
17 REBUTTAL ARGUMENT OF CARTER G PHILLIPS
18 ON BEHALF OF THE PETITIONERS
19 MR PHILLIPS Thank you Mr Chief Justice
20 Id just like to make a few points
21 First of all with respect to the question
22 you asked which is looking at 159 et cetera all I can
23 tell you is that if you look at claim 33 it talks about
24 matched orders the matched orders that are described in
25 286 and 287 and then makes specific reference to 159
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1 and that flow chart thats there And its all designed
2 as a package Its only one element of the shyshy of the
3 invention but it is a central element and its an easy
4 one to understand And it goes well beyond simply the
5 notion of hedge shyshy hedge against settlement risk and do
6 it by a computer
7 JUSTICE SOTOMAYOR Your adversary says that
8 his shyshy the appendix to his brief are the only patents at
9 issue that the flow charts are not at issue in this
10 case
11 MR PHILLIPS Theres no basis for that
12 statement Your Honor There shyshy remember this went off
13 on a very truncated litigation process So theres shyshy
14 you know we shyshy we got cut off at the beginning of it
15 Theres been no construction of the shyshy of the claims
16 and shyshy and obviously these are specifications that go
17 to how you interpret the claim
18 JUSTICE SOTOMAYOR If we were to say that
19 there are no business patents shyshy
20 MR PHILLIPS Yes
21 JUSTICE SOTOMAYOR shyshy would your patent
22 survive at all
23 MR PHILLIPS No I dont shyshy I dont
24 believe so I think theres no question And you
25 know General Verrilli could not have been any plainer
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1 in his statement of how he wants to interpret the
2 abstract idea concept
3 JUSTICE SOTOMAYOR Yes he wants to say no
4 business patents
5 MR PHILLIPS No business shyshy just another
6 way of saying no business methods And you know the
7 Court rejected that And it seems to me extraordinary
8 to say Congress didnt reject no business methods in
9 101 but were going to do shyshy were going to manipulate
10 the judicial exception to accomplish precisely that same
11 thing It seems to me thats wholly inappropriate
12 Justice Ginsburg you asked my shyshy my friend
13 here you know whats his test He didnt answer that
14 question youll notice because he doesnt have an
15 answer His basic argument is whatever you do just
16 kill this patent
17 And if I were in his shoes I suppose Id
18 take that same position I think whats absolutely
19 clear is that the test ought to be one that is
20 structured as a very coarse filter not the kind of
21 filter that hes pushing for where it changes over time
22 I mean I thought his shyshy I thought his response to one
23 of the questions about eshymail and word processing that
24 Justice Sotomayor asked is over time it would change
25 Well thats exactly what 102 and 103 are for That is
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1 not the purpose of shyshy of Section 101
2 And then he uses the example of encryption
3 I guarantee you if we were arguing about encryption in
4 this case he would say to me that thats an abstract
5 principle because encryption is a concept thats been
6 around since time immemorial George Washington used
7 it Everybody has used encryption
8 And a question again thats not the
9 solution to these problems The question is how did we
10 go about doing it And we go beyond the basics of
11 simply saying use a computer and thats what we ask
12 this Court to focus on and to evaluate
13 As to the frequent flier program its
14 pretty clear to me that even though it was a novel idea
15 in some sense the concept itself would have been viewed
16 in shyshy in the KSR fashion as quite obvious as a means of
17 improving customer loyalty
18 There are solutions here Giving us 101
19 pass doesnt create a monopoly It just gets us to the
20 102 and 103 inquiries that are at the heart of what the
21 patent laws shyshy and 112 that are at the heart of what the
22 patent laws ought to be dealing with
23 If there are no further questions Your
24 Honor thank you
25 CHIEF JUSTICE ROBERTS Thank you counsel
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1 The case is submitted
2 (Whereupon at 1105 am the case in the
3 aboveshyentitled matter was submitted)
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
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58
A add 714 1023 algorithm 3320 41 automatically
As 525 3621 387 algorithms apply 72425 111
am 115 32 416 3013 3310 2019 281213 automobile 389
572 added 302 Alice 13 34 2822 3814 available 99
abacus 61213 4923 363 3717 4217 avenues 4124
710 1018 additional 5017 3822 4117 applying 4213 avoids 524
1325 3614 3617
address 4121 4317 4511
Alices 271 2919 3678
approach 226 395 4513 B
ability 1514 addressed 435 allow 94 472 B 121 29 4413
able 1511 167 addressing 181 allows 97 242 appropriate 5122
1919 516 adds 4623 amazing 2514 81516 1514 back 1621
aboveshyentitled adhere 437 amici 3825 453 4913 1922 2512
113 573 adjudication amicus 123 5224 3018 322
absolutely 125 241 210 4414 Archimedes 3991222
1215 159 adjusting 3611 analysis 424 281122 3811 4025
5518 41610 364 406 area 219 5112 ball 526
abstract 4267 adjustment 417 4924 argue 2518 Bank 17 35
48 6682023 418 analyze 1416 arguing 563 banks 95
721 8218 administered 1716 argument 114 bars 43
141920 1522 454 announce 4525 225812 33 baseball 527
165 181618 administration answer 119 37 41 144 based 423 406
2220 24925 4316 2219 247 18323 226 baseline 522
2621 277 administrative 3919 4221 26715 4413 basic 413 5515
2938 3422 171218 187 456 461416 457 5317 basically 1821
3523 395 242 4123 4721 551315 5515 2319
405 414 424 adopt 203 answering 5119 arguments basics 5610
4418 461823 adopted 31317 answers 3713 1415 basis 132 1512
491221 505 advancement 461821 arms 1625 1516 2719
53368811 351 anyway 1810 arrangements 5411
552 564 advances 3513 apparatus 2916 131 beating 435
accept 102 adversary 547 APPEARAN arrows 315 beginning 163
accomplish advice 1715 116 art 1919 5414
5510 advocated 4916 appears 820 arts 2124 5310 begins 3810
account 55 618 affect 4225 appendix 1910 aside 1422 157 behalf 11719
397 affirmative 402 311 326 369 asked 2314 122 24710
accounts 823 agent 52 3021 548 278 5322 214 38 2616
9356 3611 ago 318 2224 applicant 3220 551224 4414 5318
3611 3615 5111 3921 4023 asking 193 believe 1316
accurately 2413 agree 920 2021 416 4314 221213 273 1416 2421
acknowledges 221 2418 application 3324 5215 255 264 451
1121 4021 421 2623 4117 aspect 517 5424
act 99 2017 agrees 2812 4918 asserted 3113 belong 529
activities 229 ahead 4225 applications 311618 benchmark 522
activity 2122 AIA 2912 4122 333 asserting 325 Benson 361923
3325 4812 airline 5220 applied 434 attaching 124 best 161124
actual 4020 AL 18 523 attention 3813 better 1610 albeit 923 applies 31418 Attorney 2021 216 2819
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59
3322 brightshyline 409 2313 37 71 4338 5519 beyond 115 4012 5317 checks 618 5614
1312 4623 bring 5115 case 3412 46 Chief 339 clearly 211 251 544 5610 broad 248 116 1524 261217 3024 523
Bilski 313 46 broader 225 2022 213 31812 378 client 311416 415 1722 browsing 228 2211 2313 371416 386 close 2822 2224 2329 builder 2811 2625 311424 421414 4410 CLS 17 35 262020 271 building 5218 3314 36620 441116 5110 1120 2816 2999 built 2324 426816 5118 531419 coarse 247 3935 4125 business 168 451822 461 5625 5520 427 4322 1749 203 461422 5024 chits 611 code 1213 142 447 452 2124 222122 5124 5410 chronological 1916171720 461821 4825 2311 29613 564 5712 1512 2725 4018 49481922 32132323 cases 244 2816 chronologically coffee 1211 5047 3322525 4011 423 colleagues 116
Bilskis 447 34415 3610 catalogues 2512 circuit 2818 college 58 bit 323 48214 4969 262 401112 425 columns 325 blocks 54 508111620 categorically 42912 4324 come 108 234 Bloomberg 517 5419 202 4825 3017 399
2115 225 554568 category 489 circumstances 475 boat 2811 businessshymeth 5125 318 1515 comes 1318 bonds 4717 457 CBM 2913 claim 416 2418 2018 231 bothering 118 buy 183 cellphones 228 2423 2522 coming 923 bound 1521 buys 3924 central 95 543 264 27917 common 31120 boundary 4913 certain 1216 3019 3121 2157 bounds 1521 C certainly 518 32420 361 company 4224 box 392425 C 21 31 263 358 392325 403 competition
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brief 211315 carefully 1725 chart 541 283 3118 516 621 710 2255 322 caricature 718 charted 2620 37517 398 71325 9113 4215 4715 72020 1417 charts 1911 406 5415 91824 1035 4810 5113 1716 549 clarity 4755 10725 1116 548 carry 4420 Charybdis 511116 124102024
briefs 1524 4923 1620 2619 class 59 13911 1479 1618 CARTER 117 checkbook 617 clear 1015 118 1421 15710
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1517 165 confess 1111 coterminous 4121 5324 181719 196 configured 383 2321 customer 518 describes 425 19814 206 confined 5224 cotton 914 444 5617 2918 3211 2025 211016 confirmed 2912 4711 487 cut 5414 3913 2117 2410 confusion 434 counsel 4411 description
D2521525 535 5625 3917 402022 D 312622 30522 Congress 178 countries 137 deserve 342 DC 1101719 31311 3210 1725 1856 course 719 designed 720
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dealing 4175013 51922 contains 327 40141515 2789 4421 1119 135546 5611 content 281417 4114 42215 different 421 151216 3412 computers 2819 4223 4323 79 919 1377 56224610 5121 context 2319 44717 4957 191 259 266
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1811522 53368 526 241 251 difficulty 437 decisions 274552 56515 conventional 5619 direct 2721
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1112 391522 253 53911 corresponding curiae 123 211 144 1520 4024conduct 5020 2720 2915 4415 disagree 513
described 717conducted 297 346 current 4112 disagrees 4213
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disclosure 328 413 302021 4220 figure 1146 discuss 164 economy 1516 ESQ 1171921 excerpted 323 311222 3917 discussion 299 effective 1223 236913 exhausted 1813 file 406 dispose 2625 5021 essence 211 exist 420 131 filed 4214 dispute 325 effectively 5214 essential 1224 existence 1119 fill 2818 disputed 3120 efficacy 1224 3425 175 filled 293
363 1517 essentially 2016 existing 337 filter 248 5520 distance 2311 efficiency 3722 261 4125 422 5521 distinction 415 efficient 5020 4215 exists 42 filters 5213
4719 481519 either 202 established expert 3688 finance 2124 distinguishing 5121 311919 381 4814
4811 electronic 262 establishing expertise 1210 financial 1225 distribution 4178 275 experts 2817 29517
443 electronically et 18 387 5322 367 fine 103 2223 district 4323 2525 evaluate 97 extent 1924 4223 divorced 5220 element 811 5612 2323 265 finished 133 doing 91315 4212 5423 evaluating 526 extinguish 457 first 1111 2718
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factors 5113drawings 3117 embedded 1418 exaggeration flow 1911 541 fail 2419 272 3117 employ 75 1017 549 fairly 511 507 dubious 2915 enabled 1921 examiner 4134 fluctuation faithful 451446 encourages examiners 455 2711 fall 925 229 due 5212 132222 474 4912 focus 1013
242022 2910 Dyk 4824 encryption example 1912 5612 fallacious 38213410 5018 291 30918 folks 3825
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earlier 822 faster 166enter 95 5215 562 former 4214 early 417 Federal 4011entire 186 examples 83 forms 2513 easy 511 1113 4012 4259 environment 297 331 formula 534
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5512 getting 289 grab 618 historically 499 552 5614 friends 272 479 grain 624 711 history 1721 ideas 293 395
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functionality 277 425 432 group 1210 home 510 immemorial 3599 456 532 441 Honor 1814 566
functioning 5512 guarantee 563 214 269 implement 911 4515 4725 give 2225 257 guess 51111 2722 282 102125 147 512223 281325 3221 171 2218 2921923 149 1510
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1 is that computers or software are never eligible Both
2 of those things have to be wrong because what the Court
3 said in Bilski was future innovation is too uncertain
4 We are not going to do that as a Court And the Court
5 laid out an approach using abstract ideas in Bilski and
6 inventive contribution in Mayo that is flexible enough
7 to take into account that innovation and to deal with
8 particular claims in context which is why at the end
9 of the day we have to come back to these patents and
10 decide which shyshy
11 JUSTICE KAGAN Mr Perry before we get
12 back to these matters you said to Justice Scalia if a
13 patent sufficiently describes how a computer will
14 implement an idea then its patentable So how
15 sufficiently does one have to describe it What do we
16 want a judge to do at this threshold level in terms of
17 trying to figure out whether the description is
18 sufficient to get you past it
19 MR PERRY If I can answer in two steps
20 Justice Kagan First in the negative What the
21 applicant or patentee must do shyshy must not do is simply
22 describe the desired result That would take us back to
23 State Street That would simply say I claim a magic
24 box that buys high and sells low or vice versa I
25 suppose I claim a magic box for investing Thats what
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1 these patents do
2 Then to put it in the affirmative and in the
3 language of Mayo the claim has to recite something
4 significantly more something significantly more than
5 the abstract idea itself That would be a contextual
6 analysis based on the claims and specifications and file
7 history and we know that some devices some methods
8 some programming will pass that
9 It is not going to be a brightshyline rule and
10 thats one of the tugshyofshywar issues that this Court and
11 the Federal Circuit have been having in these cases
12 The Federal Circuit wants brightshyline rules All
13 computers are in or all computers are out
14 This Court has been more contextual This
15 Court has been more nuanced This Court has looked at
16 things in a more robust way
17 JUSTICE KAGAN Youre not suggesting that
18 specific code is necessary
19 MR PERRY No Your Honor I think the shyshy
20 actual description of the programming is a 112 problem
21 I agree with that A 112 issue That is the realm of
22 the written description requirement What is a 101
23 problem is it is on the applicant to do more than simply
24 describe the results simply say A magic box that does
25 intermediate settlement And we can tie that back to
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1 this particular prosecution the 510 patent which is
2 the method patent
3 The examiner rejected it Under Section
4 101 the examiner said this is an abstract idea You
5 cant have this patent And the only change that this
6 applicant made was to add in the adjusting step
7 electronic adjustment It put in one word
8 electronic adjustment And under State Street which
9 is what this patent is prosecuted under that was
10 enough because the result of adjusting run through a
11 computer is enough
12 Under current law that cant be enough
13 That just cant get a patent over the line because this
14 Court said in Mayo and I got to quote this language
15 Simply implementing a fundamental principle on a
16 physical machine namely a computer is not a patentable
17 application of that principle Thats all that Alice
18 has done
19 These are preshyBilski patents They never
20 should have been issued General Verrilli will stand up
21 and address that point And certainly under current
22 law shyshy one point on the AIA Congress did not send all
23 this to the administrative process Congress created
24 two avenues the courts and the PTO to use the
25 standards Essentially it ratified Bilski and Mayo and
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1 said we agree with what you all are doing at the
2 Supreme Court and the existing standards are good enough
3 for us This is a judicial problem And that is a good
4 reason The abstract shyshy
5 JUSTICE GINSBURG The Federal Circuit in
6 this case split in many ways and it had our decisions
7 to deal with You said given Bilski and Mayo this is
8 an easy case What is the instruction that escaped a
9 good number of judges on the Federal Circuit How would
10 you state the rule
11 MR PERRY Your Honor I think theres a
12 significant element to the Federal Circuit that
13 disagrees with Mayo and has been resistant in applying
14 it Chief Judge shyshy former Chief Judge Michelle filed a
15 brief in this Court essentially saying Mayo is a
16 lifeshysciences case You should limit it to that because
17 if you apply it to everything else then these patents
18 are no good
19 Mayo we submit is a technologyshyneutral
20 industryshyneutral exceptionshyneutral framework that can
21 be used to answer all of these questions This is not
22 the death of software patents The software industry is
23 all before this Court saying this is fine with us
24 Every company in the United States practically except
25 for IBM is saying go ahead This will not affect
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1 software patents
2 Justice Ginsburg this Courts precedents
3 are clear They are unanimous They just need to be
4 applied To suggest that there is confusion that needs
5 to be addressed by retreating beating a retreat from
6 recent unanimous decisions would simply reward
7 intransigence difficulty refusal to adhere to what are
8 clear precedents because shyshy
9 JUSTICE KAGAN Should we be concerned
10 Mr Perry that there are old patents that in fact could
11 meet the test that you set forth but wont because they
12 were written in a different time and so used much more
13 general language
14 MR PERRY Your Honor the applicant or the
15 patent holder would have the opportunity to institute a
16 reexamination proceeding or some sort of administration
17 process to address that issue
18 And second it should be noted this is a
19 very small problem There are 2 million outstanding
20 patents in the United States In the last four fiscal
21 years there were 22000 infringement litigations
22 instituted but since Bilski there have only been 57
23 district court decisions on Section 101 issues There
24 have only been 12 Federal Circuit decisions total on
25 computer implementation
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1 We are talking about a group of patents
2 Justice Kagan thats way out at the tail end of
3 distribution Most patents never have a 101 challenge
4 This is not an issue with cotton gins and other things
5 This is a problem for the most marginal
6 most dubious most skeptical patents the ones that this
7 Court in Bilski shyshy and remember what Bilskis holding
8 is The majority said they are processes but it did
9 not say they are eligible
10 Thank you Mr Chief Justice
11 CHIEF JUSTICE ROBERTS Thank you counsel
12 General Verrilli
13 ORAL ARGUMENT OF DONALD B VERRILLI JR
14 ON BEHALF OF THE UNITED STATES AS AMICUS
15 CURIAE SUPPORTING RESPONDENTS
16 GENERAL VERRILLI Mr Chief Justice and
17 may it please the Court
18 An abstract idea does not become
19 patentshyeligible merely by tacking on an instruction to
20 use a computer to carry it out A computer makes a
21 difference under Section 101 when it imposes a
22 meaningful limit on the patent claim That occurs when
23 the claim is directed at improvement in computing
24 technology or an innovation that uses computing
25 technology to improve other technological functions
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1 Thats the test that we believe is most faithful to this
2 Courts precedents in Bilski and Mayo It keeps patents
3 within their traditional and appropriate domain and it
4 is capable of being administered consistently by Courts
5 and by PTO examiners
6 JUSTICE GINSBURG How do you answer the
7 argument that your view would extinguish businessshymethod
8 patents and make all software ineligible for patent
9 protection
10 GENERAL VERRILLI Yeah with shyshy let me
11 address software patents first because that I think is
12 obviously a significant question And its just not
13 correct to say that our approach would make software
14 patenting ineligible Any software patent that improves
15 the functioning of the computer technology is eligible
16 Any software patent that improves shyshy that is used to
17 improve another technology is eligible For example
18 the patent in the shyshy in the Diehr case is one in
19 which shyshy
20 JUSTICE SOTOMAYOR Why do we need to reach
21 this in that shyshy reach software patents at all in this
22 case
23 GENERAL VERRILLI Well shyshy
24 JUSTICE SOTOMAYOR Whats the necessity for
25 us to announce a general rule with respect to software
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1 There is no software being patented in this case
2 GENERAL VERRILLI Well I shyshy
3 JUSTICE SOTOMAYOR Theres a systems
4 GENERAL VERRILLI Well I shyshy I think shyshy
5 well they shyshy they shyshy theres a process being and shyshy and
6 one can think of software patents as process patents
7 And I think thats why my friends on the other side are
8 saying the sky is falling because they shyshy they are
9 interpreting what were saying about that when a
10 computer makes shyshy when a computers involvement makes
11 something eligible under 101 its calling those into
12 question and it doesnt
13 JUSTICE SOTOMAYOR Do you think we have to
14 reach the patentability of software to answer this case
15 GENERAL VERRILLI Well I think you can shyshy
16 I think the answer to that question is no not
17 necessarily You can decide it by saying that shyshy that
18 Bilski answers the question whether this is an abstract
19 idea because this form of hedging is really no
20 different than the form of hedging as a conceptual
21 matter at issue in Bilski And then Mayo answers the
22 question of whether the use of a computer in this case
23 adds enough to the abstract idea beyond conventional
24 steps because here all we have after all is just
25 conventional use of computing technology no computer
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1 innovation such that you dont qualify under 101 You
2 could take that approach
3 But it is important to the United States
4 that we shyshy and to our patent examiners that we get some
5 clarity if we can I think the clarity could come from
6 the text that I propose which I want to reiterate shyshy
7 JUSTICE SOTOMAYOR Well shyshy
8 JUSTICE BREYER Could shyshy could shyshy could you
9 go on with that because you were just getting to the
10 point where I think you say a computer improvement that
11 in fact leads to an improvement in harvesting cotton is
12 an improvement through a computer of technology so it
13 qualifies
14 But then I think you were going to say or I
15 got this also from the brief a computer improvement
16 that leads to an improvement in the methods of selling
17 bonds over the telephone is not an improvement in
18 technology reached by the computer Am I right about
19 the distinction youre making
20 GENERAL VERRILLI I dont think theres a
21 yes or no answer to that question
22 JUSTICE BREYER What is your view Yeah
23 what is shyshy how do we deal with just that problem
24 GENERAL VERRILLI If there is a genuine
25 innovation in the functioning of the computer shyshy
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1 JUSTICE BREYER Yes
2 GENERAL VERRILLI shyshy such that business
3 processes shyshy
4 JUSTICE BREYER Weve got that Yes yes
5 We got the computer But then it doesnt improve the
6 computer but rather it improves through the computer
7 the harvesting of cotton
8 Now youve got it in what you said was your
9 second category which is an improvement through the
10 computer of a technology And I thought in your brief
11 you were distinguishing an improvement through the
12 computer of a human activity that is not a technology
13 and in particular to pick an example of that
14 something in finance or something in business
15 Now am I right about the distinction youre
16 making
17 GENERAL VERRILLI Yeah that shyshy
18 JUSTICE BREYER If Im not right what is
19 the distinction
20 GENERAL VERRILLI That is generally the
21 line were drawing Frankly shyshy
22 JUSTICE BREYER And how is that justified
23 GENERAL VERRILLI I do want shyshy
24 JUSTICE BREYER That shyshy that is Judge Dyk
25 in shyshy in Bilski in the Federal circuit 4 people sort of
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1 picked it up maybe 5 didnt pick it up Would you say
2 a few words about it
3 GENERAL VERRILLI Sure About shyshy let me go
4 to Bilski there in that I do think while shyshy while
5 certainly the Court held that the term process got a
6 natural construction which could include business
7 methods it seems to me that thats not all the Court
8 said in Bilski The Court also said that it was
9 historically and traditionally quite rare that business
10 methods were patent eligible
11 It also said that shyshy that the shyshy that courts
12 and the PTO examiners should use the abstract ideas
13 exception to 101 to police the appropriate boundary
14 It also said that the
15 machineshyorshytransformation test that the United States
16 advocated remained a useful tool And of course that
17 directs to you seeing whether there is a technology
18 application
19 And of course the holding in Bilski was
20 that the shyshy the method for hedging risk was ineligible
21 because it was an abstract idea and I cant imagine
22 that if in Bilski the shyshy the claim had been exactly the
23 same but had added use a computer to carry out some of
24 these standard random analysis functions that are
25 claimed by the patent that you would have found it to
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1 be patent eligible
2 And I shyshy I would submit for the Court that
3 the key point here I think is that now given where
4 the Court shyshy what the Court has held in Bilski given
5 what its held in Mayo the abstract ideas exception is
6 really the only tool left to deal with what I shyshy what I
7 think I fairly read Bilski as saying is a significant
8 problem the proliferation of patents of business
9 methods
10 JUSTICE KENNEDY Is there an example that
11 you can give us of a shyshy what we can call a business
12 process that is patentable a process that doesnt
13 involve improving the workings of a computer
14 GENERAL VERRILLI I shyshy I think its going
15 to be difficult for me to do that I think for
16 example if you had a business method a process for
17 additional security pointshyofshysale credit card
18 transactions using particular encryption technology
19 that might well be patent eligible Its a technology
20 that it makes conduct of business more efficient or
21 effective
22 But there is a technological link here and
23 we do think thats critical to our shyshy to our point of
24 view with respect to the case And I shyshy and I do think
25 remember that when we say something is not patent
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1 eligible were not saying they cant do it Were
2 saying they cant monopolize it
3 And the concern in a situation like this one
4 is that if this is patent eligible its hard to see
5 why for example the first person who came up with a
6 frequent flier program wouldnt have been able to claim
7 a patent there because after all thats a business
8 method for improving customer loyalty implemented on a
9 computer
10 CHIEF JUSTICE ROBERTS General I shyshy you
11 mentioned a while ago the need for greater clarity and
12 certainty in this area And Im just wondering in your
13 brief youve got a nonshyexhaustive of factors to
14 consider and there are 6 different ones And Im just
15 doubtful that thats going to bring about greater
16 clarity and certainty
17 GENERAL VERRILLI I take shyshy I take the
18 point Mr Chief Justice but I think the key is that
19 they are all directed to answering the question of
20 whether the innovation that is claimed and is an
21 innovation in either A the improvement of a computers
22 functioning or B the use of computer technology to
23 improve the functioning of another technological
24 process and a case like Diehr would be in the latter
25 category
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1 And so I do think that thats the key
2 benchmark Thats the baseline Thats the test that
3 we do think can be applied clearly and consistently by
4 the courts or the PTO And it avoids the risk of things
5 like frequent flier programs or the Oakland As money
6 ball methods for evaluating the contributions in
7 individual baseball players make or any one of a host of
8 other things that our intuitions tell us just dont
9 belong in the patent system
10 Thats the shyshy drawing that line keeps them
11 out not drawing that line lets them in And with all
12 due respect I dont think that the novelty and
13 nonobviousness filters that 102 and 103 really deal with
14 that problem effectively because when you get to
15 nonobviousness in 103 for example youll be asking a
16 different question
17 If you take the frequent flier program you
18 would say well is this innovation in building consumer
19 loyalty something that would have been obvious to
20 somebody who runs an airline Its totally divorced
21 from the question of technology at that point and
22 therefore I dont think youre going to get the screen
23 that you need to get in order for the patent system to
24 be confined to its traditional and appropriate scope
25 If there are no further questions thank
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1 you
2 JUSTICE GINSBURG I have a question about
3 how do you identify an abstract concept The shyshy a
4 natural phenomenon a mathematical formula those are
5 easy to identify but there has been some confusion on
6 what qualifies as an abstract concept
7 GENERAL VERRILLI We would define
8 abstract shyshy an abstract concept as a claim that is not
9 directed to a concrete innovation in technology
10 science or the industrial arts So its the shyshy its
11 abstract in the sense that it is not a concrete
12 innovation in the traditional realm of patent law
13 Thank you
14 CHIEF JUSTICE ROBERTS Thank you General
15 Mr Phillips you have four minutes
16 remaining
17 REBUTTAL ARGUMENT OF CARTER G PHILLIPS
18 ON BEHALF OF THE PETITIONERS
19 MR PHILLIPS Thank you Mr Chief Justice
20 Id just like to make a few points
21 First of all with respect to the question
22 you asked which is looking at 159 et cetera all I can
23 tell you is that if you look at claim 33 it talks about
24 matched orders the matched orders that are described in
25 286 and 287 and then makes specific reference to 159
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1 and that flow chart thats there And its all designed
2 as a package Its only one element of the shyshy of the
3 invention but it is a central element and its an easy
4 one to understand And it goes well beyond simply the
5 notion of hedge shyshy hedge against settlement risk and do
6 it by a computer
7 JUSTICE SOTOMAYOR Your adversary says that
8 his shyshy the appendix to his brief are the only patents at
9 issue that the flow charts are not at issue in this
10 case
11 MR PHILLIPS Theres no basis for that
12 statement Your Honor There shyshy remember this went off
13 on a very truncated litigation process So theres shyshy
14 you know we shyshy we got cut off at the beginning of it
15 Theres been no construction of the shyshy of the claims
16 and shyshy and obviously these are specifications that go
17 to how you interpret the claim
18 JUSTICE SOTOMAYOR If we were to say that
19 there are no business patents shyshy
20 MR PHILLIPS Yes
21 JUSTICE SOTOMAYOR shyshy would your patent
22 survive at all
23 MR PHILLIPS No I dont shyshy I dont
24 believe so I think theres no question And you
25 know General Verrilli could not have been any plainer
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1 in his statement of how he wants to interpret the
2 abstract idea concept
3 JUSTICE SOTOMAYOR Yes he wants to say no
4 business patents
5 MR PHILLIPS No business shyshy just another
6 way of saying no business methods And you know the
7 Court rejected that And it seems to me extraordinary
8 to say Congress didnt reject no business methods in
9 101 but were going to do shyshy were going to manipulate
10 the judicial exception to accomplish precisely that same
11 thing It seems to me thats wholly inappropriate
12 Justice Ginsburg you asked my shyshy my friend
13 here you know whats his test He didnt answer that
14 question youll notice because he doesnt have an
15 answer His basic argument is whatever you do just
16 kill this patent
17 And if I were in his shoes I suppose Id
18 take that same position I think whats absolutely
19 clear is that the test ought to be one that is
20 structured as a very coarse filter not the kind of
21 filter that hes pushing for where it changes over time
22 I mean I thought his shyshy I thought his response to one
23 of the questions about eshymail and word processing that
24 Justice Sotomayor asked is over time it would change
25 Well thats exactly what 102 and 103 are for That is
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1 not the purpose of shyshy of Section 101
2 And then he uses the example of encryption
3 I guarantee you if we were arguing about encryption in
4 this case he would say to me that thats an abstract
5 principle because encryption is a concept thats been
6 around since time immemorial George Washington used
7 it Everybody has used encryption
8 And a question again thats not the
9 solution to these problems The question is how did we
10 go about doing it And we go beyond the basics of
11 simply saying use a computer and thats what we ask
12 this Court to focus on and to evaluate
13 As to the frequent flier program its
14 pretty clear to me that even though it was a novel idea
15 in some sense the concept itself would have been viewed
16 in shyshy in the KSR fashion as quite obvious as a means of
17 improving customer loyalty
18 There are solutions here Giving us 101
19 pass doesnt create a monopoly It just gets us to the
20 102 and 103 inquiries that are at the heart of what the
21 patent laws shyshy and 112 that are at the heart of what the
22 patent laws ought to be dealing with
23 If there are no further questions Your
24 Honor thank you
25 CHIEF JUSTICE ROBERTS Thank you counsel
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1 The case is submitted
2 (Whereupon at 1105 am the case in the
3 aboveshyentitled matter was submitted)
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
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58
A add 714 1023 algorithm 3320 41 automatically
As 525 3621 387 algorithms apply 72425 111
am 115 32 416 3013 3310 2019 281213 automobile 389
572 added 302 Alice 13 34 2822 3814 available 99
abacus 61213 4923 363 3717 4217 avenues 4124
710 1018 additional 5017 3822 4117 applying 4213 avoids 524
1325 3614 3617
address 4121 4317 4511
Alices 271 2919 3678
approach 226 395 4513 B
ability 1514 addressed 435 allow 94 472 B 121 29 4413
able 1511 167 addressing 181 allows 97 242 appropriate 5122
1919 516 adds 4623 amazing 2514 81516 1514 back 1621
aboveshyentitled adhere 437 amici 3825 453 4913 1922 2512
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absolutely 125 241 210 4414 Archimedes 3991222
1215 159 adjusting 3611 analysis 424 281122 3811 4025
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abstract 4267 adjustment 417 4924 argue 2518 Bank 17 35
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721 8218 administered 1716 argument 114 bars 43
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accept 102 adversary 547 APPEARAN arrows 315 beginning 163
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account 55 618 affect 4225 appendix 1910 aside 1422 157 behalf 11719
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accounts 823 agent 52 3021 548 278 5322 214 38 2616
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activities 229 ahead 4225 applications 311618 benchmark 522
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actual 4020 AL 18 523 attention 3813 better 1610 albeit 923 applies 31418 Attorney 2021 216 2819
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3322 brightshyline 409 2313 37 71 4338 5519 beyond 115 4012 5317 checks 618 5614
1312 4623 bring 5115 case 3412 46 Chief 339 clearly 211 251 544 5610 broad 248 116 1524 261217 3024 523
Bilski 313 46 broader 225 2022 213 31812 378 client 311416 415 1722 browsing 228 2211 2313 371416 386 close 2822 2224 2329 builder 2811 2625 311424 421414 4410 CLS 17 35 262020 271 building 5218 3314 36620 441116 5110 1120 2816 2999 built 2324 426816 5118 531419 coarse 247 3935 4125 business 168 451822 461 5625 5520 427 4322 1749 203 461422 5024 chits 611 code 1213 142 447 452 2124 222122 5124 5410 chronological 1916171720 461821 4825 2311 29613 564 5712 1512 2725 4018 49481922 32132323 cases 244 2816 chronologically coffee 1211 5047 3322525 4011 423 colleagues 116
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brief 211315 carefully 1725 chart 541 283 3118 516 621 710 2255 322 caricature 718 charted 2620 37517 398 71325 9113 4215 4715 72020 1417 charts 1911 406 5415 91824 1035 4810 5113 1716 549 clarity 4755 10725 1116 548 carry 4420 Charybdis 511116 124102024
briefs 1524 4923 1620 2619 class 59 13911 1479 1618 CARTER 117 checkbook 617 clear 1015 118 1421 15710
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1517 165 confess 1111 coterminous 4121 5324 181719 196 configured 383 2321 customer 518 describes 425 19814 206 confined 5224 cotton 914 444 5617 2918 3211 2025 211016 confirmed 2912 4711 487 cut 5414 3913 2117 2410 confusion 434 counsel 4411 description
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disclosure 328 413 302021 4220 figure 1146 discuss 164 economy 1516 ESQ 1171921 excerpted 323 311222 3917 discussion 299 effective 1223 236913 exhausted 1813 file 406 dispose 2625 5021 essence 211 exist 420 131 filed 4214 dispute 325 effectively 5214 essential 1224 existence 1119 fill 2818 disputed 3120 efficacy 1224 3425 175 filled 293
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level 920 3916 M 452 4621 4716 49710 needs 314 434 liberal 1715 machine 915 505 509 526 556 negative 3920 lifeshysciences 2120 3322 mean 69 716 558 never 1615
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1 these patents do
2 Then to put it in the affirmative and in the
3 language of Mayo the claim has to recite something
4 significantly more something significantly more than
5 the abstract idea itself That would be a contextual
6 analysis based on the claims and specifications and file
7 history and we know that some devices some methods
8 some programming will pass that
9 It is not going to be a brightshyline rule and
10 thats one of the tugshyofshywar issues that this Court and
11 the Federal Circuit have been having in these cases
12 The Federal Circuit wants brightshyline rules All
13 computers are in or all computers are out
14 This Court has been more contextual This
15 Court has been more nuanced This Court has looked at
16 things in a more robust way
17 JUSTICE KAGAN Youre not suggesting that
18 specific code is necessary
19 MR PERRY No Your Honor I think the shyshy
20 actual description of the programming is a 112 problem
21 I agree with that A 112 issue That is the realm of
22 the written description requirement What is a 101
23 problem is it is on the applicant to do more than simply
24 describe the results simply say A magic box that does
25 intermediate settlement And we can tie that back to
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1 this particular prosecution the 510 patent which is
2 the method patent
3 The examiner rejected it Under Section
4 101 the examiner said this is an abstract idea You
5 cant have this patent And the only change that this
6 applicant made was to add in the adjusting step
7 electronic adjustment It put in one word
8 electronic adjustment And under State Street which
9 is what this patent is prosecuted under that was
10 enough because the result of adjusting run through a
11 computer is enough
12 Under current law that cant be enough
13 That just cant get a patent over the line because this
14 Court said in Mayo and I got to quote this language
15 Simply implementing a fundamental principle on a
16 physical machine namely a computer is not a patentable
17 application of that principle Thats all that Alice
18 has done
19 These are preshyBilski patents They never
20 should have been issued General Verrilli will stand up
21 and address that point And certainly under current
22 law shyshy one point on the AIA Congress did not send all
23 this to the administrative process Congress created
24 two avenues the courts and the PTO to use the
25 standards Essentially it ratified Bilski and Mayo and
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1 said we agree with what you all are doing at the
2 Supreme Court and the existing standards are good enough
3 for us This is a judicial problem And that is a good
4 reason The abstract shyshy
5 JUSTICE GINSBURG The Federal Circuit in
6 this case split in many ways and it had our decisions
7 to deal with You said given Bilski and Mayo this is
8 an easy case What is the instruction that escaped a
9 good number of judges on the Federal Circuit How would
10 you state the rule
11 MR PERRY Your Honor I think theres a
12 significant element to the Federal Circuit that
13 disagrees with Mayo and has been resistant in applying
14 it Chief Judge shyshy former Chief Judge Michelle filed a
15 brief in this Court essentially saying Mayo is a
16 lifeshysciences case You should limit it to that because
17 if you apply it to everything else then these patents
18 are no good
19 Mayo we submit is a technologyshyneutral
20 industryshyneutral exceptionshyneutral framework that can
21 be used to answer all of these questions This is not
22 the death of software patents The software industry is
23 all before this Court saying this is fine with us
24 Every company in the United States practically except
25 for IBM is saying go ahead This will not affect
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1 software patents
2 Justice Ginsburg this Courts precedents
3 are clear They are unanimous They just need to be
4 applied To suggest that there is confusion that needs
5 to be addressed by retreating beating a retreat from
6 recent unanimous decisions would simply reward
7 intransigence difficulty refusal to adhere to what are
8 clear precedents because shyshy
9 JUSTICE KAGAN Should we be concerned
10 Mr Perry that there are old patents that in fact could
11 meet the test that you set forth but wont because they
12 were written in a different time and so used much more
13 general language
14 MR PERRY Your Honor the applicant or the
15 patent holder would have the opportunity to institute a
16 reexamination proceeding or some sort of administration
17 process to address that issue
18 And second it should be noted this is a
19 very small problem There are 2 million outstanding
20 patents in the United States In the last four fiscal
21 years there were 22000 infringement litigations
22 instituted but since Bilski there have only been 57
23 district court decisions on Section 101 issues There
24 have only been 12 Federal Circuit decisions total on
25 computer implementation
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1 We are talking about a group of patents
2 Justice Kagan thats way out at the tail end of
3 distribution Most patents never have a 101 challenge
4 This is not an issue with cotton gins and other things
5 This is a problem for the most marginal
6 most dubious most skeptical patents the ones that this
7 Court in Bilski shyshy and remember what Bilskis holding
8 is The majority said they are processes but it did
9 not say they are eligible
10 Thank you Mr Chief Justice
11 CHIEF JUSTICE ROBERTS Thank you counsel
12 General Verrilli
13 ORAL ARGUMENT OF DONALD B VERRILLI JR
14 ON BEHALF OF THE UNITED STATES AS AMICUS
15 CURIAE SUPPORTING RESPONDENTS
16 GENERAL VERRILLI Mr Chief Justice and
17 may it please the Court
18 An abstract idea does not become
19 patentshyeligible merely by tacking on an instruction to
20 use a computer to carry it out A computer makes a
21 difference under Section 101 when it imposes a
22 meaningful limit on the patent claim That occurs when
23 the claim is directed at improvement in computing
24 technology or an innovation that uses computing
25 technology to improve other technological functions
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1 Thats the test that we believe is most faithful to this
2 Courts precedents in Bilski and Mayo It keeps patents
3 within their traditional and appropriate domain and it
4 is capable of being administered consistently by Courts
5 and by PTO examiners
6 JUSTICE GINSBURG How do you answer the
7 argument that your view would extinguish businessshymethod
8 patents and make all software ineligible for patent
9 protection
10 GENERAL VERRILLI Yeah with shyshy let me
11 address software patents first because that I think is
12 obviously a significant question And its just not
13 correct to say that our approach would make software
14 patenting ineligible Any software patent that improves
15 the functioning of the computer technology is eligible
16 Any software patent that improves shyshy that is used to
17 improve another technology is eligible For example
18 the patent in the shyshy in the Diehr case is one in
19 which shyshy
20 JUSTICE SOTOMAYOR Why do we need to reach
21 this in that shyshy reach software patents at all in this
22 case
23 GENERAL VERRILLI Well shyshy
24 JUSTICE SOTOMAYOR Whats the necessity for
25 us to announce a general rule with respect to software
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1 There is no software being patented in this case
2 GENERAL VERRILLI Well I shyshy
3 JUSTICE SOTOMAYOR Theres a systems
4 GENERAL VERRILLI Well I shyshy I think shyshy
5 well they shyshy they shyshy theres a process being and shyshy and
6 one can think of software patents as process patents
7 And I think thats why my friends on the other side are
8 saying the sky is falling because they shyshy they are
9 interpreting what were saying about that when a
10 computer makes shyshy when a computers involvement makes
11 something eligible under 101 its calling those into
12 question and it doesnt
13 JUSTICE SOTOMAYOR Do you think we have to
14 reach the patentability of software to answer this case
15 GENERAL VERRILLI Well I think you can shyshy
16 I think the answer to that question is no not
17 necessarily You can decide it by saying that shyshy that
18 Bilski answers the question whether this is an abstract
19 idea because this form of hedging is really no
20 different than the form of hedging as a conceptual
21 matter at issue in Bilski And then Mayo answers the
22 question of whether the use of a computer in this case
23 adds enough to the abstract idea beyond conventional
24 steps because here all we have after all is just
25 conventional use of computing technology no computer
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1 innovation such that you dont qualify under 101 You
2 could take that approach
3 But it is important to the United States
4 that we shyshy and to our patent examiners that we get some
5 clarity if we can I think the clarity could come from
6 the text that I propose which I want to reiterate shyshy
7 JUSTICE SOTOMAYOR Well shyshy
8 JUSTICE BREYER Could shyshy could shyshy could you
9 go on with that because you were just getting to the
10 point where I think you say a computer improvement that
11 in fact leads to an improvement in harvesting cotton is
12 an improvement through a computer of technology so it
13 qualifies
14 But then I think you were going to say or I
15 got this also from the brief a computer improvement
16 that leads to an improvement in the methods of selling
17 bonds over the telephone is not an improvement in
18 technology reached by the computer Am I right about
19 the distinction youre making
20 GENERAL VERRILLI I dont think theres a
21 yes or no answer to that question
22 JUSTICE BREYER What is your view Yeah
23 what is shyshy how do we deal with just that problem
24 GENERAL VERRILLI If there is a genuine
25 innovation in the functioning of the computer shyshy
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1 JUSTICE BREYER Yes
2 GENERAL VERRILLI shyshy such that business
3 processes shyshy
4 JUSTICE BREYER Weve got that Yes yes
5 We got the computer But then it doesnt improve the
6 computer but rather it improves through the computer
7 the harvesting of cotton
8 Now youve got it in what you said was your
9 second category which is an improvement through the
10 computer of a technology And I thought in your brief
11 you were distinguishing an improvement through the
12 computer of a human activity that is not a technology
13 and in particular to pick an example of that
14 something in finance or something in business
15 Now am I right about the distinction youre
16 making
17 GENERAL VERRILLI Yeah that shyshy
18 JUSTICE BREYER If Im not right what is
19 the distinction
20 GENERAL VERRILLI That is generally the
21 line were drawing Frankly shyshy
22 JUSTICE BREYER And how is that justified
23 GENERAL VERRILLI I do want shyshy
24 JUSTICE BREYER That shyshy that is Judge Dyk
25 in shyshy in Bilski in the Federal circuit 4 people sort of
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1 picked it up maybe 5 didnt pick it up Would you say
2 a few words about it
3 GENERAL VERRILLI Sure About shyshy let me go
4 to Bilski there in that I do think while shyshy while
5 certainly the Court held that the term process got a
6 natural construction which could include business
7 methods it seems to me that thats not all the Court
8 said in Bilski The Court also said that it was
9 historically and traditionally quite rare that business
10 methods were patent eligible
11 It also said that shyshy that the shyshy that courts
12 and the PTO examiners should use the abstract ideas
13 exception to 101 to police the appropriate boundary
14 It also said that the
15 machineshyorshytransformation test that the United States
16 advocated remained a useful tool And of course that
17 directs to you seeing whether there is a technology
18 application
19 And of course the holding in Bilski was
20 that the shyshy the method for hedging risk was ineligible
21 because it was an abstract idea and I cant imagine
22 that if in Bilski the shyshy the claim had been exactly the
23 same but had added use a computer to carry out some of
24 these standard random analysis functions that are
25 claimed by the patent that you would have found it to
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1 be patent eligible
2 And I shyshy I would submit for the Court that
3 the key point here I think is that now given where
4 the Court shyshy what the Court has held in Bilski given
5 what its held in Mayo the abstract ideas exception is
6 really the only tool left to deal with what I shyshy what I
7 think I fairly read Bilski as saying is a significant
8 problem the proliferation of patents of business
9 methods
10 JUSTICE KENNEDY Is there an example that
11 you can give us of a shyshy what we can call a business
12 process that is patentable a process that doesnt
13 involve improving the workings of a computer
14 GENERAL VERRILLI I shyshy I think its going
15 to be difficult for me to do that I think for
16 example if you had a business method a process for
17 additional security pointshyofshysale credit card
18 transactions using particular encryption technology
19 that might well be patent eligible Its a technology
20 that it makes conduct of business more efficient or
21 effective
22 But there is a technological link here and
23 we do think thats critical to our shyshy to our point of
24 view with respect to the case And I shyshy and I do think
25 remember that when we say something is not patent
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1 eligible were not saying they cant do it Were
2 saying they cant monopolize it
3 And the concern in a situation like this one
4 is that if this is patent eligible its hard to see
5 why for example the first person who came up with a
6 frequent flier program wouldnt have been able to claim
7 a patent there because after all thats a business
8 method for improving customer loyalty implemented on a
9 computer
10 CHIEF JUSTICE ROBERTS General I shyshy you
11 mentioned a while ago the need for greater clarity and
12 certainty in this area And Im just wondering in your
13 brief youve got a nonshyexhaustive of factors to
14 consider and there are 6 different ones And Im just
15 doubtful that thats going to bring about greater
16 clarity and certainty
17 GENERAL VERRILLI I take shyshy I take the
18 point Mr Chief Justice but I think the key is that
19 they are all directed to answering the question of
20 whether the innovation that is claimed and is an
21 innovation in either A the improvement of a computers
22 functioning or B the use of computer technology to
23 improve the functioning of another technological
24 process and a case like Diehr would be in the latter
25 category
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1 And so I do think that thats the key
2 benchmark Thats the baseline Thats the test that
3 we do think can be applied clearly and consistently by
4 the courts or the PTO And it avoids the risk of things
5 like frequent flier programs or the Oakland As money
6 ball methods for evaluating the contributions in
7 individual baseball players make or any one of a host of
8 other things that our intuitions tell us just dont
9 belong in the patent system
10 Thats the shyshy drawing that line keeps them
11 out not drawing that line lets them in And with all
12 due respect I dont think that the novelty and
13 nonobviousness filters that 102 and 103 really deal with
14 that problem effectively because when you get to
15 nonobviousness in 103 for example youll be asking a
16 different question
17 If you take the frequent flier program you
18 would say well is this innovation in building consumer
19 loyalty something that would have been obvious to
20 somebody who runs an airline Its totally divorced
21 from the question of technology at that point and
22 therefore I dont think youre going to get the screen
23 that you need to get in order for the patent system to
24 be confined to its traditional and appropriate scope
25 If there are no further questions thank
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1 you
2 JUSTICE GINSBURG I have a question about
3 how do you identify an abstract concept The shyshy a
4 natural phenomenon a mathematical formula those are
5 easy to identify but there has been some confusion on
6 what qualifies as an abstract concept
7 GENERAL VERRILLI We would define
8 abstract shyshy an abstract concept as a claim that is not
9 directed to a concrete innovation in technology
10 science or the industrial arts So its the shyshy its
11 abstract in the sense that it is not a concrete
12 innovation in the traditional realm of patent law
13 Thank you
14 CHIEF JUSTICE ROBERTS Thank you General
15 Mr Phillips you have four minutes
16 remaining
17 REBUTTAL ARGUMENT OF CARTER G PHILLIPS
18 ON BEHALF OF THE PETITIONERS
19 MR PHILLIPS Thank you Mr Chief Justice
20 Id just like to make a few points
21 First of all with respect to the question
22 you asked which is looking at 159 et cetera all I can
23 tell you is that if you look at claim 33 it talks about
24 matched orders the matched orders that are described in
25 286 and 287 and then makes specific reference to 159
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1 and that flow chart thats there And its all designed
2 as a package Its only one element of the shyshy of the
3 invention but it is a central element and its an easy
4 one to understand And it goes well beyond simply the
5 notion of hedge shyshy hedge against settlement risk and do
6 it by a computer
7 JUSTICE SOTOMAYOR Your adversary says that
8 his shyshy the appendix to his brief are the only patents at
9 issue that the flow charts are not at issue in this
10 case
11 MR PHILLIPS Theres no basis for that
12 statement Your Honor There shyshy remember this went off
13 on a very truncated litigation process So theres shyshy
14 you know we shyshy we got cut off at the beginning of it
15 Theres been no construction of the shyshy of the claims
16 and shyshy and obviously these are specifications that go
17 to how you interpret the claim
18 JUSTICE SOTOMAYOR If we were to say that
19 there are no business patents shyshy
20 MR PHILLIPS Yes
21 JUSTICE SOTOMAYOR shyshy would your patent
22 survive at all
23 MR PHILLIPS No I dont shyshy I dont
24 believe so I think theres no question And you
25 know General Verrilli could not have been any plainer
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1 in his statement of how he wants to interpret the
2 abstract idea concept
3 JUSTICE SOTOMAYOR Yes he wants to say no
4 business patents
5 MR PHILLIPS No business shyshy just another
6 way of saying no business methods And you know the
7 Court rejected that And it seems to me extraordinary
8 to say Congress didnt reject no business methods in
9 101 but were going to do shyshy were going to manipulate
10 the judicial exception to accomplish precisely that same
11 thing It seems to me thats wholly inappropriate
12 Justice Ginsburg you asked my shyshy my friend
13 here you know whats his test He didnt answer that
14 question youll notice because he doesnt have an
15 answer His basic argument is whatever you do just
16 kill this patent
17 And if I were in his shoes I suppose Id
18 take that same position I think whats absolutely
19 clear is that the test ought to be one that is
20 structured as a very coarse filter not the kind of
21 filter that hes pushing for where it changes over time
22 I mean I thought his shyshy I thought his response to one
23 of the questions about eshymail and word processing that
24 Justice Sotomayor asked is over time it would change
25 Well thats exactly what 102 and 103 are for That is
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1 not the purpose of shyshy of Section 101
2 And then he uses the example of encryption
3 I guarantee you if we were arguing about encryption in
4 this case he would say to me that thats an abstract
5 principle because encryption is a concept thats been
6 around since time immemorial George Washington used
7 it Everybody has used encryption
8 And a question again thats not the
9 solution to these problems The question is how did we
10 go about doing it And we go beyond the basics of
11 simply saying use a computer and thats what we ask
12 this Court to focus on and to evaluate
13 As to the frequent flier program its
14 pretty clear to me that even though it was a novel idea
15 in some sense the concept itself would have been viewed
16 in shyshy in the KSR fashion as quite obvious as a means of
17 improving customer loyalty
18 There are solutions here Giving us 101
19 pass doesnt create a monopoly It just gets us to the
20 102 and 103 inquiries that are at the heart of what the
21 patent laws shyshy and 112 that are at the heart of what the
22 patent laws ought to be dealing with
23 If there are no further questions Your
24 Honor thank you
25 CHIEF JUSTICE ROBERTS Thank you counsel
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1 The case is submitted
2 (Whereupon at 1105 am the case in the
3 aboveshyentitled matter was submitted)
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see 61519 723 4044 1717 1925 4120 submit 4219 1023 1313 Silicon 1211 291822 3213 standard 2736 502 1612 2024 similar 2124 331 34415 4924 submitted 571 2214 338 simple 153 3516 569 standards 1713 573 3811 514 271822 solutions 1925 4125 422 substantive
seeing 822 simply 810 solutions 308 started 3018 1713 197 4917 11141616 5618 state 3219 sufficient 924
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146 2624 39722 472 5511 1024 111 ultimately 56 3918 511717 5217 things 1112 Trademark unanimous 274
sufficiently 5518 167 2725 1321 4336 3211 391315 takes 2221 297 316 trading 3089 uncertain 393
suggest 720 talking 519 3813 392 3312 3411 understand 925 172 441 4016 444 traditional 453 2110 3110 3821 434 talks 5323 5248 5224 5312 544
suggested 223 teaching 295 think 412 103 traditionally understands suggesting 1520 technological 111324 2013 499 1917
4017 291822 307 2013 212 transaction 813 understood suggestion 1714 321314 331 229 231921 91011 1913 3522 362 suggestions 3311 34415 24172225 283 3718 undoubtedly
1619 351216 4425 26367 2810 transactions 54 3311 suggests 2724 5022 5123 2921 35612 98 136 1513 United 111423 supporting 123 technology 386 4019 2725 5018 210 169
211 4415 211921 3411 4211 4511 transmission 4224 4320 suppose 12812 35223 4424 464671315 3014 4414 473
3925 5517 4425 451517 4616 47510 transmitting 4915 supposed 364 4625 471218 471420 494 3414 unknowable Supreme 1114 481012 4917 50371415 treatment 414 2012
422 501819 5122 502324 5118 trouble 385 unmet 3516 sure 824 1011 5221 539 52131222 true 121618 urge 199
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text 476 824 137 TV 339 3015 3212 T thank 39 2612 1514 2611 two 1625 2224 4916
T 211 441011 5225 281 3511 2624 2717 user 3510 tack 3244 53131419 4312 552124 283 3114 uses 3521 4424 tacking 4419 562425 566 371318 3919 562 tail 442 theoretically today 333 3515 4124 utterly 2012 take 422 723 3711 3517 twoshyparty 3020
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various 3616 3420 4016 4312 1327shy28 369 94 2715 vary 1420 442 556 wrong 392 159 1910 311 Verrilli 121 29 ways 717 3015 wrote 1213 532225
4120 441213 4416 451023
426 well 33 1611 X
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462415 2019 x 129 1990s 1120 472024 482 48172023 493 5014 5117 537 5425
versa 3924 version 253 versus 34
were 82 103 1823 192 469 4821 5111 5599
weve 1925 484 web 227 weekend 510
1212
Y Yeah 1613 385
4510 4722 4817
years 318 259 3615 371019 4321
2 2 3424 4319 20 371018 2014 111 22000 4321 25 3118 26 27 2712
vice 3924 video 33458 view 1015
wellshyestablished 276
went 1724
Z zones 421 281
285shy286 1910 286 5325 287 5325
1623 3420 2214 362 0 293 2715 457 4722 5024
viewed 5615 violate 55
W waiting 1334 want 1324 172
221 232 252424 339 3916 476 4823
wanted 2423 wants 2222
4012 5513 Washington
110171922 566
wasnt 2125 2310
watch 3349 water 71 way 416 58
81625 1113 151520 1614 1624 1721 1815 2017 2112 235 2425 254
5412 wholly 5511 willing 377 wondering
5112 word 52021
821 228 2813 3418 35517 363 417 5523
words 713 291 3422 3711 3819 492
work 51719 1124 2110 312 3322 374
workings 5013 world 2018
2510 3011 3816
wouldnt 414 415 2514 3313 516
write 264 writers 132325 written 617
1716 2925 304 4022
1 1004 115 32 100 3615 101 3121522
414 65 1715 18267 2019 2324 2467 2545 2658 3622 3824 4022 414 4323 44321 4611 471 4913 559 56118
102 1717 187 2325 2425 5213 5525 5620
103 1717 187 2325 2435 521315 5525 5620
11 2445 1105 572 112 1921 4020
4021 5621 12 4324 13shy298 15 34
3 3 24 30 259 31 111 33 3118 5323 37 3118
4 4 325 4825 42 1524 1618 44 211
5 5 491 510 3019 411 53 214 57 4322
6 6 5114 65 3019
7
8
9 9 245 9shy0 365
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1 this particular prosecution the 510 patent which is
2 the method patent
3 The examiner rejected it Under Section
4 101 the examiner said this is an abstract idea You
5 cant have this patent And the only change that this
6 applicant made was to add in the adjusting step
7 electronic adjustment It put in one word
8 electronic adjustment And under State Street which
9 is what this patent is prosecuted under that was
10 enough because the result of adjusting run through a
11 computer is enough
12 Under current law that cant be enough
13 That just cant get a patent over the line because this
14 Court said in Mayo and I got to quote this language
15 Simply implementing a fundamental principle on a
16 physical machine namely a computer is not a patentable
17 application of that principle Thats all that Alice
18 has done
19 These are preshyBilski patents They never
20 should have been issued General Verrilli will stand up
21 and address that point And certainly under current
22 law shyshy one point on the AIA Congress did not send all
23 this to the administrative process Congress created
24 two avenues the courts and the PTO to use the
25 standards Essentially it ratified Bilski and Mayo and
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1 said we agree with what you all are doing at the
2 Supreme Court and the existing standards are good enough
3 for us This is a judicial problem And that is a good
4 reason The abstract shyshy
5 JUSTICE GINSBURG The Federal Circuit in
6 this case split in many ways and it had our decisions
7 to deal with You said given Bilski and Mayo this is
8 an easy case What is the instruction that escaped a
9 good number of judges on the Federal Circuit How would
10 you state the rule
11 MR PERRY Your Honor I think theres a
12 significant element to the Federal Circuit that
13 disagrees with Mayo and has been resistant in applying
14 it Chief Judge shyshy former Chief Judge Michelle filed a
15 brief in this Court essentially saying Mayo is a
16 lifeshysciences case You should limit it to that because
17 if you apply it to everything else then these patents
18 are no good
19 Mayo we submit is a technologyshyneutral
20 industryshyneutral exceptionshyneutral framework that can
21 be used to answer all of these questions This is not
22 the death of software patents The software industry is
23 all before this Court saying this is fine with us
24 Every company in the United States practically except
25 for IBM is saying go ahead This will not affect
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1 software patents
2 Justice Ginsburg this Courts precedents
3 are clear They are unanimous They just need to be
4 applied To suggest that there is confusion that needs
5 to be addressed by retreating beating a retreat from
6 recent unanimous decisions would simply reward
7 intransigence difficulty refusal to adhere to what are
8 clear precedents because shyshy
9 JUSTICE KAGAN Should we be concerned
10 Mr Perry that there are old patents that in fact could
11 meet the test that you set forth but wont because they
12 were written in a different time and so used much more
13 general language
14 MR PERRY Your Honor the applicant or the
15 patent holder would have the opportunity to institute a
16 reexamination proceeding or some sort of administration
17 process to address that issue
18 And second it should be noted this is a
19 very small problem There are 2 million outstanding
20 patents in the United States In the last four fiscal
21 years there were 22000 infringement litigations
22 instituted but since Bilski there have only been 57
23 district court decisions on Section 101 issues There
24 have only been 12 Federal Circuit decisions total on
25 computer implementation
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1 We are talking about a group of patents
2 Justice Kagan thats way out at the tail end of
3 distribution Most patents never have a 101 challenge
4 This is not an issue with cotton gins and other things
5 This is a problem for the most marginal
6 most dubious most skeptical patents the ones that this
7 Court in Bilski shyshy and remember what Bilskis holding
8 is The majority said they are processes but it did
9 not say they are eligible
10 Thank you Mr Chief Justice
11 CHIEF JUSTICE ROBERTS Thank you counsel
12 General Verrilli
13 ORAL ARGUMENT OF DONALD B VERRILLI JR
14 ON BEHALF OF THE UNITED STATES AS AMICUS
15 CURIAE SUPPORTING RESPONDENTS
16 GENERAL VERRILLI Mr Chief Justice and
17 may it please the Court
18 An abstract idea does not become
19 patentshyeligible merely by tacking on an instruction to
20 use a computer to carry it out A computer makes a
21 difference under Section 101 when it imposes a
22 meaningful limit on the patent claim That occurs when
23 the claim is directed at improvement in computing
24 technology or an innovation that uses computing
25 technology to improve other technological functions
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1 Thats the test that we believe is most faithful to this
2 Courts precedents in Bilski and Mayo It keeps patents
3 within their traditional and appropriate domain and it
4 is capable of being administered consistently by Courts
5 and by PTO examiners
6 JUSTICE GINSBURG How do you answer the
7 argument that your view would extinguish businessshymethod
8 patents and make all software ineligible for patent
9 protection
10 GENERAL VERRILLI Yeah with shyshy let me
11 address software patents first because that I think is
12 obviously a significant question And its just not
13 correct to say that our approach would make software
14 patenting ineligible Any software patent that improves
15 the functioning of the computer technology is eligible
16 Any software patent that improves shyshy that is used to
17 improve another technology is eligible For example
18 the patent in the shyshy in the Diehr case is one in
19 which shyshy
20 JUSTICE SOTOMAYOR Why do we need to reach
21 this in that shyshy reach software patents at all in this
22 case
23 GENERAL VERRILLI Well shyshy
24 JUSTICE SOTOMAYOR Whats the necessity for
25 us to announce a general rule with respect to software
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1 There is no software being patented in this case
2 GENERAL VERRILLI Well I shyshy
3 JUSTICE SOTOMAYOR Theres a systems
4 GENERAL VERRILLI Well I shyshy I think shyshy
5 well they shyshy they shyshy theres a process being and shyshy and
6 one can think of software patents as process patents
7 And I think thats why my friends on the other side are
8 saying the sky is falling because they shyshy they are
9 interpreting what were saying about that when a
10 computer makes shyshy when a computers involvement makes
11 something eligible under 101 its calling those into
12 question and it doesnt
13 JUSTICE SOTOMAYOR Do you think we have to
14 reach the patentability of software to answer this case
15 GENERAL VERRILLI Well I think you can shyshy
16 I think the answer to that question is no not
17 necessarily You can decide it by saying that shyshy that
18 Bilski answers the question whether this is an abstract
19 idea because this form of hedging is really no
20 different than the form of hedging as a conceptual
21 matter at issue in Bilski And then Mayo answers the
22 question of whether the use of a computer in this case
23 adds enough to the abstract idea beyond conventional
24 steps because here all we have after all is just
25 conventional use of computing technology no computer
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1 innovation such that you dont qualify under 101 You
2 could take that approach
3 But it is important to the United States
4 that we shyshy and to our patent examiners that we get some
5 clarity if we can I think the clarity could come from
6 the text that I propose which I want to reiterate shyshy
7 JUSTICE SOTOMAYOR Well shyshy
8 JUSTICE BREYER Could shyshy could shyshy could you
9 go on with that because you were just getting to the
10 point where I think you say a computer improvement that
11 in fact leads to an improvement in harvesting cotton is
12 an improvement through a computer of technology so it
13 qualifies
14 But then I think you were going to say or I
15 got this also from the brief a computer improvement
16 that leads to an improvement in the methods of selling
17 bonds over the telephone is not an improvement in
18 technology reached by the computer Am I right about
19 the distinction youre making
20 GENERAL VERRILLI I dont think theres a
21 yes or no answer to that question
22 JUSTICE BREYER What is your view Yeah
23 what is shyshy how do we deal with just that problem
24 GENERAL VERRILLI If there is a genuine
25 innovation in the functioning of the computer shyshy
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1 JUSTICE BREYER Yes
2 GENERAL VERRILLI shyshy such that business
3 processes shyshy
4 JUSTICE BREYER Weve got that Yes yes
5 We got the computer But then it doesnt improve the
6 computer but rather it improves through the computer
7 the harvesting of cotton
8 Now youve got it in what you said was your
9 second category which is an improvement through the
10 computer of a technology And I thought in your brief
11 you were distinguishing an improvement through the
12 computer of a human activity that is not a technology
13 and in particular to pick an example of that
14 something in finance or something in business
15 Now am I right about the distinction youre
16 making
17 GENERAL VERRILLI Yeah that shyshy
18 JUSTICE BREYER If Im not right what is
19 the distinction
20 GENERAL VERRILLI That is generally the
21 line were drawing Frankly shyshy
22 JUSTICE BREYER And how is that justified
23 GENERAL VERRILLI I do want shyshy
24 JUSTICE BREYER That shyshy that is Judge Dyk
25 in shyshy in Bilski in the Federal circuit 4 people sort of
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1 picked it up maybe 5 didnt pick it up Would you say
2 a few words about it
3 GENERAL VERRILLI Sure About shyshy let me go
4 to Bilski there in that I do think while shyshy while
5 certainly the Court held that the term process got a
6 natural construction which could include business
7 methods it seems to me that thats not all the Court
8 said in Bilski The Court also said that it was
9 historically and traditionally quite rare that business
10 methods were patent eligible
11 It also said that shyshy that the shyshy that courts
12 and the PTO examiners should use the abstract ideas
13 exception to 101 to police the appropriate boundary
14 It also said that the
15 machineshyorshytransformation test that the United States
16 advocated remained a useful tool And of course that
17 directs to you seeing whether there is a technology
18 application
19 And of course the holding in Bilski was
20 that the shyshy the method for hedging risk was ineligible
21 because it was an abstract idea and I cant imagine
22 that if in Bilski the shyshy the claim had been exactly the
23 same but had added use a computer to carry out some of
24 these standard random analysis functions that are
25 claimed by the patent that you would have found it to
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1 be patent eligible
2 And I shyshy I would submit for the Court that
3 the key point here I think is that now given where
4 the Court shyshy what the Court has held in Bilski given
5 what its held in Mayo the abstract ideas exception is
6 really the only tool left to deal with what I shyshy what I
7 think I fairly read Bilski as saying is a significant
8 problem the proliferation of patents of business
9 methods
10 JUSTICE KENNEDY Is there an example that
11 you can give us of a shyshy what we can call a business
12 process that is patentable a process that doesnt
13 involve improving the workings of a computer
14 GENERAL VERRILLI I shyshy I think its going
15 to be difficult for me to do that I think for
16 example if you had a business method a process for
17 additional security pointshyofshysale credit card
18 transactions using particular encryption technology
19 that might well be patent eligible Its a technology
20 that it makes conduct of business more efficient or
21 effective
22 But there is a technological link here and
23 we do think thats critical to our shyshy to our point of
24 view with respect to the case And I shyshy and I do think
25 remember that when we say something is not patent
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1 eligible were not saying they cant do it Were
2 saying they cant monopolize it
3 And the concern in a situation like this one
4 is that if this is patent eligible its hard to see
5 why for example the first person who came up with a
6 frequent flier program wouldnt have been able to claim
7 a patent there because after all thats a business
8 method for improving customer loyalty implemented on a
9 computer
10 CHIEF JUSTICE ROBERTS General I shyshy you
11 mentioned a while ago the need for greater clarity and
12 certainty in this area And Im just wondering in your
13 brief youve got a nonshyexhaustive of factors to
14 consider and there are 6 different ones And Im just
15 doubtful that thats going to bring about greater
16 clarity and certainty
17 GENERAL VERRILLI I take shyshy I take the
18 point Mr Chief Justice but I think the key is that
19 they are all directed to answering the question of
20 whether the innovation that is claimed and is an
21 innovation in either A the improvement of a computers
22 functioning or B the use of computer technology to
23 improve the functioning of another technological
24 process and a case like Diehr would be in the latter
25 category
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1 And so I do think that thats the key
2 benchmark Thats the baseline Thats the test that
3 we do think can be applied clearly and consistently by
4 the courts or the PTO And it avoids the risk of things
5 like frequent flier programs or the Oakland As money
6 ball methods for evaluating the contributions in
7 individual baseball players make or any one of a host of
8 other things that our intuitions tell us just dont
9 belong in the patent system
10 Thats the shyshy drawing that line keeps them
11 out not drawing that line lets them in And with all
12 due respect I dont think that the novelty and
13 nonobviousness filters that 102 and 103 really deal with
14 that problem effectively because when you get to
15 nonobviousness in 103 for example youll be asking a
16 different question
17 If you take the frequent flier program you
18 would say well is this innovation in building consumer
19 loyalty something that would have been obvious to
20 somebody who runs an airline Its totally divorced
21 from the question of technology at that point and
22 therefore I dont think youre going to get the screen
23 that you need to get in order for the patent system to
24 be confined to its traditional and appropriate scope
25 If there are no further questions thank
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1 you
2 JUSTICE GINSBURG I have a question about
3 how do you identify an abstract concept The shyshy a
4 natural phenomenon a mathematical formula those are
5 easy to identify but there has been some confusion on
6 what qualifies as an abstract concept
7 GENERAL VERRILLI We would define
8 abstract shyshy an abstract concept as a claim that is not
9 directed to a concrete innovation in technology
10 science or the industrial arts So its the shyshy its
11 abstract in the sense that it is not a concrete
12 innovation in the traditional realm of patent law
13 Thank you
14 CHIEF JUSTICE ROBERTS Thank you General
15 Mr Phillips you have four minutes
16 remaining
17 REBUTTAL ARGUMENT OF CARTER G PHILLIPS
18 ON BEHALF OF THE PETITIONERS
19 MR PHILLIPS Thank you Mr Chief Justice
20 Id just like to make a few points
21 First of all with respect to the question
22 you asked which is looking at 159 et cetera all I can
23 tell you is that if you look at claim 33 it talks about
24 matched orders the matched orders that are described in
25 286 and 287 and then makes specific reference to 159
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1 and that flow chart thats there And its all designed
2 as a package Its only one element of the shyshy of the
3 invention but it is a central element and its an easy
4 one to understand And it goes well beyond simply the
5 notion of hedge shyshy hedge against settlement risk and do
6 it by a computer
7 JUSTICE SOTOMAYOR Your adversary says that
8 his shyshy the appendix to his brief are the only patents at
9 issue that the flow charts are not at issue in this
10 case
11 MR PHILLIPS Theres no basis for that
12 statement Your Honor There shyshy remember this went off
13 on a very truncated litigation process So theres shyshy
14 you know we shyshy we got cut off at the beginning of it
15 Theres been no construction of the shyshy of the claims
16 and shyshy and obviously these are specifications that go
17 to how you interpret the claim
18 JUSTICE SOTOMAYOR If we were to say that
19 there are no business patents shyshy
20 MR PHILLIPS Yes
21 JUSTICE SOTOMAYOR shyshy would your patent
22 survive at all
23 MR PHILLIPS No I dont shyshy I dont
24 believe so I think theres no question And you
25 know General Verrilli could not have been any plainer
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1 in his statement of how he wants to interpret the
2 abstract idea concept
3 JUSTICE SOTOMAYOR Yes he wants to say no
4 business patents
5 MR PHILLIPS No business shyshy just another
6 way of saying no business methods And you know the
7 Court rejected that And it seems to me extraordinary
8 to say Congress didnt reject no business methods in
9 101 but were going to do shyshy were going to manipulate
10 the judicial exception to accomplish precisely that same
11 thing It seems to me thats wholly inappropriate
12 Justice Ginsburg you asked my shyshy my friend
13 here you know whats his test He didnt answer that
14 question youll notice because he doesnt have an
15 answer His basic argument is whatever you do just
16 kill this patent
17 And if I were in his shoes I suppose Id
18 take that same position I think whats absolutely
19 clear is that the test ought to be one that is
20 structured as a very coarse filter not the kind of
21 filter that hes pushing for where it changes over time
22 I mean I thought his shyshy I thought his response to one
23 of the questions about eshymail and word processing that
24 Justice Sotomayor asked is over time it would change
25 Well thats exactly what 102 and 103 are for That is
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1 not the purpose of shyshy of Section 101
2 And then he uses the example of encryption
3 I guarantee you if we were arguing about encryption in
4 this case he would say to me that thats an abstract
5 principle because encryption is a concept thats been
6 around since time immemorial George Washington used
7 it Everybody has used encryption
8 And a question again thats not the
9 solution to these problems The question is how did we
10 go about doing it And we go beyond the basics of
11 simply saying use a computer and thats what we ask
12 this Court to focus on and to evaluate
13 As to the frequent flier program its
14 pretty clear to me that even though it was a novel idea
15 in some sense the concept itself would have been viewed
16 in shyshy in the KSR fashion as quite obvious as a means of
17 improving customer loyalty
18 There are solutions here Giving us 101
19 pass doesnt create a monopoly It just gets us to the
20 102 and 103 inquiries that are at the heart of what the
21 patent laws shyshy and 112 that are at the heart of what the
22 patent laws ought to be dealing with
23 If there are no further questions Your
24 Honor thank you
25 CHIEF JUSTICE ROBERTS Thank you counsel
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1 The case is submitted
2 (Whereupon at 1105 am the case in the
3 aboveshyentitled matter was submitted)
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
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58
A add 714 1023 algorithm 3320 41 automatically
As 525 3621 387 algorithms apply 72425 111
am 115 32 416 3013 3310 2019 281213 automobile 389
572 added 302 Alice 13 34 2822 3814 available 99
abacus 61213 4923 363 3717 4217 avenues 4124
710 1018 additional 5017 3822 4117 applying 4213 avoids 524
1325 3614 3617
address 4121 4317 4511
Alices 271 2919 3678
approach 226 395 4513 B
ability 1514 addressed 435 allow 94 472 B 121 29 4413
able 1511 167 addressing 181 allows 97 242 appropriate 5122
1919 516 adds 4623 amazing 2514 81516 1514 back 1621
aboveshyentitled adhere 437 amici 3825 453 4913 1922 2512
113 573 adjudication amicus 123 5224 3018 322
absolutely 125 241 210 4414 Archimedes 3991222
1215 159 adjusting 3611 analysis 424 281122 3811 4025
5518 41610 364 406 area 219 5112 ball 526
abstract 4267 adjustment 417 4924 argue 2518 Bank 17 35
48 6682023 418 analyze 1416 arguing 563 banks 95
721 8218 administered 1716 argument 114 bars 43
141920 1522 454 announce 4525 225812 33 baseball 527
165 181618 administration answer 119 37 41 144 based 423 406
2220 24925 4316 2219 247 18323 226 baseline 522
2621 277 administrative 3919 4221 26715 4413 basic 413 5515
2938 3422 171218 187 456 461416 457 5317 basically 1821
3523 395 242 4123 4721 551315 5515 2319
405 414 424 adopt 203 answering 5119 arguments basics 5610
4418 461823 adopted 31317 answers 3713 1415 basis 132 1512
491221 505 advancement 461821 arms 1625 1516 2719
53368811 351 anyway 1810 arrangements 5411
552 564 advances 3513 apparatus 2916 131 beating 435
accept 102 adversary 547 APPEARAN arrows 315 beginning 163
accomplish advice 1715 116 art 1919 5414
5510 advocated 4916 appears 820 arts 2124 5310 begins 3810
account 55 618 affect 4225 appendix 1910 aside 1422 157 behalf 11719
397 affirmative 402 311 326 369 asked 2314 122 24710
accounts 823 agent 52 3021 548 278 5322 214 38 2616
9356 3611 ago 318 2224 applicant 3220 551224 4414 5318
3611 3615 5111 3921 4023 asking 193 believe 1316
accurately 2413 agree 920 2021 416 4314 221213 273 1416 2421
acknowledges 221 2418 application 3324 5215 255 264 451
1121 4021 421 2623 4117 aspect 517 5424
act 99 2017 agrees 2812 4918 asserted 3113 belong 529
activities 229 ahead 4225 applications 311618 benchmark 522
activity 2122 AIA 2912 4122 333 asserting 325 Benson 361923
3325 4812 airline 5220 applied 434 attaching 124 best 161124
actual 4020 AL 18 523 attention 3813 better 1610 albeit 923 applies 31418 Attorney 2021 216 2819
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59
3322 brightshyline 409 2313 37 71 4338 5519 beyond 115 4012 5317 checks 618 5614
1312 4623 bring 5115 case 3412 46 Chief 339 clearly 211 251 544 5610 broad 248 116 1524 261217 3024 523
Bilski 313 46 broader 225 2022 213 31812 378 client 311416 415 1722 browsing 228 2211 2313 371416 386 close 2822 2224 2329 builder 2811 2625 311424 421414 4410 CLS 17 35 262020 271 building 5218 3314 36620 441116 5110 1120 2816 2999 built 2324 426816 5118 531419 coarse 247 3935 4125 business 168 451822 461 5625 5520 427 4322 1749 203 461422 5024 chits 611 code 1213 142 447 452 2124 222122 5124 5410 chronological 1916171720 461821 4825 2311 29613 564 5712 1512 2725 4018 49481922 32132323 cases 244 2816 chronologically coffee 1211 5047 3322525 4011 423 colleagues 116
Bilskis 447 34415 3610 catalogues 2512 circuit 2818 college 58 bit 323 48214 4969 262 401112 425 columns 325 blocks 54 508111620 categorically 42912 4324 come 108 234 Bloomberg 517 5419 202 4825 3017 399
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1 said we agree with what you all are doing at the
2 Supreme Court and the existing standards are good enough
3 for us This is a judicial problem And that is a good
4 reason The abstract shyshy
5 JUSTICE GINSBURG The Federal Circuit in
6 this case split in many ways and it had our decisions
7 to deal with You said given Bilski and Mayo this is
8 an easy case What is the instruction that escaped a
9 good number of judges on the Federal Circuit How would
10 you state the rule
11 MR PERRY Your Honor I think theres a
12 significant element to the Federal Circuit that
13 disagrees with Mayo and has been resistant in applying
14 it Chief Judge shyshy former Chief Judge Michelle filed a
15 brief in this Court essentially saying Mayo is a
16 lifeshysciences case You should limit it to that because
17 if you apply it to everything else then these patents
18 are no good
19 Mayo we submit is a technologyshyneutral
20 industryshyneutral exceptionshyneutral framework that can
21 be used to answer all of these questions This is not
22 the death of software patents The software industry is
23 all before this Court saying this is fine with us
24 Every company in the United States practically except
25 for IBM is saying go ahead This will not affect
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1 software patents
2 Justice Ginsburg this Courts precedents
3 are clear They are unanimous They just need to be
4 applied To suggest that there is confusion that needs
5 to be addressed by retreating beating a retreat from
6 recent unanimous decisions would simply reward
7 intransigence difficulty refusal to adhere to what are
8 clear precedents because shyshy
9 JUSTICE KAGAN Should we be concerned
10 Mr Perry that there are old patents that in fact could
11 meet the test that you set forth but wont because they
12 were written in a different time and so used much more
13 general language
14 MR PERRY Your Honor the applicant or the
15 patent holder would have the opportunity to institute a
16 reexamination proceeding or some sort of administration
17 process to address that issue
18 And second it should be noted this is a
19 very small problem There are 2 million outstanding
20 patents in the United States In the last four fiscal
21 years there were 22000 infringement litigations
22 instituted but since Bilski there have only been 57
23 district court decisions on Section 101 issues There
24 have only been 12 Federal Circuit decisions total on
25 computer implementation
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1 We are talking about a group of patents
2 Justice Kagan thats way out at the tail end of
3 distribution Most patents never have a 101 challenge
4 This is not an issue with cotton gins and other things
5 This is a problem for the most marginal
6 most dubious most skeptical patents the ones that this
7 Court in Bilski shyshy and remember what Bilskis holding
8 is The majority said they are processes but it did
9 not say they are eligible
10 Thank you Mr Chief Justice
11 CHIEF JUSTICE ROBERTS Thank you counsel
12 General Verrilli
13 ORAL ARGUMENT OF DONALD B VERRILLI JR
14 ON BEHALF OF THE UNITED STATES AS AMICUS
15 CURIAE SUPPORTING RESPONDENTS
16 GENERAL VERRILLI Mr Chief Justice and
17 may it please the Court
18 An abstract idea does not become
19 patentshyeligible merely by tacking on an instruction to
20 use a computer to carry it out A computer makes a
21 difference under Section 101 when it imposes a
22 meaningful limit on the patent claim That occurs when
23 the claim is directed at improvement in computing
24 technology or an innovation that uses computing
25 technology to improve other technological functions
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1 Thats the test that we believe is most faithful to this
2 Courts precedents in Bilski and Mayo It keeps patents
3 within their traditional and appropriate domain and it
4 is capable of being administered consistently by Courts
5 and by PTO examiners
6 JUSTICE GINSBURG How do you answer the
7 argument that your view would extinguish businessshymethod
8 patents and make all software ineligible for patent
9 protection
10 GENERAL VERRILLI Yeah with shyshy let me
11 address software patents first because that I think is
12 obviously a significant question And its just not
13 correct to say that our approach would make software
14 patenting ineligible Any software patent that improves
15 the functioning of the computer technology is eligible
16 Any software patent that improves shyshy that is used to
17 improve another technology is eligible For example
18 the patent in the shyshy in the Diehr case is one in
19 which shyshy
20 JUSTICE SOTOMAYOR Why do we need to reach
21 this in that shyshy reach software patents at all in this
22 case
23 GENERAL VERRILLI Well shyshy
24 JUSTICE SOTOMAYOR Whats the necessity for
25 us to announce a general rule with respect to software
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1 There is no software being patented in this case
2 GENERAL VERRILLI Well I shyshy
3 JUSTICE SOTOMAYOR Theres a systems
4 GENERAL VERRILLI Well I shyshy I think shyshy
5 well they shyshy they shyshy theres a process being and shyshy and
6 one can think of software patents as process patents
7 And I think thats why my friends on the other side are
8 saying the sky is falling because they shyshy they are
9 interpreting what were saying about that when a
10 computer makes shyshy when a computers involvement makes
11 something eligible under 101 its calling those into
12 question and it doesnt
13 JUSTICE SOTOMAYOR Do you think we have to
14 reach the patentability of software to answer this case
15 GENERAL VERRILLI Well I think you can shyshy
16 I think the answer to that question is no not
17 necessarily You can decide it by saying that shyshy that
18 Bilski answers the question whether this is an abstract
19 idea because this form of hedging is really no
20 different than the form of hedging as a conceptual
21 matter at issue in Bilski And then Mayo answers the
22 question of whether the use of a computer in this case
23 adds enough to the abstract idea beyond conventional
24 steps because here all we have after all is just
25 conventional use of computing technology no computer
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1 innovation such that you dont qualify under 101 You
2 could take that approach
3 But it is important to the United States
4 that we shyshy and to our patent examiners that we get some
5 clarity if we can I think the clarity could come from
6 the text that I propose which I want to reiterate shyshy
7 JUSTICE SOTOMAYOR Well shyshy
8 JUSTICE BREYER Could shyshy could shyshy could you
9 go on with that because you were just getting to the
10 point where I think you say a computer improvement that
11 in fact leads to an improvement in harvesting cotton is
12 an improvement through a computer of technology so it
13 qualifies
14 But then I think you were going to say or I
15 got this also from the brief a computer improvement
16 that leads to an improvement in the methods of selling
17 bonds over the telephone is not an improvement in
18 technology reached by the computer Am I right about
19 the distinction youre making
20 GENERAL VERRILLI I dont think theres a
21 yes or no answer to that question
22 JUSTICE BREYER What is your view Yeah
23 what is shyshy how do we deal with just that problem
24 GENERAL VERRILLI If there is a genuine
25 innovation in the functioning of the computer shyshy
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1 JUSTICE BREYER Yes
2 GENERAL VERRILLI shyshy such that business
3 processes shyshy
4 JUSTICE BREYER Weve got that Yes yes
5 We got the computer But then it doesnt improve the
6 computer but rather it improves through the computer
7 the harvesting of cotton
8 Now youve got it in what you said was your
9 second category which is an improvement through the
10 computer of a technology And I thought in your brief
11 you were distinguishing an improvement through the
12 computer of a human activity that is not a technology
13 and in particular to pick an example of that
14 something in finance or something in business
15 Now am I right about the distinction youre
16 making
17 GENERAL VERRILLI Yeah that shyshy
18 JUSTICE BREYER If Im not right what is
19 the distinction
20 GENERAL VERRILLI That is generally the
21 line were drawing Frankly shyshy
22 JUSTICE BREYER And how is that justified
23 GENERAL VERRILLI I do want shyshy
24 JUSTICE BREYER That shyshy that is Judge Dyk
25 in shyshy in Bilski in the Federal circuit 4 people sort of
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1 picked it up maybe 5 didnt pick it up Would you say
2 a few words about it
3 GENERAL VERRILLI Sure About shyshy let me go
4 to Bilski there in that I do think while shyshy while
5 certainly the Court held that the term process got a
6 natural construction which could include business
7 methods it seems to me that thats not all the Court
8 said in Bilski The Court also said that it was
9 historically and traditionally quite rare that business
10 methods were patent eligible
11 It also said that shyshy that the shyshy that courts
12 and the PTO examiners should use the abstract ideas
13 exception to 101 to police the appropriate boundary
14 It also said that the
15 machineshyorshytransformation test that the United States
16 advocated remained a useful tool And of course that
17 directs to you seeing whether there is a technology
18 application
19 And of course the holding in Bilski was
20 that the shyshy the method for hedging risk was ineligible
21 because it was an abstract idea and I cant imagine
22 that if in Bilski the shyshy the claim had been exactly the
23 same but had added use a computer to carry out some of
24 these standard random analysis functions that are
25 claimed by the patent that you would have found it to
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1 be patent eligible
2 And I shyshy I would submit for the Court that
3 the key point here I think is that now given where
4 the Court shyshy what the Court has held in Bilski given
5 what its held in Mayo the abstract ideas exception is
6 really the only tool left to deal with what I shyshy what I
7 think I fairly read Bilski as saying is a significant
8 problem the proliferation of patents of business
9 methods
10 JUSTICE KENNEDY Is there an example that
11 you can give us of a shyshy what we can call a business
12 process that is patentable a process that doesnt
13 involve improving the workings of a computer
14 GENERAL VERRILLI I shyshy I think its going
15 to be difficult for me to do that I think for
16 example if you had a business method a process for
17 additional security pointshyofshysale credit card
18 transactions using particular encryption technology
19 that might well be patent eligible Its a technology
20 that it makes conduct of business more efficient or
21 effective
22 But there is a technological link here and
23 we do think thats critical to our shyshy to our point of
24 view with respect to the case And I shyshy and I do think
25 remember that when we say something is not patent
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1 eligible were not saying they cant do it Were
2 saying they cant monopolize it
3 And the concern in a situation like this one
4 is that if this is patent eligible its hard to see
5 why for example the first person who came up with a
6 frequent flier program wouldnt have been able to claim
7 a patent there because after all thats a business
8 method for improving customer loyalty implemented on a
9 computer
10 CHIEF JUSTICE ROBERTS General I shyshy you
11 mentioned a while ago the need for greater clarity and
12 certainty in this area And Im just wondering in your
13 brief youve got a nonshyexhaustive of factors to
14 consider and there are 6 different ones And Im just
15 doubtful that thats going to bring about greater
16 clarity and certainty
17 GENERAL VERRILLI I take shyshy I take the
18 point Mr Chief Justice but I think the key is that
19 they are all directed to answering the question of
20 whether the innovation that is claimed and is an
21 innovation in either A the improvement of a computers
22 functioning or B the use of computer technology to
23 improve the functioning of another technological
24 process and a case like Diehr would be in the latter
25 category
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1 And so I do think that thats the key
2 benchmark Thats the baseline Thats the test that
3 we do think can be applied clearly and consistently by
4 the courts or the PTO And it avoids the risk of things
5 like frequent flier programs or the Oakland As money
6 ball methods for evaluating the contributions in
7 individual baseball players make or any one of a host of
8 other things that our intuitions tell us just dont
9 belong in the patent system
10 Thats the shyshy drawing that line keeps them
11 out not drawing that line lets them in And with all
12 due respect I dont think that the novelty and
13 nonobviousness filters that 102 and 103 really deal with
14 that problem effectively because when you get to
15 nonobviousness in 103 for example youll be asking a
16 different question
17 If you take the frequent flier program you
18 would say well is this innovation in building consumer
19 loyalty something that would have been obvious to
20 somebody who runs an airline Its totally divorced
21 from the question of technology at that point and
22 therefore I dont think youre going to get the screen
23 that you need to get in order for the patent system to
24 be confined to its traditional and appropriate scope
25 If there are no further questions thank
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1 you
2 JUSTICE GINSBURG I have a question about
3 how do you identify an abstract concept The shyshy a
4 natural phenomenon a mathematical formula those are
5 easy to identify but there has been some confusion on
6 what qualifies as an abstract concept
7 GENERAL VERRILLI We would define
8 abstract shyshy an abstract concept as a claim that is not
9 directed to a concrete innovation in technology
10 science or the industrial arts So its the shyshy its
11 abstract in the sense that it is not a concrete
12 innovation in the traditional realm of patent law
13 Thank you
14 CHIEF JUSTICE ROBERTS Thank you General
15 Mr Phillips you have four minutes
16 remaining
17 REBUTTAL ARGUMENT OF CARTER G PHILLIPS
18 ON BEHALF OF THE PETITIONERS
19 MR PHILLIPS Thank you Mr Chief Justice
20 Id just like to make a few points
21 First of all with respect to the question
22 you asked which is looking at 159 et cetera all I can
23 tell you is that if you look at claim 33 it talks about
24 matched orders the matched orders that are described in
25 286 and 287 and then makes specific reference to 159
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1 and that flow chart thats there And its all designed
2 as a package Its only one element of the shyshy of the
3 invention but it is a central element and its an easy
4 one to understand And it goes well beyond simply the
5 notion of hedge shyshy hedge against settlement risk and do
6 it by a computer
7 JUSTICE SOTOMAYOR Your adversary says that
8 his shyshy the appendix to his brief are the only patents at
9 issue that the flow charts are not at issue in this
10 case
11 MR PHILLIPS Theres no basis for that
12 statement Your Honor There shyshy remember this went off
13 on a very truncated litigation process So theres shyshy
14 you know we shyshy we got cut off at the beginning of it
15 Theres been no construction of the shyshy of the claims
16 and shyshy and obviously these are specifications that go
17 to how you interpret the claim
18 JUSTICE SOTOMAYOR If we were to say that
19 there are no business patents shyshy
20 MR PHILLIPS Yes
21 JUSTICE SOTOMAYOR shyshy would your patent
22 survive at all
23 MR PHILLIPS No I dont shyshy I dont
24 believe so I think theres no question And you
25 know General Verrilli could not have been any plainer
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1 in his statement of how he wants to interpret the
2 abstract idea concept
3 JUSTICE SOTOMAYOR Yes he wants to say no
4 business patents
5 MR PHILLIPS No business shyshy just another
6 way of saying no business methods And you know the
7 Court rejected that And it seems to me extraordinary
8 to say Congress didnt reject no business methods in
9 101 but were going to do shyshy were going to manipulate
10 the judicial exception to accomplish precisely that same
11 thing It seems to me thats wholly inappropriate
12 Justice Ginsburg you asked my shyshy my friend
13 here you know whats his test He didnt answer that
14 question youll notice because he doesnt have an
15 answer His basic argument is whatever you do just
16 kill this patent
17 And if I were in his shoes I suppose Id
18 take that same position I think whats absolutely
19 clear is that the test ought to be one that is
20 structured as a very coarse filter not the kind of
21 filter that hes pushing for where it changes over time
22 I mean I thought his shyshy I thought his response to one
23 of the questions about eshymail and word processing that
24 Justice Sotomayor asked is over time it would change
25 Well thats exactly what 102 and 103 are for That is
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1 not the purpose of shyshy of Section 101
2 And then he uses the example of encryption
3 I guarantee you if we were arguing about encryption in
4 this case he would say to me that thats an abstract
5 principle because encryption is a concept thats been
6 around since time immemorial George Washington used
7 it Everybody has used encryption
8 And a question again thats not the
9 solution to these problems The question is how did we
10 go about doing it And we go beyond the basics of
11 simply saying use a computer and thats what we ask
12 this Court to focus on and to evaluate
13 As to the frequent flier program its
14 pretty clear to me that even though it was a novel idea
15 in some sense the concept itself would have been viewed
16 in shyshy in the KSR fashion as quite obvious as a means of
17 improving customer loyalty
18 There are solutions here Giving us 101
19 pass doesnt create a monopoly It just gets us to the
20 102 and 103 inquiries that are at the heart of what the
21 patent laws shyshy and 112 that are at the heart of what the
22 patent laws ought to be dealing with
23 If there are no further questions Your
24 Honor thank you
25 CHIEF JUSTICE ROBERTS Thank you counsel
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1 The case is submitted
2 (Whereupon at 1105 am the case in the
3 aboveshyentitled matter was submitted)
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
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25
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58
A add 714 1023 algorithm 3320 41 automatically
As 525 3621 387 algorithms apply 72425 111
am 115 32 416 3013 3310 2019 281213 automobile 389
572 added 302 Alice 13 34 2822 3814 available 99
abacus 61213 4923 363 3717 4217 avenues 4124
710 1018 additional 5017 3822 4117 applying 4213 avoids 524
1325 3614 3617
address 4121 4317 4511
Alices 271 2919 3678
approach 226 395 4513 B
ability 1514 addressed 435 allow 94 472 B 121 29 4413
able 1511 167 addressing 181 allows 97 242 appropriate 5122
1919 516 adds 4623 amazing 2514 81516 1514 back 1621
aboveshyentitled adhere 437 amici 3825 453 4913 1922 2512
113 573 adjudication amicus 123 5224 3018 322
absolutely 125 241 210 4414 Archimedes 3991222
1215 159 adjusting 3611 analysis 424 281122 3811 4025
5518 41610 364 406 area 219 5112 ball 526
abstract 4267 adjustment 417 4924 argue 2518 Bank 17 35
48 6682023 418 analyze 1416 arguing 563 banks 95
721 8218 administered 1716 argument 114 bars 43
141920 1522 454 announce 4525 225812 33 baseball 527
165 181618 administration answer 119 37 41 144 based 423 406
2220 24925 4316 2219 247 18323 226 baseline 522
2621 277 administrative 3919 4221 26715 4413 basic 413 5515
2938 3422 171218 187 456 461416 457 5317 basically 1821
3523 395 242 4123 4721 551315 5515 2319
405 414 424 adopt 203 answering 5119 arguments basics 5610
4418 461823 adopted 31317 answers 3713 1415 basis 132 1512
491221 505 advancement 461821 arms 1625 1516 2719
53368811 351 anyway 1810 arrangements 5411
552 564 advances 3513 apparatus 2916 131 beating 435
accept 102 adversary 547 APPEARAN arrows 315 beginning 163
accomplish advice 1715 116 art 1919 5414
5510 advocated 4916 appears 820 arts 2124 5310 begins 3810
account 55 618 affect 4225 appendix 1910 aside 1422 157 behalf 11719
397 affirmative 402 311 326 369 asked 2314 122 24710
accounts 823 agent 52 3021 548 278 5322 214 38 2616
9356 3611 ago 318 2224 applicant 3220 551224 4414 5318
3611 3615 5111 3921 4023 asking 193 believe 1316
accurately 2413 agree 920 2021 416 4314 221213 273 1416 2421
acknowledges 221 2418 application 3324 5215 255 264 451
1121 4021 421 2623 4117 aspect 517 5424
act 99 2017 agrees 2812 4918 asserted 3113 belong 529
activities 229 ahead 4225 applications 311618 benchmark 522
activity 2122 AIA 2912 4122 333 asserting 325 Benson 361923
3325 4812 airline 5220 applied 434 attaching 124 best 161124
actual 4020 AL 18 523 attention 3813 better 1610 albeit 923 applies 31418 Attorney 2021 216 2819
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3322 brightshyline 409 2313 37 71 4338 5519 beyond 115 4012 5317 checks 618 5614
1312 4623 bring 5115 case 3412 46 Chief 339 clearly 211 251 544 5610 broad 248 116 1524 261217 3024 523
Bilski 313 46 broader 225 2022 213 31812 378 client 311416 415 1722 browsing 228 2211 2313 371416 386 close 2822 2224 2329 builder 2811 2625 311424 421414 4410 CLS 17 35 262020 271 building 5218 3314 36620 441116 5110 1120 2816 2999 built 2324 426816 5118 531419 coarse 247 3935 4125 business 168 451822 461 5625 5520 427 4322 1749 203 461422 5024 chits 611 code 1213 142 447 452 2124 222122 5124 5410 chronological 1916171720 461821 4825 2311 29613 564 5712 1512 2725 4018 49481922 32132323 cases 244 2816 chronologically coffee 1211 5047 3322525 4011 423 colleagues 116
Bilskis 447 34415 3610 catalogues 2512 circuit 2818 college 58 bit 323 48214 4969 262 401112 425 columns 325 blocks 54 508111620 categorically 42912 4324 come 108 234 Bloomberg 517 5419 202 4825 3017 399
2115 225 554568 category 489 circumstances 475 boat 2811 businessshymeth 5125 318 1515 comes 1318 bonds 4717 457 CBM 2913 claim 416 2418 2018 231 bothering 118 buy 183 cellphones 228 2423 2522 coming 923 bound 1521 buys 3924 central 95 543 264 27917 common 31120 boundary 4913 certain 1216 3019 3121 2157 bounds 1521 C certainly 518 32420 361 company 4224 box 392425 C 21 31 263 358 392325 403 competition
4024 cables 3012 4121 495 442223 4922 161011 Breyer 66823 calculator 3519 certainty 5112 516 53823 completely 921
74691923 call 3812 5011 5116 5417 1422 2320 85810 1012 called 721 275 cetera 387 claimed 41014 complex 126 1021 1523 3316 5322 281 3017 complicated 161418 171 calling 4611 Chakrabarty 34162123 1225 235 1922 2114 capabilities 2016 3721242425 3025 315 221216 239 3723 challenge 443 382 4925 component 2315 285 capable 141 change 186 5120 352024 293 3613 454 273 311 415 claims 1416 compression 38520 478 capture 2415 5524 171616 2419 309 3212 4722 4814 captures 2412 changes 3817 2424 2515 3320 349 48182224 card 5017 5521 2520 2648 computer 422
brief 211315 carefully 1725 chart 541 283 3118 516 621 710 2255 322 caricature 718 charted 2620 37517 398 71325 9113 4215 4715 72020 1417 charts 1911 406 5415 91824 1035 4810 5113 1716 549 clarity 4755 10725 1116 548 carry 4420 Charybdis 511116 124102024
briefs 1524 4923 1620 2619 class 59 13911 1479 1618 CARTER 117 checkbook 617 clear 1015 118 1421 15710
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1517 165 confess 1111 coterminous 4121 5324 181719 196 configured 383 2321 customer 518 describes 425 19814 206 confined 5224 cotton 914 444 5617 2918 3211 2025 211016 confirmed 2912 4711 487 cut 5414 3913 2117 2410 confusion 434 counsel 4411 description
D2521525 535 5625 3917 402022 D 312622 30522 Congress 178 countries 137 deserve 342 DC 1101719 31311 3210 1725 1856 course 719 designed 720
1223211 33519 1924 2014 1613 298 812 541 data 2917 309 34142425 2325 291213 3210 491619 desired 3922
30111214 351 361220 346 412223 court 1114 detail 363 3212 3367 3621 37156 558 3101317 detailed 1914 3320 34914 379121523 consequences 922 145 developed 2119 3722382334815 2011 1720 1939 device 207
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910 399442020 4515 454 523 2618 27345 dicta 923 1012 deal 42023 46102225 constitutes 312 28718 299 Diehr 2322
172 187 397 4710121518 construction 31202122 3313 4518 427 47234725 48566 496 5415 334 36523 5124 506 5213481012 4923 consumer 5218 39244 4010 difference 921
dealing 4175013 51922 contains 327 40141515 2789 4421 1119 135546 5611 content 281417 4114 42215 different 421 151216 3412 computers 2819 4223 4323 79 919 1377 56224610 5121 context 2319 44717 4957 191 259 266
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4617concept 413 396 4911 524 159 5015 decision 161810 1419 contributions create 96 1712 difficulties 420
1811522 53368 526 241 251 difficulty 437 decisions 274552 56515 conventional 5619 direct 2721
426 43623 concepts 2944 3521 361 created 186 directed 4423 43242955 462325 244 4123 5119 539
declare 2010conceptual converting 141 creates 93 directions 319 default 27104620 copyrighted creation 518 directly 31415 define 537concern 513 1315 credit 231 322 2019 Departmentconcerned 373 Corporation 13 271021 5017 298 3613
122439 34 crediting 2718 directs 4917 depends 2520concerns 93 correct 4513 critical 5023 disable 3313 describe 58concrete 1118 correctly 2416 crunching 3722 disaggregate
1112 391522 253 53911 corresponding curiae 123 211 144 1520 4024conduct 5020 2720 2915 4415 disagree 513
described 717conducted 297 346 current 4112 disagrees 4213
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disclosure 328 413 302021 4220 figure 1146 discuss 164 economy 1516 ESQ 1171921 excerpted 323 311222 3917 discussion 299 effective 1223 236913 exhausted 1813 file 406 dispose 2625 5021 essence 211 exist 420 131 filed 4214 dispute 325 effectively 5214 essential 1224 existence 1119 fill 2818 disputed 3120 efficacy 1224 3425 175 filled 293
363 1517 essentially 2016 existing 337 filter 248 5520 distance 2311 efficiency 3722 261 4125 422 5521 distinction 415 efficient 5020 4215 exists 42 filters 5213
4719 481519 either 202 established expert 3688 finance 2124 distinguishing 5121 311919 381 4814
4811 electronic 262 establishing expertise 1210 financial 1225 distribution 4178 275 experts 2817 29517
443 electronically et 18 387 5322 367 fine 103 2223 district 4323 2525 evaluate 97 extent 1924 4223 divorced 5220 element 811 5612 2323 265 finished 133 doing 91315 4212 5423 evaluating 526 extinguish 457 first 1111 2718
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factors 5113drawings 3117 embedded 1418 exaggeration flow 1911 541 fail 2419 272 3117 employ 75 1017 549 fairly 511 507 dubious 2915 enabled 1921 examiner 4134 fluctuation faithful 451446 encourages examiners 455 2711 fall 925 229 due 5212 132222 474 4912 focus 1013
242022 2910 Dyk 4824 encryption example 1912 5612 fallacious 38213410 5018 291 30918 folks 3825
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earlier 822 faster 166enter 95 5215 562 former 4214 early 417 Federal 4011entire 186 examples 83 forms 2513 easy 511 1113 4012 4259 environment 297 331 formula 534
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economic 2621 fell 2010equivalent 345 4913 505 found 1525 294 fiber 3012escaped 428 5510 4925
economics 413 fifth 2217escrow 52 exceptionshyneu founders 2513
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four 1720 182 48172023 5599 3312 461920 1016 123 18912 2216 493 5014 gold 6101114 4920 138 14610 2311 275 511017 537 134 held 46 495 141120 164 4320 5315 5314 5425 good 611 167 5045 181618 2220
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52517 5613 genuine 4724 governments high 3924 414 4418 friend 3725 George 566 211313 2210 hires 612 461923 4921
5512 getting 289 grab 618 historically 499 552 5614 friends 272 479 grain 624 711 history 1721 ideas 293 395
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821222324 131720 1719 2157 447 4919 imagine 69 91 1724 239 grounds 2456 holds 262022 4921
functionality 277 425 432 group 1210 home 510 immemorial 3599 456 532 441 Honor 1814 566
functioning 5512 guarantee 563 214 269 implement 911 4515 4725 give 2225 257 guess 51111 2722 282 102125 147 512223 281325 3221 171 2218 2921923 149 1510
functions 1323 33217 347 2414 3225 331823 165 181719 141 1918 5011 guy 711 34319 356 252 3914 4425 4924 given 61113 4019 4211 implementation
fundamental 427 5034 H 4314 5412 3620 4325 1115 249 giving 611 habit 610 5624 implemented 2621 4115 5618 hand 915 1923 hope 188 56 81518
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further 51 117 go 510 1157 handwritten house 3021 implementing 2610 2823 161419 1922 3617 HUDshy1 3022 4115 291 5225 2314 256 happen 133 human 4812 important 243 5623 281123 291 happens 388 hundred 3710 366 473
future 393 316 4225 hard 201423 3719 imposes 4421 479 493 514 hundreds 2010 impractical
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317 5317 1312 191013 4711 487 258 2825 gather 1325 2012 389 head 3621 improve 2121 general 121 544 hear 33 I 4425 4517
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48911 5121 410 53 issue 316 1010 31812 329 141919 5520 improvements International 3124 4021 3221 331521 kinds 248
324 17 35 4317 444 3324 34717 King 6924 improves 206 Internet 2514 4621 5499 3524814 1016 1124
451416 486 2524 issued 4120 3613 37814 knock 227 improving 206 interpersonal issues 4010 3716 3857 knocked 245
5013 518 296 4323 3820 391112 know 4611 53 5617 interpret 2112 3920 4017 54 109 141
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1 software patents
2 Justice Ginsburg this Courts precedents
3 are clear They are unanimous They just need to be
4 applied To suggest that there is confusion that needs
5 to be addressed by retreating beating a retreat from
6 recent unanimous decisions would simply reward
7 intransigence difficulty refusal to adhere to what are
8 clear precedents because shyshy
9 JUSTICE KAGAN Should we be concerned
10 Mr Perry that there are old patents that in fact could
11 meet the test that you set forth but wont because they
12 were written in a different time and so used much more
13 general language
14 MR PERRY Your Honor the applicant or the
15 patent holder would have the opportunity to institute a
16 reexamination proceeding or some sort of administration
17 process to address that issue
18 And second it should be noted this is a
19 very small problem There are 2 million outstanding
20 patents in the United States In the last four fiscal
21 years there were 22000 infringement litigations
22 instituted but since Bilski there have only been 57
23 district court decisions on Section 101 issues There
24 have only been 12 Federal Circuit decisions total on
25 computer implementation
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1 We are talking about a group of patents
2 Justice Kagan thats way out at the tail end of
3 distribution Most patents never have a 101 challenge
4 This is not an issue with cotton gins and other things
5 This is a problem for the most marginal
6 most dubious most skeptical patents the ones that this
7 Court in Bilski shyshy and remember what Bilskis holding
8 is The majority said they are processes but it did
9 not say they are eligible
10 Thank you Mr Chief Justice
11 CHIEF JUSTICE ROBERTS Thank you counsel
12 General Verrilli
13 ORAL ARGUMENT OF DONALD B VERRILLI JR
14 ON BEHALF OF THE UNITED STATES AS AMICUS
15 CURIAE SUPPORTING RESPONDENTS
16 GENERAL VERRILLI Mr Chief Justice and
17 may it please the Court
18 An abstract idea does not become
19 patentshyeligible merely by tacking on an instruction to
20 use a computer to carry it out A computer makes a
21 difference under Section 101 when it imposes a
22 meaningful limit on the patent claim That occurs when
23 the claim is directed at improvement in computing
24 technology or an innovation that uses computing
25 technology to improve other technological functions
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1 Thats the test that we believe is most faithful to this
2 Courts precedents in Bilski and Mayo It keeps patents
3 within their traditional and appropriate domain and it
4 is capable of being administered consistently by Courts
5 and by PTO examiners
6 JUSTICE GINSBURG How do you answer the
7 argument that your view would extinguish businessshymethod
8 patents and make all software ineligible for patent
9 protection
10 GENERAL VERRILLI Yeah with shyshy let me
11 address software patents first because that I think is
12 obviously a significant question And its just not
13 correct to say that our approach would make software
14 patenting ineligible Any software patent that improves
15 the functioning of the computer technology is eligible
16 Any software patent that improves shyshy that is used to
17 improve another technology is eligible For example
18 the patent in the shyshy in the Diehr case is one in
19 which shyshy
20 JUSTICE SOTOMAYOR Why do we need to reach
21 this in that shyshy reach software patents at all in this
22 case
23 GENERAL VERRILLI Well shyshy
24 JUSTICE SOTOMAYOR Whats the necessity for
25 us to announce a general rule with respect to software
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1 There is no software being patented in this case
2 GENERAL VERRILLI Well I shyshy
3 JUSTICE SOTOMAYOR Theres a systems
4 GENERAL VERRILLI Well I shyshy I think shyshy
5 well they shyshy they shyshy theres a process being and shyshy and
6 one can think of software patents as process patents
7 And I think thats why my friends on the other side are
8 saying the sky is falling because they shyshy they are
9 interpreting what were saying about that when a
10 computer makes shyshy when a computers involvement makes
11 something eligible under 101 its calling those into
12 question and it doesnt
13 JUSTICE SOTOMAYOR Do you think we have to
14 reach the patentability of software to answer this case
15 GENERAL VERRILLI Well I think you can shyshy
16 I think the answer to that question is no not
17 necessarily You can decide it by saying that shyshy that
18 Bilski answers the question whether this is an abstract
19 idea because this form of hedging is really no
20 different than the form of hedging as a conceptual
21 matter at issue in Bilski And then Mayo answers the
22 question of whether the use of a computer in this case
23 adds enough to the abstract idea beyond conventional
24 steps because here all we have after all is just
25 conventional use of computing technology no computer
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1 innovation such that you dont qualify under 101 You
2 could take that approach
3 But it is important to the United States
4 that we shyshy and to our patent examiners that we get some
5 clarity if we can I think the clarity could come from
6 the text that I propose which I want to reiterate shyshy
7 JUSTICE SOTOMAYOR Well shyshy
8 JUSTICE BREYER Could shyshy could shyshy could you
9 go on with that because you were just getting to the
10 point where I think you say a computer improvement that
11 in fact leads to an improvement in harvesting cotton is
12 an improvement through a computer of technology so it
13 qualifies
14 But then I think you were going to say or I
15 got this also from the brief a computer improvement
16 that leads to an improvement in the methods of selling
17 bonds over the telephone is not an improvement in
18 technology reached by the computer Am I right about
19 the distinction youre making
20 GENERAL VERRILLI I dont think theres a
21 yes or no answer to that question
22 JUSTICE BREYER What is your view Yeah
23 what is shyshy how do we deal with just that problem
24 GENERAL VERRILLI If there is a genuine
25 innovation in the functioning of the computer shyshy
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1 JUSTICE BREYER Yes
2 GENERAL VERRILLI shyshy such that business
3 processes shyshy
4 JUSTICE BREYER Weve got that Yes yes
5 We got the computer But then it doesnt improve the
6 computer but rather it improves through the computer
7 the harvesting of cotton
8 Now youve got it in what you said was your
9 second category which is an improvement through the
10 computer of a technology And I thought in your brief
11 you were distinguishing an improvement through the
12 computer of a human activity that is not a technology
13 and in particular to pick an example of that
14 something in finance or something in business
15 Now am I right about the distinction youre
16 making
17 GENERAL VERRILLI Yeah that shyshy
18 JUSTICE BREYER If Im not right what is
19 the distinction
20 GENERAL VERRILLI That is generally the
21 line were drawing Frankly shyshy
22 JUSTICE BREYER And how is that justified
23 GENERAL VERRILLI I do want shyshy
24 JUSTICE BREYER That shyshy that is Judge Dyk
25 in shyshy in Bilski in the Federal circuit 4 people sort of
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1 picked it up maybe 5 didnt pick it up Would you say
2 a few words about it
3 GENERAL VERRILLI Sure About shyshy let me go
4 to Bilski there in that I do think while shyshy while
5 certainly the Court held that the term process got a
6 natural construction which could include business
7 methods it seems to me that thats not all the Court
8 said in Bilski The Court also said that it was
9 historically and traditionally quite rare that business
10 methods were patent eligible
11 It also said that shyshy that the shyshy that courts
12 and the PTO examiners should use the abstract ideas
13 exception to 101 to police the appropriate boundary
14 It also said that the
15 machineshyorshytransformation test that the United States
16 advocated remained a useful tool And of course that
17 directs to you seeing whether there is a technology
18 application
19 And of course the holding in Bilski was
20 that the shyshy the method for hedging risk was ineligible
21 because it was an abstract idea and I cant imagine
22 that if in Bilski the shyshy the claim had been exactly the
23 same but had added use a computer to carry out some of
24 these standard random analysis functions that are
25 claimed by the patent that you would have found it to
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1 be patent eligible
2 And I shyshy I would submit for the Court that
3 the key point here I think is that now given where
4 the Court shyshy what the Court has held in Bilski given
5 what its held in Mayo the abstract ideas exception is
6 really the only tool left to deal with what I shyshy what I
7 think I fairly read Bilski as saying is a significant
8 problem the proliferation of patents of business
9 methods
10 JUSTICE KENNEDY Is there an example that
11 you can give us of a shyshy what we can call a business
12 process that is patentable a process that doesnt
13 involve improving the workings of a computer
14 GENERAL VERRILLI I shyshy I think its going
15 to be difficult for me to do that I think for
16 example if you had a business method a process for
17 additional security pointshyofshysale credit card
18 transactions using particular encryption technology
19 that might well be patent eligible Its a technology
20 that it makes conduct of business more efficient or
21 effective
22 But there is a technological link here and
23 we do think thats critical to our shyshy to our point of
24 view with respect to the case And I shyshy and I do think
25 remember that when we say something is not patent
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1 eligible were not saying they cant do it Were
2 saying they cant monopolize it
3 And the concern in a situation like this one
4 is that if this is patent eligible its hard to see
5 why for example the first person who came up with a
6 frequent flier program wouldnt have been able to claim
7 a patent there because after all thats a business
8 method for improving customer loyalty implemented on a
9 computer
10 CHIEF JUSTICE ROBERTS General I shyshy you
11 mentioned a while ago the need for greater clarity and
12 certainty in this area And Im just wondering in your
13 brief youve got a nonshyexhaustive of factors to
14 consider and there are 6 different ones And Im just
15 doubtful that thats going to bring about greater
16 clarity and certainty
17 GENERAL VERRILLI I take shyshy I take the
18 point Mr Chief Justice but I think the key is that
19 they are all directed to answering the question of
20 whether the innovation that is claimed and is an
21 innovation in either A the improvement of a computers
22 functioning or B the use of computer technology to
23 improve the functioning of another technological
24 process and a case like Diehr would be in the latter
25 category
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1 And so I do think that thats the key
2 benchmark Thats the baseline Thats the test that
3 we do think can be applied clearly and consistently by
4 the courts or the PTO And it avoids the risk of things
5 like frequent flier programs or the Oakland As money
6 ball methods for evaluating the contributions in
7 individual baseball players make or any one of a host of
8 other things that our intuitions tell us just dont
9 belong in the patent system
10 Thats the shyshy drawing that line keeps them
11 out not drawing that line lets them in And with all
12 due respect I dont think that the novelty and
13 nonobviousness filters that 102 and 103 really deal with
14 that problem effectively because when you get to
15 nonobviousness in 103 for example youll be asking a
16 different question
17 If you take the frequent flier program you
18 would say well is this innovation in building consumer
19 loyalty something that would have been obvious to
20 somebody who runs an airline Its totally divorced
21 from the question of technology at that point and
22 therefore I dont think youre going to get the screen
23 that you need to get in order for the patent system to
24 be confined to its traditional and appropriate scope
25 If there are no further questions thank
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1 you
2 JUSTICE GINSBURG I have a question about
3 how do you identify an abstract concept The shyshy a
4 natural phenomenon a mathematical formula those are
5 easy to identify but there has been some confusion on
6 what qualifies as an abstract concept
7 GENERAL VERRILLI We would define
8 abstract shyshy an abstract concept as a claim that is not
9 directed to a concrete innovation in technology
10 science or the industrial arts So its the shyshy its
11 abstract in the sense that it is not a concrete
12 innovation in the traditional realm of patent law
13 Thank you
14 CHIEF JUSTICE ROBERTS Thank you General
15 Mr Phillips you have four minutes
16 remaining
17 REBUTTAL ARGUMENT OF CARTER G PHILLIPS
18 ON BEHALF OF THE PETITIONERS
19 MR PHILLIPS Thank you Mr Chief Justice
20 Id just like to make a few points
21 First of all with respect to the question
22 you asked which is looking at 159 et cetera all I can
23 tell you is that if you look at claim 33 it talks about
24 matched orders the matched orders that are described in
25 286 and 287 and then makes specific reference to 159
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1 and that flow chart thats there And its all designed
2 as a package Its only one element of the shyshy of the
3 invention but it is a central element and its an easy
4 one to understand And it goes well beyond simply the
5 notion of hedge shyshy hedge against settlement risk and do
6 it by a computer
7 JUSTICE SOTOMAYOR Your adversary says that
8 his shyshy the appendix to his brief are the only patents at
9 issue that the flow charts are not at issue in this
10 case
11 MR PHILLIPS Theres no basis for that
12 statement Your Honor There shyshy remember this went off
13 on a very truncated litigation process So theres shyshy
14 you know we shyshy we got cut off at the beginning of it
15 Theres been no construction of the shyshy of the claims
16 and shyshy and obviously these are specifications that go
17 to how you interpret the claim
18 JUSTICE SOTOMAYOR If we were to say that
19 there are no business patents shyshy
20 MR PHILLIPS Yes
21 JUSTICE SOTOMAYOR shyshy would your patent
22 survive at all
23 MR PHILLIPS No I dont shyshy I dont
24 believe so I think theres no question And you
25 know General Verrilli could not have been any plainer
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1 in his statement of how he wants to interpret the
2 abstract idea concept
3 JUSTICE SOTOMAYOR Yes he wants to say no
4 business patents
5 MR PHILLIPS No business shyshy just another
6 way of saying no business methods And you know the
7 Court rejected that And it seems to me extraordinary
8 to say Congress didnt reject no business methods in
9 101 but were going to do shyshy were going to manipulate
10 the judicial exception to accomplish precisely that same
11 thing It seems to me thats wholly inappropriate
12 Justice Ginsburg you asked my shyshy my friend
13 here you know whats his test He didnt answer that
14 question youll notice because he doesnt have an
15 answer His basic argument is whatever you do just
16 kill this patent
17 And if I were in his shoes I suppose Id
18 take that same position I think whats absolutely
19 clear is that the test ought to be one that is
20 structured as a very coarse filter not the kind of
21 filter that hes pushing for where it changes over time
22 I mean I thought his shyshy I thought his response to one
23 of the questions about eshymail and word processing that
24 Justice Sotomayor asked is over time it would change
25 Well thats exactly what 102 and 103 are for That is
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1 not the purpose of shyshy of Section 101
2 And then he uses the example of encryption
3 I guarantee you if we were arguing about encryption in
4 this case he would say to me that thats an abstract
5 principle because encryption is a concept thats been
6 around since time immemorial George Washington used
7 it Everybody has used encryption
8 And a question again thats not the
9 solution to these problems The question is how did we
10 go about doing it And we go beyond the basics of
11 simply saying use a computer and thats what we ask
12 this Court to focus on and to evaluate
13 As to the frequent flier program its
14 pretty clear to me that even though it was a novel idea
15 in some sense the concept itself would have been viewed
16 in shyshy in the KSR fashion as quite obvious as a means of
17 improving customer loyalty
18 There are solutions here Giving us 101
19 pass doesnt create a monopoly It just gets us to the
20 102 and 103 inquiries that are at the heart of what the
21 patent laws shyshy and 112 that are at the heart of what the
22 patent laws ought to be dealing with
23 If there are no further questions Your
24 Honor thank you
25 CHIEF JUSTICE ROBERTS Thank you counsel
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1 The case is submitted
2 (Whereupon at 1105 am the case in the
3 aboveshyentitled matter was submitted)
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146 2624 39722 472 5511 1024 111 ultimately 56 3918 511717 5217 things 1112 Trademark unanimous 274
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various 3616 3420 4016 4312 1327shy28 369 94 2715 vary 1420 442 556 wrong 392 159 1910 311 Verrilli 121 29 ways 717 3015 wrote 1213 532225
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5 5 491 510 3019 411 53 214 57 4322
6 6 5114 65 3019
7
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9 9 245 9shy0 365
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1 We are talking about a group of patents
2 Justice Kagan thats way out at the tail end of
3 distribution Most patents never have a 101 challenge
4 This is not an issue with cotton gins and other things
5 This is a problem for the most marginal
6 most dubious most skeptical patents the ones that this
7 Court in Bilski shyshy and remember what Bilskis holding
8 is The majority said they are processes but it did
9 not say they are eligible
10 Thank you Mr Chief Justice
11 CHIEF JUSTICE ROBERTS Thank you counsel
12 General Verrilli
13 ORAL ARGUMENT OF DONALD B VERRILLI JR
14 ON BEHALF OF THE UNITED STATES AS AMICUS
15 CURIAE SUPPORTING RESPONDENTS
16 GENERAL VERRILLI Mr Chief Justice and
17 may it please the Court
18 An abstract idea does not become
19 patentshyeligible merely by tacking on an instruction to
20 use a computer to carry it out A computer makes a
21 difference under Section 101 when it imposes a
22 meaningful limit on the patent claim That occurs when
23 the claim is directed at improvement in computing
24 technology or an innovation that uses computing
25 technology to improve other technological functions
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1 Thats the test that we believe is most faithful to this
2 Courts precedents in Bilski and Mayo It keeps patents
3 within their traditional and appropriate domain and it
4 is capable of being administered consistently by Courts
5 and by PTO examiners
6 JUSTICE GINSBURG How do you answer the
7 argument that your view would extinguish businessshymethod
8 patents and make all software ineligible for patent
9 protection
10 GENERAL VERRILLI Yeah with shyshy let me
11 address software patents first because that I think is
12 obviously a significant question And its just not
13 correct to say that our approach would make software
14 patenting ineligible Any software patent that improves
15 the functioning of the computer technology is eligible
16 Any software patent that improves shyshy that is used to
17 improve another technology is eligible For example
18 the patent in the shyshy in the Diehr case is one in
19 which shyshy
20 JUSTICE SOTOMAYOR Why do we need to reach
21 this in that shyshy reach software patents at all in this
22 case
23 GENERAL VERRILLI Well shyshy
24 JUSTICE SOTOMAYOR Whats the necessity for
25 us to announce a general rule with respect to software
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1 There is no software being patented in this case
2 GENERAL VERRILLI Well I shyshy
3 JUSTICE SOTOMAYOR Theres a systems
4 GENERAL VERRILLI Well I shyshy I think shyshy
5 well they shyshy they shyshy theres a process being and shyshy and
6 one can think of software patents as process patents
7 And I think thats why my friends on the other side are
8 saying the sky is falling because they shyshy they are
9 interpreting what were saying about that when a
10 computer makes shyshy when a computers involvement makes
11 something eligible under 101 its calling those into
12 question and it doesnt
13 JUSTICE SOTOMAYOR Do you think we have to
14 reach the patentability of software to answer this case
15 GENERAL VERRILLI Well I think you can shyshy
16 I think the answer to that question is no not
17 necessarily You can decide it by saying that shyshy that
18 Bilski answers the question whether this is an abstract
19 idea because this form of hedging is really no
20 different than the form of hedging as a conceptual
21 matter at issue in Bilski And then Mayo answers the
22 question of whether the use of a computer in this case
23 adds enough to the abstract idea beyond conventional
24 steps because here all we have after all is just
25 conventional use of computing technology no computer
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1 innovation such that you dont qualify under 101 You
2 could take that approach
3 But it is important to the United States
4 that we shyshy and to our patent examiners that we get some
5 clarity if we can I think the clarity could come from
6 the text that I propose which I want to reiterate shyshy
7 JUSTICE SOTOMAYOR Well shyshy
8 JUSTICE BREYER Could shyshy could shyshy could you
9 go on with that because you were just getting to the
10 point where I think you say a computer improvement that
11 in fact leads to an improvement in harvesting cotton is
12 an improvement through a computer of technology so it
13 qualifies
14 But then I think you were going to say or I
15 got this also from the brief a computer improvement
16 that leads to an improvement in the methods of selling
17 bonds over the telephone is not an improvement in
18 technology reached by the computer Am I right about
19 the distinction youre making
20 GENERAL VERRILLI I dont think theres a
21 yes or no answer to that question
22 JUSTICE BREYER What is your view Yeah
23 what is shyshy how do we deal with just that problem
24 GENERAL VERRILLI If there is a genuine
25 innovation in the functioning of the computer shyshy
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1 JUSTICE BREYER Yes
2 GENERAL VERRILLI shyshy such that business
3 processes shyshy
4 JUSTICE BREYER Weve got that Yes yes
5 We got the computer But then it doesnt improve the
6 computer but rather it improves through the computer
7 the harvesting of cotton
8 Now youve got it in what you said was your
9 second category which is an improvement through the
10 computer of a technology And I thought in your brief
11 you were distinguishing an improvement through the
12 computer of a human activity that is not a technology
13 and in particular to pick an example of that
14 something in finance or something in business
15 Now am I right about the distinction youre
16 making
17 GENERAL VERRILLI Yeah that shyshy
18 JUSTICE BREYER If Im not right what is
19 the distinction
20 GENERAL VERRILLI That is generally the
21 line were drawing Frankly shyshy
22 JUSTICE BREYER And how is that justified
23 GENERAL VERRILLI I do want shyshy
24 JUSTICE BREYER That shyshy that is Judge Dyk
25 in shyshy in Bilski in the Federal circuit 4 people sort of
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1 picked it up maybe 5 didnt pick it up Would you say
2 a few words about it
3 GENERAL VERRILLI Sure About shyshy let me go
4 to Bilski there in that I do think while shyshy while
5 certainly the Court held that the term process got a
6 natural construction which could include business
7 methods it seems to me that thats not all the Court
8 said in Bilski The Court also said that it was
9 historically and traditionally quite rare that business
10 methods were patent eligible
11 It also said that shyshy that the shyshy that courts
12 and the PTO examiners should use the abstract ideas
13 exception to 101 to police the appropriate boundary
14 It also said that the
15 machineshyorshytransformation test that the United States
16 advocated remained a useful tool And of course that
17 directs to you seeing whether there is a technology
18 application
19 And of course the holding in Bilski was
20 that the shyshy the method for hedging risk was ineligible
21 because it was an abstract idea and I cant imagine
22 that if in Bilski the shyshy the claim had been exactly the
23 same but had added use a computer to carry out some of
24 these standard random analysis functions that are
25 claimed by the patent that you would have found it to
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1 be patent eligible
2 And I shyshy I would submit for the Court that
3 the key point here I think is that now given where
4 the Court shyshy what the Court has held in Bilski given
5 what its held in Mayo the abstract ideas exception is
6 really the only tool left to deal with what I shyshy what I
7 think I fairly read Bilski as saying is a significant
8 problem the proliferation of patents of business
9 methods
10 JUSTICE KENNEDY Is there an example that
11 you can give us of a shyshy what we can call a business
12 process that is patentable a process that doesnt
13 involve improving the workings of a computer
14 GENERAL VERRILLI I shyshy I think its going
15 to be difficult for me to do that I think for
16 example if you had a business method a process for
17 additional security pointshyofshysale credit card
18 transactions using particular encryption technology
19 that might well be patent eligible Its a technology
20 that it makes conduct of business more efficient or
21 effective
22 But there is a technological link here and
23 we do think thats critical to our shyshy to our point of
24 view with respect to the case And I shyshy and I do think
25 remember that when we say something is not patent
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1 eligible were not saying they cant do it Were
2 saying they cant monopolize it
3 And the concern in a situation like this one
4 is that if this is patent eligible its hard to see
5 why for example the first person who came up with a
6 frequent flier program wouldnt have been able to claim
7 a patent there because after all thats a business
8 method for improving customer loyalty implemented on a
9 computer
10 CHIEF JUSTICE ROBERTS General I shyshy you
11 mentioned a while ago the need for greater clarity and
12 certainty in this area And Im just wondering in your
13 brief youve got a nonshyexhaustive of factors to
14 consider and there are 6 different ones And Im just
15 doubtful that thats going to bring about greater
16 clarity and certainty
17 GENERAL VERRILLI I take shyshy I take the
18 point Mr Chief Justice but I think the key is that
19 they are all directed to answering the question of
20 whether the innovation that is claimed and is an
21 innovation in either A the improvement of a computers
22 functioning or B the use of computer technology to
23 improve the functioning of another technological
24 process and a case like Diehr would be in the latter
25 category
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1 And so I do think that thats the key
2 benchmark Thats the baseline Thats the test that
3 we do think can be applied clearly and consistently by
4 the courts or the PTO And it avoids the risk of things
5 like frequent flier programs or the Oakland As money
6 ball methods for evaluating the contributions in
7 individual baseball players make or any one of a host of
8 other things that our intuitions tell us just dont
9 belong in the patent system
10 Thats the shyshy drawing that line keeps them
11 out not drawing that line lets them in And with all
12 due respect I dont think that the novelty and
13 nonobviousness filters that 102 and 103 really deal with
14 that problem effectively because when you get to
15 nonobviousness in 103 for example youll be asking a
16 different question
17 If you take the frequent flier program you
18 would say well is this innovation in building consumer
19 loyalty something that would have been obvious to
20 somebody who runs an airline Its totally divorced
21 from the question of technology at that point and
22 therefore I dont think youre going to get the screen
23 that you need to get in order for the patent system to
24 be confined to its traditional and appropriate scope
25 If there are no further questions thank
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1 you
2 JUSTICE GINSBURG I have a question about
3 how do you identify an abstract concept The shyshy a
4 natural phenomenon a mathematical formula those are
5 easy to identify but there has been some confusion on
6 what qualifies as an abstract concept
7 GENERAL VERRILLI We would define
8 abstract shyshy an abstract concept as a claim that is not
9 directed to a concrete innovation in technology
10 science or the industrial arts So its the shyshy its
11 abstract in the sense that it is not a concrete
12 innovation in the traditional realm of patent law
13 Thank you
14 CHIEF JUSTICE ROBERTS Thank you General
15 Mr Phillips you have four minutes
16 remaining
17 REBUTTAL ARGUMENT OF CARTER G PHILLIPS
18 ON BEHALF OF THE PETITIONERS
19 MR PHILLIPS Thank you Mr Chief Justice
20 Id just like to make a few points
21 First of all with respect to the question
22 you asked which is looking at 159 et cetera all I can
23 tell you is that if you look at claim 33 it talks about
24 matched orders the matched orders that are described in
25 286 and 287 and then makes specific reference to 159
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1 and that flow chart thats there And its all designed
2 as a package Its only one element of the shyshy of the
3 invention but it is a central element and its an easy
4 one to understand And it goes well beyond simply the
5 notion of hedge shyshy hedge against settlement risk and do
6 it by a computer
7 JUSTICE SOTOMAYOR Your adversary says that
8 his shyshy the appendix to his brief are the only patents at
9 issue that the flow charts are not at issue in this
10 case
11 MR PHILLIPS Theres no basis for that
12 statement Your Honor There shyshy remember this went off
13 on a very truncated litigation process So theres shyshy
14 you know we shyshy we got cut off at the beginning of it
15 Theres been no construction of the shyshy of the claims
16 and shyshy and obviously these are specifications that go
17 to how you interpret the claim
18 JUSTICE SOTOMAYOR If we were to say that
19 there are no business patents shyshy
20 MR PHILLIPS Yes
21 JUSTICE SOTOMAYOR shyshy would your patent
22 survive at all
23 MR PHILLIPS No I dont shyshy I dont
24 believe so I think theres no question And you
25 know General Verrilli could not have been any plainer
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1 in his statement of how he wants to interpret the
2 abstract idea concept
3 JUSTICE SOTOMAYOR Yes he wants to say no
4 business patents
5 MR PHILLIPS No business shyshy just another
6 way of saying no business methods And you know the
7 Court rejected that And it seems to me extraordinary
8 to say Congress didnt reject no business methods in
9 101 but were going to do shyshy were going to manipulate
10 the judicial exception to accomplish precisely that same
11 thing It seems to me thats wholly inappropriate
12 Justice Ginsburg you asked my shyshy my friend
13 here you know whats his test He didnt answer that
14 question youll notice because he doesnt have an
15 answer His basic argument is whatever you do just
16 kill this patent
17 And if I were in his shoes I suppose Id
18 take that same position I think whats absolutely
19 clear is that the test ought to be one that is
20 structured as a very coarse filter not the kind of
21 filter that hes pushing for where it changes over time
22 I mean I thought his shyshy I thought his response to one
23 of the questions about eshymail and word processing that
24 Justice Sotomayor asked is over time it would change
25 Well thats exactly what 102 and 103 are for That is
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1 not the purpose of shyshy of Section 101
2 And then he uses the example of encryption
3 I guarantee you if we were arguing about encryption in
4 this case he would say to me that thats an abstract
5 principle because encryption is a concept thats been
6 around since time immemorial George Washington used
7 it Everybody has used encryption
8 And a question again thats not the
9 solution to these problems The question is how did we
10 go about doing it And we go beyond the basics of
11 simply saying use a computer and thats what we ask
12 this Court to focus on and to evaluate
13 As to the frequent flier program its
14 pretty clear to me that even though it was a novel idea
15 in some sense the concept itself would have been viewed
16 in shyshy in the KSR fashion as quite obvious as a means of
17 improving customer loyalty
18 There are solutions here Giving us 101
19 pass doesnt create a monopoly It just gets us to the
20 102 and 103 inquiries that are at the heart of what the
21 patent laws shyshy and 112 that are at the heart of what the
22 patent laws ought to be dealing with
23 If there are no further questions Your
24 Honor thank you
25 CHIEF JUSTICE ROBERTS Thank you counsel
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1 The case is submitted
2 (Whereupon at 1105 am the case in the
3 aboveshyentitled matter was submitted)
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
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58
A add 714 1023 algorithm 3320 41 automatically
As 525 3621 387 algorithms apply 72425 111
am 115 32 416 3013 3310 2019 281213 automobile 389
572 added 302 Alice 13 34 2822 3814 available 99
abacus 61213 4923 363 3717 4217 avenues 4124
710 1018 additional 5017 3822 4117 applying 4213 avoids 524
1325 3614 3617
address 4121 4317 4511
Alices 271 2919 3678
approach 226 395 4513 B
ability 1514 addressed 435 allow 94 472 B 121 29 4413
able 1511 167 addressing 181 allows 97 242 appropriate 5122
1919 516 adds 4623 amazing 2514 81516 1514 back 1621
aboveshyentitled adhere 437 amici 3825 453 4913 1922 2512
113 573 adjudication amicus 123 5224 3018 322
absolutely 125 241 210 4414 Archimedes 3991222
1215 159 adjusting 3611 analysis 424 281122 3811 4025
5518 41610 364 406 area 219 5112 ball 526
abstract 4267 adjustment 417 4924 argue 2518 Bank 17 35
48 6682023 418 analyze 1416 arguing 563 banks 95
721 8218 administered 1716 argument 114 bars 43
141920 1522 454 announce 4525 225812 33 baseball 527
165 181618 administration answer 119 37 41 144 based 423 406
2220 24925 4316 2219 247 18323 226 baseline 522
2621 277 administrative 3919 4221 26715 4413 basic 413 5515
2938 3422 171218 187 456 461416 457 5317 basically 1821
3523 395 242 4123 4721 551315 5515 2319
405 414 424 adopt 203 answering 5119 arguments basics 5610
4418 461823 adopted 31317 answers 3713 1415 basis 132 1512
491221 505 advancement 461821 arms 1625 1516 2719
53368811 351 anyway 1810 arrangements 5411
552 564 advances 3513 apparatus 2916 131 beating 435
accept 102 adversary 547 APPEARAN arrows 315 beginning 163
accomplish advice 1715 116 art 1919 5414
5510 advocated 4916 appears 820 arts 2124 5310 begins 3810
account 55 618 affect 4225 appendix 1910 aside 1422 157 behalf 11719
397 affirmative 402 311 326 369 asked 2314 122 24710
accounts 823 agent 52 3021 548 278 5322 214 38 2616
9356 3611 ago 318 2224 applicant 3220 551224 4414 5318
3611 3615 5111 3921 4023 asking 193 believe 1316
accurately 2413 agree 920 2021 416 4314 221213 273 1416 2421
acknowledges 221 2418 application 3324 5215 255 264 451
1121 4021 421 2623 4117 aspect 517 5424
act 99 2017 agrees 2812 4918 asserted 3113 belong 529
activities 229 ahead 4225 applications 311618 benchmark 522
activity 2122 AIA 2912 4122 333 asserting 325 Benson 361923
3325 4812 airline 5220 applied 434 attaching 124 best 161124
actual 4020 AL 18 523 attention 3813 better 1610 albeit 923 applies 31418 Attorney 2021 216 2819
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59
3322 brightshyline 409 2313 37 71 4338 5519 beyond 115 4012 5317 checks 618 5614
1312 4623 bring 5115 case 3412 46 Chief 339 clearly 211 251 544 5610 broad 248 116 1524 261217 3024 523
Bilski 313 46 broader 225 2022 213 31812 378 client 311416 415 1722 browsing 228 2211 2313 371416 386 close 2822 2224 2329 builder 2811 2625 311424 421414 4410 CLS 17 35 262020 271 building 5218 3314 36620 441116 5110 1120 2816 2999 built 2324 426816 5118 531419 coarse 247 3935 4125 business 168 451822 461 5625 5520 427 4322 1749 203 461422 5024 chits 611 code 1213 142 447 452 2124 222122 5124 5410 chronological 1916171720 461821 4825 2311 29613 564 5712 1512 2725 4018 49481922 32132323 cases 244 2816 chronologically coffee 1211 5047 3322525 4011 423 colleagues 116
Bilskis 447 34415 3610 catalogues 2512 circuit 2818 college 58 bit 323 48214 4969 262 401112 425 columns 325 blocks 54 508111620 categorically 42912 4324 come 108 234 Bloomberg 517 5419 202 4825 3017 399
2115 225 554568 category 489 circumstances 475 boat 2811 businessshymeth 5125 318 1515 comes 1318 bonds 4717 457 CBM 2913 claim 416 2418 2018 231 bothering 118 buy 183 cellphones 228 2423 2522 coming 923 bound 1521 buys 3924 central 95 543 264 27917 common 31120 boundary 4913 certain 1216 3019 3121 2157 bounds 1521 C certainly 518 32420 361 company 4224 box 392425 C 21 31 263 358 392325 403 competition
4024 cables 3012 4121 495 442223 4922 161011 Breyer 66823 calculator 3519 certainty 5112 516 53823 completely 921
74691923 call 3812 5011 5116 5417 1422 2320 85810 1012 called 721 275 cetera 387 claimed 41014 complex 126 1021 1523 3316 5322 281 3017 complicated 161418 171 calling 4611 Chakrabarty 34162123 1225 235 1922 2114 capabilities 2016 3721242425 3025 315 221216 239 3723 challenge 443 382 4925 component 2315 285 capable 141 change 186 5120 352024 293 3613 454 273 311 415 claims 1416 compression 38520 478 capture 2415 5524 171616 2419 309 3212 4722 4814 captures 2412 changes 3817 2424 2515 3320 349 48182224 card 5017 5521 2520 2648 computer 422
brief 211315 carefully 1725 chart 541 283 3118 516 621 710 2255 322 caricature 718 charted 2620 37517 398 71325 9113 4215 4715 72020 1417 charts 1911 406 5415 91824 1035 4810 5113 1716 549 clarity 4755 10725 1116 548 carry 4420 Charybdis 511116 124102024
briefs 1524 4923 1620 2619 class 59 13911 1479 1618 CARTER 117 checkbook 617 clear 1015 118 1421 15710
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1517 165 confess 1111 coterminous 4121 5324 181719 196 configured 383 2321 customer 518 describes 425 19814 206 confined 5224 cotton 914 444 5617 2918 3211 2025 211016 confirmed 2912 4711 487 cut 5414 3913 2117 2410 confusion 434 counsel 4411 description
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1 Thats the test that we believe is most faithful to this
2 Courts precedents in Bilski and Mayo It keeps patents
3 within their traditional and appropriate domain and it
4 is capable of being administered consistently by Courts
5 and by PTO examiners
6 JUSTICE GINSBURG How do you answer the
7 argument that your view would extinguish businessshymethod
8 patents and make all software ineligible for patent
9 protection
10 GENERAL VERRILLI Yeah with shyshy let me
11 address software patents first because that I think is
12 obviously a significant question And its just not
13 correct to say that our approach would make software
14 patenting ineligible Any software patent that improves
15 the functioning of the computer technology is eligible
16 Any software patent that improves shyshy that is used to
17 improve another technology is eligible For example
18 the patent in the shyshy in the Diehr case is one in
19 which shyshy
20 JUSTICE SOTOMAYOR Why do we need to reach
21 this in that shyshy reach software patents at all in this
22 case
23 GENERAL VERRILLI Well shyshy
24 JUSTICE SOTOMAYOR Whats the necessity for
25 us to announce a general rule with respect to software
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1 There is no software being patented in this case
2 GENERAL VERRILLI Well I shyshy
3 JUSTICE SOTOMAYOR Theres a systems
4 GENERAL VERRILLI Well I shyshy I think shyshy
5 well they shyshy they shyshy theres a process being and shyshy and
6 one can think of software patents as process patents
7 And I think thats why my friends on the other side are
8 saying the sky is falling because they shyshy they are
9 interpreting what were saying about that when a
10 computer makes shyshy when a computers involvement makes
11 something eligible under 101 its calling those into
12 question and it doesnt
13 JUSTICE SOTOMAYOR Do you think we have to
14 reach the patentability of software to answer this case
15 GENERAL VERRILLI Well I think you can shyshy
16 I think the answer to that question is no not
17 necessarily You can decide it by saying that shyshy that
18 Bilski answers the question whether this is an abstract
19 idea because this form of hedging is really no
20 different than the form of hedging as a conceptual
21 matter at issue in Bilski And then Mayo answers the
22 question of whether the use of a computer in this case
23 adds enough to the abstract idea beyond conventional
24 steps because here all we have after all is just
25 conventional use of computing technology no computer
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1 innovation such that you dont qualify under 101 You
2 could take that approach
3 But it is important to the United States
4 that we shyshy and to our patent examiners that we get some
5 clarity if we can I think the clarity could come from
6 the text that I propose which I want to reiterate shyshy
7 JUSTICE SOTOMAYOR Well shyshy
8 JUSTICE BREYER Could shyshy could shyshy could you
9 go on with that because you were just getting to the
10 point where I think you say a computer improvement that
11 in fact leads to an improvement in harvesting cotton is
12 an improvement through a computer of technology so it
13 qualifies
14 But then I think you were going to say or I
15 got this also from the brief a computer improvement
16 that leads to an improvement in the methods of selling
17 bonds over the telephone is not an improvement in
18 technology reached by the computer Am I right about
19 the distinction youre making
20 GENERAL VERRILLI I dont think theres a
21 yes or no answer to that question
22 JUSTICE BREYER What is your view Yeah
23 what is shyshy how do we deal with just that problem
24 GENERAL VERRILLI If there is a genuine
25 innovation in the functioning of the computer shyshy
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1 JUSTICE BREYER Yes
2 GENERAL VERRILLI shyshy such that business
3 processes shyshy
4 JUSTICE BREYER Weve got that Yes yes
5 We got the computer But then it doesnt improve the
6 computer but rather it improves through the computer
7 the harvesting of cotton
8 Now youve got it in what you said was your
9 second category which is an improvement through the
10 computer of a technology And I thought in your brief
11 you were distinguishing an improvement through the
12 computer of a human activity that is not a technology
13 and in particular to pick an example of that
14 something in finance or something in business
15 Now am I right about the distinction youre
16 making
17 GENERAL VERRILLI Yeah that shyshy
18 JUSTICE BREYER If Im not right what is
19 the distinction
20 GENERAL VERRILLI That is generally the
21 line were drawing Frankly shyshy
22 JUSTICE BREYER And how is that justified
23 GENERAL VERRILLI I do want shyshy
24 JUSTICE BREYER That shyshy that is Judge Dyk
25 in shyshy in Bilski in the Federal circuit 4 people sort of
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1 picked it up maybe 5 didnt pick it up Would you say
2 a few words about it
3 GENERAL VERRILLI Sure About shyshy let me go
4 to Bilski there in that I do think while shyshy while
5 certainly the Court held that the term process got a
6 natural construction which could include business
7 methods it seems to me that thats not all the Court
8 said in Bilski The Court also said that it was
9 historically and traditionally quite rare that business
10 methods were patent eligible
11 It also said that shyshy that the shyshy that courts
12 and the PTO examiners should use the abstract ideas
13 exception to 101 to police the appropriate boundary
14 It also said that the
15 machineshyorshytransformation test that the United States
16 advocated remained a useful tool And of course that
17 directs to you seeing whether there is a technology
18 application
19 And of course the holding in Bilski was
20 that the shyshy the method for hedging risk was ineligible
21 because it was an abstract idea and I cant imagine
22 that if in Bilski the shyshy the claim had been exactly the
23 same but had added use a computer to carry out some of
24 these standard random analysis functions that are
25 claimed by the patent that you would have found it to
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1 be patent eligible
2 And I shyshy I would submit for the Court that
3 the key point here I think is that now given where
4 the Court shyshy what the Court has held in Bilski given
5 what its held in Mayo the abstract ideas exception is
6 really the only tool left to deal with what I shyshy what I
7 think I fairly read Bilski as saying is a significant
8 problem the proliferation of patents of business
9 methods
10 JUSTICE KENNEDY Is there an example that
11 you can give us of a shyshy what we can call a business
12 process that is patentable a process that doesnt
13 involve improving the workings of a computer
14 GENERAL VERRILLI I shyshy I think its going
15 to be difficult for me to do that I think for
16 example if you had a business method a process for
17 additional security pointshyofshysale credit card
18 transactions using particular encryption technology
19 that might well be patent eligible Its a technology
20 that it makes conduct of business more efficient or
21 effective
22 But there is a technological link here and
23 we do think thats critical to our shyshy to our point of
24 view with respect to the case And I shyshy and I do think
25 remember that when we say something is not patent
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1 eligible were not saying they cant do it Were
2 saying they cant monopolize it
3 And the concern in a situation like this one
4 is that if this is patent eligible its hard to see
5 why for example the first person who came up with a
6 frequent flier program wouldnt have been able to claim
7 a patent there because after all thats a business
8 method for improving customer loyalty implemented on a
9 computer
10 CHIEF JUSTICE ROBERTS General I shyshy you
11 mentioned a while ago the need for greater clarity and
12 certainty in this area And Im just wondering in your
13 brief youve got a nonshyexhaustive of factors to
14 consider and there are 6 different ones And Im just
15 doubtful that thats going to bring about greater
16 clarity and certainty
17 GENERAL VERRILLI I take shyshy I take the
18 point Mr Chief Justice but I think the key is that
19 they are all directed to answering the question of
20 whether the innovation that is claimed and is an
21 innovation in either A the improvement of a computers
22 functioning or B the use of computer technology to
23 improve the functioning of another technological
24 process and a case like Diehr would be in the latter
25 category
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1 And so I do think that thats the key
2 benchmark Thats the baseline Thats the test that
3 we do think can be applied clearly and consistently by
4 the courts or the PTO And it avoids the risk of things
5 like frequent flier programs or the Oakland As money
6 ball methods for evaluating the contributions in
7 individual baseball players make or any one of a host of
8 other things that our intuitions tell us just dont
9 belong in the patent system
10 Thats the shyshy drawing that line keeps them
11 out not drawing that line lets them in And with all
12 due respect I dont think that the novelty and
13 nonobviousness filters that 102 and 103 really deal with
14 that problem effectively because when you get to
15 nonobviousness in 103 for example youll be asking a
16 different question
17 If you take the frequent flier program you
18 would say well is this innovation in building consumer
19 loyalty something that would have been obvious to
20 somebody who runs an airline Its totally divorced
21 from the question of technology at that point and
22 therefore I dont think youre going to get the screen
23 that you need to get in order for the patent system to
24 be confined to its traditional and appropriate scope
25 If there are no further questions thank
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1 you
2 JUSTICE GINSBURG I have a question about
3 how do you identify an abstract concept The shyshy a
4 natural phenomenon a mathematical formula those are
5 easy to identify but there has been some confusion on
6 what qualifies as an abstract concept
7 GENERAL VERRILLI We would define
8 abstract shyshy an abstract concept as a claim that is not
9 directed to a concrete innovation in technology
10 science or the industrial arts So its the shyshy its
11 abstract in the sense that it is not a concrete
12 innovation in the traditional realm of patent law
13 Thank you
14 CHIEF JUSTICE ROBERTS Thank you General
15 Mr Phillips you have four minutes
16 remaining
17 REBUTTAL ARGUMENT OF CARTER G PHILLIPS
18 ON BEHALF OF THE PETITIONERS
19 MR PHILLIPS Thank you Mr Chief Justice
20 Id just like to make a few points
21 First of all with respect to the question
22 you asked which is looking at 159 et cetera all I can
23 tell you is that if you look at claim 33 it talks about
24 matched orders the matched orders that are described in
25 286 and 287 and then makes specific reference to 159
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1 and that flow chart thats there And its all designed
2 as a package Its only one element of the shyshy of the
3 invention but it is a central element and its an easy
4 one to understand And it goes well beyond simply the
5 notion of hedge shyshy hedge against settlement risk and do
6 it by a computer
7 JUSTICE SOTOMAYOR Your adversary says that
8 his shyshy the appendix to his brief are the only patents at
9 issue that the flow charts are not at issue in this
10 case
11 MR PHILLIPS Theres no basis for that
12 statement Your Honor There shyshy remember this went off
13 on a very truncated litigation process So theres shyshy
14 you know we shyshy we got cut off at the beginning of it
15 Theres been no construction of the shyshy of the claims
16 and shyshy and obviously these are specifications that go
17 to how you interpret the claim
18 JUSTICE SOTOMAYOR If we were to say that
19 there are no business patents shyshy
20 MR PHILLIPS Yes
21 JUSTICE SOTOMAYOR shyshy would your patent
22 survive at all
23 MR PHILLIPS No I dont shyshy I dont
24 believe so I think theres no question And you
25 know General Verrilli could not have been any plainer
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1 in his statement of how he wants to interpret the
2 abstract idea concept
3 JUSTICE SOTOMAYOR Yes he wants to say no
4 business patents
5 MR PHILLIPS No business shyshy just another
6 way of saying no business methods And you know the
7 Court rejected that And it seems to me extraordinary
8 to say Congress didnt reject no business methods in
9 101 but were going to do shyshy were going to manipulate
10 the judicial exception to accomplish precisely that same
11 thing It seems to me thats wholly inappropriate
12 Justice Ginsburg you asked my shyshy my friend
13 here you know whats his test He didnt answer that
14 question youll notice because he doesnt have an
15 answer His basic argument is whatever you do just
16 kill this patent
17 And if I were in his shoes I suppose Id
18 take that same position I think whats absolutely
19 clear is that the test ought to be one that is
20 structured as a very coarse filter not the kind of
21 filter that hes pushing for where it changes over time
22 I mean I thought his shyshy I thought his response to one
23 of the questions about eshymail and word processing that
24 Justice Sotomayor asked is over time it would change
25 Well thats exactly what 102 and 103 are for That is
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1 not the purpose of shyshy of Section 101
2 And then he uses the example of encryption
3 I guarantee you if we were arguing about encryption in
4 this case he would say to me that thats an abstract
5 principle because encryption is a concept thats been
6 around since time immemorial George Washington used
7 it Everybody has used encryption
8 And a question again thats not the
9 solution to these problems The question is how did we
10 go about doing it And we go beyond the basics of
11 simply saying use a computer and thats what we ask
12 this Court to focus on and to evaluate
13 As to the frequent flier program its
14 pretty clear to me that even though it was a novel idea
15 in some sense the concept itself would have been viewed
16 in shyshy in the KSR fashion as quite obvious as a means of
17 improving customer loyalty
18 There are solutions here Giving us 101
19 pass doesnt create a monopoly It just gets us to the
20 102 and 103 inquiries that are at the heart of what the
21 patent laws shyshy and 112 that are at the heart of what the
22 patent laws ought to be dealing with
23 If there are no further questions Your
24 Honor thank you
25 CHIEF JUSTICE ROBERTS Thank you counsel
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1 The case is submitted
2 (Whereupon at 1105 am the case in the
3 aboveshyentitled matter was submitted)
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
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58
A add 714 1023 algorithm 3320 41 automatically
As 525 3621 387 algorithms apply 72425 111
am 115 32 416 3013 3310 2019 281213 automobile 389
572 added 302 Alice 13 34 2822 3814 available 99
abacus 61213 4923 363 3717 4217 avenues 4124
710 1018 additional 5017 3822 4117 applying 4213 avoids 524
1325 3614 3617
address 4121 4317 4511
Alices 271 2919 3678
approach 226 395 4513 B
ability 1514 addressed 435 allow 94 472 B 121 29 4413
able 1511 167 addressing 181 allows 97 242 appropriate 5122
1919 516 adds 4623 amazing 2514 81516 1514 back 1621
aboveshyentitled adhere 437 amici 3825 453 4913 1922 2512
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absolutely 125 241 210 4414 Archimedes 3991222
1215 159 adjusting 3611 analysis 424 281122 3811 4025
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abstract 4267 adjustment 417 4924 argue 2518 Bank 17 35
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721 8218 administered 1716 argument 114 bars 43
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account 55 618 affect 4225 appendix 1910 aside 1422 157 behalf 11719
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actual 4020 AL 18 523 attention 3813 better 1610 albeit 923 applies 31418 Attorney 2021 216 2819
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3322 brightshyline 409 2313 37 71 4338 5519 beyond 115 4012 5317 checks 618 5614
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Bilski 313 46 broader 225 2022 213 31812 378 client 311416 415 1722 browsing 228 2211 2313 371416 386 close 2822 2224 2329 builder 2811 2625 311424 421414 4410 CLS 17 35 262020 271 building 5218 3314 36620 441116 5110 1120 2816 2999 built 2324 426816 5118 531419 coarse 247 3935 4125 business 168 451822 461 5625 5520 427 4322 1749 203 461422 5024 chits 611 code 1213 142 447 452 2124 222122 5124 5410 chronological 1916171720 461821 4825 2311 29613 564 5712 1512 2725 4018 49481922 32132323 cases 244 2816 chronologically coffee 1211 5047 3322525 4011 423 colleagues 116
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briefs 1524 4923 1620 2619 class 59 13911 1479 1618 CARTER 117 checkbook 617 clear 1015 118 1421 15710
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1517 165 confess 1111 coterminous 4121 5324 181719 196 configured 383 2321 customer 518 describes 425 19814 206 confined 5224 cotton 914 444 5617 2918 3211 2025 211016 confirmed 2912 4711 487 cut 5414 3913 2117 2410 confusion 434 counsel 4411 description
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disclosure 328 413 302021 4220 figure 1146 discuss 164 economy 1516 ESQ 1171921 excerpted 323 311222 3917 discussion 299 effective 1223 236913 exhausted 1813 file 406 dispose 2625 5021 essence 211 exist 420 131 filed 4214 dispute 325 effectively 5214 essential 1224 existence 1119 fill 2818 disputed 3120 efficacy 1224 3425 175 filled 293
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1 There is no software being patented in this case
2 GENERAL VERRILLI Well I shyshy
3 JUSTICE SOTOMAYOR Theres a systems
4 GENERAL VERRILLI Well I shyshy I think shyshy
5 well they shyshy they shyshy theres a process being and shyshy and
6 one can think of software patents as process patents
7 And I think thats why my friends on the other side are
8 saying the sky is falling because they shyshy they are
9 interpreting what were saying about that when a
10 computer makes shyshy when a computers involvement makes
11 something eligible under 101 its calling those into
12 question and it doesnt
13 JUSTICE SOTOMAYOR Do you think we have to
14 reach the patentability of software to answer this case
15 GENERAL VERRILLI Well I think you can shyshy
16 I think the answer to that question is no not
17 necessarily You can decide it by saying that shyshy that
18 Bilski answers the question whether this is an abstract
19 idea because this form of hedging is really no
20 different than the form of hedging as a conceptual
21 matter at issue in Bilski And then Mayo answers the
22 question of whether the use of a computer in this case
23 adds enough to the abstract idea beyond conventional
24 steps because here all we have after all is just
25 conventional use of computing technology no computer
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1 innovation such that you dont qualify under 101 You
2 could take that approach
3 But it is important to the United States
4 that we shyshy and to our patent examiners that we get some
5 clarity if we can I think the clarity could come from
6 the text that I propose which I want to reiterate shyshy
7 JUSTICE SOTOMAYOR Well shyshy
8 JUSTICE BREYER Could shyshy could shyshy could you
9 go on with that because you were just getting to the
10 point where I think you say a computer improvement that
11 in fact leads to an improvement in harvesting cotton is
12 an improvement through a computer of technology so it
13 qualifies
14 But then I think you were going to say or I
15 got this also from the brief a computer improvement
16 that leads to an improvement in the methods of selling
17 bonds over the telephone is not an improvement in
18 technology reached by the computer Am I right about
19 the distinction youre making
20 GENERAL VERRILLI I dont think theres a
21 yes or no answer to that question
22 JUSTICE BREYER What is your view Yeah
23 what is shyshy how do we deal with just that problem
24 GENERAL VERRILLI If there is a genuine
25 innovation in the functioning of the computer shyshy
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1 JUSTICE BREYER Yes
2 GENERAL VERRILLI shyshy such that business
3 processes shyshy
4 JUSTICE BREYER Weve got that Yes yes
5 We got the computer But then it doesnt improve the
6 computer but rather it improves through the computer
7 the harvesting of cotton
8 Now youve got it in what you said was your
9 second category which is an improvement through the
10 computer of a technology And I thought in your brief
11 you were distinguishing an improvement through the
12 computer of a human activity that is not a technology
13 and in particular to pick an example of that
14 something in finance or something in business
15 Now am I right about the distinction youre
16 making
17 GENERAL VERRILLI Yeah that shyshy
18 JUSTICE BREYER If Im not right what is
19 the distinction
20 GENERAL VERRILLI That is generally the
21 line were drawing Frankly shyshy
22 JUSTICE BREYER And how is that justified
23 GENERAL VERRILLI I do want shyshy
24 JUSTICE BREYER That shyshy that is Judge Dyk
25 in shyshy in Bilski in the Federal circuit 4 people sort of
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1 picked it up maybe 5 didnt pick it up Would you say
2 a few words about it
3 GENERAL VERRILLI Sure About shyshy let me go
4 to Bilski there in that I do think while shyshy while
5 certainly the Court held that the term process got a
6 natural construction which could include business
7 methods it seems to me that thats not all the Court
8 said in Bilski The Court also said that it was
9 historically and traditionally quite rare that business
10 methods were patent eligible
11 It also said that shyshy that the shyshy that courts
12 and the PTO examiners should use the abstract ideas
13 exception to 101 to police the appropriate boundary
14 It also said that the
15 machineshyorshytransformation test that the United States
16 advocated remained a useful tool And of course that
17 directs to you seeing whether there is a technology
18 application
19 And of course the holding in Bilski was
20 that the shyshy the method for hedging risk was ineligible
21 because it was an abstract idea and I cant imagine
22 that if in Bilski the shyshy the claim had been exactly the
23 same but had added use a computer to carry out some of
24 these standard random analysis functions that are
25 claimed by the patent that you would have found it to
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1 be patent eligible
2 And I shyshy I would submit for the Court that
3 the key point here I think is that now given where
4 the Court shyshy what the Court has held in Bilski given
5 what its held in Mayo the abstract ideas exception is
6 really the only tool left to deal with what I shyshy what I
7 think I fairly read Bilski as saying is a significant
8 problem the proliferation of patents of business
9 methods
10 JUSTICE KENNEDY Is there an example that
11 you can give us of a shyshy what we can call a business
12 process that is patentable a process that doesnt
13 involve improving the workings of a computer
14 GENERAL VERRILLI I shyshy I think its going
15 to be difficult for me to do that I think for
16 example if you had a business method a process for
17 additional security pointshyofshysale credit card
18 transactions using particular encryption technology
19 that might well be patent eligible Its a technology
20 that it makes conduct of business more efficient or
21 effective
22 But there is a technological link here and
23 we do think thats critical to our shyshy to our point of
24 view with respect to the case And I shyshy and I do think
25 remember that when we say something is not patent
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1 eligible were not saying they cant do it Were
2 saying they cant monopolize it
3 And the concern in a situation like this one
4 is that if this is patent eligible its hard to see
5 why for example the first person who came up with a
6 frequent flier program wouldnt have been able to claim
7 a patent there because after all thats a business
8 method for improving customer loyalty implemented on a
9 computer
10 CHIEF JUSTICE ROBERTS General I shyshy you
11 mentioned a while ago the need for greater clarity and
12 certainty in this area And Im just wondering in your
13 brief youve got a nonshyexhaustive of factors to
14 consider and there are 6 different ones And Im just
15 doubtful that thats going to bring about greater
16 clarity and certainty
17 GENERAL VERRILLI I take shyshy I take the
18 point Mr Chief Justice but I think the key is that
19 they are all directed to answering the question of
20 whether the innovation that is claimed and is an
21 innovation in either A the improvement of a computers
22 functioning or B the use of computer technology to
23 improve the functioning of another technological
24 process and a case like Diehr would be in the latter
25 category
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1 And so I do think that thats the key
2 benchmark Thats the baseline Thats the test that
3 we do think can be applied clearly and consistently by
4 the courts or the PTO And it avoids the risk of things
5 like frequent flier programs or the Oakland As money
6 ball methods for evaluating the contributions in
7 individual baseball players make or any one of a host of
8 other things that our intuitions tell us just dont
9 belong in the patent system
10 Thats the shyshy drawing that line keeps them
11 out not drawing that line lets them in And with all
12 due respect I dont think that the novelty and
13 nonobviousness filters that 102 and 103 really deal with
14 that problem effectively because when you get to
15 nonobviousness in 103 for example youll be asking a
16 different question
17 If you take the frequent flier program you
18 would say well is this innovation in building consumer
19 loyalty something that would have been obvious to
20 somebody who runs an airline Its totally divorced
21 from the question of technology at that point and
22 therefore I dont think youre going to get the screen
23 that you need to get in order for the patent system to
24 be confined to its traditional and appropriate scope
25 If there are no further questions thank
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1 you
2 JUSTICE GINSBURG I have a question about
3 how do you identify an abstract concept The shyshy a
4 natural phenomenon a mathematical formula those are
5 easy to identify but there has been some confusion on
6 what qualifies as an abstract concept
7 GENERAL VERRILLI We would define
8 abstract shyshy an abstract concept as a claim that is not
9 directed to a concrete innovation in technology
10 science or the industrial arts So its the shyshy its
11 abstract in the sense that it is not a concrete
12 innovation in the traditional realm of patent law
13 Thank you
14 CHIEF JUSTICE ROBERTS Thank you General
15 Mr Phillips you have four minutes
16 remaining
17 REBUTTAL ARGUMENT OF CARTER G PHILLIPS
18 ON BEHALF OF THE PETITIONERS
19 MR PHILLIPS Thank you Mr Chief Justice
20 Id just like to make a few points
21 First of all with respect to the question
22 you asked which is looking at 159 et cetera all I can
23 tell you is that if you look at claim 33 it talks about
24 matched orders the matched orders that are described in
25 286 and 287 and then makes specific reference to 159
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1 and that flow chart thats there And its all designed
2 as a package Its only one element of the shyshy of the
3 invention but it is a central element and its an easy
4 one to understand And it goes well beyond simply the
5 notion of hedge shyshy hedge against settlement risk and do
6 it by a computer
7 JUSTICE SOTOMAYOR Your adversary says that
8 his shyshy the appendix to his brief are the only patents at
9 issue that the flow charts are not at issue in this
10 case
11 MR PHILLIPS Theres no basis for that
12 statement Your Honor There shyshy remember this went off
13 on a very truncated litigation process So theres shyshy
14 you know we shyshy we got cut off at the beginning of it
15 Theres been no construction of the shyshy of the claims
16 and shyshy and obviously these are specifications that go
17 to how you interpret the claim
18 JUSTICE SOTOMAYOR If we were to say that
19 there are no business patents shyshy
20 MR PHILLIPS Yes
21 JUSTICE SOTOMAYOR shyshy would your patent
22 survive at all
23 MR PHILLIPS No I dont shyshy I dont
24 believe so I think theres no question And you
25 know General Verrilli could not have been any plainer
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1 in his statement of how he wants to interpret the
2 abstract idea concept
3 JUSTICE SOTOMAYOR Yes he wants to say no
4 business patents
5 MR PHILLIPS No business shyshy just another
6 way of saying no business methods And you know the
7 Court rejected that And it seems to me extraordinary
8 to say Congress didnt reject no business methods in
9 101 but were going to do shyshy were going to manipulate
10 the judicial exception to accomplish precisely that same
11 thing It seems to me thats wholly inappropriate
12 Justice Ginsburg you asked my shyshy my friend
13 here you know whats his test He didnt answer that
14 question youll notice because he doesnt have an
15 answer His basic argument is whatever you do just
16 kill this patent
17 And if I were in his shoes I suppose Id
18 take that same position I think whats absolutely
19 clear is that the test ought to be one that is
20 structured as a very coarse filter not the kind of
21 filter that hes pushing for where it changes over time
22 I mean I thought his shyshy I thought his response to one
23 of the questions about eshymail and word processing that
24 Justice Sotomayor asked is over time it would change
25 Well thats exactly what 102 and 103 are for That is
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1 not the purpose of shyshy of Section 101
2 And then he uses the example of encryption
3 I guarantee you if we were arguing about encryption in
4 this case he would say to me that thats an abstract
5 principle because encryption is a concept thats been
6 around since time immemorial George Washington used
7 it Everybody has used encryption
8 And a question again thats not the
9 solution to these problems The question is how did we
10 go about doing it And we go beyond the basics of
11 simply saying use a computer and thats what we ask
12 this Court to focus on and to evaluate
13 As to the frequent flier program its
14 pretty clear to me that even though it was a novel idea
15 in some sense the concept itself would have been viewed
16 in shyshy in the KSR fashion as quite obvious as a means of
17 improving customer loyalty
18 There are solutions here Giving us 101
19 pass doesnt create a monopoly It just gets us to the
20 102 and 103 inquiries that are at the heart of what the
21 patent laws shyshy and 112 that are at the heart of what the
22 patent laws ought to be dealing with
23 If there are no further questions Your
24 Honor thank you
25 CHIEF JUSTICE ROBERTS Thank you counsel
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1 The case is submitted
2 (Whereupon at 1105 am the case in the
3 aboveshyentitled matter was submitted)
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
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58
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actual 4020 AL 18 523 attention 3813 better 1610 albeit 923 applies 31418 Attorney 2021 216 2819
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1 innovation such that you dont qualify under 101 You
2 could take that approach
3 But it is important to the United States
4 that we shyshy and to our patent examiners that we get some
5 clarity if we can I think the clarity could come from
6 the text that I propose which I want to reiterate shyshy
7 JUSTICE SOTOMAYOR Well shyshy
8 JUSTICE BREYER Could shyshy could shyshy could you
9 go on with that because you were just getting to the
10 point where I think you say a computer improvement that
11 in fact leads to an improvement in harvesting cotton is
12 an improvement through a computer of technology so it
13 qualifies
14 But then I think you were going to say or I
15 got this also from the brief a computer improvement
16 that leads to an improvement in the methods of selling
17 bonds over the telephone is not an improvement in
18 technology reached by the computer Am I right about
19 the distinction youre making
20 GENERAL VERRILLI I dont think theres a
21 yes or no answer to that question
22 JUSTICE BREYER What is your view Yeah
23 what is shyshy how do we deal with just that problem
24 GENERAL VERRILLI If there is a genuine
25 innovation in the functioning of the computer shyshy
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1 JUSTICE BREYER Yes
2 GENERAL VERRILLI shyshy such that business
3 processes shyshy
4 JUSTICE BREYER Weve got that Yes yes
5 We got the computer But then it doesnt improve the
6 computer but rather it improves through the computer
7 the harvesting of cotton
8 Now youve got it in what you said was your
9 second category which is an improvement through the
10 computer of a technology And I thought in your brief
11 you were distinguishing an improvement through the
12 computer of a human activity that is not a technology
13 and in particular to pick an example of that
14 something in finance or something in business
15 Now am I right about the distinction youre
16 making
17 GENERAL VERRILLI Yeah that shyshy
18 JUSTICE BREYER If Im not right what is
19 the distinction
20 GENERAL VERRILLI That is generally the
21 line were drawing Frankly shyshy
22 JUSTICE BREYER And how is that justified
23 GENERAL VERRILLI I do want shyshy
24 JUSTICE BREYER That shyshy that is Judge Dyk
25 in shyshy in Bilski in the Federal circuit 4 people sort of
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1 picked it up maybe 5 didnt pick it up Would you say
2 a few words about it
3 GENERAL VERRILLI Sure About shyshy let me go
4 to Bilski there in that I do think while shyshy while
5 certainly the Court held that the term process got a
6 natural construction which could include business
7 methods it seems to me that thats not all the Court
8 said in Bilski The Court also said that it was
9 historically and traditionally quite rare that business
10 methods were patent eligible
11 It also said that shyshy that the shyshy that courts
12 and the PTO examiners should use the abstract ideas
13 exception to 101 to police the appropriate boundary
14 It also said that the
15 machineshyorshytransformation test that the United States
16 advocated remained a useful tool And of course that
17 directs to you seeing whether there is a technology
18 application
19 And of course the holding in Bilski was
20 that the shyshy the method for hedging risk was ineligible
21 because it was an abstract idea and I cant imagine
22 that if in Bilski the shyshy the claim had been exactly the
23 same but had added use a computer to carry out some of
24 these standard random analysis functions that are
25 claimed by the patent that you would have found it to
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1 be patent eligible
2 And I shyshy I would submit for the Court that
3 the key point here I think is that now given where
4 the Court shyshy what the Court has held in Bilski given
5 what its held in Mayo the abstract ideas exception is
6 really the only tool left to deal with what I shyshy what I
7 think I fairly read Bilski as saying is a significant
8 problem the proliferation of patents of business
9 methods
10 JUSTICE KENNEDY Is there an example that
11 you can give us of a shyshy what we can call a business
12 process that is patentable a process that doesnt
13 involve improving the workings of a computer
14 GENERAL VERRILLI I shyshy I think its going
15 to be difficult for me to do that I think for
16 example if you had a business method a process for
17 additional security pointshyofshysale credit card
18 transactions using particular encryption technology
19 that might well be patent eligible Its a technology
20 that it makes conduct of business more efficient or
21 effective
22 But there is a technological link here and
23 we do think thats critical to our shyshy to our point of
24 view with respect to the case And I shyshy and I do think
25 remember that when we say something is not patent
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1 eligible were not saying they cant do it Were
2 saying they cant monopolize it
3 And the concern in a situation like this one
4 is that if this is patent eligible its hard to see
5 why for example the first person who came up with a
6 frequent flier program wouldnt have been able to claim
7 a patent there because after all thats a business
8 method for improving customer loyalty implemented on a
9 computer
10 CHIEF JUSTICE ROBERTS General I shyshy you
11 mentioned a while ago the need for greater clarity and
12 certainty in this area And Im just wondering in your
13 brief youve got a nonshyexhaustive of factors to
14 consider and there are 6 different ones And Im just
15 doubtful that thats going to bring about greater
16 clarity and certainty
17 GENERAL VERRILLI I take shyshy I take the
18 point Mr Chief Justice but I think the key is that
19 they are all directed to answering the question of
20 whether the innovation that is claimed and is an
21 innovation in either A the improvement of a computers
22 functioning or B the use of computer technology to
23 improve the functioning of another technological
24 process and a case like Diehr would be in the latter
25 category
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1 And so I do think that thats the key
2 benchmark Thats the baseline Thats the test that
3 we do think can be applied clearly and consistently by
4 the courts or the PTO And it avoids the risk of things
5 like frequent flier programs or the Oakland As money
6 ball methods for evaluating the contributions in
7 individual baseball players make or any one of a host of
8 other things that our intuitions tell us just dont
9 belong in the patent system
10 Thats the shyshy drawing that line keeps them
11 out not drawing that line lets them in And with all
12 due respect I dont think that the novelty and
13 nonobviousness filters that 102 and 103 really deal with
14 that problem effectively because when you get to
15 nonobviousness in 103 for example youll be asking a
16 different question
17 If you take the frequent flier program you
18 would say well is this innovation in building consumer
19 loyalty something that would have been obvious to
20 somebody who runs an airline Its totally divorced
21 from the question of technology at that point and
22 therefore I dont think youre going to get the screen
23 that you need to get in order for the patent system to
24 be confined to its traditional and appropriate scope
25 If there are no further questions thank
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1 you
2 JUSTICE GINSBURG I have a question about
3 how do you identify an abstract concept The shyshy a
4 natural phenomenon a mathematical formula those are
5 easy to identify but there has been some confusion on
6 what qualifies as an abstract concept
7 GENERAL VERRILLI We would define
8 abstract shyshy an abstract concept as a claim that is not
9 directed to a concrete innovation in technology
10 science or the industrial arts So its the shyshy its
11 abstract in the sense that it is not a concrete
12 innovation in the traditional realm of patent law
13 Thank you
14 CHIEF JUSTICE ROBERTS Thank you General
15 Mr Phillips you have four minutes
16 remaining
17 REBUTTAL ARGUMENT OF CARTER G PHILLIPS
18 ON BEHALF OF THE PETITIONERS
19 MR PHILLIPS Thank you Mr Chief Justice
20 Id just like to make a few points
21 First of all with respect to the question
22 you asked which is looking at 159 et cetera all I can
23 tell you is that if you look at claim 33 it talks about
24 matched orders the matched orders that are described in
25 286 and 287 and then makes specific reference to 159
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1 and that flow chart thats there And its all designed
2 as a package Its only one element of the shyshy of the
3 invention but it is a central element and its an easy
4 one to understand And it goes well beyond simply the
5 notion of hedge shyshy hedge against settlement risk and do
6 it by a computer
7 JUSTICE SOTOMAYOR Your adversary says that
8 his shyshy the appendix to his brief are the only patents at
9 issue that the flow charts are not at issue in this
10 case
11 MR PHILLIPS Theres no basis for that
12 statement Your Honor There shyshy remember this went off
13 on a very truncated litigation process So theres shyshy
14 you know we shyshy we got cut off at the beginning of it
15 Theres been no construction of the shyshy of the claims
16 and shyshy and obviously these are specifications that go
17 to how you interpret the claim
18 JUSTICE SOTOMAYOR If we were to say that
19 there are no business patents shyshy
20 MR PHILLIPS Yes
21 JUSTICE SOTOMAYOR shyshy would your patent
22 survive at all
23 MR PHILLIPS No I dont shyshy I dont
24 believe so I think theres no question And you
25 know General Verrilli could not have been any plainer
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1 in his statement of how he wants to interpret the
2 abstract idea concept
3 JUSTICE SOTOMAYOR Yes he wants to say no
4 business patents
5 MR PHILLIPS No business shyshy just another
6 way of saying no business methods And you know the
7 Court rejected that And it seems to me extraordinary
8 to say Congress didnt reject no business methods in
9 101 but were going to do shyshy were going to manipulate
10 the judicial exception to accomplish precisely that same
11 thing It seems to me thats wholly inappropriate
12 Justice Ginsburg you asked my shyshy my friend
13 here you know whats his test He didnt answer that
14 question youll notice because he doesnt have an
15 answer His basic argument is whatever you do just
16 kill this patent
17 And if I were in his shoes I suppose Id
18 take that same position I think whats absolutely
19 clear is that the test ought to be one that is
20 structured as a very coarse filter not the kind of
21 filter that hes pushing for where it changes over time
22 I mean I thought his shyshy I thought his response to one
23 of the questions about eshymail and word processing that
24 Justice Sotomayor asked is over time it would change
25 Well thats exactly what 102 and 103 are for That is
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1 not the purpose of shyshy of Section 101
2 And then he uses the example of encryption
3 I guarantee you if we were arguing about encryption in
4 this case he would say to me that thats an abstract
5 principle because encryption is a concept thats been
6 around since time immemorial George Washington used
7 it Everybody has used encryption
8 And a question again thats not the
9 solution to these problems The question is how did we
10 go about doing it And we go beyond the basics of
11 simply saying use a computer and thats what we ask
12 this Court to focus on and to evaluate
13 As to the frequent flier program its
14 pretty clear to me that even though it was a novel idea
15 in some sense the concept itself would have been viewed
16 in shyshy in the KSR fashion as quite obvious as a means of
17 improving customer loyalty
18 There are solutions here Giving us 101
19 pass doesnt create a monopoly It just gets us to the
20 102 and 103 inquiries that are at the heart of what the
21 patent laws shyshy and 112 that are at the heart of what the
22 patent laws ought to be dealing with
23 If there are no further questions Your
24 Honor thank you
25 CHIEF JUSTICE ROBERTS Thank you counsel
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1 The case is submitted
2 (Whereupon at 1105 am the case in the
3 aboveshyentitled matter was submitted)
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
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58
A add 714 1023 algorithm 3320 41 automatically
As 525 3621 387 algorithms apply 72425 111
am 115 32 416 3013 3310 2019 281213 automobile 389
572 added 302 Alice 13 34 2822 3814 available 99
abacus 61213 4923 363 3717 4217 avenues 4124
710 1018 additional 5017 3822 4117 applying 4213 avoids 524
1325 3614 3617
address 4121 4317 4511
Alices 271 2919 3678
approach 226 395 4513 B
ability 1514 addressed 435 allow 94 472 B 121 29 4413
able 1511 167 addressing 181 allows 97 242 appropriate 5122
1919 516 adds 4623 amazing 2514 81516 1514 back 1621
aboveshyentitled adhere 437 amici 3825 453 4913 1922 2512
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absolutely 125 241 210 4414 Archimedes 3991222
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abstract 4267 adjustment 417 4924 argue 2518 Bank 17 35
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actual 4020 AL 18 523 attention 3813 better 1610 albeit 923 applies 31418 Attorney 2021 216 2819
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3322 brightshyline 409 2313 37 71 4338 5519 beyond 115 4012 5317 checks 618 5614
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Bilski 313 46 broader 225 2022 213 31812 378 client 311416 415 1722 browsing 228 2211 2313 371416 386 close 2822 2224 2329 builder 2811 2625 311424 421414 4410 CLS 17 35 262020 271 building 5218 3314 36620 441116 5110 1120 2816 2999 built 2324 426816 5118 531419 coarse 247 3935 4125 business 168 451822 461 5625 5520 427 4322 1749 203 461422 5024 chits 611 code 1213 142 447 452 2124 222122 5124 5410 chronological 1916171720 461821 4825 2311 29613 564 5712 1512 2725 4018 49481922 32132323 cases 244 2816 chronologically coffee 1211 5047 3322525 4011 423 colleagues 116
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briefs 1524 4923 1620 2619 class 59 13911 1479 1618 CARTER 117 checkbook 617 clear 1015 118 1421 15710
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1517 165 confess 1111 coterminous 4121 5324 181719 196 configured 383 2321 customer 518 describes 425 19814 206 confined 5224 cotton 914 444 5617 2918 3211 2025 211016 confirmed 2912 4711 487 cut 5414 3913 2117 2410 confusion 434 counsel 4411 description
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disclosure 328 413 302021 4220 figure 1146 discuss 164 economy 1516 ESQ 1171921 excerpted 323 311222 3917 discussion 299 effective 1223 236913 exhausted 1813 file 406 dispose 2625 5021 essence 211 exist 420 131 filed 4214 dispute 325 effectively 5214 essential 1224 existence 1119 fill 2818 disputed 3120 efficacy 1224 3425 175 filled 293
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1 JUSTICE BREYER Yes
2 GENERAL VERRILLI shyshy such that business
3 processes shyshy
4 JUSTICE BREYER Weve got that Yes yes
5 We got the computer But then it doesnt improve the
6 computer but rather it improves through the computer
7 the harvesting of cotton
8 Now youve got it in what you said was your
9 second category which is an improvement through the
10 computer of a technology And I thought in your brief
11 you were distinguishing an improvement through the
12 computer of a human activity that is not a technology
13 and in particular to pick an example of that
14 something in finance or something in business
15 Now am I right about the distinction youre
16 making
17 GENERAL VERRILLI Yeah that shyshy
18 JUSTICE BREYER If Im not right what is
19 the distinction
20 GENERAL VERRILLI That is generally the
21 line were drawing Frankly shyshy
22 JUSTICE BREYER And how is that justified
23 GENERAL VERRILLI I do want shyshy
24 JUSTICE BREYER That shyshy that is Judge Dyk
25 in shyshy in Bilski in the Federal circuit 4 people sort of
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1 picked it up maybe 5 didnt pick it up Would you say
2 a few words about it
3 GENERAL VERRILLI Sure About shyshy let me go
4 to Bilski there in that I do think while shyshy while
5 certainly the Court held that the term process got a
6 natural construction which could include business
7 methods it seems to me that thats not all the Court
8 said in Bilski The Court also said that it was
9 historically and traditionally quite rare that business
10 methods were patent eligible
11 It also said that shyshy that the shyshy that courts
12 and the PTO examiners should use the abstract ideas
13 exception to 101 to police the appropriate boundary
14 It also said that the
15 machineshyorshytransformation test that the United States
16 advocated remained a useful tool And of course that
17 directs to you seeing whether there is a technology
18 application
19 And of course the holding in Bilski was
20 that the shyshy the method for hedging risk was ineligible
21 because it was an abstract idea and I cant imagine
22 that if in Bilski the shyshy the claim had been exactly the
23 same but had added use a computer to carry out some of
24 these standard random analysis functions that are
25 claimed by the patent that you would have found it to
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1 be patent eligible
2 And I shyshy I would submit for the Court that
3 the key point here I think is that now given where
4 the Court shyshy what the Court has held in Bilski given
5 what its held in Mayo the abstract ideas exception is
6 really the only tool left to deal with what I shyshy what I
7 think I fairly read Bilski as saying is a significant
8 problem the proliferation of patents of business
9 methods
10 JUSTICE KENNEDY Is there an example that
11 you can give us of a shyshy what we can call a business
12 process that is patentable a process that doesnt
13 involve improving the workings of a computer
14 GENERAL VERRILLI I shyshy I think its going
15 to be difficult for me to do that I think for
16 example if you had a business method a process for
17 additional security pointshyofshysale credit card
18 transactions using particular encryption technology
19 that might well be patent eligible Its a technology
20 that it makes conduct of business more efficient or
21 effective
22 But there is a technological link here and
23 we do think thats critical to our shyshy to our point of
24 view with respect to the case And I shyshy and I do think
25 remember that when we say something is not patent
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1 eligible were not saying they cant do it Were
2 saying they cant monopolize it
3 And the concern in a situation like this one
4 is that if this is patent eligible its hard to see
5 why for example the first person who came up with a
6 frequent flier program wouldnt have been able to claim
7 a patent there because after all thats a business
8 method for improving customer loyalty implemented on a
9 computer
10 CHIEF JUSTICE ROBERTS General I shyshy you
11 mentioned a while ago the need for greater clarity and
12 certainty in this area And Im just wondering in your
13 brief youve got a nonshyexhaustive of factors to
14 consider and there are 6 different ones And Im just
15 doubtful that thats going to bring about greater
16 clarity and certainty
17 GENERAL VERRILLI I take shyshy I take the
18 point Mr Chief Justice but I think the key is that
19 they are all directed to answering the question of
20 whether the innovation that is claimed and is an
21 innovation in either A the improvement of a computers
22 functioning or B the use of computer technology to
23 improve the functioning of another technological
24 process and a case like Diehr would be in the latter
25 category
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1 And so I do think that thats the key
2 benchmark Thats the baseline Thats the test that
3 we do think can be applied clearly and consistently by
4 the courts or the PTO And it avoids the risk of things
5 like frequent flier programs or the Oakland As money
6 ball methods for evaluating the contributions in
7 individual baseball players make or any one of a host of
8 other things that our intuitions tell us just dont
9 belong in the patent system
10 Thats the shyshy drawing that line keeps them
11 out not drawing that line lets them in And with all
12 due respect I dont think that the novelty and
13 nonobviousness filters that 102 and 103 really deal with
14 that problem effectively because when you get to
15 nonobviousness in 103 for example youll be asking a
16 different question
17 If you take the frequent flier program you
18 would say well is this innovation in building consumer
19 loyalty something that would have been obvious to
20 somebody who runs an airline Its totally divorced
21 from the question of technology at that point and
22 therefore I dont think youre going to get the screen
23 that you need to get in order for the patent system to
24 be confined to its traditional and appropriate scope
25 If there are no further questions thank
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1 you
2 JUSTICE GINSBURG I have a question about
3 how do you identify an abstract concept The shyshy a
4 natural phenomenon a mathematical formula those are
5 easy to identify but there has been some confusion on
6 what qualifies as an abstract concept
7 GENERAL VERRILLI We would define
8 abstract shyshy an abstract concept as a claim that is not
9 directed to a concrete innovation in technology
10 science or the industrial arts So its the shyshy its
11 abstract in the sense that it is not a concrete
12 innovation in the traditional realm of patent law
13 Thank you
14 CHIEF JUSTICE ROBERTS Thank you General
15 Mr Phillips you have four minutes
16 remaining
17 REBUTTAL ARGUMENT OF CARTER G PHILLIPS
18 ON BEHALF OF THE PETITIONERS
19 MR PHILLIPS Thank you Mr Chief Justice
20 Id just like to make a few points
21 First of all with respect to the question
22 you asked which is looking at 159 et cetera all I can
23 tell you is that if you look at claim 33 it talks about
24 matched orders the matched orders that are described in
25 286 and 287 and then makes specific reference to 159
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1 and that flow chart thats there And its all designed
2 as a package Its only one element of the shyshy of the
3 invention but it is a central element and its an easy
4 one to understand And it goes well beyond simply the
5 notion of hedge shyshy hedge against settlement risk and do
6 it by a computer
7 JUSTICE SOTOMAYOR Your adversary says that
8 his shyshy the appendix to his brief are the only patents at
9 issue that the flow charts are not at issue in this
10 case
11 MR PHILLIPS Theres no basis for that
12 statement Your Honor There shyshy remember this went off
13 on a very truncated litigation process So theres shyshy
14 you know we shyshy we got cut off at the beginning of it
15 Theres been no construction of the shyshy of the claims
16 and shyshy and obviously these are specifications that go
17 to how you interpret the claim
18 JUSTICE SOTOMAYOR If we were to say that
19 there are no business patents shyshy
20 MR PHILLIPS Yes
21 JUSTICE SOTOMAYOR shyshy would your patent
22 survive at all
23 MR PHILLIPS No I dont shyshy I dont
24 believe so I think theres no question And you
25 know General Verrilli could not have been any plainer
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1 in his statement of how he wants to interpret the
2 abstract idea concept
3 JUSTICE SOTOMAYOR Yes he wants to say no
4 business patents
5 MR PHILLIPS No business shyshy just another
6 way of saying no business methods And you know the
7 Court rejected that And it seems to me extraordinary
8 to say Congress didnt reject no business methods in
9 101 but were going to do shyshy were going to manipulate
10 the judicial exception to accomplish precisely that same
11 thing It seems to me thats wholly inappropriate
12 Justice Ginsburg you asked my shyshy my friend
13 here you know whats his test He didnt answer that
14 question youll notice because he doesnt have an
15 answer His basic argument is whatever you do just
16 kill this patent
17 And if I were in his shoes I suppose Id
18 take that same position I think whats absolutely
19 clear is that the test ought to be one that is
20 structured as a very coarse filter not the kind of
21 filter that hes pushing for where it changes over time
22 I mean I thought his shyshy I thought his response to one
23 of the questions about eshymail and word processing that
24 Justice Sotomayor asked is over time it would change
25 Well thats exactly what 102 and 103 are for That is
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1 not the purpose of shyshy of Section 101
2 And then he uses the example of encryption
3 I guarantee you if we were arguing about encryption in
4 this case he would say to me that thats an abstract
5 principle because encryption is a concept thats been
6 around since time immemorial George Washington used
7 it Everybody has used encryption
8 And a question again thats not the
9 solution to these problems The question is how did we
10 go about doing it And we go beyond the basics of
11 simply saying use a computer and thats what we ask
12 this Court to focus on and to evaluate
13 As to the frequent flier program its
14 pretty clear to me that even though it was a novel idea
15 in some sense the concept itself would have been viewed
16 in shyshy in the KSR fashion as quite obvious as a means of
17 improving customer loyalty
18 There are solutions here Giving us 101
19 pass doesnt create a monopoly It just gets us to the
20 102 and 103 inquiries that are at the heart of what the
21 patent laws shyshy and 112 that are at the heart of what the
22 patent laws ought to be dealing with
23 If there are no further questions Your
24 Honor thank you
25 CHIEF JUSTICE ROBERTS Thank you counsel
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1 The case is submitted
2 (Whereupon at 1105 am the case in the
3 aboveshyentitled matter was submitted)
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
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58
A add 714 1023 algorithm 3320 41 automatically
As 525 3621 387 algorithms apply 72425 111
am 115 32 416 3013 3310 2019 281213 automobile 389
572 added 302 Alice 13 34 2822 3814 available 99
abacus 61213 4923 363 3717 4217 avenues 4124
710 1018 additional 5017 3822 4117 applying 4213 avoids 524
1325 3614 3617
address 4121 4317 4511
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approach 226 395 4513 B
ability 1514 addressed 435 allow 94 472 B 121 29 4413
able 1511 167 addressing 181 allows 97 242 appropriate 5122
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aboveshyentitled adhere 437 amici 3825 453 4913 1922 2512
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absolutely 125 241 210 4414 Archimedes 3991222
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3322 brightshyline 409 2313 37 71 4338 5519 beyond 115 4012 5317 checks 618 5614
1312 4623 bring 5115 case 3412 46 Chief 339 clearly 211 251 544 5610 broad 248 116 1524 261217 3024 523
Bilski 313 46 broader 225 2022 213 31812 378 client 311416 415 1722 browsing 228 2211 2313 371416 386 close 2822 2224 2329 builder 2811 2625 311424 421414 4410 CLS 17 35 262020 271 building 5218 3314 36620 441116 5110 1120 2816 2999 built 2324 426816 5118 531419 coarse 247 3935 4125 business 168 451822 461 5625 5520 427 4322 1749 203 461422 5024 chits 611 code 1213 142 447 452 2124 222122 5124 5410 chronological 1916171720 461821 4825 2311 29613 564 5712 1512 2725 4018 49481922 32132323 cases 244 2816 chronologically coffee 1211 5047 3322525 4011 423 colleagues 116
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brief 211315 carefully 1725 chart 541 283 3118 516 621 710 2255 322 caricature 718 charted 2620 37517 398 71325 9113 4215 4715 72020 1417 charts 1911 406 5415 91824 1035 4810 5113 1716 549 clarity 4755 10725 1116 548 carry 4420 Charybdis 511116 124102024
briefs 1524 4923 1620 2619 class 59 13911 1479 1618 CARTER 117 checkbook 617 clear 1015 118 1421 15710
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1 picked it up maybe 5 didnt pick it up Would you say
2 a few words about it
3 GENERAL VERRILLI Sure About shyshy let me go
4 to Bilski there in that I do think while shyshy while
5 certainly the Court held that the term process got a
6 natural construction which could include business
7 methods it seems to me that thats not all the Court
8 said in Bilski The Court also said that it was
9 historically and traditionally quite rare that business
10 methods were patent eligible
11 It also said that shyshy that the shyshy that courts
12 and the PTO examiners should use the abstract ideas
13 exception to 101 to police the appropriate boundary
14 It also said that the
15 machineshyorshytransformation test that the United States
16 advocated remained a useful tool And of course that
17 directs to you seeing whether there is a technology
18 application
19 And of course the holding in Bilski was
20 that the shyshy the method for hedging risk was ineligible
21 because it was an abstract idea and I cant imagine
22 that if in Bilski the shyshy the claim had been exactly the
23 same but had added use a computer to carry out some of
24 these standard random analysis functions that are
25 claimed by the patent that you would have found it to
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1 be patent eligible
2 And I shyshy I would submit for the Court that
3 the key point here I think is that now given where
4 the Court shyshy what the Court has held in Bilski given
5 what its held in Mayo the abstract ideas exception is
6 really the only tool left to deal with what I shyshy what I
7 think I fairly read Bilski as saying is a significant
8 problem the proliferation of patents of business
9 methods
10 JUSTICE KENNEDY Is there an example that
11 you can give us of a shyshy what we can call a business
12 process that is patentable a process that doesnt
13 involve improving the workings of a computer
14 GENERAL VERRILLI I shyshy I think its going
15 to be difficult for me to do that I think for
16 example if you had a business method a process for
17 additional security pointshyofshysale credit card
18 transactions using particular encryption technology
19 that might well be patent eligible Its a technology
20 that it makes conduct of business more efficient or
21 effective
22 But there is a technological link here and
23 we do think thats critical to our shyshy to our point of
24 view with respect to the case And I shyshy and I do think
25 remember that when we say something is not patent
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1 eligible were not saying they cant do it Were
2 saying they cant monopolize it
3 And the concern in a situation like this one
4 is that if this is patent eligible its hard to see
5 why for example the first person who came up with a
6 frequent flier program wouldnt have been able to claim
7 a patent there because after all thats a business
8 method for improving customer loyalty implemented on a
9 computer
10 CHIEF JUSTICE ROBERTS General I shyshy you
11 mentioned a while ago the need for greater clarity and
12 certainty in this area And Im just wondering in your
13 brief youve got a nonshyexhaustive of factors to
14 consider and there are 6 different ones And Im just
15 doubtful that thats going to bring about greater
16 clarity and certainty
17 GENERAL VERRILLI I take shyshy I take the
18 point Mr Chief Justice but I think the key is that
19 they are all directed to answering the question of
20 whether the innovation that is claimed and is an
21 innovation in either A the improvement of a computers
22 functioning or B the use of computer technology to
23 improve the functioning of another technological
24 process and a case like Diehr would be in the latter
25 category
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1 And so I do think that thats the key
2 benchmark Thats the baseline Thats the test that
3 we do think can be applied clearly and consistently by
4 the courts or the PTO And it avoids the risk of things
5 like frequent flier programs or the Oakland As money
6 ball methods for evaluating the contributions in
7 individual baseball players make or any one of a host of
8 other things that our intuitions tell us just dont
9 belong in the patent system
10 Thats the shyshy drawing that line keeps them
11 out not drawing that line lets them in And with all
12 due respect I dont think that the novelty and
13 nonobviousness filters that 102 and 103 really deal with
14 that problem effectively because when you get to
15 nonobviousness in 103 for example youll be asking a
16 different question
17 If you take the frequent flier program you
18 would say well is this innovation in building consumer
19 loyalty something that would have been obvious to
20 somebody who runs an airline Its totally divorced
21 from the question of technology at that point and
22 therefore I dont think youre going to get the screen
23 that you need to get in order for the patent system to
24 be confined to its traditional and appropriate scope
25 If there are no further questions thank
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1 you
2 JUSTICE GINSBURG I have a question about
3 how do you identify an abstract concept The shyshy a
4 natural phenomenon a mathematical formula those are
5 easy to identify but there has been some confusion on
6 what qualifies as an abstract concept
7 GENERAL VERRILLI We would define
8 abstract shyshy an abstract concept as a claim that is not
9 directed to a concrete innovation in technology
10 science or the industrial arts So its the shyshy its
11 abstract in the sense that it is not a concrete
12 innovation in the traditional realm of patent law
13 Thank you
14 CHIEF JUSTICE ROBERTS Thank you General
15 Mr Phillips you have four minutes
16 remaining
17 REBUTTAL ARGUMENT OF CARTER G PHILLIPS
18 ON BEHALF OF THE PETITIONERS
19 MR PHILLIPS Thank you Mr Chief Justice
20 Id just like to make a few points
21 First of all with respect to the question
22 you asked which is looking at 159 et cetera all I can
23 tell you is that if you look at claim 33 it talks about
24 matched orders the matched orders that are described in
25 286 and 287 and then makes specific reference to 159
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1 and that flow chart thats there And its all designed
2 as a package Its only one element of the shyshy of the
3 invention but it is a central element and its an easy
4 one to understand And it goes well beyond simply the
5 notion of hedge shyshy hedge against settlement risk and do
6 it by a computer
7 JUSTICE SOTOMAYOR Your adversary says that
8 his shyshy the appendix to his brief are the only patents at
9 issue that the flow charts are not at issue in this
10 case
11 MR PHILLIPS Theres no basis for that
12 statement Your Honor There shyshy remember this went off
13 on a very truncated litigation process So theres shyshy
14 you know we shyshy we got cut off at the beginning of it
15 Theres been no construction of the shyshy of the claims
16 and shyshy and obviously these are specifications that go
17 to how you interpret the claim
18 JUSTICE SOTOMAYOR If we were to say that
19 there are no business patents shyshy
20 MR PHILLIPS Yes
21 JUSTICE SOTOMAYOR shyshy would your patent
22 survive at all
23 MR PHILLIPS No I dont shyshy I dont
24 believe so I think theres no question And you
25 know General Verrilli could not have been any plainer
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1 in his statement of how he wants to interpret the
2 abstract idea concept
3 JUSTICE SOTOMAYOR Yes he wants to say no
4 business patents
5 MR PHILLIPS No business shyshy just another
6 way of saying no business methods And you know the
7 Court rejected that And it seems to me extraordinary
8 to say Congress didnt reject no business methods in
9 101 but were going to do shyshy were going to manipulate
10 the judicial exception to accomplish precisely that same
11 thing It seems to me thats wholly inappropriate
12 Justice Ginsburg you asked my shyshy my friend
13 here you know whats his test He didnt answer that
14 question youll notice because he doesnt have an
15 answer His basic argument is whatever you do just
16 kill this patent
17 And if I were in his shoes I suppose Id
18 take that same position I think whats absolutely
19 clear is that the test ought to be one that is
20 structured as a very coarse filter not the kind of
21 filter that hes pushing for where it changes over time
22 I mean I thought his shyshy I thought his response to one
23 of the questions about eshymail and word processing that
24 Justice Sotomayor asked is over time it would change
25 Well thats exactly what 102 and 103 are for That is
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1 not the purpose of shyshy of Section 101
2 And then he uses the example of encryption
3 I guarantee you if we were arguing about encryption in
4 this case he would say to me that thats an abstract
5 principle because encryption is a concept thats been
6 around since time immemorial George Washington used
7 it Everybody has used encryption
8 And a question again thats not the
9 solution to these problems The question is how did we
10 go about doing it And we go beyond the basics of
11 simply saying use a computer and thats what we ask
12 this Court to focus on and to evaluate
13 As to the frequent flier program its
14 pretty clear to me that even though it was a novel idea
15 in some sense the concept itself would have been viewed
16 in shyshy in the KSR fashion as quite obvious as a means of
17 improving customer loyalty
18 There are solutions here Giving us 101
19 pass doesnt create a monopoly It just gets us to the
20 102 and 103 inquiries that are at the heart of what the
21 patent laws shyshy and 112 that are at the heart of what the
22 patent laws ought to be dealing with
23 If there are no further questions Your
24 Honor thank you
25 CHIEF JUSTICE ROBERTS Thank you counsel
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1 The case is submitted
2 (Whereupon at 1105 am the case in the
3 aboveshyentitled matter was submitted)
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
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58
A add 714 1023 algorithm 3320 41 automatically
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disclosure 328 413 302021 4220 figure 1146 discuss 164 economy 1516 ESQ 1171921 excerpted 323 311222 3917 discussion 299 effective 1223 236913 exhausted 1813 file 406 dispose 2625 5021 essence 211 exist 420 131 filed 4214 dispute 325 effectively 5214 essential 1224 existence 1119 fill 2818 disputed 3120 efficacy 1224 3425 175 filled 293
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1 be patent eligible
2 And I shyshy I would submit for the Court that
3 the key point here I think is that now given where
4 the Court shyshy what the Court has held in Bilski given
5 what its held in Mayo the abstract ideas exception is
6 really the only tool left to deal with what I shyshy what I
7 think I fairly read Bilski as saying is a significant
8 problem the proliferation of patents of business
9 methods
10 JUSTICE KENNEDY Is there an example that
11 you can give us of a shyshy what we can call a business
12 process that is patentable a process that doesnt
13 involve improving the workings of a computer
14 GENERAL VERRILLI I shyshy I think its going
15 to be difficult for me to do that I think for
16 example if you had a business method a process for
17 additional security pointshyofshysale credit card
18 transactions using particular encryption technology
19 that might well be patent eligible Its a technology
20 that it makes conduct of business more efficient or
21 effective
22 But there is a technological link here and
23 we do think thats critical to our shyshy to our point of
24 view with respect to the case And I shyshy and I do think
25 remember that when we say something is not patent
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1 eligible were not saying they cant do it Were
2 saying they cant monopolize it
3 And the concern in a situation like this one
4 is that if this is patent eligible its hard to see
5 why for example the first person who came up with a
6 frequent flier program wouldnt have been able to claim
7 a patent there because after all thats a business
8 method for improving customer loyalty implemented on a
9 computer
10 CHIEF JUSTICE ROBERTS General I shyshy you
11 mentioned a while ago the need for greater clarity and
12 certainty in this area And Im just wondering in your
13 brief youve got a nonshyexhaustive of factors to
14 consider and there are 6 different ones And Im just
15 doubtful that thats going to bring about greater
16 clarity and certainty
17 GENERAL VERRILLI I take shyshy I take the
18 point Mr Chief Justice but I think the key is that
19 they are all directed to answering the question of
20 whether the innovation that is claimed and is an
21 innovation in either A the improvement of a computers
22 functioning or B the use of computer technology to
23 improve the functioning of another technological
24 process and a case like Diehr would be in the latter
25 category
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1 And so I do think that thats the key
2 benchmark Thats the baseline Thats the test that
3 we do think can be applied clearly and consistently by
4 the courts or the PTO And it avoids the risk of things
5 like frequent flier programs or the Oakland As money
6 ball methods for evaluating the contributions in
7 individual baseball players make or any one of a host of
8 other things that our intuitions tell us just dont
9 belong in the patent system
10 Thats the shyshy drawing that line keeps them
11 out not drawing that line lets them in And with all
12 due respect I dont think that the novelty and
13 nonobviousness filters that 102 and 103 really deal with
14 that problem effectively because when you get to
15 nonobviousness in 103 for example youll be asking a
16 different question
17 If you take the frequent flier program you
18 would say well is this innovation in building consumer
19 loyalty something that would have been obvious to
20 somebody who runs an airline Its totally divorced
21 from the question of technology at that point and
22 therefore I dont think youre going to get the screen
23 that you need to get in order for the patent system to
24 be confined to its traditional and appropriate scope
25 If there are no further questions thank
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1 you
2 JUSTICE GINSBURG I have a question about
3 how do you identify an abstract concept The shyshy a
4 natural phenomenon a mathematical formula those are
5 easy to identify but there has been some confusion on
6 what qualifies as an abstract concept
7 GENERAL VERRILLI We would define
8 abstract shyshy an abstract concept as a claim that is not
9 directed to a concrete innovation in technology
10 science or the industrial arts So its the shyshy its
11 abstract in the sense that it is not a concrete
12 innovation in the traditional realm of patent law
13 Thank you
14 CHIEF JUSTICE ROBERTS Thank you General
15 Mr Phillips you have four minutes
16 remaining
17 REBUTTAL ARGUMENT OF CARTER G PHILLIPS
18 ON BEHALF OF THE PETITIONERS
19 MR PHILLIPS Thank you Mr Chief Justice
20 Id just like to make a few points
21 First of all with respect to the question
22 you asked which is looking at 159 et cetera all I can
23 tell you is that if you look at claim 33 it talks about
24 matched orders the matched orders that are described in
25 286 and 287 and then makes specific reference to 159
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1 and that flow chart thats there And its all designed
2 as a package Its only one element of the shyshy of the
3 invention but it is a central element and its an easy
4 one to understand And it goes well beyond simply the
5 notion of hedge shyshy hedge against settlement risk and do
6 it by a computer
7 JUSTICE SOTOMAYOR Your adversary says that
8 his shyshy the appendix to his brief are the only patents at
9 issue that the flow charts are not at issue in this
10 case
11 MR PHILLIPS Theres no basis for that
12 statement Your Honor There shyshy remember this went off
13 on a very truncated litigation process So theres shyshy
14 you know we shyshy we got cut off at the beginning of it
15 Theres been no construction of the shyshy of the claims
16 and shyshy and obviously these are specifications that go
17 to how you interpret the claim
18 JUSTICE SOTOMAYOR If we were to say that
19 there are no business patents shyshy
20 MR PHILLIPS Yes
21 JUSTICE SOTOMAYOR shyshy would your patent
22 survive at all
23 MR PHILLIPS No I dont shyshy I dont
24 believe so I think theres no question And you
25 know General Verrilli could not have been any plainer
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1 in his statement of how he wants to interpret the
2 abstract idea concept
3 JUSTICE SOTOMAYOR Yes he wants to say no
4 business patents
5 MR PHILLIPS No business shyshy just another
6 way of saying no business methods And you know the
7 Court rejected that And it seems to me extraordinary
8 to say Congress didnt reject no business methods in
9 101 but were going to do shyshy were going to manipulate
10 the judicial exception to accomplish precisely that same
11 thing It seems to me thats wholly inappropriate
12 Justice Ginsburg you asked my shyshy my friend
13 here you know whats his test He didnt answer that
14 question youll notice because he doesnt have an
15 answer His basic argument is whatever you do just
16 kill this patent
17 And if I were in his shoes I suppose Id
18 take that same position I think whats absolutely
19 clear is that the test ought to be one that is
20 structured as a very coarse filter not the kind of
21 filter that hes pushing for where it changes over time
22 I mean I thought his shyshy I thought his response to one
23 of the questions about eshymail and word processing that
24 Justice Sotomayor asked is over time it would change
25 Well thats exactly what 102 and 103 are for That is
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1 not the purpose of shyshy of Section 101
2 And then he uses the example of encryption
3 I guarantee you if we were arguing about encryption in
4 this case he would say to me that thats an abstract
5 principle because encryption is a concept thats been
6 around since time immemorial George Washington used
7 it Everybody has used encryption
8 And a question again thats not the
9 solution to these problems The question is how did we
10 go about doing it And we go beyond the basics of
11 simply saying use a computer and thats what we ask
12 this Court to focus on and to evaluate
13 As to the frequent flier program its
14 pretty clear to me that even though it was a novel idea
15 in some sense the concept itself would have been viewed
16 in shyshy in the KSR fashion as quite obvious as a means of
17 improving customer loyalty
18 There are solutions here Giving us 101
19 pass doesnt create a monopoly It just gets us to the
20 102 and 103 inquiries that are at the heart of what the
21 patent laws shyshy and 112 that are at the heart of what the
22 patent laws ought to be dealing with
23 If there are no further questions Your
24 Honor thank you
25 CHIEF JUSTICE ROBERTS Thank you counsel
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1 The case is submitted
2 (Whereupon at 1105 am the case in the
3 aboveshyentitled matter was submitted)
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
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58
A add 714 1023 algorithm 3320 41 automatically
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abacus 61213 4923 363 3717 4217 avenues 4124
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3322 brightshyline 409 2313 37 71 4338 5519 beyond 115 4012 5317 checks 618 5614
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Bilski 313 46 broader 225 2022 213 31812 378 client 311416 415 1722 browsing 228 2211 2313 371416 386 close 2822 2224 2329 builder 2811 2625 311424 421414 4410 CLS 17 35 262020 271 building 5218 3314 36620 441116 5110 1120 2816 2999 built 2324 426816 5118 531419 coarse 247 3935 4125 business 168 451822 461 5625 5520 427 4322 1749 203 461422 5024 chits 611 code 1213 142 447 452 2124 222122 5124 5410 chronological 1916171720 461821 4825 2311 29613 564 5712 1512 2725 4018 49481922 32132323 cases 244 2816 chronologically coffee 1211 5047 3322525 4011 423 colleagues 116
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briefs 1524 4923 1620 2619 class 59 13911 1479 1618 CARTER 117 checkbook 617 clear 1015 118 1421 15710
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1517 165 confess 1111 coterminous 4121 5324 181719 196 configured 383 2321 customer 518 describes 425 19814 206 confined 5224 cotton 914 444 5617 2918 3211 2025 211016 confirmed 2912 4711 487 cut 5414 3913 2117 2410 confusion 434 counsel 4411 description
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disclosure 328 413 302021 4220 figure 1146 discuss 164 economy 1516 ESQ 1171921 excerpted 323 311222 3917 discussion 299 effective 1223 236913 exhausted 1813 file 406 dispose 2625 5021 essence 211 exist 420 131 filed 4214 dispute 325 effectively 5214 essential 1224 existence 1119 fill 2818 disputed 3120 efficacy 1224 3425 175 filled 293
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1 eligible were not saying they cant do it Were
2 saying they cant monopolize it
3 And the concern in a situation like this one
4 is that if this is patent eligible its hard to see
5 why for example the first person who came up with a
6 frequent flier program wouldnt have been able to claim
7 a patent there because after all thats a business
8 method for improving customer loyalty implemented on a
9 computer
10 CHIEF JUSTICE ROBERTS General I shyshy you
11 mentioned a while ago the need for greater clarity and
12 certainty in this area And Im just wondering in your
13 brief youve got a nonshyexhaustive of factors to
14 consider and there are 6 different ones And Im just
15 doubtful that thats going to bring about greater
16 clarity and certainty
17 GENERAL VERRILLI I take shyshy I take the
18 point Mr Chief Justice but I think the key is that
19 they are all directed to answering the question of
20 whether the innovation that is claimed and is an
21 innovation in either A the improvement of a computers
22 functioning or B the use of computer technology to
23 improve the functioning of another technological
24 process and a case like Diehr would be in the latter
25 category
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1 And so I do think that thats the key
2 benchmark Thats the baseline Thats the test that
3 we do think can be applied clearly and consistently by
4 the courts or the PTO And it avoids the risk of things
5 like frequent flier programs or the Oakland As money
6 ball methods for evaluating the contributions in
7 individual baseball players make or any one of a host of
8 other things that our intuitions tell us just dont
9 belong in the patent system
10 Thats the shyshy drawing that line keeps them
11 out not drawing that line lets them in And with all
12 due respect I dont think that the novelty and
13 nonobviousness filters that 102 and 103 really deal with
14 that problem effectively because when you get to
15 nonobviousness in 103 for example youll be asking a
16 different question
17 If you take the frequent flier program you
18 would say well is this innovation in building consumer
19 loyalty something that would have been obvious to
20 somebody who runs an airline Its totally divorced
21 from the question of technology at that point and
22 therefore I dont think youre going to get the screen
23 that you need to get in order for the patent system to
24 be confined to its traditional and appropriate scope
25 If there are no further questions thank
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1 you
2 JUSTICE GINSBURG I have a question about
3 how do you identify an abstract concept The shyshy a
4 natural phenomenon a mathematical formula those are
5 easy to identify but there has been some confusion on
6 what qualifies as an abstract concept
7 GENERAL VERRILLI We would define
8 abstract shyshy an abstract concept as a claim that is not
9 directed to a concrete innovation in technology
10 science or the industrial arts So its the shyshy its
11 abstract in the sense that it is not a concrete
12 innovation in the traditional realm of patent law
13 Thank you
14 CHIEF JUSTICE ROBERTS Thank you General
15 Mr Phillips you have four minutes
16 remaining
17 REBUTTAL ARGUMENT OF CARTER G PHILLIPS
18 ON BEHALF OF THE PETITIONERS
19 MR PHILLIPS Thank you Mr Chief Justice
20 Id just like to make a few points
21 First of all with respect to the question
22 you asked which is looking at 159 et cetera all I can
23 tell you is that if you look at claim 33 it talks about
24 matched orders the matched orders that are described in
25 286 and 287 and then makes specific reference to 159
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1 and that flow chart thats there And its all designed
2 as a package Its only one element of the shyshy of the
3 invention but it is a central element and its an easy
4 one to understand And it goes well beyond simply the
5 notion of hedge shyshy hedge against settlement risk and do
6 it by a computer
7 JUSTICE SOTOMAYOR Your adversary says that
8 his shyshy the appendix to his brief are the only patents at
9 issue that the flow charts are not at issue in this
10 case
11 MR PHILLIPS Theres no basis for that
12 statement Your Honor There shyshy remember this went off
13 on a very truncated litigation process So theres shyshy
14 you know we shyshy we got cut off at the beginning of it
15 Theres been no construction of the shyshy of the claims
16 and shyshy and obviously these are specifications that go
17 to how you interpret the claim
18 JUSTICE SOTOMAYOR If we were to say that
19 there are no business patents shyshy
20 MR PHILLIPS Yes
21 JUSTICE SOTOMAYOR shyshy would your patent
22 survive at all
23 MR PHILLIPS No I dont shyshy I dont
24 believe so I think theres no question And you
25 know General Verrilli could not have been any plainer
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1 in his statement of how he wants to interpret the
2 abstract idea concept
3 JUSTICE SOTOMAYOR Yes he wants to say no
4 business patents
5 MR PHILLIPS No business shyshy just another
6 way of saying no business methods And you know the
7 Court rejected that And it seems to me extraordinary
8 to say Congress didnt reject no business methods in
9 101 but were going to do shyshy were going to manipulate
10 the judicial exception to accomplish precisely that same
11 thing It seems to me thats wholly inappropriate
12 Justice Ginsburg you asked my shyshy my friend
13 here you know whats his test He didnt answer that
14 question youll notice because he doesnt have an
15 answer His basic argument is whatever you do just
16 kill this patent
17 And if I were in his shoes I suppose Id
18 take that same position I think whats absolutely
19 clear is that the test ought to be one that is
20 structured as a very coarse filter not the kind of
21 filter that hes pushing for where it changes over time
22 I mean I thought his shyshy I thought his response to one
23 of the questions about eshymail and word processing that
24 Justice Sotomayor asked is over time it would change
25 Well thats exactly what 102 and 103 are for That is
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1 not the purpose of shyshy of Section 101
2 And then he uses the example of encryption
3 I guarantee you if we were arguing about encryption in
4 this case he would say to me that thats an abstract
5 principle because encryption is a concept thats been
6 around since time immemorial George Washington used
7 it Everybody has used encryption
8 And a question again thats not the
9 solution to these problems The question is how did we
10 go about doing it And we go beyond the basics of
11 simply saying use a computer and thats what we ask
12 this Court to focus on and to evaluate
13 As to the frequent flier program its
14 pretty clear to me that even though it was a novel idea
15 in some sense the concept itself would have been viewed
16 in shyshy in the KSR fashion as quite obvious as a means of
17 improving customer loyalty
18 There are solutions here Giving us 101
19 pass doesnt create a monopoly It just gets us to the
20 102 and 103 inquiries that are at the heart of what the
21 patent laws shyshy and 112 that are at the heart of what the
22 patent laws ought to be dealing with
23 If there are no further questions Your
24 Honor thank you
25 CHIEF JUSTICE ROBERTS Thank you counsel
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1 The case is submitted
2 (Whereupon at 1105 am the case in the
3 aboveshyentitled matter was submitted)
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
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1 And so I do think that thats the key
2 benchmark Thats the baseline Thats the test that
3 we do think can be applied clearly and consistently by
4 the courts or the PTO And it avoids the risk of things
5 like frequent flier programs or the Oakland As money
6 ball methods for evaluating the contributions in
7 individual baseball players make or any one of a host of
8 other things that our intuitions tell us just dont
9 belong in the patent system
10 Thats the shyshy drawing that line keeps them
11 out not drawing that line lets them in And with all
12 due respect I dont think that the novelty and
13 nonobviousness filters that 102 and 103 really deal with
14 that problem effectively because when you get to
15 nonobviousness in 103 for example youll be asking a
16 different question
17 If you take the frequent flier program you
18 would say well is this innovation in building consumer
19 loyalty something that would have been obvious to
20 somebody who runs an airline Its totally divorced
21 from the question of technology at that point and
22 therefore I dont think youre going to get the screen
23 that you need to get in order for the patent system to
24 be confined to its traditional and appropriate scope
25 If there are no further questions thank
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1 you
2 JUSTICE GINSBURG I have a question about
3 how do you identify an abstract concept The shyshy a
4 natural phenomenon a mathematical formula those are
5 easy to identify but there has been some confusion on
6 what qualifies as an abstract concept
7 GENERAL VERRILLI We would define
8 abstract shyshy an abstract concept as a claim that is not
9 directed to a concrete innovation in technology
10 science or the industrial arts So its the shyshy its
11 abstract in the sense that it is not a concrete
12 innovation in the traditional realm of patent law
13 Thank you
14 CHIEF JUSTICE ROBERTS Thank you General
15 Mr Phillips you have four minutes
16 remaining
17 REBUTTAL ARGUMENT OF CARTER G PHILLIPS
18 ON BEHALF OF THE PETITIONERS
19 MR PHILLIPS Thank you Mr Chief Justice
20 Id just like to make a few points
21 First of all with respect to the question
22 you asked which is looking at 159 et cetera all I can
23 tell you is that if you look at claim 33 it talks about
24 matched orders the matched orders that are described in
25 286 and 287 and then makes specific reference to 159
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1 and that flow chart thats there And its all designed
2 as a package Its only one element of the shyshy of the
3 invention but it is a central element and its an easy
4 one to understand And it goes well beyond simply the
5 notion of hedge shyshy hedge against settlement risk and do
6 it by a computer
7 JUSTICE SOTOMAYOR Your adversary says that
8 his shyshy the appendix to his brief are the only patents at
9 issue that the flow charts are not at issue in this
10 case
11 MR PHILLIPS Theres no basis for that
12 statement Your Honor There shyshy remember this went off
13 on a very truncated litigation process So theres shyshy
14 you know we shyshy we got cut off at the beginning of it
15 Theres been no construction of the shyshy of the claims
16 and shyshy and obviously these are specifications that go
17 to how you interpret the claim
18 JUSTICE SOTOMAYOR If we were to say that
19 there are no business patents shyshy
20 MR PHILLIPS Yes
21 JUSTICE SOTOMAYOR shyshy would your patent
22 survive at all
23 MR PHILLIPS No I dont shyshy I dont
24 believe so I think theres no question And you
25 know General Verrilli could not have been any plainer
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1 in his statement of how he wants to interpret the
2 abstract idea concept
3 JUSTICE SOTOMAYOR Yes he wants to say no
4 business patents
5 MR PHILLIPS No business shyshy just another
6 way of saying no business methods And you know the
7 Court rejected that And it seems to me extraordinary
8 to say Congress didnt reject no business methods in
9 101 but were going to do shyshy were going to manipulate
10 the judicial exception to accomplish precisely that same
11 thing It seems to me thats wholly inappropriate
12 Justice Ginsburg you asked my shyshy my friend
13 here you know whats his test He didnt answer that
14 question youll notice because he doesnt have an
15 answer His basic argument is whatever you do just
16 kill this patent
17 And if I were in his shoes I suppose Id
18 take that same position I think whats absolutely
19 clear is that the test ought to be one that is
20 structured as a very coarse filter not the kind of
21 filter that hes pushing for where it changes over time
22 I mean I thought his shyshy I thought his response to one
23 of the questions about eshymail and word processing that
24 Justice Sotomayor asked is over time it would change
25 Well thats exactly what 102 and 103 are for That is
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1 not the purpose of shyshy of Section 101
2 And then he uses the example of encryption
3 I guarantee you if we were arguing about encryption in
4 this case he would say to me that thats an abstract
5 principle because encryption is a concept thats been
6 around since time immemorial George Washington used
7 it Everybody has used encryption
8 And a question again thats not the
9 solution to these problems The question is how did we
10 go about doing it And we go beyond the basics of
11 simply saying use a computer and thats what we ask
12 this Court to focus on and to evaluate
13 As to the frequent flier program its
14 pretty clear to me that even though it was a novel idea
15 in some sense the concept itself would have been viewed
16 in shyshy in the KSR fashion as quite obvious as a means of
17 improving customer loyalty
18 There are solutions here Giving us 101
19 pass doesnt create a monopoly It just gets us to the
20 102 and 103 inquiries that are at the heart of what the
21 patent laws shyshy and 112 that are at the heart of what the
22 patent laws ought to be dealing with
23 If there are no further questions Your
24 Honor thank you
25 CHIEF JUSTICE ROBERTS Thank you counsel
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1 The case is submitted
2 (Whereupon at 1105 am the case in the
3 aboveshyentitled matter was submitted)
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1 you
2 JUSTICE GINSBURG I have a question about
3 how do you identify an abstract concept The shyshy a
4 natural phenomenon a mathematical formula those are
5 easy to identify but there has been some confusion on
6 what qualifies as an abstract concept
7 GENERAL VERRILLI We would define
8 abstract shyshy an abstract concept as a claim that is not
9 directed to a concrete innovation in technology
10 science or the industrial arts So its the shyshy its
11 abstract in the sense that it is not a concrete
12 innovation in the traditional realm of patent law
13 Thank you
14 CHIEF JUSTICE ROBERTS Thank you General
15 Mr Phillips you have four minutes
16 remaining
17 REBUTTAL ARGUMENT OF CARTER G PHILLIPS
18 ON BEHALF OF THE PETITIONERS
19 MR PHILLIPS Thank you Mr Chief Justice
20 Id just like to make a few points
21 First of all with respect to the question
22 you asked which is looking at 159 et cetera all I can
23 tell you is that if you look at claim 33 it talks about
24 matched orders the matched orders that are described in
25 286 and 287 and then makes specific reference to 159
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1 and that flow chart thats there And its all designed
2 as a package Its only one element of the shyshy of the
3 invention but it is a central element and its an easy
4 one to understand And it goes well beyond simply the
5 notion of hedge shyshy hedge against settlement risk and do
6 it by a computer
7 JUSTICE SOTOMAYOR Your adversary says that
8 his shyshy the appendix to his brief are the only patents at
9 issue that the flow charts are not at issue in this
10 case
11 MR PHILLIPS Theres no basis for that
12 statement Your Honor There shyshy remember this went off
13 on a very truncated litigation process So theres shyshy
14 you know we shyshy we got cut off at the beginning of it
15 Theres been no construction of the shyshy of the claims
16 and shyshy and obviously these are specifications that go
17 to how you interpret the claim
18 JUSTICE SOTOMAYOR If we were to say that
19 there are no business patents shyshy
20 MR PHILLIPS Yes
21 JUSTICE SOTOMAYOR shyshy would your patent
22 survive at all
23 MR PHILLIPS No I dont shyshy I dont
24 believe so I think theres no question And you
25 know General Verrilli could not have been any plainer
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1 in his statement of how he wants to interpret the
2 abstract idea concept
3 JUSTICE SOTOMAYOR Yes he wants to say no
4 business patents
5 MR PHILLIPS No business shyshy just another
6 way of saying no business methods And you know the
7 Court rejected that And it seems to me extraordinary
8 to say Congress didnt reject no business methods in
9 101 but were going to do shyshy were going to manipulate
10 the judicial exception to accomplish precisely that same
11 thing It seems to me thats wholly inappropriate
12 Justice Ginsburg you asked my shyshy my friend
13 here you know whats his test He didnt answer that
14 question youll notice because he doesnt have an
15 answer His basic argument is whatever you do just
16 kill this patent
17 And if I were in his shoes I suppose Id
18 take that same position I think whats absolutely
19 clear is that the test ought to be one that is
20 structured as a very coarse filter not the kind of
21 filter that hes pushing for where it changes over time
22 I mean I thought his shyshy I thought his response to one
23 of the questions about eshymail and word processing that
24 Justice Sotomayor asked is over time it would change
25 Well thats exactly what 102 and 103 are for That is
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1 not the purpose of shyshy of Section 101
2 And then he uses the example of encryption
3 I guarantee you if we were arguing about encryption in
4 this case he would say to me that thats an abstract
5 principle because encryption is a concept thats been
6 around since time immemorial George Washington used
7 it Everybody has used encryption
8 And a question again thats not the
9 solution to these problems The question is how did we
10 go about doing it And we go beyond the basics of
11 simply saying use a computer and thats what we ask
12 this Court to focus on and to evaluate
13 As to the frequent flier program its
14 pretty clear to me that even though it was a novel idea
15 in some sense the concept itself would have been viewed
16 in shyshy in the KSR fashion as quite obvious as a means of
17 improving customer loyalty
18 There are solutions here Giving us 101
19 pass doesnt create a monopoly It just gets us to the
20 102 and 103 inquiries that are at the heart of what the
21 patent laws shyshy and 112 that are at the heart of what the
22 patent laws ought to be dealing with
23 If there are no further questions Your
24 Honor thank you
25 CHIEF JUSTICE ROBERTS Thank you counsel
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1 The case is submitted
2 (Whereupon at 1105 am the case in the
3 aboveshyentitled matter was submitted)
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
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1 and that flow chart thats there And its all designed
2 as a package Its only one element of the shyshy of the
3 invention but it is a central element and its an easy
4 one to understand And it goes well beyond simply the
5 notion of hedge shyshy hedge against settlement risk and do
6 it by a computer
7 JUSTICE SOTOMAYOR Your adversary says that
8 his shyshy the appendix to his brief are the only patents at
9 issue that the flow charts are not at issue in this
10 case
11 MR PHILLIPS Theres no basis for that
12 statement Your Honor There shyshy remember this went off
13 on a very truncated litigation process So theres shyshy
14 you know we shyshy we got cut off at the beginning of it
15 Theres been no construction of the shyshy of the claims
16 and shyshy and obviously these are specifications that go
17 to how you interpret the claim
18 JUSTICE SOTOMAYOR If we were to say that
19 there are no business patents shyshy
20 MR PHILLIPS Yes
21 JUSTICE SOTOMAYOR shyshy would your patent
22 survive at all
23 MR PHILLIPS No I dont shyshy I dont
24 believe so I think theres no question And you
25 know General Verrilli could not have been any plainer
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1 in his statement of how he wants to interpret the
2 abstract idea concept
3 JUSTICE SOTOMAYOR Yes he wants to say no
4 business patents
5 MR PHILLIPS No business shyshy just another
6 way of saying no business methods And you know the
7 Court rejected that And it seems to me extraordinary
8 to say Congress didnt reject no business methods in
9 101 but were going to do shyshy were going to manipulate
10 the judicial exception to accomplish precisely that same
11 thing It seems to me thats wholly inappropriate
12 Justice Ginsburg you asked my shyshy my friend
13 here you know whats his test He didnt answer that
14 question youll notice because he doesnt have an
15 answer His basic argument is whatever you do just
16 kill this patent
17 And if I were in his shoes I suppose Id
18 take that same position I think whats absolutely
19 clear is that the test ought to be one that is
20 structured as a very coarse filter not the kind of
21 filter that hes pushing for where it changes over time
22 I mean I thought his shyshy I thought his response to one
23 of the questions about eshymail and word processing that
24 Justice Sotomayor asked is over time it would change
25 Well thats exactly what 102 and 103 are for That is
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1 not the purpose of shyshy of Section 101
2 And then he uses the example of encryption
3 I guarantee you if we were arguing about encryption in
4 this case he would say to me that thats an abstract
5 principle because encryption is a concept thats been
6 around since time immemorial George Washington used
7 it Everybody has used encryption
8 And a question again thats not the
9 solution to these problems The question is how did we
10 go about doing it And we go beyond the basics of
11 simply saying use a computer and thats what we ask
12 this Court to focus on and to evaluate
13 As to the frequent flier program its
14 pretty clear to me that even though it was a novel idea
15 in some sense the concept itself would have been viewed
16 in shyshy in the KSR fashion as quite obvious as a means of
17 improving customer loyalty
18 There are solutions here Giving us 101
19 pass doesnt create a monopoly It just gets us to the
20 102 and 103 inquiries that are at the heart of what the
21 patent laws shyshy and 112 that are at the heart of what the
22 patent laws ought to be dealing with
23 If there are no further questions Your
24 Honor thank you
25 CHIEF JUSTICE ROBERTS Thank you counsel
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1 The case is submitted
2 (Whereupon at 1105 am the case in the
3 aboveshyentitled matter was submitted)
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
20
21
22
23
24
25
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1 in his statement of how he wants to interpret the
2 abstract idea concept
3 JUSTICE SOTOMAYOR Yes he wants to say no
4 business patents
5 MR PHILLIPS No business shyshy just another
6 way of saying no business methods And you know the
7 Court rejected that And it seems to me extraordinary
8 to say Congress didnt reject no business methods in
9 101 but were going to do shyshy were going to manipulate
10 the judicial exception to accomplish precisely that same
11 thing It seems to me thats wholly inappropriate
12 Justice Ginsburg you asked my shyshy my friend
13 here you know whats his test He didnt answer that
14 question youll notice because he doesnt have an
15 answer His basic argument is whatever you do just
16 kill this patent
17 And if I were in his shoes I suppose Id
18 take that same position I think whats absolutely
19 clear is that the test ought to be one that is
20 structured as a very coarse filter not the kind of
21 filter that hes pushing for where it changes over time
22 I mean I thought his shyshy I thought his response to one
23 of the questions about eshymail and word processing that
24 Justice Sotomayor asked is over time it would change
25 Well thats exactly what 102 and 103 are for That is
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1 not the purpose of shyshy of Section 101
2 And then he uses the example of encryption
3 I guarantee you if we were arguing about encryption in
4 this case he would say to me that thats an abstract
5 principle because encryption is a concept thats been
6 around since time immemorial George Washington used
7 it Everybody has used encryption
8 And a question again thats not the
9 solution to these problems The question is how did we
10 go about doing it And we go beyond the basics of
11 simply saying use a computer and thats what we ask
12 this Court to focus on and to evaluate
13 As to the frequent flier program its
14 pretty clear to me that even though it was a novel idea
15 in some sense the concept itself would have been viewed
16 in shyshy in the KSR fashion as quite obvious as a means of
17 improving customer loyalty
18 There are solutions here Giving us 101
19 pass doesnt create a monopoly It just gets us to the
20 102 and 103 inquiries that are at the heart of what the
21 patent laws shyshy and 112 that are at the heart of what the
22 patent laws ought to be dealing with
23 If there are no further questions Your
24 Honor thank you
25 CHIEF JUSTICE ROBERTS Thank you counsel
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1 The case is submitted
2 (Whereupon at 1105 am the case in the
3 aboveshyentitled matter was submitted)
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
19
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21
22
23
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25
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1 not the purpose of shyshy of Section 101
2 And then he uses the example of encryption
3 I guarantee you if we were arguing about encryption in
4 this case he would say to me that thats an abstract
5 principle because encryption is a concept thats been
6 around since time immemorial George Washington used
7 it Everybody has used encryption
8 And a question again thats not the
9 solution to these problems The question is how did we
10 go about doing it And we go beyond the basics of
11 simply saying use a computer and thats what we ask
12 this Court to focus on and to evaluate
13 As to the frequent flier program its
14 pretty clear to me that even though it was a novel idea
15 in some sense the concept itself would have been viewed
16 in shyshy in the KSR fashion as quite obvious as a means of
17 improving customer loyalty
18 There are solutions here Giving us 101
19 pass doesnt create a monopoly It just gets us to the
20 102 and 103 inquiries that are at the heart of what the
21 patent laws shyshy and 112 that are at the heart of what the
22 patent laws ought to be dealing with
23 If there are no further questions Your
24 Honor thank you
25 CHIEF JUSTICE ROBERTS Thank you counsel
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1 The case is submitted
2 (Whereupon at 1105 am the case in the
3 aboveshyentitled matter was submitted)
4
5
6
7
8
9
10
11
12
13
14
15
16
17
18
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25
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Alderson Reporting Company
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68
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Official shy Subject to Final Review
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Alderson Reporting Company
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Alderson Reporting Company
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