130 S.Ct. 3218
`Page 1
`561 U.S. 593, 130 S.Ct. 3218, 177 L.Ed.2d 792, 78 USLW 4802, 2010-1 USTC P 50,481, 95 U.S.P.Q.2d 1001, 10 Cal.
`Daily Op. Serv. 7966, 2010 Daily Journal D.A.R. 9848, 22 Fla. L. Weekly Fed. S 703
`(Cite as: 561 U.S. 593, 130 S.Ct. 3218)
`
`
`
`
`
`
`
`
`
`Supreme Court of the United States
`Bernard L. BILSKI and Rand A. Warsaw, Petitioners,
`v.
`David J. KAPPOS, Under Secretary of Commerce for
`Intellectual Property and Director, Patent and Trade-
`mark Office.
`
`No. 08–964.
`Argued Nov. 9, 2009.
`Decided June 28, 2010.
`
`
`Background: Patent applicants challenged denial of
`patent application for method of hedging risk in field
`of commodities trading in the energy market based on
`lack of patent-eligible subject matter. The Patent and
`Trademark Office, Board of Patent Appeals and In-
`terferences, 2006 WL 5738364, sustained rejection of
`all claims in application. Applicants appealed. Fol-
`lowing sua sponte order of review en banc, the United
`States Court of Appeals for the Federal Circuit,
`Michel, Chief Judge, 545 F.3d 943, affirmed. Certio-
`rari was granted.
`
`Holdings: The Supreme Court, Justice Kennedy, held
`that:
`(1) machine-or-transformation test is not the sole test
`for determining the patent eligibility of a process, and
`(2) applicants' method was an unpatentable abstract
`idea.
`
`
`Affirmed.
`
`
`
`
`
` Justice Scalia joined the opinion in part.
`
` Justice Stevens filed an opinion concurring in the
`judgment, in which Justice Ginsburg, Justice Breyer,
`and Justice Sotomayor joined.
`
`
`
` Justice Breyer filed an opinion concurring in the
`judgment, in which Justice Scalia joined in part.
`
`
`West Headnotes
`
`1
`
`
`[1] Patents 291
`
`291 Patents
` 291I Subjects of Patents
` 291k1 k. Nature of patent rights. Most Cited
`Cases
`
`
`The Patent Act specifies four independent cate-
`gories of inventions or discoveries that are eligible for
`protection: processes, machines, manufactures, and
`compositions of matter. 35 U.S.C.A. § 101.
`
`[2] Patents 291
`
`291 Patents
` 291I Subjects of Patents
` 291k1 k. Nature of patent rights. Most Cited
`Cases
`
`
`1
`
`In choosing the Patent Act's expansive terms for
`specifying the four independent categories of inven-
`tions or discoveries that are eligible for protection,
`namely processes, machines, manufactures, and
`compositions of matter, modified by the comprehen-
`sive “any,” Congress plainly contemplated that the
`patent laws would be given wide scope. 35 U.S.C.A. §
`101.
`
`[3] Patents 291
`
`291 Patents
` 291I Subjects of Patents
`
`1
`
`© 2014 Thomson Reuters. No Claim to Orig. US Gov. Works.
`
`1
`
`SAMSUNG-1032
`
`

`
`130 S.Ct. 3218
`Page 2
`561 U.S. 593, 130 S.Ct. 3218, 177 L.Ed.2d 792, 78 USLW 4802, 2010-1 USTC P 50,481, 95 U.S.P.Q.2d 1001, 10 Cal.
`Daily Op. Serv. 7966, 2010 Daily Journal D.A.R. 9848, 22 Fla. L. Weekly Fed. S 703
`(Cite as: 561 U.S. 593, 130 S.Ct. 3218)
`
` 291k1 k. Nature of patent rights. Most Cited
`Cases
`
`
`6
`
`Congress took a permissive approach to patent
`eligibility to ensure that ingenuity should receive a
`liberal encouragement. 35 U.S.C.A. § 101.
`
`[4] Patents 291
`
`291 Patents
` 291I Subjects of Patents
` 291k4 Arts
` 291k6 k. Principles or laws of nature. Most
`Cited Cases
`
`
`There are three specific exceptions to the Patent
`Act's broad patent-eligibility principles, namely laws
`of nature, physical phenomena, and abstract ideas;
`while these exceptions are not required by the statu-
`tory text, they are consistent with the notion that a
`patentable process must be new and useful, and the
`concepts covered by these exceptions are part of the
`storehouse of knowledge of all men, free to all men,
`and reserved exclusively to none. 35 U.S.C.A. § 101.
`
`[5] Patents 291
`
`291 Patents
` 291I Subjects of Patents
` 291k1 k. Nature of patent rights. Most Cited
`Cases
`
`
`1
`
`The patent-eligibility inquiry into whether a
`claimed invention is a process, machine, manufacture,
`or composition of matter is only a threshold test for
`patent protection. 35 U.S.C.A. § 101.
`
`[6] Patents 291
`
`291 Patents
` 291II Patentability
`
`16(1)
`
`37
`
` 291II(A) Invention; Obviousness
` 291k16 Invention and Obviousness in
`General
` 291k16(1) k. In general. Most Cited
`Cases
`
`Patents 291
`
`291 Patents
` 291II Patentability
` 291II(B) Novelty
` 291k37 k. Nature and necessity of patenta-
`ble novelty. Most Cited Cases
`
`Patents 291
`
`291 Patents
` 291IV Applications and Proceedings Thereon
` 291k99 k. Description of invention in speci-
`fication. Most Cited Cases
`
`
`99
`
`Even if an invention qualifies as a process, ma-
`chine, manufacture, or composition of matter, in order
`to receive the Patent Act's protection the claimed
`invention must also be novel, nonobvious, and fully
`and particularly described. 35 U.S.C.A. §§ 101, 102,
`103, 112.
`
`[7] Patents 291
`
`291 Patents
` 291I Subjects of Patents
` 291k3 k. Constitutional and statutory provi-
`sions. Most Cited Cases
`
`
`3
`
`In patent law, as in all statutory construction,
`unless otherwise defined, words will be interpreted as
`taking their ordinary, contemporary, common mean-
`ing.
`
`[8] Patents 291
`
`7.11
`
`© 2014 Thomson Reuters. No Claim to Orig. US Gov. Works.
`
`2
`
`

`
`130 S.Ct. 3218
`Page 3
`561 U.S. 593, 130 S.Ct. 3218, 177 L.Ed.2d 792, 78 USLW 4802, 2010-1 USTC P 50,481, 95 U.S.P.Q.2d 1001, 10 Cal.
`Daily Op. Serv. 7966, 2010 Daily Journal D.A.R. 9848, 22 Fla. L. Weekly Fed. S 703
`(Cite as: 561 U.S. 593, 130 S.Ct. 3218)
`
`
`291 Patents
` 291I Subjects of Patents
` 291k4 Arts
` 291k7.11 k. Use or operation of machine or
`apparatus as affecting process. Most Cited Cases
`
`
`test,” which
`The “machine-or-transformation
`provides a claimed invention is not patentable if it is
`not tied to a machine and does not transform an article,
`is not the sole test for determining the patent eligibility
`of a process; the test is a useful and important clue, an
`investigative tool, for determining whether some
`claimed inventions are patent-eligible processes. 35
`U.S.C.A. § 101.
`
`[9] Statutes 361
`
`361 Statutes
` 361III Construction
` 361III(E) Statute as a Whole; Relation of Parts
`to Whole and to One Another
` 361k1159 k. Associated terms and provi-
`sions; noscitur a sociis. Most Cited Cases
` (Formerly 361k193)
`
`
`1159
`
`1
`
`Under the doctrine of “noscitur a sociis,” an am-
`biguous term may be given more precise content by
`the neighboring words with which it is associated.
`
`[10] Patents 291
`
`291 Patents
` 291I Subjects of Patents
` 291k1 k. Nature of patent rights. Most Cited
`Cases
`
`
`Patent Act provision defining the subject matter
`that may be patented is dynamic and designed to en-
`compass new and unforeseen inventions. (Per Justice
`Kennedy, with three Justices joining and four Justices
`concurring in the judgment.) 35 U.S.C.A. § 101.
`
`1
`
`
`[11] Patents 291
`
`291 Patents
` 291I Subjects of Patents
` 291k1 k. Nature of patent rights. Most Cited
`Cases
`
`
`A categorical rule denying patent protection for
`inventions in areas not contemplated by Congress
`would frustrate the purposes of the Patent Act. (Per
`Justice Kennedy, with three Justices joining and four
`Justices concurring in the judgment.) 35 U.S.C.A. §
`101.
`
`[12] Patents 291
`
`291 Patents
` 291I Subjects of Patents
` 291k4 Arts
` 291k7 k. Process or methods in general.
`Most Cited Cases
`
`
`7
`
`1214
`
`A patent-eligible “process” may include at least
`some methods of doing business. 35 U.S.C.A. § 101.
`
`[13] Statutes 361
`
`361 Statutes
` 361III Construction
` 361III(G) Other Law, Construction with Ref-
`erence to
` 361k1210 Other Statutes
` 361k1214 k. Superfluousness. Most
`Cited Cases
` (Formerly 361k223.1)
`
` Statutes 361
`
`361 Statutes
` 361III Construction
`
`1219
`
`© 2014 Thomson Reuters. No Claim to Orig. US Gov. Works.
`
`3
`
`

`
`130 S.Ct. 3218
`Page 4
`561 U.S. 593, 130 S.Ct. 3218, 177 L.Ed.2d 792, 78 USLW 4802, 2010-1 USTC P 50,481, 95 U.S.P.Q.2d 1001, 10 Cal.
`Daily Op. Serv. 7966, 2010 Daily Journal D.A.R. 9848, 22 Fla. L. Weekly Fed. S 703
`(Cite as: 561 U.S. 593, 130 S.Ct. 3218)
`
`1245(1)
`
` 361III(G) Other Law, Construction with Ref-
`erence to
` 361k1210 Other Statutes
` 361k1219 k. Earlier and later statutes.
`Most Cited Cases
` (Formerly 361k223.1)
`
` Statutes 361
`
`361 Statutes
` 361III Construction
` 361III(H) Legislative History
` 361k1243 Particular Kinds of Legislative
`History
` 361k1245 Motives, Opinions, and
`Statements of Legislators
` 361k1245(1) k. In general. Most
`Cited Cases
` (Formerly 361k216)
`
` Statutes 361
`
`361 Statutes
` 361III Construction
` 361III(M) Presumptions and Inferences as to
`Construction
` 361k1381 Other Law, Construction with
`Reference to
` 361k1385 Other Statutes
` 361k1385(1) k. In general. Most
`Cited Cases
` (Formerly 361k212.4)
`
`
`1385(1)
`
`The canon against interpreting any statutory pro-
`vision in a manner that would render another provision
`superfluous applies to interpreting any two provisions
`in the United States Code, even when Congress en-
`acted the provisions at different times; the canon
`cannot be overcome by judicial speculation as to the
`subjective intent of various legislators in enacting the
`subsequent provision.
`
`
`16(1)
`
`[14] Patents 291
`
`291 Patents
` 291II Patentability
` 291II(A) Invention; Obviousness
` 291k16 Invention and Obviousness in
`General
` 291k16(1) k. In general. Most Cited
`Cases
`
`Patents 291
`
`291 Patents
` 291II Patentability
` 291II(B) Novelty
` 291k37 k. Nature and necessity of patenta-
`ble novelty. Most Cited Cases
`
`Patents 291
`
`291 Patents
` 291IV Applications and Proceedings Thereon
` 291k99 k. Description of invention in speci-
`fication. Most Cited Cases
`
`
`37
`
`99
`
`The requirements for receiving patent protection,
`that any claimed invention must be novel, nonobvious,
`and fully and particularly described, serve a critical
`role in adjusting the tension, ever present in patent
`law, between stimulating innovation by protecting
`inventors and impeding progress by granting patents
`when not justified by the statutory design. (Per Justice
`Kennedy, with three Justices joining and four Justices
`concurring in the judgment.) 35 U.S.C.A. §§ 102, 103,
`112.
`
`[15] Patents 291
`
`291 Patents
` 291I Subjects of Patents
` 291k4 Arts
`
`7.14
`
`© 2014 Thomson Reuters. No Claim to Orig. US Gov. Works.
`
`4
`
`

`
`130 S.Ct. 3218
`Page 5
`561 U.S. 593, 130 S.Ct. 3218, 177 L.Ed.2d 792, 78 USLW 4802, 2010-1 USTC P 50,481, 95 U.S.P.Q.2d 1001, 10 Cal.
`Daily Op. Serv. 7966, 2010 Daily Journal D.A.R. 9848, 22 Fla. L. Weekly Fed. S 703
`(Cite as: 561 U.S. 593, 130 S.Ct. 3218)
`
` 291k7.14 k. Particular processes or methods
`as constituting invention. Most Cited Cases
`
`
`Claimed invention that explained how buyers and
`sellers of commodities in the energy market could
`protect, or hedge, against the risk of price changes and
`that reduced this concept of hedging to a mathematical
`formula was an “abstract idea,” and thus was not a
`patentable “process.” 35 U.S.C.A. § 101.
`
`[16] Patents 291
`
`291 Patents
` 291II Patentability
` 291II(A) Invention; Obviousness
` 291k16.2 k. Ideas and abstract principles.
`Most Cited Cases
`
`
`16.2
`
`Limiting an abstract idea to one field of use or
`adding token postsolution components do not make
`the concept patentable. 35 U.S.C.A. § 101.
`
`
`*3220 Syllabus FN*
`
`FN* The syllabus constitutes no part of the
`opinion of the Court but has been prepared by
`the Reporter of Decisions for the conven-
`ience of the reader. See United States v. De-
`troit Timber & Lumber Co., 200 U.S. 321,
`337, 26 S.Ct. 282, 50 L.Ed. 499.
`
`
`
`
`
`Petitioners' patent application seeks protection for
`a claimed invention that explains how commodities
`buyers and sellers in the energy market can protect, or
`hedge, against the risk of price changes. The key
`claims are claim 1, which describes a series of steps
`instructing how to hedge risk, and claim 4, which
`places the claim 1 concept into a simple mathematical
`formula. The remaining claims explain how claims 1
`and 4 can be applied to allow energy suppliers and
`consumers to minimize the risks resulting from fluc-
`tuations in market demand. The patent examiner re-
`
`jected the application on the grounds that the invention
`is not implemented on a specific apparatus, merely
`manipulates an abstract idea, and solves a purely
`mathematical problem. The Board of Patent Appeals
`and Interferences agreed and affirmed. The Federal
`Circuit, in turn, affirmed. The en banc court rejected
`its prior test for determining whether a claimed in-
`vention was a patentable “process” under Patent Act,
`35 U.S.C. § 101—i.e., whether the invention produced
`a “useful, concrete, and tangible result,” see, e.g.,
`State Street Bank & Trust Co. v. Signature Financial
`Group, Inc., 149 F.3d 1368, 1373—holding instead
`that a claimed *3221 process is patent eligible if: (1) it
`is tied to a particular machine or apparatus, or (2) it
`transforms a particular article into a different state or
`thing.
`Concluding
`that
`this
`“ma-
`chine-or-transformation test” is the sole test for de-
`termining patent eligibility of a “process” under § 101,
`the court applied the test and held that the application
`was not patent eligible.
`
`
`Held: The judgment is affirmed.
`
`
`
`
`
` 545 F.3d 943, affirmed.
`
`Justice KENNEDY delivered the opinion of the
`Court, except as to Parts II–B–2 and II–C–2, con-
`cluding that petitioners' claimed invention is not pa-
`tent eligible. Pp. 3224 – 3227, 3228 – 3229, 3229 –
`3231.
`
`
`(a) Section 101 specifies four independent cate-
`gories of inventions or discoveries that are patent
`eligible: “process[es],” “machin[es],” “manufactur
`[es],” and “composition[s] of matter.” “In choosing
`such expansive terms, ... Congress plainly contem-
`plated that the patent laws would be given wide
`scope,” Diamond v. Chakrabarty, 447 U.S. 303, 308,
`100 S.Ct. 2204, 65 L.Ed.2d 144, in order to ensure that
`“ ‘ingenuity should receive a liberal encouragement,’
`” id., at 308–309, 100 S.Ct. 2204. This Court's prec-
`edents provide three specific exceptions to § 101's
`
`© 2014 Thomson Reuters. No Claim to Orig. US Gov. Works.
`
`5
`
`

`
`130 S.Ct. 3218
`Page 6
`561 U.S. 593, 130 S.Ct. 3218, 177 L.Ed.2d 792, 78 USLW 4802, 2010-1 USTC P 50,481, 95 U.S.P.Q.2d 1001, 10 Cal.
`Daily Op. Serv. 7966, 2010 Daily Journal D.A.R. 9848, 22 Fla. L. Weekly Fed. S 703
`(Cite as: 561 U.S. 593, 130 S.Ct. 3218)
`
`broad principles: “laws of nature, physical phenome-
`na, and abstract ideas.” Id., at 309, 100 S.Ct. 2204.
`While not required by the statutory text, these excep-
`tions are consistent with the notion that a patentable
`process must be “new and useful.” And, in any case,
`the exceptions have defined the statute's reach as a
`matter of statutory stare decisis going back 150 years.
`See Le Roy v. Tatham, 14 How. 156, 174, 14 L.Ed.
`367. The § 101 eligibility inquiry is only a threshold
`test. Even if a claimed invention qualifies in one of the
`four categories, it must also satisfy “the conditions and
`requirements of this title,” § 101(a), including novelty,
`see § 102, nonobviousness, see § 103, and a full and
`particular description, see § 112. The invention at
`issue is claimed to be a “process,” which § 100(b)
`defines as a “process, art or method, and includes a
`new use of a known process, machine, manufacture,
`composition of matter, or material.” Pp. 3225.
`
`
`(b) The machine-or-transformation test is not the
`sole test for patent eligibility under § 101. The Court's
`precedents establish that although that test may be a
`useful and important clue or investigative tool, it is not
`the sole test for deciding whether an invention is a
`patent-eligible “process” under § 101. In holding to
`the contrary, the Federal Circuit violated two princi-
`ples of statutory interpretation: Courts “ ‘should not
`read into the patent laws limitations and conditions
`which the legislature has not expressed,’ ” Diamond v.
`Diehr, 450 U.S. 175, 182, 101 S.Ct. 1048, 67 L.Ed.2d
`155, and, “[u]nless otherwise defined, ‘words will be
`interpreted as taking their ordinary, contemporary,
`common meaning,’ ” ibid. The Court is unaware of
`any ordinary, contemporary, common meaning of
`“process” that would require it to be tied to a machine
`or the transformation of an article. Respondent Patent
`Director urges the Court to read § 101's other three
`patentable categories as confining “process” to a
`machine or transformation. However, the doctrine of
`noscitur a sociis is inapplicable here, for § 100(b)
`already explicitly defines “process,” see Burgess v.
`United States, 553 U.S. 124, 130, 128 S.Ct. 1572, 170
`L.Ed.2d 478, and nothing about the section's inclusion
`
`of those other categories suggests that a “process”
`must be tied to one of them. Finally, the Federal Cir-
`cuit incorrectly concluded that this Court has endorsed
`the machine-or-transformation test as the exclusive
`test. Recent authorities show that the test was never
`intended to be exhaustive*3222 or exclusive. See, e.g.,
`Parker v. Flook, 437 U.S. 584, 588, n. 9, 98 S.Ct.
`2522, 57 L.Ed.2d 451. Pp. 3225 – 3227.
`
`
`(c) Section 101 similarly precludes a reading of
`the term “process” that would categorically exclude
`business methods. The term “method” within §
`100(b)'s “process” definition, at least as a textual
`matter and before other consulting other Patent Act
`limitations and this Court's precedents, may include at
`least some methods of doing business. The Court is
`unaware of any argument that the “ordinary, con-
`temporary, common meaning,” Diehr, supra, at 182,
`101 S.Ct. 1048, of “method” excludes business
`methods. Nor is it clear what a business method ex-
`ception would sweep in and whether it would exclude
`technologies for conducting a business more effi-
`ciently. The categorical exclusion argument is further
`undermined by the fact that federal law explicitly
`contemplates the existence of at least some business
`method patents: Under § 273(b)(1), if a patent holder
`claims infringement based on “a method in [a] patent,”
`the alleged infringer can assert a defense of prior use.
`By allowing this defense, the statute itself acknowl-
`edges that there may be business method patents.
`Section 273 thus clarifies the understanding that a
`business method is simply one kind of “method” that
`is, at least in some circumstances, eligible for patent-
`ing under § 101. A contrary conclusion would violate
`the canon against interpreting any statutory provision
`in a manner that would render another provision su-
`perfluous. See Corley v. United States, 556 U.S. 303,
`––––, 129 S.Ct. 1558, 173 L.Ed.2d 443. Finally, while
`§ 273 appears to leave open the possibility of some
`business method patents, it does not suggest broad
`patentability of such claimed inventions. Pp. 3228 –
`3229.
`
`
`© 2014 Thomson Reuters. No Claim to Orig. US Gov. Works.
`
`6
`
`

`
`130 S.Ct. 3218
`Page 7
`561 U.S. 593, 130 S.Ct. 3218, 177 L.Ed.2d 792, 78 USLW 4802, 2010-1 USTC P 50,481, 95 U.S.P.Q.2d 1001, 10 Cal.
`Daily Op. Serv. 7966, 2010 Daily Journal D.A.R. 9848, 22 Fla. L. Weekly Fed. S 703
`(Cite as: 561 U.S. 593, 130 S.Ct. 3218)
`
`(d) Even though petitioners' application is not
`categorically outside of § 101 under the two a textual
`approaches the Court rejects today, that does not mean
`it is a “process” under § 101. Petitioners seek to patent
`both the concept of hedging risk and the application of
`that concept to energy markets. Under Benson, Flook,
`and Diehr, however, these are not patentable pro-
`cesses but attempts to patent abstract ideas. Claims 1
`and 4 explain the basic concept of hedging and reduce
`that concept to a mathematical formula. This is an
`unpatentable abstract idea, just like the algorithms at
`issue in Benson and Flook. Petitioners' remaining
`claims, broad examples of how hedging can be used in
`commodities and energy markets, attempt to patent the
`use of the abstract hedging idea, then instruct the use
`of well-known random analysis techniques to help
`establish some of the inputs into the equation. They
`add even less to the underlying abstract principle than
`the invention held patent ineligible in Flook. Pp. 3229
`– 3231.
`
`
`(e) Because petitioners' patent application can be
`rejected under the Court's precedents on the un-
`patentability of abstract ideas, the Court need not
`define further what constitutes a patentable “process,”
`beyond pointing to the definition of that term provided
`in § 100(b) and looking to the guideposts in Benson,
`Flook, and Diehr. Nothing in today's opinion should
`be read as endorsing the Federal Circuit's past inter-
`pretations of § 101. See, e.g., State Street, 149 F.3d, at
`1373. The appeals court may have thought it needed to
`make the machine-or-transformation test exclusive
`precisely because its case law had not adequately
`identified less extreme means of restricting business
`method patents. In disapproving an exclusive ma-
`chine-or-transformation test, this Court by no means
`desires to preclude the Federal Circuit's development
`of other limiting criteria that further the Patent Act's
`purposes*3223 and are not inconsistent with its text.
`P. 3231.
`
`
`KENNEDY, J., delivered the opinion of the
`Court, except for Parts II–B–2 and II–C–2. ROB-
`
`ERTS, C.J., and THOMAS and ALITO, JJ., joined the
`opinion in full, and SCALIA, J., joined except for
`Parts II–B–2 and II–C–2. STEVENS, J., filed an
`opinion concurring
`in
`the
`judgment,
`in which
`GINSBURG, BREYER, and SOTOMAYOR, JJ.,
`joined. BREYER, J., filed an opinion concurring in
`the judgment, in which SCALIA, J., joined as to Part
`II.
`J. Michael Jakes, Washington, DC, for petitioners.
`
`Malcolm L. Stewart, Washington, DC, for respondent.
`
`J. Michael Jakes, Counsel of Record, Erika H. Arner,
`Finnegan, Henderson, Farabow, Garrett & Dunner,
`L.L.P., Washington, DC, Ronald E. Myrick, Denise
`W. DeFranco, Finnegan, Henderson, Farabow, Garrett
`& Dunner, L.L.P., Cambridge, Massachusetts, for
`petitioner.
`
`Cameron F. Kerry, General Counsel, Quentin A. Pal-
`frey, Associate General Counsel, Joan Bernott
`Maginnis, Assistant General Counsel, U.S. Depart-
`ment of Commerce, Washington, DC, Raymond T.
`Chen, Solicitor and Deputy General Counsel, Thomas
`W. Krause, Scott C. Weidenfeller, Associate Solici-
`tors, Alexandria, VA, Elena Kagan, Solicitor General,
`Counsel of Record, Malcolm L. Stewart, Deputy So-
`licitor General, Tony West, Assistant Attorney Gen-
`eral, Ginger D. Anders, Assistant to the Solicitor
`General, Scott R. McIntosh, Mark R. Freeman, At-
`torneys, Department of Justice, Washington, DC, for
`respondent.
`
`For U.S. Supreme Court briefs, see:2009 WL 2372921
`(Pet.Brief)2009 WL 3070864 (Resp.Brief)2009 WL
`3453657 (Reply.Brief)
`
`Justice KENNEDY delivered the opinion of the Court,
`except as to Parts II–B–2 and II–C–2.FN*
`
`
`FN* Justice SCALIA does not join Parts
`II–B–2 and II–C–2.
`
`© 2014 Thomson Reuters. No Claim to Orig. US Gov. Works.
`
`7
`
`

`
`130 S.Ct. 3218
`Page 8
`561 U.S. 593, 130 S.Ct. 3218, 177 L.Ed.2d 792, 78 USLW 4802, 2010-1 USTC P 50,481, 95 U.S.P.Q.2d 1001, 10 Cal.
`Daily Op. Serv. 7966, 2010 Daily Journal D.A.R. 9848, 22 Fla. L. Weekly Fed. S 703
`(Cite as: 561 U.S. 593, 130 S.Ct. 3218)
`
`
`
`The question in this case turns on whether a patent
`can be issued for a claimed invention designed for the
`business world. The patent application claims a pro-
`cedure for instructing buyers and sellers how to pro-
`tect against the risk of price fluctuations in a discrete
`section of the economy. Three arguments are ad-
`vanced for the proposition that the claimed invention
`is outside the scope of patent law: (1) it is not tied to a
`machine and does not transform an article; (2) it in-
`volves a method of conducting business; and (3) it is
`merely an abstract idea. The Court of Appeals ruled
`that the first mentioned of these, the so-called ma-
`chine-or-transformation test, was the sole test to be
`used for determining the patentability of a “process”
`under the Patent Act, 35 U.S.C. § 101.
`
`
`I
`Petitioners' application seeks patent protection for
`a claimed invention that explains how buyers and
`sellers of commodities in the energy market can pro-
`tect, or hedge, against the risk of price changes. The
`key claims are claims 1 and 4. Claim 1 describes a
`series of steps instructing how to hedge risk. Claim 4
`puts the concept articulated in claim 1 into a simple
`mathematical formula. Claim 1 consists of the fol-
`lowing steps:
`
`
`“(a) initiating a series of transactions between
`said commodity provider and consumers of said
`commodity wherein said consumers purchase said
`commodity*3224 at a fixed rate based upon histor-
`ical averages, said fixed rate corresponding to a risk
`position of said consumers;
`
`“(b) identifying market participants for said
`commodity having a counter-risk position to said
`consumers; and
`
`“(c) initiating a series of transactions between
`said commodity provider and said market partici-
`pants at a second fixed rate such that said series of
`
`
`
`
`
`market participant transactions balances the risk
`position of said series of consumer transactions.”
`App. 19–20.
`
`
`
`The remaining claims explain how claims 1 and 4
`can be applied to allow energy suppliers and con-
`sumers to minimize the risks resulting from fluctua-
`tions in market demand for energy. For example,
`claim 2 claims “[t]he method of claim 1 wherein said
`commodity is energy and said market participants are
`transmission distributors.” Id., at 20. Some of these
`claims also suggest familiar statistical approaches to
`determine the inputs to use in claim 4's equation. For
`example, claim 7 advises using well-known random
`analysis techniques to determine how much a seller
`will gain “from each transaction under each historical
`weather pattern.” Id., at 21.
`
`
`The patent examiner rejected petitioners' appli-
`cation, explaining that it “ ‘is not implemented on a
`specific apparatus and merely manipulates [an] ab-
`stract idea and solves a purely mathematical problem
`without any limitation to a practical application,
`therefore, the invention is not directed to the techno-
`logical arts.’ ” App. to Pet. for Cert. 148a. The Board
`of Patent Appeals and Interferences affirmed, con-
`cluding that the application involved only mental steps
`that do not transform physical matter and was directed
`to an abstract idea. Id., at 181a–186a.
`
`
`The United States Court of Appeals for the Fed-
`eral Circuit heard the case en banc and affirmed. The
`case produced five different opinions. Students of
`patent law would be well advised to study these
`scholarly opinions.
`
`
`Chief Judge Michel wrote the opinion of the
`court. The court rejected its prior test for determining
`whether a claimed invention was a patentable “pro-
`cess” under § 101—whether it produces a “ ‘useful,
`concrete, and tangible result’ ”—as articulated in State
`Street Bank & Trust Co. v. Signature Financial
`
`© 2014 Thomson Reuters. No Claim to Orig. US Gov. Works.
`
`8
`
`

`
`130 S.Ct. 3218
`Page 9
`561 U.S. 593, 130 S.Ct. 3218, 177 L.Ed.2d 792, 78 USLW 4802, 2010-1 USTC P 50,481, 95 U.S.P.Q.2d 1001, 10 Cal.
`Daily Op. Serv. 7966, 2010 Daily Journal D.A.R. 9848, 22 Fla. L. Weekly Fed. S 703
`(Cite as: 561 U.S. 593, 130 S.Ct. 3218)
`
`Group, Inc., 149 F.3d 1368, 1373 (1998), and AT & T
`Corp. v. Excel Communications, Inc., 172 F.3d 1352,
`1357 (1999). See In re Bilski, 545 F.3d 943, 959–960,
`and n. 19 (C.A.Fed.2008) (en banc). The court held
`that “[a] claimed process is surely patent-eligible
`under § 101 if: (1) it is tied to a particular machine or
`apparatus, or (2) it transforms a particular article into a
`different state or thing.” Id., at 954. The court con-
`cluded this “machine-or-transformation test” is “the
`sole test governing § 101 analyses,” id., at 955, and
`thus the “test for determining patent eligibility of a
`process under § 101,” id., at 956. Applying the ma-
`chine-or-transformation test, the court held that peti-
`tioners' application was not patent eligible. Id., at
`963–966. Judge Dyk wrote a separate concurring
`opinion, providing historical support for the court's
`approach. Id., at 966–976.
`
`
`Three judges wrote dissenting opinions. Judge
`Mayer argued that petitioners' application was “not
`eligible for patent protection because it is directed to a
`method of conducting business.” Id., at 998. He urged
`the adoption of a “technological standard for patenta-
`bility.” Id., at 1010. Judge Rader would have found
`petitioners' claims were an unpatentable abstract idea.
`Id., at 1011. Only Judge Newman disagreed with the
`court's conclusion that petitioners' application was
`outside of the reach of § 101. She did not say that the
`application should have been granted but *3225 only
`that the issue should be remanded for further pro-
`ceedings to determine whether the application quali-
`fied as patentable under other provisions. Id., at 997.
`
`
`This Court granted certiorari. 556 U.S. 1268, 129
`S.Ct. 2735, 174 L.Ed.2d 246 (2009).
`
`
`II
`A
`[1][2][3] Section 101 defines the subject matter
`that may be patented under the Patent Act:
`
`
`“Whoever invents or discovers any new and
`
`useful process, machine, manufacture, or composi-
`tion of matter, or any new and useful improvement
`thereof, may obtain a patent therefor, subject to the
`conditions and requirements of this title.”
`
`
`
`Section 101 thus specifies four independent cat-
`egories of inventions or discoveries that are eligible
`for protection: processes, machines, manufactures,
`and compositions of matter. “In choosing such ex-
`pansive terms ... modified by the comprehensive
`‘any,’ Congress plainly contemplated that the patent
`laws would be given wide scope.” Diamond v.
`Chakrabarty, 447 U.S. 303, 308, 100 S.Ct. 2204, 65
`L.Ed.2d 144 (1980). Congress took this permissive
`approach to patent eligibility to ensure that “ ‘ingenu-
`ity should receive a liberal encouragement.’ ” Id., at
`308–309, 100 S.Ct. 2204 (quoting 5 Writings of
`Thomas Jefferson 75–76 (H. Washington ed. 1871)).
`
`
`[4] The Court's precedents provide three specific
`exceptions to § 101's broad patent-eligibility princi-
`ples: “laws of nature, physical phenomena, and ab-
`stract ideas.” Chakrabarty, supra, at 309, 100 S.Ct.
`2204. While these exceptions are not required by the
`statutory text, they are consistent with the notion that a
`patentable process must be “new and useful.” And, in
`any case, these exceptions have defined the reach of
`the statute as a matter of statutory stare decisis going
`back 150 years. See Le Roy v. Tatham, 14 How. 156,
`174–175, 14 L.Ed. 367 (1853). The concepts covered
`by these exceptions are “part of the storehouse of
`knowledge of all men ... free to all men and reserved
`exclusively to none.” Funk Brothers Seed Co. v. Kalo
`Inoculant Co., 333 U.S. 127, 130, 68 S.Ct. 440, 92
`L.Ed. 588 (1948).
`
`
`[5][6] The § 101 patent-eligibility inquiry is only
`a threshold test. Even if an invention qualifies as a
`process, machine, manufacture, or composition of
`matter, in order to receive the Patent Act's protection
`the claimed invention must also satisfy “the conditions
`and requirements of this title.” § 101. Those require-
`ments include that the invention be novel, see § 102,
`
`© 2014 Thomson Reuters. No Claim to Orig. US Gov. Works.
`
`9
`
`

`
`130 S.Ct. 3218
`Page 10
`561 U.S. 593, 130 S.Ct. 3218, 177 L.Ed.2d 792, 78 USLW 4802, 2010-1 USTC P 50,481, 95 U.S.P.Q.2d 1001, 10 Cal.
`Daily Op. Serv. 7966, 2010 Daily Journal D.A.R. 9848, 22 Fla. L. Weekly Fed. S 703
`(Cite as: 561 U.S. 593, 130 S.Ct. 3218)
`
`nonobvious, see § 103, and fully and particularly
`described, see § 112.
`
`
`The present case involves an invention that is
`claimed to be a “process” under § 101. Section 100(b)
`defines “process” as:
`
`
`“process, art or method, and includes a new use of a
`known process, machine, manufacture, composition
`of matter, or material.”
`
`
`
`The Court first considers two propose