No. 08-964 
IN THE 
Supreme Court of the United States 
————  
BERNARD L. BILSKI AND RAND A. WARSAW, 
Petitioners,  
v.  
JOHN J. DOLL, ACTING UNDER SECRETARY OF 
COMMERCE FOR INTELLECTUAL PROPERTY 
AND ACTING DIRECTOR OF THE UNITED 
STATES PATENT AND TRADEMARK OFFICE,  
Respondent.  
————  
On Writ of Certiorari to the United States Court 
of Appeals for the Federal Circuit  
————  
BRIEF OF AMICUS CURIAE  
TIMOTHY F. MCDONOUGH, PH.D.  
IN SUPPORT OF PETITIONERS  
————  
WILLIAM LAMOREAUX  
Counsel of Record  
900 Jackson Street, Suite 180  
Dallas, Texas 75202  
(214) 747-2012  
 
Attorney for Amicus Curiae 
Timothy F. McDonough, Ph.D.  
LEGAL PRINTERS  LLC, Washington DC !   202-747-2400 !   legalprinters.com

 
i
 
QUESTIONS PRESENTED 
 
1. Whether the Court of Appeals for the Federal 
Circuit erred by holding that a “process” must be tied 
to a particular machine or apparatus, or transform a 
particular article into a different state or thing 
(“machine-or-transformation”  test), to be eligible for 
patenting under 35 U.S.C. § 101, despite this Court’s 
precedent declining to limit the broad statutory 
grant of patent eligibility for “any” new and useful 
process beyond excluding patents for “laws of nature, 
physical phenomena, and abstract ideas.” 
 
2. Whether the “machine-or-transformation” test for 
patent eligibility adopted by the Federal Circuit, 
effectively foreclosing meaningful patent protection 
to a business model involving a series of transactions 
among a commodity provider, consumers, and 
market participants, contradicts the clear 
Congressional intent that patents protect “method[s] 
of doing or conducting business.” 35 U.S.C. § 273. 

 
ii
 
TABLE OF CONTENTS 
Page  
QUESTIONS PRESENTED ..................................... i 
TABLE OF CONTENTS .......................................... ii 
TABLE OF AUTHORITIES .................................... iii 
INTEREST OF AMICUS CURIAE.......................... 1 
SUMMARY OF ARGUMENT ..................................  2 
INTRODUCTION .....................................................  2 
ARGUMENT ............................................................ 3 
IMPEDIMENT TO CAPITAL FORMATION 
IN THE SERVICES SECTOR OF THE 
ECONOMY ........................................................... 3 
DISRUPTION OF EXISTING PROPERTY 
RIGHTS ................................................................. 7 
LOSS OF INCENTIVE FOR INVENTORS TO 
PUBLICLY DISCLOSE INNOVATIONS ............ 9 
CONCLUSION ......................................................... 9 

 
iii
 
TABLE OF AUTHORITIES 
  
Page 
FEDERAL CASES 
Diamond v. Chakrabarty, 447 U.S. 303 (1980) ....... 8 
In Re Bilski, 545 F.3d 943 (Fed. Cir. 2008) ... passim 
Kendall v. Winsor, 62 U.S. 322 (1858) .................... 9 
Pfaff v. Wells Electronics, Inc., 525 U.S. 55 
(1998) .....................................................................  9 
State Street Bank & Trust Co. v. Signature 
Financial Group, 149 F.3d 943 (Fed. Cir. 
1998) .................................................................. 5, 8 
FEDERAL STATUTES  
35 U.S.C. § 100  ........................................................ 5 
35 U.S.C. § 101  ........................................................ 4 
OTHER AUTHORITIES  
Mann, Ronald J., “Do Patents Facilitate 
Financing in the Software Industry?”, Texas 
Law Review, Vol. 83, p. 961, 2005. Available 
at SSRN: http://ssrn.com/abstract=510103 ......... 6 
 
 


INTEREST OF AMICUS CURIAE1 
Timothy F. McDonough, Ph.D. is a political 
economist, inventor and entrepreneur. He is the 
inventor of “Mechanism and business method for 
implementing a service contract futures exchange,” 
patent number 7,373,3202. He holds a Bachelor of 
Science in Electrical Engineering from the 
University of Hawaii at Manoa, a Master of Science 
in Economic Research from the University of North 
Texas and a Doctor of Philosophy in Political 
Economy from the University of Texas at Dallas. 
In his 30-year professional career Dr. McDonough 
has designed components and installations of 
autopilot and collision avoidance systems for 
transport category airplanes such as the Boeing 
757/767 and Douglas DC-10. He has served as a 
senior capacity planning analyst on the headquarters 
staff of American Airlines where he employed the 
principles of applied microeconomics and operations 
research to the challenge of efficiently allocating 
services of one of the largest air carrier networks in 
the world. As a self-employed business consultant he 
has assisted major suppliers in the utilities, 
communications, banking, entertainment, apparel, 
and food distribution industries to optimize their 
                                                 
1 Pursuant to Supreme Court Rule 37, no counsel for any party 
authored this brief in whole or in part, and no person or entity 
other than amicus curiae made a monetary contribution to the 
preparation or submission of the brief. Counsel of record for all 
parties were timely notified 10 days prior to filing and have 
consented to this filing. Letters of consent have been filed with 
the Clerk of the Court.  
2 Application filed March 30, 2000 and issued May 13, 2008. 

 
2
 
service offerings, product mix, distribution and 
pricing.  
Dr. McDonough has no business or personal 
relationship with the petitioners and does 
respectfully submit this brief as a true amicus curiae 
in hope that the policy and economic arguments 
presented herein may encourage this Court to affirm 
the two questions presented in this case. 
SUMMARY OF ARGUMENT  
The present amicus curiae takes no position on 
whether the Petitioner’s claims are patentable. His 
concern is that the economic and policy effects of 
implementation of the decision of the Court of 
Appeals for the Federal Circuit in this case would a) 
hamper the formation of capital in the services sector 
of the economy, b) degrade or eliminate existing 
property rights that are essential to continued infant 
industry protection, and c) eliminate incentive to 
inventors to disclose innovations that would further 
the public weal. 
INTRODUCTION  
American innovation is not confined to Industrial 
Age mousetraps and other cleverly contrived 
gadgets. The modern economic agent is more likely 
to encounter innovation today in the services they 
consume than in the contraptions they use. The 
present  amicus curiae suggests that the decision of 
the Federal Circuit in this case is an attempt to 
apply an Industrial Age standard to address a 
perceived Services Age problem, a problem that the 
present amicus curiae suggests does not exist.  

 
3
 
ARGUMENT  
IMPEDIMENT TO CAPITAL FORMATION IN 
THE SERVICES SECTOR OF THE ECONOMY 
The sector composition of the United States 
economy has shifted significantly from agriculture 
and manufacturing to services since the ratification 
of the Constitution and the enactment of the first 
patent legislation in 1790. When the first census to 
include a breakdown of economic activities was 
conducted in 1820, it was found that private goods-
producing industries3 accounted for 97% of aggregate 
output.4 By 1947 the U.S. Department of Commerce 
reports that private services-producing industries5 
accounted for 48% of output and the share of private 
goods-producing industries fell to 40% of output.6 In 
2007 private services dominated the economy with 
                                                 
3 Private goods-producing industries consists of agriculture, 
forestry, fishing, and hunting; mining; construction; and 
manufacturing. 
4 Historical Census Browser. Retrieved June26, 2009, from the 
University of Virginia, Geospatial and Statistical Data Center: 
http://fisher.lib.virginia.edu/collections/stats/histcensus/index.ht
ml. 
5 Private services industries consists of utilities; wholesale 
trade; retail trade; transportation and warehousing; 
information; finance, insurance, real estate, rental, and leasing; 
professional and business services; educational services, health 
care, and social assistance; arts, entertainment, recreation, 
accommodation, and food services; and other services, except 
government. 
6 U.S. Department of Commerce. Retrieved June 16, 2009, from 
the Bureau of Economic Analysis:  
http://www.bea.gov/industry/gpotables/. 

 
4
 
69% of the total with goods production declining to a 
share of only 31%.7 
Innovation in the delivery of services is usually 
manifested in improvements in organization of 
factors of production to achieve higher efficiencies. 
The discipline of industrial engineering is a prolific 
contributor to advancement of service efficiencies but 
it is not the only contributor. The services 
themselves are intrinsic innovations that by their 
presence in the economy division of labor and other 
input factors of production is enabled and the 
subsequent economies of comparative advantage 
accrue to the entire society. 
A substantial portion of the 69% share of economic 
activity represented by the services sector does not 
result in any physical transformation of any article 
or state or thing. Some services innovations may only 
rearrange human labor that may operate in a 
sedentary physical state with no manipulation of 
matter yet are easily recognized by a rational person 
to be a useful, concrete and tangible result. Such 
innovations surely advance the public weal as much 
or more so in a services dominated economy than the 
many cleverly constructed gadgets did in the 
Industrial Age. 
Congressional intent on the patentability of 
methods is explicitly expressed in 35 U.S.C. § 101 
(“Whoever invents or discovers any new and useful 
process, machine, manufacture, or composition of 
matter, or any new and useful improvement thereof, 
                                                 
7 Ibid. 

 
5
 
may obtain a patent therefore, subject to the 
conditions and requirements of this title.”) and in the 
statutory definition of “process” in 35 U.S.C. § 100 
(“The term "process" means process, art or method, 
and includes a new use of a known process, machine, 
manufacture, composition of matter, or material.” 
Emphasis added.).  
If the prime expression of innovation in the 
services sector is in methods of doing business then it 
stands to reason that intellectual property rights 
that are allocated by law to innovators of Industrial 
Age  things should also be allocated to innovators of 
Service Age methods with as much vigor and 
conviction of the society afforded to the latter as to 
the former. This Court has done exactly that in 
denying  certiorari to the petitioners in State Street 
Bank which has affirmed that business methods are 
patentable subject matter and thus satisfied the 
longstanding need to interpret the law of patents to 
be meaningful in the services dominated economy. 
State Street Bank & Trust Co. v. Signature Financial 
Group, 149 F.3d 1368, 1375 (Fed. Cir. 1998).  
The United States is by public choice a free market 
capitalist economy that relies on government to 
preserve property rights but it is left to the devices of 
the market participants to assemble the means of 
production without government intervention 
whenever possible. The American economy is not, 
however, a perfectly competitive landscape. Market 
failures and distortions do occur and when they do 
we turn to government to enable allocation of scarce 
resources in ways that neutralize the distortions. 

 
6
 
One way this is done is to grant temporary monopoly 
to innovators who are thus shielded from the risks of 
allocation of substantial capital to start-up or 
breakout enterprise. 
Capital formation in any enterprise in any sector 
of the economy is fraught with risks that would 
ordinarily not be mitigated sufficiently to allow it to 
occur at all if not for the presence of mechanisms 
such as patent rights. In a series of about 60 
interviews of people who invest in startup 
companies—venture capitalists, high net worth 
individuals and banks, Columbia Law Professor 
Ronald Mann found that,  
…for firms that have a credible product 
idea and the expertise to implement it, 
venture capitalists plainly accept the idea 
that their goal is to identify firms that 
will have sufficient market power to earn 
extraordinary profits. I[ntellectual] 
P[roperty] protection is important only 
indirectly, as a tool that might provide 
that market power. The key is 
“sustainable differentiation”: something 
special about the particular firm that will 
enable it to do something that its 
competitors will not be able to do for the 
immediate future. The interviews reflect 
more picturesque terminology—referring 
to “secret sauce” or “magic dust.” But it is 
clear that the key to a desirable 
investment opportunity is in the 
expectation of market power, and all 

 
7
 
other attributes of the company are 
indirect predictors of that ultimate goal. 
Mann, Ronald J., “Do Patents Facilitate Financing in 
the Software Industry?”, Texas Law Review, Vol. 83, 
p. 976, 2005. 
The present amicus curiae has personally 
experienced difficulty in raising capital from private 
equity and institutional venture capital sources 
nationwide when no intellectual property could be 
offered by the amicus curiae as a capital 
contribution. The present case has caused further 
impediment to capital formation by the amicus 
curiae for a substantial services industry venture 
even though one of his business method patents is 
now issued. 
Implementation of the decision of the Court of 
Appeals for the Federal Circuit in this case would 
permanently hamper the formation of capital in any 
industry and such impediment would be especially 
felt in the services sector where an Industrial Age 
idea of “machine-or-transformation” test is 
manifestly unsuited to services that now comprise 
69% of economic activity in the United States. 
DISRUPTION OF EXISTING PROPERTY 
RIGHTS 
It is difficult to count the number of business 
method patents that have been issued since they can 
occasionally be classified with many non-method 
inventions. A popular proxy used for calculating 
trends in business method applications and issued 

 
8
 
patents is patent class 705, “Data processing: 
financial, business practice, management, or 
cost/price determination”8. During the 20-year period 
July 1, 1989 to June 30, 2009 the United States 
Patent and Trademark Office (USPTO) issued 18,238 
patents in class 705.9 Class 705 issues rose sharply 
from 998 in 2005 to 1,453 in 2006 and then increased 
steadily to 2,673 in 2008.10 
By definition, all of these patents have been found 
by the USPTO to satisfy the statutory requirements 
of patentability prior to the Federal Circuit decision 
in this case. This standard was affirmed by this 
Court in State Street and Diamond v. Chakrabarty, 
447  U.S. 303, 308-309 (1980) (“Congress plainly 
contemplated that the patent laws would be given 
wide scope,” and that “Congress intended statutory 
subject matter to ‘include anything under the sun 
that is made by man’”).  
The Federal Circuit decision in this case has 
already cast a stifling pall over the more than 18 
thousand patents in class 705 that are currently in 
force. It is difficult to recount a situation in the 
history of patent law in the United States when the 
rules have changed so drastically so late in the game 
for so many. 
                                                 
8 Reference tools: Retrieved June 30, 2009, from the USPTO 
website http://www.uspto.gov/web/patents/classification/. 
9 Patent search: Retrieved June 30, 2009, from the USPTO 
website http://patft.uspto.gov/netahtml/PTO/search-adv.htm 
10 Ibid. 

 
9
 
LOSS OF INCENTIVE FOR INVENTORS TO 
PUBLICLY DISCLOSE INNOVATIONS 
This Court has consistently recognized the true 
purpose of the laws of intellectual property. Kendall 
v. Winsor, 62 U.S. 322, 328 (1858) (“[T]he benefit to 
the public or community at large was another and 
doubtless the primary object in granting and 
securing that monopoly.”). Pfaff v. Wells Electronics, 
Inc., 525 U.S. 55, 63 (1998) (“[T]he patent system 
represents a carefully crafted bargain that 
encourages both the creation and the public 
disclosure of new and useful advances in technology, 
in return for an exclusive monopoly for a limited 
period of time.”). The Federal Circuit decision in this 
case threatens to severely compromise that bargain 
and the sector of the economy that now represents 
more than two thirds of all output is going to suffer 
the most if allowed to stand. 
Innovative methods of providing services cannot be 
hidden away in the company safe as readily as the 
secret gadget and a mountain of non-disclosure 
agreements are no substitute for intellectual 
property statutes. Without IP protection capital 
providers will not have incentive to invest, 
entrepreneurs will not have incentive to engage in 
the process of building and nurturing new enterprise 
and innovators will have no incentive to disclose 
their ideas to the public. 
CONCLUSION  
The American propensity to innovate is evident in 
every economic age. From the Age of Agriculture 

 
10
 
through the Industrial Age and now the Age of 
Services, the American economy has demonstrated 
an efficiency that is unmatched by any system on the 
planet. The allocation of intellectual property rights 
under the laws of the United States has played a 
pivotal role in that ascendency. 
For the foregoing reasons the present amicus 
curiae therefore urges the Court to affirm the two 
questions presented in this case. 
 
Respectfully submitted, 
 
WILLIAM LAMOREAUX  
Counsel of Record  
900 Jackson Street, Suite 180  
Dallas, Texas 75202  
(214) 747-2012  
 
Attorney for Amicus Curiae 
Timothy F. McDonough, Ph.D.