The multiple unconstitutionality of business method patents: common sense, congressional consideration, and constitutional history.

• Author: Pollack, Malla

1. INTRODUCTION

   Business method patents are of sufficiently doubtful constitutionality that the Supreme Court should either render them void or, at the least, require a clear Congressional fact finding that they are likely to promote the "Progress of ... [the] Useful Arts." (1) Four separate arguments support this conclusion. First, common sense shows that patents on business methods do not promote progress. Second, Congress has not considered whether business method patents are likely to promote progress. Third, "useful arts," as that phrase is used in the Constitution, does not include mere commerce. Lastly, the historical background of the Intellectual Property Clause (2) demonstrates that the ratifying generation would have considered business method patents abusive of the basic rights of Englishmen. The ratification background and the history of early patent practice also support argument three.

   Consider the following hypothetical patent:

   I claim:

   (1) A method of doing business comprising:

   (a) loading trade goods on a vessel in a port of the northeastern American continent;

   (b) without voyaging to either the British Islands or the European mainland, proceeding with this vessel to a port in China and there selling the trade goods and acquiring other merchandise, and;

   (c) without voyaging to either the British Islands or the European mainland, returning the aforementioned vessel to a port of the northeastern American continent. (3)

   (2) The method described in claim one, where the vessel takes on furs on the Northwest coast of North America on its way to China. (4)

   (3) The method described in claim one, where the vessel is below 175 tons burthen. (5)

   (4) The method described in claim one, where the vessel's return voyage is financed, at least in part, by a loan from a creditor in the Chinese port, with the vessel or its cargo serving as collateral. (6)

   These business method claims probably would have been novel, useful, and not obvious to a person of ordinary skill in the art of international trade (7) in 1780. (8) However, would these claims have stated patentable subject matter under the Patent Act of 17907 That act allowed the Patent Board to grant protection to "any useful Art, Manufacture, Engine, Machine, or Device, or any improvement therein...." (9) Competition demonstrates that no such patent was issued, even though the China Trade was a matter of great pride in American entrepreneurship, perhaps being "the quintessential business innovation of the 1780s...." (10)

   We have good reason to doubt that such patent claims would have been issued -- not just because the Board had discretion to deny patents, (11) but also because business method patents seem outside the 1790 understanding of either the Patent Act or the enabling clause of the United States Constitution: "business" was not considered among the "useful arts." (12) These hypothetical claims seem, in fact, quite close to the then-current archetype of an abusive "monopoly," (13) allowable, if at all, only after individualized legislative scrutiny. The seemingly uncontroversial nature of the Intellectual Property Clause affirms that the ratifying public did not read it as to allow exclusive rights to trading companies, i.e., odious monopolies, i.e., business method patents.

   The above arguments rest on history. Additionally, common sense suggests that business method patents are unnecessary and anti-competitive, and, therefore, unconstitutional because they do not promote the progress of the useful arts. "Promoting progress" is a limit on Congress' patent power, which renders extremely unwise decisions unconstitutional. The constitutional limitation may not be avoided by claiming power under a more general clause, such as the Commerce Clause. (14) The Necessary and Proper Clause is also unavailable because it may not be used to negate constitutional limits or to empower Congress to pursue a goal not entrusted to the federal government. (15) So far, however, no case law sets the standard of scrutiny the courts should use when considering whether Congress has bypassed the progress limit.

   Additionally, the Constitution seems to require Congress to make a rational decision that business method patents promote the progress of the useful arts. Congress has not done so.

   The rest of this article explains these four arguments.

2. THE UNACCEPTABLE ORIGIN OF BUSINESS METHOD PATENTS

   The recent explosion of business method patents was prompted by judicial interpretation of muddy congressional wording. In 1998, in State Street Bank & Trust Co. v. Signature Financial Group, Inc., the United States Court of Appeals for the Federal Circuit simultaneously enlarged the scope of patents on computer programs and announced the non-existence of a "business method" exception to patentable subject matter. (16)

   The Federal Circuit phrased its State Street holdings as decisions on statutory construction. (17) The leading Supreme Court cases also purport to deal exclusively with statutory construction. (18) The statutory phrase at issue is 35 U.S.C. [section] 101, which lists as patentable subject matter "any new and useful process, machine, manufacture, or composition of matter, or any new and useful improvement thereof...." (19) "Process" was substituted for "art" by the 1952 Patent Act. (20) According to the accompanying Senate Report, the case law had interpreted "art" as "practically synonymous with process or method." (21)

   In State Street, the Federal Circuit laid "to rest" the "ill-conceived" business method exception to patentable subject matter on two statutory grounds. (22) First, the statute says "any." (23) Second, Congress has defined [section] 101 as including "anything under the sun that is made by man." (24)

   The Federal Circuit erred.

   The Senate Report was not discussing processes; it may not have been expressing expansive intent. The Report was discussing "machine[s]" and "manufacture[s]," and clarifying a limit on patentability. The entire one sentence paragraph reads as follows:

   A person may have `invented' a machine or manufacture, which may include anything under the sun that is made by man, but it is not necessarily patentable under Section 101 unless the conditions of the title are fulfilled. (25) The Federal Circuit did not notice that the Report says "may" not "shall." (26) Additionally, the Federal Circuit overlooked the "process" aspect of "business methods," perhaps because it had just construed independent claim one as "directed to a machine." (27) No similar language in the Report declares that Congress intended "process" to have this wide a reach. (28) The Federal Circuit, furthermore, overlooked the Supreme Court's growing reluctance to rely on legislative history. (29)

   The Federal Circuit, additionally, did not ask whether granting "business method" patents is a good idea. Nor did it claim that Congress had ever investigated or discussed whether business method patents are sufficiently likely to promote the progress of the useful arts to warrant patent protection. The Federal Circuit did not ask if "Useful Arts" in the Constitution included "business methods."

   I think someone should.

   Why should you care? First, courts do not have the institutional competence to decide the societal result of creating a new category of patentable subject matter. Business is different in this respect than, for example, gene splicing. Gene splicing is one unanticipated form assumed by anticipated progress in a category already clearly included in patentable subject matter -- medical technology. The Patent Act says "any" to allow such inventions to be patentable without congressional action. Business methods are different, however, because business has always been with us and yet never covered by patent law.

   Second, narrowing judicial oversight to the statute allows Congress almost limitless power to grant patents. Worse, Congress does not consider each patent; instead an administrative agency, the United States Patent and Trademark Office ("USPTO") is required to grant patents to a widening class of applicants unless the USPTO can document obviousness. (30) The logic in State Street, therefore, places the burden on the party alleging non-patentability; the default position is that anyone who originates any non-obvious anything has the right to patent protection, but this turns a mere means into a goal. The Supreme Court has repeatedly stated that the primary purpose of Congress' constitutionally based intellectual property power is to enrich the public domain, not to enrich authors or inventors. (31)

3. Defining a "Business Method Patent"

   By business method, I mean a process where the point of invention lies in the entrepreneurial strategy. (32) Acceptable technological grants, in contrast, generally involve invention of novel physical objects or novel physical manipulation of physical objects.

   When the point of invention is some object or machine, the patent clearly is not for a business method. Separating business methods from other processes is more difficult -- especially in light of the ability to draft a patent so that an activity turns into a means-plus-function "machine," as occurred in State Street. We can prevent such "sleight of word" by focusing on the point of invention, not the entire claim. (33) This is the central insight of the dissent in Diamond v. Diehr; (34) it is also the position taken by Congress in the First Inventor's Defense Act recently enacted as a minor limit on business method patents. (35) This interpretation, furthermore, is more attuned to the constitutional and statutory texts. Congress may grant to inventors only "exclusive [r]ight[s in] their ... [d]iscoveries." (36) Congress has only granted to "[w]hoever invents or discoverers" something "new and useful" the right to obtain a patent "therefor," i.e., in the res invented. (37)

   Consider the hypothetical claim at the beginning of this paper: it is a business method...